Alexandra.MANOLE@ec.europa.eu
MANOLE Alexandra (CLIMA)
2014-09-05T15:10:47Z
2014-09-18T09:14:58Z
14.00
12555
28800
0
-15
False
False
Questions for stakeholder consultation on Emission Trading System (ETS) post-2020 carbon leakage provisions |
Status : CLOSED |
Start date : 2014-05-08 |
End date : 2014-07-31 |
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0. Registration |
I. General: competitiveness, carbon leakage and present free allocation rules |
II.A. Options for post-2020 - Strategic Choices |
II.B. Options for post-2020 - Allocation modalities |
II.C. Options for post-2020 - Innovation support |
II.D. Other issues |
profile |
name |
contact |
under ETS scope? |
motivation ETS scope not relevant |
publish submission? |
ability of industry to further reduce emissions |
motivation ability to further reduce emissions |
EU ETS role |
motivation EU ETS role |
protecting industry against disadvantages relative to third countries |
motivation protecting industry against disadvantages relative to third countries |
free allocation adequacy |
motivation free allocation adequacy |
free allocation impact on incentive to innovate |
motivation free allocation impact on incentive to innovate |
proportionality of administrative burden |
motivation proportionality of administrative burden |
share of allowances for CL and competitiveness |
motivation share of allowances for CL and competitiveness |
NER300 e.g. - future share of allocation for innovation support? |
motivation future share of allocation for innovation support? |
financial support for industrial innovation? |
motivation financial support for industrial innovation |
sources of funding for innovation |
motivation sources of funding for innovation |
additional safeguards against CL (beyond free allocation and innovation)? |
motivation additional safeguards against CL (beyond free allocation and innovation) |
CL groups? |
motivation CL groups? |
CL criteria |
motivation CL criteria |
CL criteria - thresholds |
motivation CL criteria - thresholds |
maintaining qualitative assessment? |
motivation maintaining qualitative assessment |
validity of CL list |
motivation validity of CL list |
benchmark updating |
motivation benchmark adaptation |
revising benchmarks in line with technological advance? |
motivation revising benchmarks in line with technological advance |
updating production data used for allocation? |
motivation updating production data used for allocation |
deviations from general harmonised allocation rules? |
motivation deviations from general harmonised allocation rules |
EU-wide indirect costs compensation? |
motivation EU-wide indirect costs compensation |
22. In your view, at which stage of the innovation process is there a particular need to strengthen the EU's innovation support? |
motivation stage of innovation process |
innovation funding - auctioning or free allowances? |
motivation innovation funding |
other issues |
0.1 What is your profile? |
0.2 Please enter the name of your business/organisation/association etc. (maximum 500 characters): |
0.3. Please enter your contact details (address, telephone, email): |
0.4 If relevant, please state if the sector/industry you represent falls under the scope of EU ETS: |
Please explain, why it is not relevant to you. |
0.5 The results of this stakeholder consultation will be published unless stated otherwise. Can we include your replies in the publication? |
1: Do you think that EU industry is able to further reduce greenhouse gas emissions towards 2020 and beyond, without reducing industrial production in the EU? |
If you wish, please motivate your answer (max. 1000 characters): |
2: Do you think that the EU ETS helps the EU industry to become more energy efficient, and thus contributes to increasing the competitiveness of European industry in the long-term? |
If you wish, please motivate your answer (max. 1000 characters): |
3: Do you think the EU needs to provide special (transitional) measures to support EU industry covered by the EU ETS, in order to address potential competitiveness disadvantages vis-à-vis third countries with less ambitious climate policy? |
If you wish, please motivate your answer (max. 1000 characters): |
4: In your view, how adequate a policy instrument is free allocation and, in particular, increased free allocation for certain industrial sectors to address the risk of carbon leakage? |
If you wish, please motivate your answer (max. 1000 characters): |
5: In your view, how does free allocation impact the incentives to innovate for reducing emissions? |
If you wish, please motivate your answer (max. 1000 characters): |
6: In your view, is the administrative burden for companies to ensure the free allocation via the implementation of the benchmarking provisions proportionate to the objectives? |
If you wish, please motivate your answer (max. 1000 characters): |
7: What share of the post-2020 allowance budget should be dedicated to carbon leakage and competitiveness purposes? |
If you wish, please motivate your answer (max. 1000 characters): |
8: Currently the European Commission implements the NER300 programme to provide from EU ETS specific support for large-scale demonstration of Carbon Capture Storage (CCS) projects and innovative renewable energy. 300 million allowances, representing ca. 2% of total phase 3 allowances, are dedicated for this purpose. What share of the post-2020 allowance budget should be dedicated to such innovation support? |
If you wish, please motivate your answer (max. 1000 characters): |
9: At the moment, EU ETS rules do not contain a specific support scheme for industrial innovation and deployment of new low-carbon technologies (apart from support for CCS and renewables under the NER300). Do you think there should be such a financial support scheme? |
If you wish, please motivate your answer (max. 1000 characters): |
10: If innovative low carbon technologies in the industry are to be further supported, which could be possible sources of funding? |
If you wish, please motivate your answer (max. 1000 characters): |
11: In your view, is there a need for additional measures beyond free allocation and EU-level innovation support to address the risk of carbon leakage for energy intensive sectors covered by the EU ETS, post-2020? |
If you wish, please motivate your answer (max. 1000 characters): |
12: Currently there are two categories for sectors in terms of exposure to the risk of carbon leakage: sectors are either deemed to be exposed to such risk (the sectors on the carbon leakage list) or not (sectors not on the carbon leakage list). Should the system continue with two carbon leakage exposure groups or is some further differentiation needed? |
If you wish, please motivate your answer (max. 1000 characters): |
13: Under the current system, exposure of sectors to the risk of carbon leakage is primarily measured by the share of 'carbon costs' in their gross value added (GVA) and by the intensity of trade with third countries. What carbon leakage criteria should be defined for the post-2020 period? |
If you wish, please motivate your answer (max. 1000 characters): |
14. What thresholds should be defined for the criteria measuring the risk of carbon leakage? |
If you wish, please motivate your answer (max. 1000 characters): |
15: In the current system, there is a possibility to assess the exposure of sectors to the risk of carbon leakage also based on qualitative criteria (abatement potential, market characteristics and profit margins). Do you think that similar qualitative criteria should be maintained to complement the quantitative criteria? |
If you wish, please motivate your answer (max. 1000 characters): |
16: Currently, the list of sectors exposed to the risk of carbon leakage is valid for five years. What should be the validity of the list for the post-2020? |
If you wish, please motivate your answer (max. 1000 characters): |
17: Currently benchmarks are set to the average greenhouse gas emission performance of the 10% best performing installations in the EU for a given product. What adaptations of benchmarks for 2021 onwards should be considered, if any? |
If you wish, please motivate your answer (max. 1000 characters): |
18: Should the benchmarks be revised to reflect the technological state of the art? |
If you wish, please motivate your answer (max. 1000 characters): |
19: Currently, historical production data are used to determine the allocation due to each installation. Operators had the possibility to choose between 2005-2008 or 2009-2010 as basis years. Should the production data used to calculate allocations in Phase 4 (post 2020) be updated? |
If you wish, please motivate your answer (max. 1000 characters): |
20: Is there a case for any deviations from general harmonised allocation rules, and what would be the risks involved? |
If you wish, please motivate your answer (max. 1000 characters): |
21: Should there be a harmonised EU-wide compensation scheme for indirect costs, i.e. for increases in electricity costs resulting from the ETS? |
If you wish, please motivate your answer (max. 1000 characters): |
a) to implement a small-scale prototype |
b) at the conception stage |
c) to implement a large-scale pilot |
d) at the commercialisation stage |
If you wish, please motivate your answer (max. 1000 characters): |
23: Should the allowances funding low-carbon innovation support come from the Member States' auction budgets or from free allocation? |
If you wish, please motivate your answer (max. 1000 characters): |
24: Are there any other issues you would like to raise? |
a) Business |
AB Achema (Fertilizers producer) |
AB "Achema" Jonalaukio k., Ruklos sen. LT-55550 Jonavos r. Lithuania Tel. +370 (349) 56237 Fax +370 (349) 56004 sekretoriatas@achema.com |
a) yes |
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1) yes |
b) no |
When it comes to the EU fertilizer industry, GHG reductions by end of pipe, as for example the N2O abatement have been implemented in many plants already. This resulted in an overall reduction by more than 80% in the N2O emissions since 2004. Further reduction of GHG emissions via energy efficiency is more difficult and will require the construction of new plants with the newest technology. In the case of ammonia production, even the most energy efficient production will always result in the release of CO2 due to the chemical reaction taking place, i.e. natural gas (CH4) delivers H2 for the NH3 production and is thus the feedstock: 3 CH4 + 6 H2O + 4 N2 à 8NH3 + 3 CO2 The unavoidable process GHG release from feedstock in ammonia production should therefore be excluded from ETS. Ammonia producers should only be penalized on energy related emissions. Given the poor competitive position of Europe due to high energy costs, this type of investments are not likely to happen in Europe. |
b) no |
EU ETS motivates the industry to become more energy efficient. The EU ammonia industry is already the most efficient in the world. However, the extra ETS costs do not increase the competitiveness of the European industry, if the cost becomes excessive (cost of implementing and operating new technology and/or cost of CO2 allowances) compared to the cost for industries operating in countries with less ambitious climate policy. High EU ETS costs may lead to closure of European industries and carbon leakage. |
a) yes |
Special measures (100 % free allocations according to achievable benchmarks without correction factors) must be provided to EU industries that are exposed to carbon leakage. This allocation should be based on actual production (instead of historical production). This support must exist as long as international agreements are not reached and the European industry is facing stricter regulations than others. |
a) very adequate |
Free allocation is the best tool available under ETS to avoid carbon leakage. Free allocation should be regulated in such a way that it fully protects industries exposed to carbon leakage, especially energy intensive industries, from higher climate costs compared to industries located in other parts of the world with less strict climate regulation. |
a) it absolutely keeps the incentive |
‘Free allocation’ should be 100% free for the best performer Today this is not the case due to too tight benchmarks, CSCF and ex ante allocation system. Even if the best performers get 100% free allocation for the large majority of ETS production sites the system will be a driver for innovation of more efficient technology and use of renewables. |
b) quite proportionate |
Allocation on actual production levels will not lead to an additional administrative burden since reporting on manufacturing output is already done anyway. |
d) there should be no limit to overall free allocation to industry |
Energy intensive industries should have an unlimited free allocation based on actual production and achievable benhmarks without correction factor to compensate for differences in climate policies of countries with less ambitious targets than EU. The EU industry must not be unilaterally burdened with limits and constraints. The incentive to continue improving energy efficiency is guaranteed by a benchmark-based allocation. |
a) a substantially higher share than in Phase 3 |
Cost efficient, reliable and publically acceptable carbon capture and storage is essential for reaching the long term emission reduction targets. |
a) yes |
It is highly surprising that such a support scheme has not yet been established, since the challenge of climate change is of major importance. However, such a scheme should not be a large administrative burden and cover the project development phase rather than the operational stag (see answer to question 22). |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
ETS revenues should be directed back to the industry to continue promoting research and project helping to reduce GHG emissions. |
a) yes |
In addition: - compensation of indirect carbon costs associated with the consumption of electricity - development of an energy pricing system which is competitive with the energy pricing in other parts of the world - duties (equal to European producers ETS costs) on imports of energy intensive goods from countries not participating in ETS |
b) more carbon leakage categories should be defined |
Sectors that are severely exposed to the risk of carbon leakage, should be placed in a separate category and given preferential treatment. |
a) the present criteria should remain |
The present criteria include the use of a specific carbon price to calculate the share of carbon costs in their GVA. The carbon price must be kept at the current level; otherwise it will be unclear if an industry will be compensated for the carbon costs in the future. This uncertainty will negatively influence investment and maintenance costs. The system should also be modified such as “process emissions” should be exempted from ETS. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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d) in line with the duration of ETS Phase 4 |
The validity should be long to come to a consistent and predictable policy for the industry sectors. A review of the carbon leakage list together with the review of the ETS is therefore a logical choice. |
c) the approach should be less stringent (please specify) |
In a less stringent system the benchmarks should be based on the weighted average and not on the top 10%. A combination of the 10% benchmark and the application of a CSCF or linear reduction factor results in unrealistic low free allocations. For the ammonia industry even the best performing plant will not receive enough free allocation to compensate for the unavoidable feedstock related emission and they will face additional costs. These costs can only be avoided by reduction of the production (to max.49%) and import of the product from outside the EU, which is carbon leakage. This is fully undesired for the company, the environment and the EU economy. |
b) no |
Benchmarks should describe the level of performance of the industry and not the state of the art (which for many industry sectors will never materialize in Europe given the fact that the state of the art technology can only be implemented in new plants.) The competitive environment in Europe (energy costs, climate cost, changing climate legislation every 8-10 years) is prohibitive for multibillion investments with long payback times. Revising benchmark would also punish the early adaptors of innovations and will stop them innovating again. |
c) other (please specify) |
Historical production data should not be used. Instead, production data for the year of concern should be the basis for issuing allowances. |
a) no, there should be no deviations |
There should be no deviations as long as (1) industries severely exposed to the risk of carbon leakage are placed in a special category with preferential treatment, (2) the benchmarks remain at the present levels, and (3) actual production data is used for calculating allowances. |
d) yes, in the form of financial compensation at EU-level |
A harmonised EU-wide compensation scheme avoids discrepancies between Member States and ensures equal competition between EU industries. The indirect costs are invoice in euros (as integral part of the electricity invoice) and not in emission rights. Therefore the compensations should also be given in euros. |
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a) from the Member States' auction budgets |
Climate change is a global challenge of utmost importance to address today through technology developments. It seems unwise to limit the funding only from auction budgets and free allocations. The challenge demands a special EU R&D technology agenda. |
Absence of import emission duty on products imported from countries not committed to ETS |
a) Business |
AB Sandvik Materials Technology |
Susanne Lindqvist AB Sandvik Materials Technology 5318 81181 Sandviken, SWEDEN tel: +46702521089, +4626265550 susanne.m.lindqvist@sandvik.com |
a) yes |
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1) yes |
a) yes |
In steel industry reduction of emissions towards 2020 may be achieved through increased efficiency and investments in known technology with current production levels. To maintain capacity in production equipment it is essential to be able to vary production levels according to the economic situation. This is difficult with the current layout of EU ETS resulting in increased cost on marginal products due to the cap on free allowances. This may lead to decreased investments, a slow dismantling of production capacity and thus reduces production. The incentive for increased production must be improved. In a longer perspective break through techniques are needed to significantly reduce emissions. |
b) no |
The EU-ETS is an extremely laborious system which was intended to be a market system, but is changed by EU and governmental authorities, leaving companies with high energy costs and plans for reduction of production to meet EU emission targets. This decreases the competiveness of the Swedish steel industry and the steel industry in Europe as a whole. The steel industry is energy intensive and constantly works to reduce energy use. Plants reducing iron ore are not given time to develop CO2-neutral technology and even plants which use best available technology face danger of losing competitiveness on the world market. If adding the insecurity of electricity supply within Europe in the future, the conditions for development and investment in the steel industry in Europe are very unfavorable. Energy efficiency is a continuous work within energy intensive industry. |
a) yes |
By pushing tough legislation in Europe, companies with world-wide sales become less competitive, if other countries do not follow fast enough to create a level playing field on the market. Therefore it is important to provide measures making it possible to keep competitiveness until global agreement, with relevant commitments, is achieved. |
a) very adequate |
Carbon leakage is not a fictive construction, it is reality. Companies seldom "move" but lack of investment and in the end closure of industry in Europe is a threat to the global greenhouse gas reduction scheme, if less efficient industry in countries outside Europe wins the race. Free allocation creates space for companies within Europe to make necessary investments and changes. In Sweden the electricity cost increase due to EU-ETS is not compensated, which affects the energy intensive industry´s competiveness in any case. (Note: Sweden produce most of the electricity from water power plants and nuclear powerplants. That means very low CO2 emissions from electricity production). |
a) it absolutely keeps the incentive |
The steel industry is extremely aware of the necessity to decrease the greenhouse gas emissions. The free allocation is though needed to create time to develop new techniques for lowered emissions and in the meantime do the right investments in order to stay competitive over time. The steel industry in Sweden has set targets for emissions which exceed the targets of EU and is therefore does not need tough legislation to get incentives. |
d) absolutely exaggerated |
The process of getting free allocation and reporting CO2 emissions is extremely laborious. The changes which are implemented regularly, not enough information available in time and short time spans to act, add additional burden like increased costs for external auditors, authorities and the companies. |
d) there should be no limit to overall free allocation to industry |
The methodology for free allocation needs to give possibilities for increased production, which is also covered by free allowances in relation to efficiency. Staying competitive on the world market is crucial for European industry. Without industry the welfare of the EU union will decrease and create a downward spiral, leaving little room for investments and development. Growth is therefore essential for continuing competitiveness. |
b) the same share as in Phase 3 |
Finding and testing technological solutions to decrease greenhouse gas emissions is of vital importance for the society. Making funds available for this as a part of the ETS system makes sense. |
a) yes |
Just as renewable energy is a part of the solution of reducing greenhouse gas emissions, the development of industry is. Supporting industry development in terms of funds for research, innovation and pilot testing is a good way of making it easier to make informed and successful investments. Since industrial investments, such as in the steel industry, are very long-lived it is important to dare to make large investments in Europe. |
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
In this sense it is purposeful to equate the importance of the industry to energy generation. |
a) yes |
It is important for all countries to compensate for the increased energy cost due to the ETS system, which also is a source of decreased competitiveness. The compensation for indirect costs should be handled in a harmonized manner within EU. |
a) the present two groups should remain |
It is important to have a reasonably simple and transparent system. |
a) the present criteria should remain |
The major focus at all times must be to keep or increase the competiveness of the European industry. When a cost cannot be transferred to a customer competitiveness is lost. This includes also products with international competitors though trade intensity currently might be low. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
There will always be companies with production that does not fit into the bulk of the relevant sector. For these companies there should be a possibility to argue a case built on qualitative criteria. |
d) in line with the duration of ETS Phase 4 |
It makes sense to have an alignment between the ETS phase duration and criteria for carbon leakage to maintain a reasonably stable conditions for industry. |
a) the present approach of average of the 10% most efficient installations should remain |
In the present approach product groups include a variety of products hence the benchmark is not technically achievable for all producers especially high quality products. More specialized benchmark groups might though make the system more complicated. Therefore the approach should not be more stringent. The benchmark for hot metal is not set according to the 10% approach and is thus not achievable for any producer and should be corrected . |
b) no |
Investments in our sector are long-term and it is impossible to change rules along the way and to force new investments of major kind for every ETS phase. Industry could not comply with that. |
c) other (please specify) |
It is necessary for the ETS system and the industry to be allocated emission allowances based on actual production and not historic. This would allow for both economic growth and recession, without negatively influencing the ETS-system. |
a) no, there should be no deviations |
Favoring one installation on the expense of another should not be done. That would distort the competition. |
d) yes, in the form of financial compensation at EU-level |
Compensation for increased electricity costs is an example of how different countries can influence the competitiveness of their industry by making different decisions. In a harmonized system also compensations should be fully harmonized at EU-level. Since the auctioning revenues are different in different countries it is better to make a financial compensation at EU-level. |
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Large scale pilots are the hardest to find financing for and for such an important area as this it makes sense to make some funds available. |
a) from the Member States' auction budgets |
Auctioning revenues may be used for funding low-carbon innovation support at EU level instead of being used for various purposes on national level. |
The steel industry in Sweden has set up a vision for 2050, where we make the following commitments: Our research and innovation revolutionize technology for tomorrow´s society. Our steel constantly challenges the frontiers of engineering. Our working environment fosters new solutions for communities through global collaboration. Our creativity constantly challenges the limits of contemporary thinking. Our production uses resources so efficiently that only products of value to the community leave our plants. Our ambition constantly challenges the limits of the possible. We work very hard to reduce greenhouse gas emissions, but cannot do it on our own. We need to work together in the society to set up conditions for reducing emissions without losing competitiveness. On the contrary we need to increase competitiveness, to be able to continue to develop sustainable solutions for the whole world. This requires research and legislation which does not distort competitiveness ontheworldmar |
a) Business |
ADP-Fertilizantes, S.A. |
Adress: Estrada Nacional nº10, Salgados da Póvoa, Apartado 88, 2616-907 Alverca, Portugal Telephone: +351 210 300 400 email: geral@adp-fertilizantes.pt |
a) yes |
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1) yes |
b) no |
Theoretically, the answer is yes, but further reductions have a limited reduction potencial, as BAT are implemented and complied for the mainly greenhouse gas. It will be necessary further investments which can lead to loss of competitiveness related to outsider EU countries. |
a) yes |
EU ETS helps the EU industry to become more energy efficient, but the competition outside EU market can become a disadvantage if ETS is not global. |
a) yes |
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a) very adequate |
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a) it absolutely keeps the incentive |
Incentives shall be referred to benchmarkings. |
b) quite proportionate |
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c) a constant share as in 2013-20 |
Benchmarking shall stay the rule. |
e) I don’t know |
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a) yes |
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a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
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c) I don’t know |
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a) the present two groups should remain |
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c) the share of 'carbon costs' in the GVA should be maintained, but 'carbon costs' should be taken into account to the extent that they can't be recuperated in product prices |
Carbon costs involve maintenance of control and measurement equipments contracts with high values. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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d) in line with the duration of ETS Phase 4 |
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c) the approach should be less stringent (please specify) |
The benchmarks should account for new plants and for existing plants. |
a) yes (please specify how often) |
The revision shall take into account existing processes and its ability to adopt the thechnological state of the art, which can be incompatible with the existing plants. |
c) other (please specify) |
Production levels shall be adressed to ETS III for a period of normal operation of the plant, that could be chosen between to ranges. |
a) no, there should be no deviations |
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d) yes, in the form of financial compensation at EU-level |
Indirect costs should not lead to distorsions inside EU. |
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e) I don't know |
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a) Business |
Air Liquide Société Anonyme pour l'Etude et l'Exploitation des Procédés Georges Claude |
Thierry Sueur, Vice-President, European and International Affairs 75 quai d'Orsay 75007 Paris thierry.sueur@airliquide.com tel: +33140625212 |
a) yes |
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1) yes |
a) yes |
EU industry has already drastically decreased its GHG emissions and thoroughly works on its processes to gain energy efficiency. The production of industrial gases (oxygen, nitrogen, hydrogen, etc.) requires large amounts of energy, mainly electricity for air gases and natural gas for hydrogen which represent more than 75% for the Large Industry business line cost stack. In 40 years, we have reduced by more than 50% the energy consumption of its air separation units. Some additional gains might be found at the industrial platform level taking a more global and holistic approach. Through innovation, operational expertise, integration with its customer processes, production synergies in industrial basins, real‐time plant optimisation, etc., we reduce the energy content in the production of industrial gases thereby improving the associated environmental footprint. This is made possible only if a level playing field is ensured between the IG producers and their customers in the ETS mechani |
a) yes |
From our understanding, EU ETS purpose was to help the EU to become globally more CO2 efficient not energy efficient. Currently free allocation mechanisms based on historical data induce additional distortion as enterprises will first adapt volume rather than energy consumption. Furthermore historical volumes are not always the optimum to ensure installation efficiency. To ensure real energy efficiency, a dynamic allocation system should be put in place. Therefore the answer to this question is yes but should be conditioned to the revision of ETS if such objectives change is pursued. Furthermore, competitiveness of the European industry on the long term would indeed come from innovation and energy efficiency. We heavily invest in R&D and engineering innovation to develop new technologies for the environment (hydrogen energy, carbon capture, etc.). to tell the truth, even within our company, some people would have answered no when others were in favour of yes. |
a) yes |
Competitiveness of European companies compared to the rest of the world remains at stake. According to Air Liquide’s internal data corroborated by the International Energy Agency (world energy outlook), electricity prices in France and Germany have been multiplied by almost 3 in 10 years and are today 50% more expensive than in the US. China is massively investing in local carbon production for competitive electricity and feedstock. Natural gas is 3 times cheaper in the US than in Europe. Shale gas and shale oil revolution had also consequences on other key industrial products like ethylene, base product for the chemical industry, now 60% more expensive in Europe than in the US. Therefore and as long as there is no international agreement on carbon policy, strong support ETS EU industry should remain. |
b) quite adequate |
As explained above, measures to protect competitiveness of European sector and avoid carbon leakage remain necessary without international agreement on carbon reduction policy. Free allocations on direct and indirect emissions are the adequate tool to maintain competiveness and to avoid carbon leakage of energy intensive industry. This tool could be complemented by other tools. Nevertheless differentiation for certain sectors based on capacity to pass on cost increase is very inadequate. This simplistic approach does not take into account reality of developed industrial systems mainly based on supply chain added value. As debates on Energy and Environment state aids guidelines have shown, differentiation should be based primarily on energy intensity and only then on trade intensity. |
a) it absolutely keeps the incentive |
Free allocations do not reduce incentives for innovation in solutions for reducing emissions and increasing energy efficiency. On the contrary, free allocation ensures that the investment capacity of companies is maintained. Indeed, the marginal cost benefit obtained from reducing emissions remains the same, irrespective of the extent of free allocation. It is on such analysis that investments in emissions reductions are made. It should also be stressed that there is no industrial development without competitive energy on the long term. With the shale gas revolution in the US and the carbon boom in China, energy is more than ever a key industrial competitiveness factor. The European Union has not yet tackled this issue which is a key challenge putting at risk the future of the European industry if statu quo remains. |
a) absolutely proportionate |
If the administrative burden were important at the launch of the mechanism, the system is well adapted yet. However, it would have been an easier process (and more easily understandable) if dynamic allocations were implemented at the beginning (no needs to rebuild historical data, to make a difference between incumbent and new entrant, to manage a complex mechanism regarding capacity increase…). |
d) there should be no limit to overall free allocation to industry |
Industry should received 100% free allowance allocation at benchmark level for direct and indirect emissions based on actual production instead of historical production level, until the enforcement of a future international agreement |
b) the same share as in Phase 3 |
Innovation support is necessary in order to achieve higher reduction of GHG, NER 300 has been the only tool for funding large scale demonstration European projects. NER 300 should be continued with the same share in phase 3. |
a) yes |
Industrial innovation and deployment of low-carbon technologies are the main potential drivers for industry to achieve a reduction of GHG and to secure competitiveness. EU ETS should provide a specific tool (similar to DOE in the USA) to support industrial innovation (technology push). It is indeed essential to allocate funds to pilot or demonstration projects and to the pre-commercial phase, which play a key role in creating new business opportunities for European companies. The creation of a European fund could represent a major lever in the industrial innovation process. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Auctions revenues should go back to industry and innovative low carbon technologies in the industry should be supported and funded through auction revenues as it was initially envisioned. Auctioning revenues should be collected at EU level in order to create a critical mass to finance large scale project with a clear and strong governance ensuring that intellectual property rights are duly enforced. Therefore both answers a and b should be ticked here. |
a) yes |
Air Liquide and its large customers are energy intensive users. Investment decisions and choices of location worldwide are largely driven by the local energy sourcing conditions. Most Industrial gases are expensively transportable. Air Liquide invests its production plants where its clients are. Consequently, Air Liquide is, like its customers, exposed to international competition. The long term availability and competitiveness of energy (greenhouse gas impact included), as well as a stable regulatory environment, are a must to avoid delocalization. In this context, we recommend that : - The list of exposed sector to indirect emissions should be revised to include additional energy intensive sectors belonging to the supply chain. - Coherence between Energy, Climate and Industry policies but also the EU competition policy, which should better take into account global competitiveness driving European companies, is ensured to avoid having contradictory and conflicting goals for industry. |
a) the present two groups should remain |
The present 2 groups should remain in order to avoid additional uncertainty regarding arbitrary criteria defining new groups. The current quantitative and qualitative assessments on sector and subsector should be maintained. |
a) the present criteria should remain |
The present criteria should remain in order to preserve predictability and avoid changing the whole spectrum after each period. However the cost impact should be comprehensive of all the climate policy cost (direct an indirect emission costs, RES surcharges, and environmental taxes). |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The present threshold should be maintained, in particular the 30% on energy intensity. The latter allows to exempt correctly the few highly energy intensive sectors. If a modification on the threshold has to be done the new mechanism should be equal to the criteria set up in the EEAG for the exemptions of RES surcharges. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
It is important to maintain a certain level of discretion in the system, in particular for sectors and subsectors belonging to the supply chain in order to maintain the competitiveness of the production chain. |
b) longer (please specify) |
In order to ensure predictability and legal certainty over the period, the validity period of the list should be longer than 5 years. 10 to 15 years would be the minimum in order to plan for long term investment industrial project. EU should offer a stable legislative framework. |
a) the present approach of average of the 10% most efficient installations should remain |
Stability and predictability should prevail. The present approach based on the average of the most efficient installations which gives realistic targets for industrial sectors should therefore remain but without the cross-sectoral correction factor (C-factor). C-factor is devoid of technical significance and produces absurd consequences: benchmark level of zero (i.e. full auctioning!). |
b) no |
Benchmarks could be revised in principle every 5 to 10 years. But a continuous revision of benchmarks (i.e. "dynamic benchmark”) would undermine the incentive to invest in the long term, as the investment decisions would be quickly out-dated. Furthermore, revision based on state of the art is not optimal; it should be based on sectoral evolution of “best in class” installations. Actual ETS mechanism based on benchmarks in combination with C-factor is bringing benchmark to level beyond the technological state of art. Therefore benchmarks should not be revised unless ETS mechanism should be modified either by making less stringent the benchmarks or by introducing a dynamic allocation allowing canceling the C-factor. |
c) other (please specify) |
Adaptation to the preceding year (dynamic allocation): Historical allocation mechanism creates detrimental effect on growth and efficiency, in particular this leads to use production level as an adjustment factor. ETS should allow dynamic allocation mechanism based on actual production levels with no C-factor. An allocation supply reserves should be created to allow industrial growth. |
a) no, there should be no deviations |
There should be no deviation to avoid competition distortion. |
c) yes, in the form of additional free allocation |
We favor a EU-wide compensation mechanism to ensure harmonized rules at EU level. Free allocation seems to be the most effective way to achieve this. Currently indirect emissions guidelines introduce competition distortion between the Member states as well as between technologies (heat vs electricity or air vs industrial gases such as oxygen). List of exposed sector to indirect emissions should therefore be revised to include industrial gases. |
Least important |
Less important |
Most important |
Important |
Important funds are needed at European level for large scale pilot and pre-commercialization stage to pass over the valley of death before the commercialization and industrialization phase. |
a) from the Member States' auction budgets |
Important funds are needed at European level for large scale pilot and pre-commercialization stage to pass over the valley of death before the commercialization and industrialization phase. |
The allowances funding low carbon innovation support should come from Member States’ auctions as it was initially envisioned. Article 10.3 of the ETS Directive should be modified in order to oblige Member State to use auctioning revenues to fund low-carbon technologies. |
a) Business |
ALCOA Europe |
Alcoa Europe Government Affairs Office Avenue de Cortenbergh, 60 B-1000 Brussels +32 2 737 13 42 Francesca Stevens, Head of EU institutions relations Francesca.stevens@alcoa.com EU Transparency register # 6018012754-28 http://ec.europa.eu/transparencyregister/public/consultation/displaylobbyist.do?id=6018012754-28 |
a) yes |
|
1) yes |
b) no |
The EU aluminium GHG emission intensity has been curbed by more than 50% since 1997 but industry is reaching technology limitations and faces long development cycles for new technologies (e.g. inert anode). Sector specific technology, life cycle performance and reduction trends are not properly taken into account by EU GHG goals. The ETS design de facto favor a reduction of EU production. It is incompatible with production ramp-up or capacity increase (no ex-post adjustment of allocations to actual production), does not secure stable and EU wide compensation for industries impacted by ETS pass-through in power bills (partial state aid based indirect compensations in a handful of countries and reviewed annually), gives no long-term clarity on compensation after 2020 The financial capacity of the industry to invest into and maintain EU assets is limited by the impossibility to transfer any ETS cost into final product price as Aluminium is globally priced on the LME. |
b) no |
Given its energy-intensive nature (up to 40% of production costs are energy related), the aluminium industry has a permanent incentive to constantly strive to maximise its energy efficiency in order to reduce its high energy costs, independently of the extra cost related to ETS. Furthermore, electro-intensive industries are impacted by indirect ETS costs resulting from the pass-through of carbon costs in the electricity bill. These requires effective compensation to be provided to exposed electro-intensive industries that cannot pass on the additional ETS direct and indirect costs, to avoid shrinking margins and, as a consequence, reduced energy efficiency investments. |
a) yes |
In some energy intensive industries, including aluminium, product prices are set in global markets. Until a significantly larger share of competitors is impacted by equivalent costs of climate policies, there is a need for such measures if the EU wants to retain these industries and their associated downstream value chains. The dramatic drop in production of aluminium in the EU, despite a growing demand for aluminium products in all key European markets (automotive, transport, aerospace, construction, packaging, consumer durables), requires that adequate measures are put in place to address the combined impacts of both EU climate and energy policies. Such measures are transitional in the sense that they can be phased out when a global level playing field is effectively reached for relevant industries. |
a) very adequate |
See also Q1. Full compensation based on free allocation for both direct and indirect costs, linked to actual output and realistic benchmarks, are sine qua non conditions for maintaining Aluminium production assets in the EU, support production ramp-up and limit investments leakage first in primary aluminium then also impacting associated downstream production clusters. |
a) it absolutely keeps the incentive |
Free allocation does not remove the incentive to innovate because the sectors receiving the free permits are still bound to emission reductions according to the ETS linear reduction factor. Furthermore, none of the sectors at risk of carbon leakage receives the totality of its required carbon permits free of charge because allocation is based on best performer benchmarks (and reduced by the cross sector reduction factor). On the contrary, compensation of the direct and indirect costs of ETS through free allocation is a precon¬dition for securing adequate RoI in new technology in Europe, particularly for those sectors such as aluminium that are globally priced and cannot pass on those additional costs. Insufficient compensation reduces the opera¬tional margins and will ultimately redu¬ce the incentive to keep the production equip¬ment in good operatio¬nal condition and to invest in new and more efficient technology. |
b) quite proportionate |
The administrative burden is not insignificant, but proportionate in the sense that no better solutions to solve carbon and investment leakage have been designed |
d) there should be no limit to overall free allocation to industry |
Carbon leakage measures must be adequately funded until global efforts for climate change leads to similar costs for EU industries and their competitors. Free allocation must be sufficient to effectively compensate the most exposed industries from direct and indirect ETS costs. |
d) there should be no such innovation support post-2020 |
The raison d’être of ETS has been to support the most cost-efficient emissions reductions not to fund innovation. It is also inadequate to build an innovation fund on an auction-based revenue which is so variable and uncertain that it is incompatible with long term financial needs of innovation projects such as CCS Income from the sale of emission allowances should be used to mitigate the competitive impacts of emission trading on exposed industries. Innovation support should instead be generated from dedicated EU funding programmes and Member States’ general budgets, not from auction income. |
b) no |
See question 8. The EU ETS is not a proper basis for an innovation fund. Its primary goal is to support cost-efficient emissions reductions. Income from the sale of emission allowances should be used to mitigate the competitive impacts of emission trading on exposed industries. Innovation support should instead be generated from dedicated EU funding programmes and Member States’ general budgets, not from auction income. |
c) other types of funding (please specify) |
See question 8. The EU ETS is not a proper basis for an innovation fund. Its primary goal is to support cost-efficient emissions reductions. Income from the sale of emission allowances should be used to mitigate the competitive impacts of emission trading on exposed industries, which then can restore their margin and financial ability to invest resources in process innovation. Innovation support should instead be generated from dedicated EU funding programmes and Member States’ general budgets and, not from auction income. |
a) yes |
Effective compensation for indirect ETS costs impacting exposed electro-intensive industries must be put in place at EU-level, through additional free allocation. The current system of compensation of indirect costs has proven ineffective and discriminatory because only very few member states can financially establish national state aid schemes. As indirect ETS costs are expected to raise further as a result of carbon price increase associated to the proposals table by the European Commission, a 43% ETS reduction target and the creation of a Market Stability Reserve, a continuation of the current state aid system will: - Leave electro-intensive industries exposed to high pass-through carbon costs; - Generate competitive distortions in the internal market for energy intensive products; - Not create the long-term stability and predictability needed for investments. - Lead to plant closures |
b) more carbon leakage categories should be defined |
Industries subject to globally priced markets should be subject to a dedicated carbon leakage provisions or strengthened regime. Electro-intensive industries that are globally priced are the most exposed to carbon and investment leakage need full compensation for direct and indirect carbon costs. ETS carbon costs are passed into electricity prices through the marginal cost of electricity production including the opportunity cost of CO2. This impacts the competitiveness of aluminium companies operating in Europe, as this is a globally priced industry for which electricity represents a very high share of total costs (ca. 40%). A similar approach has been used to define the level of exemptions from the costs associated with the promotion of renewable energy in the recent revision of the European Commission’s Energy and Environment State Aid Guidelines (2014/C 200/01). |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
A single carbon leakage list based on different exposure categories should be estab¬lished. The list should be based on the combined effect of direct costs (emission allowances) and indirect costs (increases in electricity costs due to climate policy). The following set of criteria should be established to determine the level of exposure to direct and indirect carbon costs: 1. The exposure to global competition, defined as the degree of pass-through of carbon costs in their products (e.g.: revenue correlation with global markets such as the London Metal Exchange) 2. The level of electro-intensity, as defined in annex IV of the EC Energy and Environment State Aid Guidelines (2014/C 200/01). The degree of exposure should be then determined based on whether both criteria are met and to what extent, based on specific thresholds that will need to be defined. |
b) other thresholds should be defined. Please specify below |
The levels of the thresholds should be defined based on the proposed new set of categories and criteria (see questions 12 and 13). |
b) no, all criteria should be based on simple metrics and linked to clearly defined thresholds |
|
d) in line with the duration of ETS Phase 4 |
Predictability is key for industrial planning and certainty hence the validity of the list should match a minima that of the corresponding ETS phase. |
a) the present approach of average of the 10% most efficient installations should remain |
|
a) yes (please specify how often) |
Benchmarks and carbon leakage lists should be revised simultaneously (i.e. for each ETS trading period) |
c) other (please specify) |
Free allocation based on historical values neither supports growth nor preserves the environmental incentive. Com¬pen¬sation should instead be linked to actual output linked to realistic benchmarks in order to provide an incentive for growth and to allow production flexibility through business cycles. For each industry, the baseline will then be set by realistic benchmarks, in order to guarantee full compensation to new capacity and the preserva¬tion of the undistorted environmental incentive. Indirect emissions should also be set based on realistic bench¬marks and actual output. The compensation will be linked to a sum of two bench¬marks, one derived from emissions and one derived from electricity consumption. |
a) no, there should be no deviations |
|
c) yes, in the form of additional free allocation |
Effective compensation for indirect ETS costs must be set at EU-level for exposed electro-intensive industries with additional free allocation as per the exposure to carbon leakage or exposure categories (see question 13). The cost of compensation measures will be proportionate to the EUA price, thus corresponding to the value of free allowances. Today's compensation regime is largely ineffective as only very few member states have established national state aid schemes, leaving a great number of exposed industries without protection. As indirect ETS costs will further rise as a result of carbon price increases due to the proposals of the European Commission (43% ETS reduction target, Market Stability Reserve) a continuation of the current state aid system will: - Leave electro-intensive industries exposed to high pass-through costs; - Cause competitive distortions in the internal market . - Not create the predictability needed for investments; - lead to plant closure |
Important |
Least important |
Most important |
Less important |
|
d) other |
The EU ETS is not an innovation fund and it is ill-thought to rely on an auction based income to programme and sustain funding for our mid to long-term R&D and investment needs. The primary goal of the ETS is to support the most cost-efficient emissions reductions. Income from the sale of emission allowances should be primarily used to mitigate the competitive impacts of emission trading on exposed industries to maintain their primary financial capacity to invest, develop and innovate. In the context of national and EU public budget constraints, innovation support must be redesigned to unlock private innovation and investment potential through improved financial facilities (EIB, access to finance, others), effective conditions to market innovative solutions and backed by stable and refocused public investment and innovation programmes. |
|
a) Business |
Alcoa-Köfém Kft (Alcoa-Köfém Ltd) |
8000. Székesfehérvár, Verseci u. 1-15. HUNGARY Tel: 36 22 531-690, Fax: 36 22 532-276 Laszlo.Papszt@alcoa.com |
a) yes |
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1) yes |
c) I don’t know |
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a) yes |
|
a) yes |
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a) very adequate |
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b) it largely keeps the incentive |
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b) quite proportionate |
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f) I don’t know |
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e) I don’t know |
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b) no |
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b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
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b) no |
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a) the present two groups should remain |
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a) the present criteria should remain |
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c) I don’t know |
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c) I don’t know |
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a) five years |
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a) the present approach of average of the 10% most efficient installations should remain |
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b) no |
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a) no, the same baseline period chosen for allocation in Phase 3 should be maintained also for post 2020 (Phase 4) allocation |
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e) I don’t know |
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e) I don’t know |
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I don't know |
Least important |
Less important |
Important |
We do not know, please disregard the above answers we had to tick. |
a) from the Member States' auction budgets |
|
|
a) Business |
Alpiq Energia Magyarország (Alpiq Energia Magyarország Ltd) |
1085 Budapest, Kálvin tér 12. HUNGARY T: +36 1 886 34 00 F: +36 1 886 34 01 admin.hun@alpiq.com www.alpiq.hu |
a) yes |
|
1) yes |
a) yes |
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b) no |
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c) I don’t know |
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e) I don’t know |
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b) it largely keeps the incentive |
Nem önmagában a CO2 kibocsátás megszüntetésének törekvése készteti a vállalkozásokat az energiafelhasználás csökkentésére. Az energia költség önmagában sokkal erősebb ösztönző a jelenlegi helyzetben! |
c) quite exaggerated |
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d) there should be no limit to overall free allocation to industry |
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a) a substantially higher share than in Phase 3 |
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c) I don’t know |
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b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
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a) yes |
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a) the present two groups should remain |
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g) I don’t know |
Nem tudom, de a lényeg az kellene hogy legyen, hogy lehetőleg csak olyan vállaltok kerüljenek ilyen módon támogatásra, akiknek valóban van esélyük az EU-ETS alól kiköltöztetni termelésüket, vagy egyértelmű versenyhátrányt szenvednek a klimapolitikai célok miatt. |
c) I don’t know |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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d) in line with the duration of ETS Phase 4 |
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b) the approach should be more stringent (please specify) |
Véleményem szerint a „Best Parctice” fogalmát lehetne szűkíteni a leghatékonyabb 5%-ra, esetleg egy folyamatos átmenetet lehetne tervezni a 10%-ról évente 1% lépéssel az 5% irányába. Egy ilyen folyamatos szigorítás talán ösztönzőleg hathatna a fejlesztésekre is! |
a) yes (please specify how often) |
Öt évnél sűrűbben általában nem, de iparáganként eltérő lehet az innováció sebessége |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
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b) yes, there should be deviations with higher allowances for installations facing specific hardships |
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e) I don’t know |
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I don't know |
Important |
Most important |
Least important |
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c) from both |
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a) Business |
Alstom (Transparency Register: 43284012043-03) Alstom is a global equipment and services supplier to the power generation, power transmission and rail transport sectors. Through its innovative technologies, the Group contributes to improving energy efficiency, reducing CO2 emissions and developing renewable sources of energy, in line with the objectives of the EU energy and climate package. |
Juliette Langlais Director Environmental Policies Europe Alstom EU Delegation Avenue Cortenbergh, 52 1000 Brussels juliette.langlais@crn.alstom.com Office : +32 2 732 0704 / Mob : +32 47 666 0757 |
c) not relevant |
Alstom is a global equipment and services supplier. It's our customers (industry and utilities) who are primarily covered by the EUETS. |
1) yes |
a) yes |
Yes. EU as a whole is committed to 80-95% reduction of GHG by 2050 compared to 1990 levels. And both the Industry and the Power sector have a key role to play (respectively 83-87% and 93-99% by 2050 compared to 1990 levels). In order to keep GDP growth and emission reductions decoupled, both these will need to continue innovate and invest on low carbon and more efficient technologies (including implementation of BAT). This will contribute to strengthen their competitiveness while creating jobs. Of special concern is carbon capture and storage without which no industrial or power targets can be achieved. Unfortunately, CCS has been so far lagging behind in terms of commercial scale-up and deployment. |
a) yes |
By setting a cap and a price of carbon, the ETS aims at reducing CO2 emissions while encouraging investment in low carbon technologies, which also increase energy efficiency of the installations. However, the CO2 price under the EU ETS has been too low to drive investment in energy efficiency. The progress made on energy efficiency and on renewables has been due more to regulation of specific products and appliances or guided by penetration targets rather than the incentive of a CO2 price. At the same time, the cap in the EU ETS which determines to volume of certificates in the market has failed to take account the progress made in energy efficiency and renewable energy penetration. And this has contributed to the current 2 billion surplus of ETS certificates. |
a) yes |
Such measures are needed if there is evidence that the EU’s climate and energy policies are the cause of a competitive disadvantage. If the evidence is demonstrated, these transitional measures should be targeted and focused on a list of sectors and sub sectors. International developments have to be taken into account as regard these transitional measures; especially, the revision of the list post 2020 will need to take into account the outcome of UNFCCC COP21 discussions in Paris in 2015 (international agreement on post 2020 regime ). |
b) quite adequate |
Free allocation has, so far, prevented carbon leakage from occurring during Phase 2 of the EU ETS, as it has been reported. In that sense free allocation has been adequate in preventing the risk of EU industry relocalising outside of Europe to a jurisdiction with less/no climate policies. However there are concerns about the adequacy of the free allocation methodology in the future, due to increasing concerns about investment and low carbon leakage and relocation of innovative industry outside Europe in countries or areas which offer more stable and incentivising policy to invest in low carbon technologies. Carbon prices have so far represented a very marginal share of total costs of installations. An installation’s strategic decision is more influenced by other factors such as market perspectives, cost of labour, cost of raw materials, etc. than the cost of carbon. |
e) I don’t know |
|
e) I don’t know |
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f) I don’t know |
What’s important for a well-functioning EU ETS, is its cap. The EU-wide target needs to be in line with the long-term objective for the EU to reduce its emissions by 80-95% by 2050 compared to 1990 levels. The total cap of allowances in the EU ETS will depend on the EU-wide target. In order for the EU to meet this long-term objective, all sectors need to reduce their emissions. The share of post-2020 allowance budget dedicated to carbon leakage should be set under evidence based analysis, if it is demonstrated that the EU’s climate and energy policies are the cause of a competitive disadvantage. Decision on post-2020 carbon leakage measures should take into account the outcome of COP21 discussions in Paris in 2015 (international agreement). |
a) a substantially higher share than in Phase 3 |
EU cannot afford a “stop and go” approach in Innovation policy without the risk to put an irreversible break to technology development. We fully support the continuation of the NER300 beyond 2015 and before 2020. To be meaningful and credible, the Fund should make available a very large amount of money. - From the ETS: free allowances from NER non-allocated in 2020, free allo. allocated to plants that will close before 2020 (IED regulation) & EUAs from the Market Stability Reserve could be monetised. Without being monetised, EUAs could also be used as collateral to leverage financing at an agreed carbon price. - From 2014-2020 EU Budget: ‘Smart or Inclusive Growth’ or ‘Sustainable growth: Natural Resources’ lines, Structural funds, Coal and Steel Research Fund, H2020, CEF and the tax on financial transactions To ensure an optimised use of EU money, it is critical to work out a solution allowing ETS installations to benefit from Struc. Funds over 2014-2020. |
a) yes |
The legislative basis for NER300 elapses end 2015. A prolongation requires an amendment to the ETS Directive asap so that the first calls take place well before 2020. They should benefit from an even more accelerated due diligence processes than it was the case for NER300 Ph2 (18 months). In order to catch the rapid evolution of technological innovation, this new program should be open ended and rolling with calls for proposals and awards every 2 years. Demo. projects under the Fund should target innovative technos which are key for the decarbonisation of the power gen° sector and heavy industries. Notwithstanding geographical balance, the Fund could primarily target projects in MS which are heavily reliant on fossil fuels, where the transition to a low carbon economy requires transformation of the power generation system, and aiming at developing large scale demo. projects for non mature renewables and CCS. Availability of upfront funding will be one of the key elements of success. |
c) other types of funding (please specify) |
- From the ETS: free allowances from the NER non-allocated in 2020, free allocations allocated to plants that will close before 2020 (under the IED regulation) and EUAs from the Market Stability Reserve could be monetised. Without being monetised, EUAs could also be used as collateral to leverage financing at an agreed carbon price. - From the 2014-2020 EU Budget: MFF (Smart or Inclusive Growth’ or ‘Sustainable growth: Natural Resources’ lines), Structural funds, Coal and Steel Research Fund, H2020, Connecting Europe Facilities and the tax on financial transactions. “Blending” mechanisms and innovative financial instruments could unlock additional financing for projects and make more strategic use of EU grant money. Lower than expected carbon price has dramatically reduced the volume of public funding available under NER300.The set-up of a “strike carbon price” guaranteed by the EIB will offer visibility to project sponsors and applicants. |
c) I don’t know |
Post-2020 allowance budget dedicated to carbon leakage should be set under evidence based analysis, if it is demonstrated that the EU’s climate and energy policies are the cause of a competitive disadvantage. Decision on post-2020 carbon leakage measures should take into account the outcome of COP21 discussions in Paris in 2015 (international agreement). |
e) I don’t know |
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g) I don’t know |
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c) I don’t know |
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c) I don’t know |
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e) I don’t know |
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d) I don’t know |
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c) I don’t know |
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d) I don’t know |
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e) I don’t know |
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e) I don’t know |
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Least important |
Less important |
Important |
Most important |
The 4th stage mentioned in this question (« at the commercial stage ») must be understood as « at the PRE-commercial stage" |
c) from both |
Sources of funding low carbon innovation fund should not be limited a priori. All options should be foreseen. Free allowances from the New Entrant Reserve non-allocated in 2020 and free allocations allocated to plants that will close before 2020 (under the IED regulation) could be monetised. Allowances from the Market Stability Reserve (auction budget) could also be sold on the market. Without being monetised, allowances from the ETS could also be used as collateral to leverage financing at an agreed carbon price. |
|
a) Business |
Andaluza de Cales, S.A. (Ancasa) |
María Luisa Balerdi Torrecilla Egileor auzoa 101, 20.268 Altzo Gipuzkoa Spain mbalerdi@calcinor.com |
a) yes |
|
1) yes |
b) no |
Around 70% of the total CO2 emissions generated in lime production are "process emissions": they come from our raw material, limestone. These process emissions cannot be avoided without changing the quality of the final lime product which is however essential to serve specific applications. Currently, the most energy efficient kiln is near the thermodynamic minimum required for the chemical reaction needed for producing lime. The heat of the reaction for typical quicklime quality is 3.03 GJ/tonne, and the average fuel use 4.25. The energy consumption of the best available lime kiln (a Parallel Flow Regenerative Kiln, PFRK) is between 3.2 and 4.2 GJ/tonne. This type of kiln is already the most widely spread kiln technology today. However, one should keep in mind that horizontal rotary kilns (less energy efficient) provide a certain quality of lime and permit to optimize the extracted limestone due to their ability to treat the different sizes of stones. |
b) no |
The EU ETS will only remain the best solution for reducing CO2 emissions as long as the GHG reduction target is set at a level which is both technically and economically feasible. The current economic crisis and the further shrinking of the demand for lime products makes that there is at the moment a lot of “idle” production capacity in the EU. These installations are completely amortized which makes production in these installations cheaper than in a new one. A higher carbon price would not be a solution, as it would only draw money away from producers without enabling them to make an investment. When assessing the potential further ETS amendment in a sector, it is necessary to take account of the lifespan and replacement rate of kilns. Most of the time, investments costs always assume an investment in a new capacity (replacing the old capacity before its end of life). However, for the lime sector, kilns receive big maintenance periodically. |
a) yes |
Carbon Leakage will remain a big concern after 2020 in the absence of an international agreement putting forward a similar CO2 burden. Ancasa believes that all energy intensive industries should be protected against carbon leakage, and that any increased level of ambition of Europe towards 2030 should lead to increased and not decreased protection against carbon leakage. Furthermore, the EU ETS is NOT addressing the following concerns: - The GHG reduction deficit (shortage of free allowances even for the installations with the best GHG performance. - Energy costs represent on average 40% of the lime industry’s manufacturing costs. Having access to energy at a reasonable cost is an essential condition for operating in the EU and for maintaining lime's competitiveness. - Further adequate incentives for low carbon investments is needed, with auctioning revenues being targeted for low carbon investment toward the industry |
c) quite inadequate |
The current carbon leakage mitigation measures do not take into account of: The importance of CO2 embodied in imports A unilateral reduction of CO2 emissions in Europe will not help fighting against climate change if a subsequent rise of imports from third countries is created. Carbon Trust, amongst others, demonstrated that the reduction in production-related CO2 is largely compensated by CO2 embodied in imports. The cumulative burden of the EU framework Several other EU legislations have an impact on the EU's industry competitiveness (renewables, energy efficiency). The Commission should ensure an integrated approach with no overlap. Energy costs Energy costs represent on average 40% of the lime industry’s manufacturing costs. Like for any energy intensive industry, having access to energy at a reasonable cost is an essential condition for operating in the EU and for maintaining its competitiveness. |
b) it largely keeps the incentive |
It is important to remind that the Commission has calculated product specific benchmarks based on the average GHG emissions of the 10% best performers. A comparison of these benchmark values with the minimum values that are technically feasible shows that the remaining potential in some sectors, like lime, is actually quite low. The current best available and most energy-efficient kilns (the Parallel Flow Regenerative Kiln, PFRK) is close to the thermodynamic minimum required for the chemical reaction needed for producing lime. In other words, no further breakthrough technologies in energy efficiency are expected. The drive towards the most energy efficient solutions can easily be explained by the fact that energy costs represent on average around 40% of the lime sector’s production costs. Outside the deployment of a commercially and technically feasible Carbon Capture and Storage solution, there is little margin for further CO2 abatement in the lime sector. |
c) quite exaggerated |
Lime is the most impacted sector by the EU ETS. The production of 1 tonne of lime generates 1 to 1.6 tonne of CO2. This means that the EU ETS has a strong impact on the sector, up to 35% of impact of the CO2 costs on Gross Value Added (Hourcade et al, 2008). Therefore, the full impact of carbon costs would have serious consequences in terms of carbon leakage for the lime industry. While the lime industry advocates in favor of less red tape and less administrative burden, it recognizes the importance of the free allocation for maintaining a competitive industry in the EU. |
d) there should be no limit to overall free allocation to industry |
There is still a need today for an international climate agreement that would bring a level playing field to EU manufacturing companies. In the absence of such agreement, and considering that several countries in the EU neighborhood are not following the EU’s climate leadership, there should be no limit to the overall free allocations to the industry. Furthermore, Ancasa believes that all energy intensive industries should be protected against carbon leakage, and that any increased level of ambition of Europe towards 2030 should lead to increased and not decreased protection against carbon leakage. The most GHG Efficient installations should receive 100% of their needs for free. The industry cap should be adjusted so that the CSCF and linear reduction factor do not reduce the free allocations. |
c) a lower share than in Phase 3 |
It seems that the current state of efforts regarding the development of CCS (including the NER 300 program) will not reach the ambition to develop, by 2020, a commercially and technically available solution for the capture and storage of carbon. In 2012 TNO calculated for EuLA the costs of capturing CO2 at different kinds of lime kilns. For the state-of-the-art solvent (MEA) costs to capture CO2 were €94 per ton of avoided CO2. The cost to capture CO2 would more than double the production costs of around €60/ton lime. Currently, lime plants are typically located right next to the deposit, not clustered in large industrial agglomerations. Transport costs from the capture to the storage can add significantly to the capture costs. This is why Ancasa believes that further R&D is necessary, but that it should be funded via a mobilization of different sources including auctioning revenues but not the new entrants' reserve. |
a) yes |
The auctioning revenues should be used to encourage low carbon investments. As a general principle, revenues should go back to industry to enable investments in low carbon solutions. Part of the revenues could for example be used to provide cheaper loans for low carbon investments in installations falling under the EU ETS. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The auctioning revenues should be used to encourage low carbon investments. As a general principle, revenues should go back to industry to enable investments in low carbon solutions. Part of the revenues could for example be used to provide cheaper loans for low carbon investments in installations falling under the EU ETS. |
a) yes |
Ancasa strongly favors a level playing field within the EU and outside Europe. This is why Ancasa believes that the EU should maintain its efforts to achieve an internationally accepted and legally-binding agreement proportionate to the burden in the EU. In the absence of such agreement, the EU should safeguard the competitiveness of the EU industry with any appropriate measure. Ancasa has serious doubts that the current legal framework will ensure a level playing field beyond 2020. |
a) the present two groups should remain |
Ancasa believes that no further complexity and calculations should be added to an already complex scheme. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
1. Share of carbon costs in the GVA should be maintained 2. Trade intensity should take especially into account the trade with EU's neighborhood In an internal survey realized by the lime sector (NERA " Energy and transport cost comparison of the EU lime industry to 10 non-EU regions"), it has been established that the threat for lime producers mainly come from the EU neighbor countries such as Russia, Maghreb and Middle east. 3. Energy / climate requirements in Free Trade Agreements should be taken into account “Energy and climate” clauses should be part of any Free Trade Agreement, especially if the trading partner in question has not assumed any carbon reduction commitments. 4. Fuel mix price should be taken into account Finally, Ancasa recommends that the EU defines an affordable and available “fuel mix” for 2030, assesses its accessibility and compares its costs with the costs of the fuel mix used by the main EU competitors. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
It is important to point out that the revision of NACE code list (v2) implied that the assessment of the carbon leakage criteria for the lime sector is now done at a new disaggregation level, which includes not only lime but also plasters and aggregates. Ancasa believes that this assessment should be done at the appropriate level of disaggregation, since that the industrial activities that are included in the NACE v2 code for lime do not share the same fundamentals (in terms of energy intensity and carbon intensity for instance). |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Ancasa believes that it is important to maintain a certain level of discretion in the system for justified cases. This concerns both the qualitative criteria and the possibility to conduct the assessment at the appropriate level of disaggregation (Prodcom 8). |
b) longer (please specify) |
The time validity of the list of sectors exposed to carbon leakage should take into account the investment cycles of the industry. It is also necessary to take account of the lifespan and replacement rate of kilns. Most of the time, investments costs always assume an investment in a new capacity (replacing the old capacity before its end of life). However, for the lime sector, kilns receive big maintenance periodically. It is therefore important to ensure that the investments made now will not become "stranded assets" in the future due to an unexpected change in the carbon leakage list. Furthermore, any trade intensity assessment for the carbon leakage list should take into account the impact of trade with EU neighbouring countries. |
a) the present approach of average of the 10% most efficient installations should remain |
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a) yes (please specify how often) |
The most GHG efficient producers have to be defined with ambitious, fact-based and realistic benchmarks to be periodically reviewed per commitment period so as to reflect technological progress and uptake of new proven technologies in the EU. It is however important to understand that the technological state of the art is not representative of what can be achieved in practice. Lime characteristics are so vast that multiple uses can be done from the same material. It is also highly dependent of the stone quality from the quarry. The benchmarks should only take into account innovations that have been proved to be commercially viable and that can be implemented on site. |
c) other (please specify) |
In the case of the current ex-ante system, the reference year should be adapted, and the baseline should be a longer period without offering a choice between different periods, and not known in advance. However Ancasa believes that free allocation should reflect economic reality per installation based on the most recent years and should not be frozen by historic production. In this regards, Ancasa suggests to the European Commission to start working on the development of a dynamic system that could replace the current system, under the condition that no correction factor (CSCF) should be applied in addition to a dynamic system. Also, such system should take into account the administrative burden, the robustness of the control of the declared production, and the confidentiality of commercially sensitive information. |
a) no, there should be no deviations |
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d) yes, in the form of financial compensation at EU-level |
Ancasa defends a Full off-setting of CO2 costs pass through in electricity prices with a harmonised approach in all EU Member States. |
Most important |
Important |
Less important |
Least important |
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a) from the Member States' auction budgets |
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a) Business |
ArcelorMittal Register ID: 23527541824-60 |
R.J.Jeekel, ArcelorMittal: Keizerinlaan 66, 1000 Brussel, B. Tel 02 7009499.
email Robert.Jan.Jeekel@ArcelorMittal.com
|
a) yes |
1) yes |
b) no |
Following the request of EU Commission most energy intensive sectors developed their own low-carbon industrial roadmaps. Most of those roadmaps show only small incremental GHG emission reductions possible between now and 2030.Furthermore, most of the sectors will need the development, piloting, demonstration and of breakthrough technologies to meet long term goals of around -80%. These technologies, if ever developed, would only come in play after 2030. According to the BCG Study, the steel sector can only reach 15% reduction until 2050, under economically realistic circumstances.
This is particularly true for the steel sector. As demonstrated in the Steel Roadmap 2050, technologies able to drastically decrease the sector’s emissions are either uncompetitive because relying on expensive reducing agents (pre-reduction of iron) or involving Carbon Capture and Storage.
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b) no |
First of all, being exposed to fierce competition from third countries in the EU market and in the export market, the EU steel sector is not able to pass on direct and indirect CO2 costs on prices. Therefore, CO2 costs can potentially damage the operating margins and thus, financial means available for investment.
Secondly, investments in energy efficiency make the industry more competitive only if the return on investment is positive i.e. the savings exceeds the investment costs. With the ETS, investments are made only if their cost is offset by the avoided carbon costs. As such, the ETS doesn’t make the industry more competitive as ETS-driven energy efficiency measures are there only to compensate a cost that wouldn’t be there without the ETS.
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a) yes |
The EU steel industry delivered goods that are globally traded. As regards steel sector, steel is a global traded commodity and steel companies are competing on global markets. From the global crude steel output of 1,607 Mio t, China comes first with around 779 Mio t followed by the EU-28, with the EU-28 being the first steel importing region in the world and the third in term of exports. This shows that the EU steel sector faces fierce competition from third countries not only on the domestic market but also on a global level; EUROFER is therefore convinced that a comprehensive, all parties equally obliging and legally binding international climate deal is the best way to address climate change whilst solving distortion of competition issues due to asymmetric carbon constraints. In the absence of an international climate agreement providing level playing field special measures are needed to support EU industry covered by the EU ETS to address the competitiveness issue and avoid carbon leakage. |
b) quite adequate |
As shown in the Ecorys ‘Carbon leakage evidence project’ - fact sheet for steel, one of the main reasons why no evidence of leakage could be found in the first two trading periods is the effectiveness of the protection provided by free allocation. Free allocation is the best instrument to date to address carbon leakage risk for certain industrial sectors. Sectors at risk of carbon leakage shall be provided with 100% free allocation at the level of the most efficient installations, based on achievable benchmarks and without any correction factor. Equally they shall be provided with full off-setting of CO2 cost-pass through in electricity prices in all member states by either financial compensation, free allocation, or the electricity market shall be re-designed in a way that it prevents any carbon price pass-through in electricity prices, or a combination of these. |
b) it largely keeps the incentive |
With a free allocation based on achievable benchmarks companies in the tail of the benchmarks have an incentive to catch up more quickly to the benchmark due to the level of carbon related costs. Companies in the lead are incentivised to innovate to perform even better.
On the contrary, a higher level of auctioning for sectors exposed to leakage (as induced by the Cross Sectoral Correction Factor) decreases the profit margins and the financial ability to invest. This is particularly true in these periods of restricted access to capital.
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b) quite proportionate |
The implementation of the benchmarks through the NIMs requires significant resources, both from the industry as well as from the competent authorities. However, not having free allocation would have dramatic consequences for the sectors most exposed to carbon leakage. The cost impact (for the companies as well as for the society because of the costs deriving from lost market shares and possibly plant closures) would in any case be much higher than the administrative burden. |
d) there should be no limit to overall free allocation to industry |
To safeguard EU industries’ global competitiveness in absence of a comprehensive international agreement on climate change establishing a global level playing field for industry, sectors at risk of carbon leakage need to be provided with 100% free allocation at the level of the most efficient installations, based on achievable benchmarks and no correction factor.
A bottom-up approach is needed for cap setting. The cap should be flexible so as to be in line with what is technically and economically feasible in terms of CO2 reduction potential.
Benchmarks need to be revised periodically (e.g. each ETS period), in order to take into consideration technological development. In the absence of major technological change able to decrease the sector’s emissions, a flat rate of free allocation must be guaranteed.
Furthermore, in order to protect sectors at risk of leakage due to indirect CO2 costs, it should be considered to fully offset CO2 costs passed through in electricity prices by means of free allowances. This would require a larger access to the allowance budget.
Furthermore, in order to protect sectors at risk of leakage due to indirect CO2 costs, it should be considered to fully offset CO2 costs passed through in electricity prices by means of free allowances. This would require a larger access to the allowance budget.
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e) I don’t know |
For the moment these funding is not possible for steel. A dedicated program for low carbon steel technologies should be developed.
ETS Funding of low carbon innovation must be consistent with the level of ambition of the objectives. They cannot all be financed by ETS.
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a) yes |
A dedicated program for low carbon steel technologies should be developed. This should cover all carbon abatement measures, provided that there will be no additional burden for the industry. ETS by itself is supposed to be the driver for low carbon technology in the covered sectors and should not be used to finance also all funding additionally for low carbon technology, particularly not in non-covered sectors like RES and CCS. |
c) other types of funding (please specify) |
A dedicated program for low carbon steel technologies should be developed. Adequate funding should be provided by a well-balanced mix of funding sources, within and outside the EU ETS. |
a) yes |
Sectors at risk of carbon leakage shall be provided with 100% free allocation at the level of the most efficient installations, based on achievable benchmarks and no correction factor. Equally they shall be provided with full off-setting of CO2 cost-pass through in electricity prices in all member states by either financial compensation, free allocation, or the electricity market shall be re-designed in a way that it prevents any carbon price pass-through in electricity prices, or a combination of these. |
e) I don’t know |
It is important that the sectors most exposed to carbon leakage should get a flat rate of 100% free allowances based on reachable benchmarks. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
It should be evaluated if GVA could be replaced by GOS, Gross Operating Surplus. This is stated in Eurostat like GVA, excludes labour costs, and could therefore be a more relevant and fairer indicator if a sector can pay for carbon costs (labour costs in GVA blurs this picture).
Trade intensity should stay
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b) other thresholds should be defined. Please specify below |
Motivation:
-(see 13) For GOS other thresholds need to be set, based on sector outcome. We are still investigating where this should be.
-The GOS and trade intensity criteria should be reached at the same time (not just one)
-The 30% trade intensity standalone threshold should be deleted
-On trade intensity there is room in the steel industry for increase, as we cannot pass on our EU carbon cost in our prices.
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
For some sectors, statistical data doesn’t fully capture the reality of their exposure to leakage. This is often due to boundary issues or linked to the complexity of the sector and its market (e.g. existence of substitutes). There the option to have a qualitative assessment should be kept. |
d) in line with the duration of ETS Phase 4 |
On top of this, there should be the possibility to add sectors to the leakage list during the trading period, if a change of conditions justifies it. |
c) the approach should be less stringent (please specify) |
The steel benchmark is set at a level that even the best plants cannot reach it. This should be improved asap. The steel benchmark should be set at a level of an actual existing site (like in other sectors)
Only with a fair and realistic benchmark the goal of the 10% best performers is ambitious enough to lead the EU-ETS on an economical way to success. The benchmarks need to reflect real technical and economical possibilities to produce the product to be benchmarked AND to sell it on the relevant market taking international trade into account. However, in a sector with a relative low number of installations, abatement of carbon by an individual installation affects the benchmark substantially. Any adaptation of benchmarks for 2021 onwards should be considered only if the best performers of sectors at risk of carbon leakage receive true 100% free allocation and full off-set of CO2 costs pass-through in electricity prices in a harmonized way in all Member States.
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b) no |
The steel benchmark is set at a level that even the best plants cannot reach it. If this is meant with technological state of the art than it is not correct and reachable. This should be improved asap. The steel benchmark should be set at a level of an actual existing site (like in other sectors). If the latter is meant with technological state of the art we agree.
Then, a periodical review of the benchmarks once per commitment period should be made, so as to reflect technological progress and uptake of new and proven technologies in the EU. This should be done by assessing the benchmarks through an analysis of the CO2 performance of the EU industry and not be based on best available techniques (BAT), because BAT feasibility depends to a large extent on local conditions (e.g. cheap natural gas for DRI).
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c) other (please specify) |
Allocation should be based on full 100% allocation for the best performers (no correction factor) and real production levels or a rolling average of production levels over closer years (e.g. n-1, n-2). |
a) no, there should be no deviations |
Distortion of competition within the single market shall be avoided. |
c) yes, in the form of additional free allocation |
Full off-setting of CO2 cost-pass through in electricity prices should be provided in an harmonized way in all member states by either free allocation, financial compensation, or the electricity market shall be re-designed in a way that it prevents any carbon price pass-through in electricity prices, or a combination of these. |
Important |
Less important |
Most important |
Less important |
d) other |
A dedicated program for steel should be set up for this. In general, the allowances funding low-carbon innovation support should come from EU funding projects (H2020, Spre, etc) and MS’s budgets. Other public and private funding sources should also be considered. |
The carbon leakage list is no sufficient protection anymore against carbon leakage and investment leakage. The EC policy has to change structurally to take this into account.
- EC Impact assessments should be improved to make them less politically biased and more fact based as basis for decision making. Realistic outcomes for the steel industry of the immense shortages and costs from the 2030 energy & climate plan were kept out of the EC impact assessment, while all data were known. There are many ways how to improve these.
-Current policy is based on the business model of the power sector and the conviction in the some parts of the EC that huge parts of the upstream industry in Europe has to close, which is exactly what the current 2030 plan will cause, by the huge shortages of allowances and power price impacts. If this is not the case, the EC needs to provide a signal asap in the shape of actual policy measures that it intends to keep European industry, which is the basis of many value chains, innovation and jobs and prosperity.
The Commission should start using the reality of the European industry as basis for policy as the industries mostly cannot pass on their carbon costs (unlike the power sector), can relocate and can miss investments that go to other regions in the world.
The presence of a healthy EU industry IN Europe is good for Europe and good for the environment.
|
a) Business |
ArcelorMittal Eisenhüttenstadt GmbH |
Renato Thielecke - Betriebsratsmitglied
ArcelorMittal Eisenhüttenstadt GmbH 15888 Eisenhüttenstadt Tel.: (03364) 378025 oder 375146
Fax: (03364) 37655146
<mailto:renato.thielecke@arcelormittal.com> |
1) yes |
b) no |
The industrial sectors, that participate in the EU ETS have as far as possible exhausted their potential to reduce CO2 emissions. This is especially true for the steel industry, which reduced its CO2 emissions between 1990 to 2010 by 14% in the 27 EU Member States. The steel industry also has a very high percentage of process emissions. The EU ETS is at the moment as system which only covers Europe. If the EU ETS is continuing to exist only in Europe than measure against carbon leakage need to be kept in place in order to safeguard European jobs. Retrenchment should be used sectoral and differentiated (for example for the insulation of buildings and especially in the area of energy production) |
b) no |
The european ETS is a big challenge for the european industry and especially for the steel producers. Competitiors from other steel producing countries do not have a similar system (see 'Study on the EU ETS in countries with steel industry' by the 'Institute on German Economy' of 2013'). Through this European steel producers have costs, which do not eixist in other countries. Epecially due to this development, the European steel industry took severe steps even before the intorducition of the ETS to reduce emissions. To conclude that the EU ETS |
a) yes |
As explained in questions 1 and 2, through the EU ETS and the strong external trade activities there is a large cost disadvantage for European producers which can lead to carbon leakage. The circumvention of emigration is the main condition for the ETS to reach its goal: namely climate protections. As long as there is no globally binding climate measures in place, the regulation for the European market, need to have safeguards in place that give Europe fair competition conditions on a global playing field. |
a) very adequate |
See also question 3: Free allocation is a special instrument that prevents the migration of the European industry. As long as there are no globally binding climate regulations, free allocation is a useful instrument, that helps to decrease the massive disadvantage of the European industry and that prevents the reduction of industrial jobs in Europe. |
b) it largely keeps the incentive |
There are also incentives to reduce emissions without the EU ETS. Plant operators for example need to reduce energy sources that produce a lot of emission to reduce energy costs. Especially, the energy intensive industry regularly checks their potential to reduce energy in its production processes in order to stay competitive. Free allocation does not lead to the reduction of incentives to reduce energy costs. |
c) quite exaggerated |
The administrative work is quite high, especially for small firms. Therefore one should think about appropriate measures to reduce the administrative procedures. The free allocation of allowances needs to stay in place. |
d) there should be no limit to overall free allocation to industry |
In order to keep industry that falls under the EU ETS competitive – free allocation is necessary also after 2020. Up until now there are no clear signs that other countries, especially the emerging markets, will participate in a global ETS. As long as there are no finding global regulations and instruments, free allocation is essential for survival. Also benchmarks need to be used in way that they are actually accomplishable. |
d) there should be no such innovation support post-2020 |
If there is a need for investing into CCS-technologies, than this investment should not be done under the framework oft he EU ETS. The EU ETS should generally stay very transparent, meaning it should not try to fulfil additional aims which could be accomplished better through other specilisased instrument which could than in turn be integrated in the ETS.
Moreover, investing into technologies through the sale of allowances is not very adequate and reliable since the prices for the allowances are fluctuating.
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b) no |
As explained in question 8, the EU ETS should be very transparent and it should not be cluttered with additional aims.
The general view on the usage of ETS auctioning revenues does not necessarily require competences on EU level, especially since it is likely that in this case there will be a redistribution between Member States, for which there is no justification under the framework of the ETS (see above: exclusion from additional aims).
If need to be a stronger commitment of member states is imaginable in regard to the usage of ETS auctioning revenues for climate change projects and/or for social compensation measures for those that are burdened by the ETS. |
c) other types of funding (please specify) |
In case that there is a need for support for low carbon technologies on EU level, this support should be granted via other established instrument or if necessary via newly created instruments. The funding can then be realized through a redistribution of financial means or through an increase of the EU budget. The EU ETS should not be used to achieve such additional goals (see also responses to question 8 and 9). Alternatively the NER300 could be used. |
a) yes |
As explained above (questions 6 – 8) there is a need for an adequate regulation that prevents migration of industries to no-EU countries and that creates incentives for efficiency improvements. In order to reach this goal benchmarks should be adapted to a more feasible level. Globally there is currently no steel producer that is able to reach the current benchmarks.
If it is not possible to prevent migration of industry under the current ETS framework, than one should start thinking about alternatives (like for example the removal from industry out of the ETS). |
a) the present two groups should remain |
The current categories are sufficient. Through a bigger differentiation more administrative work might be necessary. The effectiveness of the measure goes hand in hand with a binding global adoption. |
a) the present criteria should remain |
The system should not be changed, in order to give operators planning certainty |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
b) no, all criteria should be based on simple metrics and linked to clearly defined thresholds |
See questions 13 and 14. |
d) in line with the duration of ETS Phase 4 |
A validity of the carbon leakage list after 2020 should be given like in the 4th trading period. An examination of the list in a shorter time frame would entail additional bureaucratic burdens and costs which would in turn worsen the competitive situation due to the missing global system. |
a) the present approach of average of the 10% most efficient installations should remain |
The 10% best benchmarks should remain. They should however be adjusted to more feasible 10% best benchmarks. An examination of the benchmarks every 5 years should take place. |
a) yes (please specify how often) |
The benchmarks should be examined every 5 years on the basis of the 10% best criteria. |
c) other (please specify) |
Allocation should be linked to actual production and not to historic emissions. |
b) yes, there should be deviations with higher allowances for installations facing specific hardships |
A hardship rule for cases in which the EU ETS rules would lead to unfair hardship is necessary. If such a hardship rule is missing (up until now), the ETS might interfere to much with the basic rights of the installation operators (see current case T-630/13). General rules – even if they are very good – cannot prevent hardship in specific cases. |
d) yes, in the form of financial compensation at EU-level |
Generally there is no difference between directly caused (costs for allowances) and indirectly cause (energy costs) migration through the ETS. In order to prevent carbon leakage both effects (direct and indirect) should be treated equally. |
I don't know |
I don't know |
I don't know |
I don't know |
This question is not relevant in regard in our opinion. Concrete innovation policies should not be seen as additional aim of the ETS in order to safeguard transparency. |
d) other |
As indicated in questions 8 – 10 there should be no concrete innovation support through ETS revenues on EU level. |
a) Business |
ArcelorMittal Poland S.A. |
Andrzej Pawlas | ArcelorMittal Poland S.A. Energy & Environmental Protection Office| al. J. Piłsudskiego 92 41-308 Dąbrowa Górnicza, Polska T: +48 32 7768628 | F: +48 32 7768867 | M: +48 692479759 andrzej.pawlas@arcelormittal.com |
a) yes |
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1) yes |
b) no |
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a) yes |
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a) yes |
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a) very adequate |
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a) it absolutely keeps the incentive |
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b) quite proportionate |
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d) there should be no limit to overall free allocation to industry |
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a) a substantially higher share than in Phase 3 |
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a) yes |
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a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
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a) yes |
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c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
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a) the present criteria should remain |
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a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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d) in line with the duration of ETS Phase 4 |
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c) the approach should be less stringent (please specify) |
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a) yes (please specify how often) |
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a) no, the same baseline period chosen for allocation in Phase 3 should be maintained also for post 2020 (Phase 4) allocation |
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d) both b) and c) |
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c) yes, in the form of additional free allocation |
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Least important |
Less important |
Important |
Most important |
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c) from both |
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a) Business |
Ardagh Group |
Steffen Seehausen Group Head of Sustainability Gr. Drakenburger Str. 132 31582 Nienburg steffen.seehausen@ardaghgroup.com T : +49 502 185 216 |
a) yes |
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1) yes |
c) I don’t know |
The glass industry is making continuous improvement in energy efficiencies and process technologies to reduce CO2, energy consumption and environmental impacts. While further reductions in the glass industry are possible, what is important is the magnitude of this reduction. All official EU publications such as the “Sector Competitiveness Studies - Competitiveness of the Glass Sector - ENTR/06/054 - Final report, 14 October 2008” or more recently the Glass BREF and the BAT Conclusions show that no breakthrough technology is currently available to reduce CO2 emissions to the extent imposed by the energy and climate package 2030 (-43% for ETS sectors between 2005 and 2030). Emissions reductions cannot be repeated ad infinitum. There is a thermodynamic limit to the glass melting process which is an absolute limit, and that current technology is already approaching. Moreover, further reductions will strongly depend upon external factors such as cullet (= recycled glass) availability and d |
b) no |
Comment: The main driver for energy efficiency improvements in the glass industry is the high share of energy costs within production costs. In fact, the glass industry has continuously improved energy efficiency over previous decades. Regulatory instruments and the EU ETS in particular, have only a marginal effect on energy efficiency improvements of glass melting activities, if any. Whilst there is no global ETS in place, the EU ETS is only a source of costs for glass industries (direct but also indirect CO2 costs linked to electricity), and therefore weakens the competitive position of European based glass industries vis-a-vis third country competitors. As such, it indirectly favors production reduction in the EU and rises in imports from non EU countries without carbon constraints into the EU. For these reasons, glass industries need to be fully protected against risks of carbon leakage. |
a) yes |
Comment: The EU glass industry faces higher costs for environmental protection, energy, labour and raw materials, than the majority of extra-EU competitors. In the absence of an international climate agreement and a level playing field between EU and extra EU competitors, the EU industry needs to be provided with measures to safeguard its competitiveness. Measures to avoid carbon leakage under the EU ETS are therefore essential. Measures should cover both the direct and indirect CO2 costs. Such measures under the EU ETS must be established in a way that ensures the ETS’ coherence with the EU’s ambition to revitalize European manufacturing activities, as proposed in the EC Communication on Industrial Renaissance. |
b) quite adequate |
Free allocation has been key up to now to mitigate the negative impacts of a unilateral climate policy. However, the Cross Sectoral Correction Factor which is applied already from 2013 reduces the free allocation, even for the most GHG efficient installations, and will dramatically increase in the future, thus further reducing free allocation. This current system is unsustainable and should be changed in order to ensure that the most GHG efficient installations receive 100% of their allowance needs. |
a) it absolutely keeps the incentive |
Free allocation does not reduce the incentive to innovate; on the contrary, the majority of installations in the sector (about 95%) do not have enough allowances, which encourages industry to invest in the efficiency of its plants to avoid having to purchase a high level of allowances, which would render the sector uncompetitive. For the installations under the benchmark (about 5%), they can sell their allowances on the market, which is also an incentive to continue reducing emissions. The incentive is therefore present. Below, we also call for a periodic revision of the benchmarks (in exchange of the cancellation of the cross-sectoral factor), which also provides for a strong incentive to improve. In addition, free allowances preserve investment capacity. Free allowances offer industry the incentive to purchase less CO2 allowances if they become more GHG efficient. However this last incentive would be better preserved if the CSCF was not forcing an unrealistic and arbitrary reducti |
b) quite proportionate |
Administrative burden is accepted, since it is necessary to maintain the free allocation system. However opportunities or improvement to this process should be considered. Conversely, the administration and calculation rules for new entrants are overly complex and can lead to under-allocation. They can therefore be seen as disproportionate and can be a disincentive to new investments. |
d) there should be no limit to overall free allocation to industry |
The current system is unsustainable (from a competition point of view) because the cross sectoral correction factor continually reduces the free allocation given to industry, even for the most GHG efficient installations. Ideally, installations whose efficiency is equal or better than the (periodically reviewed) benchmark should receive 100% of free allocations to produce in the EU and so there should be no limit. In practice, this is likely to lead to a higher share in phase IV. An increased level of EU ambition in terms of GHG reduction would require enhanced measures against carbon leakage and therefore an increase in total free allocations. |
e) I don’t know |
Overall financing for technological innovation (and not only connected with CO2 reductions) in manufacturing should be increased in the EU. However R & D should be funded via a mobilization of different sources of funding - including but not limited to - auctioning revenues. It should not come from the free entrants reserve or Free Allowances reserve. Allowances should be primarily used to ensure that the most GHG efficient installations get 100% of their needs to produce in the EU. Furthermore, financing for R&D and demonstration projects should be technology-neutral and not focused only on CCS or renewables. New technologies such as Carbon Capture and Use (CCU) and others should not be excluded. |
a) yes |
As stated above, industrial innovation, with a focus on the process and on new energy sources for industry, should be promoted. It should not be financed by shares of allowances reserved for free allocation or for new entrants, but rather from a mobilization of different sources, and not limited to auctioning revenues. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Industrial innovation should be promoted in a technology-neutral way. However this should not be done at the expense of free allocation which aims to provide effective support and protection against carbon leakage. Therefore it should be financed via other sources. This could include, among other sources, money from the auctioning revenues, as suggested in the ETS directive (Art 10.3). |
a) yes |
Inequitable carbon costs should not place EU industries at a competitive disadvantage with extra-EU competitors and this should be the ultimate objective pursued in order to achieve the EU’s ambition of 20% GDP realized by industrial activities in 2020. To that end, measures against carbon leakage are a pre-requisite but are not enough. An EU scheme for compensation of indirect costs due to higher electricity prices and some raw materials (e.g. soda ash, industrial gases, ..) should also be developed for Energy Intensive Industries. More generally, the EU needs to assess, and if needed reform, all its policies and in particular energy and environmental ones against the re-industrialisation objective. A longer term re-industrialisation objective for 2030 should be established. |
a) the present two groups should remain |
This binary model ensures that all sectors benefit from carbon leakage protection measures as soon as a risk is detected. This is essential to ensure that carbon leakage measures are effective and that protection is not granted too late, when industries are already in jeopardy. |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
The competitiveness of energy-intensive industries is sensitive to energy and carbon costs, therefore a risk exists for all these industries. For the sake of simplicity and consistency in legislation, all energy-intensive industries, as defined in Art 17 (1) a of the Energy taxation directive 2003/96/EC could be automatically placed on the carbon leakage list, i.e. An "energy-intensive business" shall mean a business entity, (…) where either the purchases of energy products and electricity amount to at least 3,0 % of the production value or the national energy tax payable amounts to at least 0,5 % of the added value. In case ETS-specific criteria are maintained, they should continue being based on both the CO2 intensity and the trade intensity metrics. The CO2 cost metric should be made more relevant to analyze the impacts of carbon cost on sectors’ profitability. To that end, the CO2 cost over GVA criteria could be replaced by a CO2 cost over Gross Operating Surplus (GOS) criteria |
b) other thresholds should be defined. Please specify below |
The competitiveness of energy-intensive industries is sensitive to energy and carbon costs, therefore a risk exists for all these industries. For the sake of simplicity and consistency in legislation, all energy-intensive industries, as defined in Art 17 (1) a of the Energy taxation directive 2003/96/EC could be automatically placed on the carbon leakage list, i.e. An "energy-intensive business" shall mean a business entity, (…) where either the purchases of energy products and electricity amount to at least 3,0 % of the production value or the national energy tax payable amounts to at least 0,5 % of the added value. In case ETS-specific criteria are maintained, thresholds must be maintained at their current levels even if the denominator of the carbon cost criteria is changed to Gross Operating Surplus. Raising thresholds would send a damaging signal to EU industries, meaning that fixing a cap to free allowances is more important than safeguarding industrial competitiveness. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The current criteria under the quantitative assessment at NACE 3 or 4 level should be maintained and used as the first assessment option. When an assessment at NACE 3 or 4 level is not appropriate to identify the relevant industrial activities falling under the EU ETS, then a quantitative assessment at 6- or 8-digit should be carried as a second option. Finally, as a third option, a qualitative assessment must remain possible. Other parameters can be studied as part of qualitative assessments, such as methodology and evidences of investment leakage. |
d) in line with the duration of ETS Phase 4 |
As long as there are no equivalent GHG reduction measures taken by major trading partners, the list of sectors exposed to the risk of carbon leakage should remain valid. This is essential to provide predictability to industries faced with long investment cycles (typically > 15 years). |
c) the approach should be less stringent (please specify) |
Glass industries support ambitious benchmark levels, which reflect the technological capabilities of the sectors best performers using the best available and proven technologies in Europe. It must be kept in mind however that this approach also has limits. Indeed, benchmark curves do not always reflect a difference in terms of « best » (the least GHG emitters per tonne of glass) or « worst » GHG players, but a difference in terms of products produced, cullet availability, age of furnace, available fuels, etc. The 10% best GHG performers can therefore be regarded as extremely challenging, especially for plants producing a wider range of more sophisticated products with higher added-value (as this usually entails higher energy consumption). |
a) yes (please specify how often) |
It seems logical to revise the benchmarks from time to time to reflect GHG improvements over time. Revision cycles should be linked to ETS phases and remain unchanged over this period. Periodical revision of the benchmark should be based on the actual EU based installations. The periodic revision of benchmarks should be the sole instrument leading to a reduction of free allowances over time, as benchmarks reflect true possibilities of GHG improvements according to state-of-the-art technologies deployed in Europe. The periodic revision of benchmarks therefore justifies that the CSCF is abandoned. |
c) other (please specify) |
Ex-ante allocation can only lead to over-allocation in crisis times, and under-allocation when the economy is growing. A better approach is to design an « ex post » system, where real allocation is corrected according to the real production. |
a) no, there should be no deviations |
In principle, there shall be no deviation from the general harmonized allocation rules at the level of an individual installation as this could cause distortion of competition. Only in the case of very specific hardship, should deviations be envisaged for an entire sector after a careful assessment of the competitive effects of such deviations. |
d) yes, in the form of financial compensation at EU-level |
Rules for the compensation of indirect costs should be revised and need to be effective to reflect the real burden of CO2 included in electricity costs for industry. A differentiated compensation approach by Member States is not acceptable from a competitiveness point of view. A harmonized approach at EU level is therefore needed. The harmonized measure should take the form of financial compensation. Free allocation should be kept aside to ensure full relief for direct emissions (most GHG efficient installations should receive 100% of their needs). A compensation system should also be put in place to compensate for higher prices of some raw materials (e.g. soda ash) and industrial gases. |
Important |
Less important |
Most important |
Least important |
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a) from the Member States' auction budgets |
Allowances funding low-carbon innovation support should be financed from the Member States’ auction revenues and from a mobilization of additional sources. However, this should not be financed at the expense of free allocation or the new entrants reserve which must be principally used for measures against risks of carbon leakage. |
It is regrettable that industry is asked to comment on such measures whereas the rules for EU ETS Phase IV have not yet been fully decided. The glass industry wishes to reiterate that so long that there is no comparable ETS system (which means that similar costs are born by competitors) operating in most part of the world and in extra-EU countries with glass industries, EU based glass industries will need to receive full and effective protection against carbon leakage. The recent assessment carried by DG CLIMA on exposure to carbon leakage risks, i.e. the carbon leakage list of 2009 and its recent revision, shows that between 2009 and 2014, risks of carbon leakage has grown in most glass sectors. For these reasons, glass industries need effective protection moving forward. This should translate in more free allocation considering the increase in the EU’s GHG reduction target. |
a) Business |
Arla Foods amba |
Arla Foods, Sonderhoj 14, Viby J, Denmark |
a) yes |
|
1) yes |
a) yes |
Arla Foods has already done a lot to reduce emissions, primarily through rationalisation of facilities, and the speed of reducing greenhouse gas emissions is slowing down Further reduction of fossil energy will only be possible with technology breakthroughs, and increasing renewable energy use. |
b) no |
Not in the current format. The cost effectiveness is too low. Despite this, most potential for energy efficiency and energy reduction are already implemented for economic reasons. The tax is not fed directly back as an incentive to the dairy industry. Moreover, ETS represents added costs only to the EU industry, decreasing de facto our competitiveness. |
a) yes |
The goal of carbon leakage allowances is to compensate for the economic disadvantages of the ETS carbon tax compared to other non-European countries. Other countries with less ambitious climate policies will not be raising taxes on its industries, and this does not help with Climate Change. The EU should plan to incentivise industries to reduce their energy intensity, which will help with Climate Change. Special measures are needed in order to address potential competitiveness disadvantages vis-à-vis third countries with less ambitious climate policy. These measures must not be transitional but stable until a level playing field of climate policy costs will be achieved. |
b) quite adequate |
Free allocation is only adequate in the current structure of a tax burden. It does not achieve forward movement. A more proactive approach where industry is assisted, or nudged, to be competitive will achieve the same outcome. Free emission allowances, thanks to the establishment of the CL list, limits the costs of the EU ETS, thus limiting the negative impact on our international competitiveness. Without free allocations, CL would first result in a decline in investments in EU countries due to the uncertainty of the EU climate policy and carbon market. The allocation of free allowances is of particular importance for energy-intensive processes that have already achieved most of the possible improvements in energy-efficiency and in the reduction of their relative emissions. But if it is one of the necessary tools to address CL, it should be completed with other relevant tools to encompass all effects of carbon costs like indirect emissions and low carbon price effects. |
b) it largely keeps the incentive |
Free allocation does not harm innovation. The cap on CL allowances though contributes to innovation in the longer term. |
b) quite proportionate |
Protecting the EU dairy industry competitiveness means keeping jobs and investments in the EU. Any measure which helps to protect the competiveness of the EU dairy industry should be implemented. The excuse of "administrative burden" is in our view not appropriate to question a tool which is efficient. |
b) a higher share than in 2013-20 |
The dairy industry and Arla's exports will increase (especially after the end of the quotas) and competition globally will increase, and therefore a higher share is necessary to protect the sustainability of the business. |
b) the same share as in Phase 3 |
Arla Foods is not supportive of funding for CCS, as the efficiency of removing GHG gases from the atmosphere by this method is much too low compared to renewable energies. Instead funding should be driven aggressively towards renewables, renewable energy storage, and the hydrogen economy. These technologies are developing at a rapid pace, and represent the EU’s sustainable future. Arla does not support CCS for the simple reason that it is hiding the real problem. The burning of fossil fuels needs to be drastically reduced. CCS continues the status quo, but attempts to bury the output (carbon dioxide). If funding is continued with fossil sources, this should be aimed at improving efficiencies, reducing energy need in the first place, and lastly lower carbon intense options (gas). |
a) yes |
ETS money should be used to support innovation, but innovation is of broader public interest and would need additional support and funding as well. |
c) other types of funding (please specify) |
ETS money should be used to support innovation, but innovation is of broader public interest and would need additional support and funding as well. Otherwise it will come to a point where the ETS system pays for innovations in companies that have nothing to do with ETS or climate change management. Auctioning of funding for climate changing innovation proposals could be also part of the solution. |
a) yes |
Innovation support in itself is helpful. The base for innovation lies in knowledge development, and Europe’s institutions contain increasing amounts of cutting edge knowledge. But it is essential that this is enabled to be brought to the market place by a carefully managed knowledge transfer system. That knowledge needs to help Europe maintain its sustainable industries, such as dairying, but is too easily exported to non EU countries by a lack of opportunity in the EU to translate the innovation into reality. Additional measures must include free allocation for indirect emissions and no cross-sectorial correction factor for sectors exposed to carbon leakage |
a) the present two groups should remain |
If there is to be the ETS mechanism, then there should be a carbon leakage list, to create a level playing field for the considerable amount of dairy products able to be exported out of Europe. |
a) the present criteria should remain |
Ideally any manufacturing company subject to ETS must be protected against carbon leakage. Nonetheless if a carbon leakage list is to be maintained the present criteria should remain. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
For reasons of simplicity and full understanding by all, those thresholds should not be changed. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The continuation of an already complex system needs review. It would probably not benefit from further complexity? But if a carbon leakage list is to be maintained a qualitative assessment should be possible for some sectors. |
a) five years |
Five years are necessary as a minimum to give stability, and the framework needs to be unchanged over this period. |
a) the present approach of average of the 10% most efficient installations should remain |
The current rules, even if demanding, should be maintained. But there should be no cross sectorial correction factor that circumvents the levels of the benchmarks by reducing the allocation. |
b) no |
But it should be analogous to the BREF process (e.g. every 7 or 8 years). Technology continues to change. However, it needs to be recognised that there are at least 3 levels of capacity within industry to be considered. The first level is what is technically possible given state of the art technological improvements. But, this may be cost prohibitive, or the technology still immature, and so the infrastructure for provision and maintenance may not be available. So the second level is what is financially possible, given current accounting and capital flow regulations and options. There is also a third practical level, which reflects real conditions in industries in Europe. To keep the approach of the 10% most efficient installations, it may be advisable to ascertain benchmarks based on the future financially possible technologies, rather than absolute state of the art. Legislative predictability is also very important to keep industry investing in the EU. |
c) other (please specify) |
Take the most current phase close to (just before) the writing down to the rules (e.g. 2013/14 if written down now). That makes it more relevant. |
a) no, there should be no deviations |
Harmonised rules must be kept in order to avoid any case of competition distortion. |
c) yes, in the form of additional free allocation |
Free allocations for indirect emissions will help to avoid the current situation of diverging national approaches leading to competition distortion. This is important to Arla as we operate across Europe. |
Most important |
Least important |
Less important |
Important |
When providing innovation support, the first key area is always to get the project from the laboratory (or academic solution) to reality (the small scale prototype). Support is important all through the project, but most innovation fails finally at the “Valley of Death”, so called because external funding only moves in when it is obvious customers are using the technology. It is very difficult to persuade end-users to invest in a technology, even if a large scale pilot is successful, when no-one else has yet purchased and implemented it. Support to bridge that gap is essential for the innovation to finally break through and succeed. |
d) other |
A combination of resources would be necessary (cf. also II. 9 and 10). ETS money should be used to support innovation, but innovation is of broader public interest and would need additional support and founding as well. Auctioning funds could be also part of the solution. |
The upcoming reform of the ETS and the CL-rules is a good opportunity to optimise the system for Arla Foods. Our purpose is not energy supply, conversion or consumption, but the production of high quality products for human nutrition and well-being. The motivation for energy saving is in the design of optimal and economic processes with a high awareness of our responsibility for our Environment. The reform should take into account the efficiencies of various systems and technologies and a link with the BREF process would be helpful. Key to reducing climate impact is reducing carbon output. If our dairy industry is to be allowed to sustainably expand in Europe (e.g. to meet export requirements for a growing world population) the first step has to be to concentrate on conversion efficiency or ratio intensity. The second step needs to approach reuse or recycling of energies and the use of lower carbon technology. Technology to reduce energy requirements at source must be developed. |
a) Business |
Aurubis / European Commission transparency register number: 11160169347-78 / Aurubis is a leader in the outstandingly sustainable European copper industry. Copper is essential in transforming the energy and mobility sector and to make it a less carbon emitting industry. A relocation of basic copper production out of Europe would result in carbon leakage due to the lower international climate and environmental protection standards. |
Ulf Gehrckens Senior Vice President Corporate Energy Affairs / Aurubis AG Hovestraße 50 20539 Hamburg Germany / Tel.: +49 407883-3955 Mail: u.gehrckens@aurubis.com |
a) yes |
|
1) yes |
b) no |
1. Aurubis as a producer of commodities that are traded on international stock exchanges cannot pass additional local costs towards its consumers. Therefore, the additional costs levied on us by European policies need to be compensated completely to prevent carbon leakage and leave us in a competitive position worldwide to maintain our competitive position. When compared to the USA the electricity and gas prices are much lower (1/2 and 1/3) compared to the German ones. 2. To reach a fair competitive position that would lead to further emission reduction potentials, it is necessary to work towards a global commitment to reduce emissions. Until then it is necessary, that the indirect emission costs are effectively compensated (Fallback for copper and historical production levels allow a maximal compensation of lower then 60%).This compensation scheme is still only valid in a few European-member states which should urgently be extended towards the others. |
b) no |
Energy intensive industry e.g. the Copper Industry has an innate incentive to become more energy efficient due to high energy cost, independently of the extra cost related to ETS. In these industries, however, the ETS may reduce the ability to become more energy efficient. These additional improvements will require investments, either in upgrading of existing capacity or in new plants. Extra cost due to climate policy, if insufficiently compen¬sated, will reduce the margins of the European industry. Shrinking margins lead intrinsically to diminished investments opportunities and therefore also reduced investments into energy efficiency. To promote these investments it is of utmost importance that the legislations are not changed too frequently, but that long-time planning horizons for investments are taken into account. Furthermore, the plants working for the recycling value added chain should get full compensation, since they are helping the EU-industry to become more energy efficient |
a) yes |
In most energy intensive industries, product prices are set in global markets. This is particularly true for copper which price is fixed globally at e.g. the LME London Metal Exchange. Until a significantly larger share of global competitors is influenced by similar increases in energy cost, there is a need for such supporting measures. Otherwise such industries will disappear from Europe. |
b) quite adequate |
Compensation for direct and indirect costs, linked to actual output and realistic benchmarks, would be a very adequate measure to address the risk of carbon leakage (predictability and effectiveness is ensured in the long term for both, direct and indirect costs). The current implementation faults however lead to a reduced effectiveness of the policy instrument. |
a) it absolutely keeps the incentive |
Full compensation for direct and indirect costs is absolutely necessary for the com-petitive position of Europe as a localisation of energy intensive industries. Com¬pen¬sation should be linked to actual output in order to provide an incentive for growth and to allow production flexibility through business cycles. Realistic bench¬marks are necessary for full compensation to new capacity and for the preserva¬tion of the undistorted environmental incentive. Expressed differently, allocation of free allowances (direct and indirect) will not reduce the envir¬on¬mental incentive for the recipi¬ent. On the contrary, full compensation for direct and indirect effects of ETS through allocation or otherwise is a precon¬dition for investment in new capacity in Europe. |
b) quite proportionate |
In most member states this is quite proportionate, however in some member states there is an enormous burden which results from e.g. the analysis of changes between the historical production data and the current ones. With the use of actual production data this burden could be decreased substantially. |
d) there should be no limit to overall free allocation to industry |
Carbon leakage undermines the environmental efficiency of EU ETS as well as EU’s industrial growth. Industries have to be protected for unfair international competition until fair conditions are restored by an international climate agreement. Without a comprehensive international agreement giving the global competitors of European industry a similar cost element related to emissions and electricity consumption, the cost of carbon leakage mitigation will be more or less stable, whereas the number of allowances to cover this cost will gradually diminish. This is a cost that is directly linked to emission trading and should be covered by the ETS system itself before any money is taken out of the system. If in the future, there is an inadequate number of allowances available to cover the need for carbon leakage mitigation, compensation could be provided as a sum of money proportionate to a given number of allowances from another source of finance. |
b) the same share as in Phase 3 |
Financing of CCS should not be a priority for the allowance budget. It is illogical to reserve a given share of the budget for this purpose: When the EUA prices are low the need for support is high and vice versa. Furthermore, the lack of stability in the EUA market creates a high project risk and high financing cost. This adds the project cost and the need for support. |
a) yes |
ETS is politically focused on the CO2-reduction which is also done by innovations which lead to lower emission therefore it is important that funds generated by a climate policy should be refunded to innovating and emission reducing industries, without endangering the competitiveness of the European Energy Intensive Industry such as Aurubis. |
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
Innovations are as already stated in question 10 an important driver towards lower emissions. Therefore these innovations are in line with the goals of the ETS and should be at least partly financed by funds from the ETS. Therefore a fund like under the NER300 system should be set-up. |
a) yes |
The use of free allowances will also have to be extended to cover indirect effects through increased electricity prices. With significantly higher EUA prices, the pre¬sent solution for indirect costs based on State Aid will: - be insufficient for long term survival of these industries in Europe, - not create the predictability needed for investments, and, as well, - create significant distur¬bances in the internal market for energy intensive products. Effective carbon leakage prevention will also require exemption from extra costs related to other elements of climate policy like support to development of renew¬able electricity generation and extra grid costs related to transmission and balan¬cing of electricity from renewable sources. |
a) the present two groups should remain |
Energy-intensive industries are particularly exposed to carbon leakage and need full allocation as well as compensation of extra cost until a significant share of competitors is influenced by similar cost increases. Most energy-intensive products have a high value compared to their weight, and may be moved between markets at a cost that is small compared to their value. They are thus globally priced with no price differentiation between markets. Especially for commodities that are traded on international exchanges the ability to pass through locally imposed costs is nonexistent. These industrial sectors should be seen as endangered by carbon leakage and need full compensation. A differentiation in smaller categories makes no sense, since companies are either endangered by carbon leakage or they are not. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
A single carbon leakage list should be established. The list should be based on the combined effect of direct cost (emission allowances) and indirect costs (increases in electricity costs due to climate policy)and in addition should include the following criteria, which takes into account the exposure to global competition. The exposure to global competition is influenced by the inability to pass through locally imposed costs to sectors whose product prices are determined internationally (price taker), which should be taken into account. |
b) other thresholds should be defined. Please specify below |
The levels of the thresholds should be based proper ana¬lysis of the proposed new set of criteria (see response to Q12 and Q13). |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Justified cases could be: inability to pass through the CO2 costs to its global customers (i.e. price-taker industrial sector), economic activity of major importance for EU society (eg recycling as a contribution to the "circular society") |
d) in line with the duration of ETS Phase 4 |
Predictability is the key to incentive efficiency. |
c) the approach should be less stringent (please specify) |
The benchmarks should be less stringent (weighted average). Currently the allocation based on the already stringent top 10% benchmarks is significantly reduced through the cross-sectoral correction factor or the linear reduction factor (both 1.74% points per year). This adds costs even for the most efficient producers and thereby discourages investments and growth. Copper as a Fallback-Industry gets even less compensation and has therefore no possibility to reach a full compensation by becoming energy efficient. This approach is not sustainable. |
b) no |
Single or even revolving revisions during periods will cause uncertainty and will hamper long term investments in carbon efficiency. Furthermore, the technological state of the art is hard to define. Research findings could not easily and automatically transformed in high scale production plants. Investments cycles make things more complicated. |
c) other (please specify) |
We recommend to use output based allocation linked to realistic benchmarks. For each industry, the baseline will then be set by the realistic benchmark. Indirect emission should also be set by realistic bench¬marks and actual output. The compensation will be linked to a sum of two bench¬marks, one derived from emissions and one derived from electricity consumption. |
a) no, there should be no deviations |
There should be no deviations linked to the short-term financial conditions of industries. There might however be a need to find special solutions for industries where it is impossible to establish sectorial benchmarks. |
a) no, the present approach should be maintained, i.e. that Member States can provide such compensation based on state aid guidelines |
Compensation inside the EU ETS should be extended to cover indirect effects through increased electricity prices. As the EU State aid guidelines have already set the range of indirect compensations it is necessary, that these ranges are used completely and for the entire 4th trading period. |
I don't know |
Less important |
Most important |
Important |
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a) from the Member States' auction budgets |
Free allocation has to protect against carbon leakage adequately. Therefore, the free allocation should not be used for innovation support. The revenues from auctioning should be reinvested for low carbon technology support, as foreseen in the ETS Directive. These auctioning budgets can of course be complemented by national state aid schemes, but a solely dependence on national regulations will lead to more countries stating that there is no budget for further support. |
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a) Business |
AVEBE UA Prins Hendrikpelin 20 9641 GK Veendam, The Netherlands |
dr. PM Bruinenberg, +31 598 665027, peter.bruinenberg@avebe.com |
a) yes |
|
1) yes |
b) no |
Dutch "Energieakkoord" will lead to extra CO2 emissions for our industry. The agreemnet favors electricity producers and does not take in to account heat. Heat power coupling will suffer. |
b) no |
A trading system should guarantee investments on climate against the lowest cost. In the end it still remains a raise of operational costs in EU. It can however help EU industry to become more efficient under the right protection against Carbon Leakage |
a) yes |
EU climate policy must not add costs to efficient EU manufacturers: 100% free direct and indirect allocation according to realistic benchmarks are the solution. Allocation should be dynamic according to recent production output in order to avoid over- and under allocation and to avoid rewarding relocation. |
b) quite adequate |
Free allocation of direct and indirect costs is the best tool to avoid carbon leakage, if it shields efficient producers from any additional climate policy costs. |
a) it absolutely keeps the incentive |
|
b) quite proportionate |
Administrative burden could be simplified |
d) there should be no limit to overall free allocation to industry |
EU industry must not be unilaterally burdened with limits and constraints. The incentive to improve efficiency performance is given due to benchmark-based free allocation already. |
b) the same share as in Phase 3 |
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a) yes |
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b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The Directive already suggests to spend 50% of revenues by member states to be earmarked for such purposes. |
a) yes |
All measures should treat all forms of energy equal. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
|
a) the present criteria should remain |
If sectors or companies are subject to ETS, they should be protected against carbon leakage. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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d) in line with the duration of ETS Phase 4 |
|
c) the approach should be less stringent (please specify) |
The benchmark could be less stringent (e.g. rather the weighted average) and should be more realistic and more sector specific. In any case, the application of a linear reduction factor brings allocation below the level needed to maintain the output for many sectors. This gives a negative signal to industry, i.e. adds costs also for most efficient producers, disencourages investment and growth in Europe. |
b) no |
There is no level playing field for environmetal policies within the EU. Benchmark should be realsistic and at least be member state specific |
c) other (please specify) |
Current 'frozen' ex-ante allocation is adding costs on the production of efficient plants thereby discouraging growth and perversely rewarding relocation to outside Europe. This needs to be changed through dynamic allocation based on recent production output. This way, over- and underallocation to most efficient producers can be avoided. |
a) no, there should be no deviations |
|
c) yes, in the form of additional free allocation |
Harmonised indirect allocation, diversity of national approaches would be a prefrerred option, however, member states already have specific energy programmes. |
Least important |
Less important |
Important |
Most important |
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a) from the Member States' auction budgets |
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In NL an Energy agreemnet exist which works out unfavourable for some chemical sectors. It showes to our opinion that focussing on one aspect of ETS (electricity generation) will harm the overall energy (heat) requirements of industry and society. Policies should be in balance for all forms of energy. |
a) Business |
AZULIBER 1,SL. |
Beatriz Garcia Seva tecnicos@azuliber.com |
a) yes |
|
1) yes |
b) no |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improve |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
a) the present two groups should remain |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value) which are subject to international competition should be considered as exposed to the risk of carbon leakage, until an international agreement is established. It is important to limit the list to sectors that really compete globally, and thus it is vital to maintain an assessment based on trade intensity with third countries. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
The present criteria should be used, considering the following element. GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated |
a) Business |
BA GLASS POLAND SP. Z O.O is dedicated to production of glass packaging in Poland. |
Sérgio Alexandre Sousa Ulica Ostroroga, 8 60-349 Poznan Poland T. +48 61 2227010 email: ssousa@bavidro.com |
a) yes |
|
1) yes |
b) no |
Of course, further reductions in the glass industry are possible. What is important is the magnitude of this reduction. All official EU publications (see FWC “Sector Competitiveness Studies - Competitiveness of the Glass Sector. Within the Framework Contract of Sectoral Competitiveness Studies – ENTR/06/054. Final report, 14 October 2008” or more recently the Glass BREF and the BAT Conclusions) show that no breakthrough technology is currently available to reduce CO2 emissions to the extent imposed by the energy and climate package 2030 (-43% for ETS sectors between 2005 and 2030). Emissions reductions can not be repeated ad infinitum. There is a thermodynamic limit to the glass melting process which is an absolute limit, and that current technology is already approaching. This is why we have answered “no” to this question. In our mind, the ambition level of the package, applied unilaterally in the EU, will lead to relocation of production in countries with no CO2 constraints. |
b) no |
If the ETS was a global system, the answer to this question is “yes”, ETS can help improving energy efficiency. Unfortunately, being only applied in the EU, it rather favors production reduction in the EU and imports from non EU countries into the EU. It has also to be underlined that high energy prices in the EU compared to competitors (US, North Africa, Eastern countries,..) is already an incentive to increase energy efficiency, but is also a cause of relocation. |
a) yes |
(see also answer to question 1 and 2). EU industry already faces higher costs for energy, labour and raw materials. In the absence of a global agreement, it is absolutely vital to provide special measures to mitigate the financial impact on EU industry of unilateral CO2 costs to keep industry (and therefore jobs and welfare) in the EU |
b) quite adequate |
Free allocation has been key up to now to mitigate the negative impacts of a unilateral climate policy. However, the Cross Sectoral Correction Factor which kicks in already in 2013 reduces the free allocation, even for best players, and will dramatically increase in the future, reducing largely free allocation. This current system is unsustainable and should be changed in order to ensure that best performers receive 100% of their needs. |
a) it absolutely keeps the incentive |
Free allocation does not reduce the incentive to innovate because good performers still have allocation that they can sell on the market. |
b) quite proportionate |
Administrative burden is consequent, but it is necessary to maintain the free allocation system alive. On the other side, rules for new entrants are disproportionate to the objective. They are a real obstacle for new investments and should be simplified in the future |
d) there should be no limit to overall free allocation to industry |
(see also answer to question 4). The current system with a cross sectoral correction factor reducing from 2013 the free allocation given to industry, even the best players, is unsustainable. it is therefore essential to have a higher share of free allocation in order to ensure that best performers can get 100% of what they need to produce in the EU. |
c) a lower share than in Phase 3 |
The first objective should be to ensure that best performers get 100% of their needs to produce in the EU. The money to finance such demonstration project s should in fact not come from the New Entrance Reserve, but from the auctioning revenue as suggested in the ETS directive (Art 10.3). |
a) yes |
Industrial innovation (focus on the process and on new energy sources for industry) should be promoted, using money from the auctioning revenue as suggested in the ETS directive (Art 10.3) |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Industrial innovation (focus on the process and on new energy sources for industry) should be promoted, using money from the auctioning revenue as suggested in the ETS directive (Art 10.3) |
a) yes |
Innovation support has to be enlarged. Also, a EU scheme for compensation of indirect costs due to higher electricity prices should be developed for manufacturing industry |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
In the absence of a global agreement, the whole manufacturing industry should be protected against the risks of carbon leakage as we face a global economy. |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
As long as there is no global level playing field, the whole manufacturing industry should be protected against the risks of carbon leakage as we face a global economy. |
b) other thresholds should be defined. Please specify below |
As long as there is no global level playing field, the whole manufacturing industry should be protected against the risks of carbon leakage as we face a global economy. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
As long as there is no global level playing field, the whole manufacturing industry should be protected against the risks of carbon leakage as we face a global economy. If this is not the option chosen by the legislator, it is indeed vital to keep some discretion is needed to cope with special cases. |
b) longer (please specify) |
As long as there is no global level playing field, the whole manufacturing industry should be protected against the risks of carbon leakage as we face a global economy. The duration should therefore be until there is a global agreement ensuring that all competitors face similar carbon costs. |
c) the approach should be less stringent (please specify) |
The benchmark curve does not always reflect a difference in terms of « best » or « worst » players, but a difference in terms of products produced, cullet availability, age of furnace, available fuels,.. Therefore, the 10% best is too stringent, and a 50% best should be preferred. |
a) yes (please specify how often) |
It seems logical to revise the benchmarks from time to time (as frequently as the BREF e.g.) to reflect improvements over time. |
c) other (please specify) |
Ex-ante allocation can only lead to overallocation in crisis times, and underallocation when the economy is growing. A better approach is to design an « ex post » system, where real allocation is corrected according to the real production. |
b) yes, there should be deviations with higher allowances for installations facing specific hardships |
It is important to have some specific rules for companies facing hardships, but this should remain an exception. |
d) yes, in the form of financial compensation at EU-level |
A differentiated approach by Member States is not acceptable from a competitiveness point of view. Financial compensation is the best option because free allocation should be kept aside to ensure full relief for direct emissions (best performers should receive 100% of their needs). |
Least important |
Less important |
Most important |
Important |
|
a) from the Member States' auction budgets |
Industrial innovation (focus on the process and on new energy sources for industry) should be promoted, using money from the auctioning revenue as suggested in the ETS directive (Art 10.3). |
Criteria for indirect compensation should be reviewed. |
a) Business |
BA Vidrio, SAU is dedicated to production of glass packaging in Spain. l. |
Sérgio Alexandre Sousa Polígono Industrial 'Los Varales', s/n 06220 Villafranca de Los Barros (Badajoz) España T. +34.924.527812 F. +34.924.527813 email: ssousa@bavidro.com |
a) yes |
|
1) yes |
b) no |
Of course, further reductions in the glass industry are possible. What is important is the magnitude of this reduction. All official EU publications (see FWC “Sector Competitiveness Studies - Competitiveness of the Glass Sector. Within the Framework Contract of Sectoral Competitiveness Studies – ENTR/06/054. Final report, 14 October 2008” or more recently the Glass BREF and the BAT Conclusions) show that no breakthrough technology is currently available to reduce CO2 emissions to the extent imposed by the energy and climate package 2030 (-43% for ETS sectors between 2005 and 2030). Emissions reductions can not be repeated ad infinitum. There is a thermodynamic limit to the glass melting process which is an absolute limit, and that current technology is already approaching. This is why we have answered “no” to this question. In our mind, the ambition level of the package, applied unilaterally in the EU, will lead to relocation of production in countries with no CO2 constraints. |
b) no |
If the ETS was a global system, the answer to this question is “yes”, ETS can help improving energy efficiency. Unfortunately, being only applied in the EU, it rather favors production reduction in the EU and imports from non EU countries into the EU. It has also to be underlined that high energy prices in the EU compared to competitors (US, North Africa, Eastern countries,..) is already an incentive to increase energy efficiency, but is also a cause of relocation. |
a) yes |
(see also answer to question 1 and 2). EU industry already faces higher costs for energy, labour and raw materials. In the absence of a global agreement, it is absolutely vital to provide special measures to mitigate the financial impact on EU industry of unilateral CO2 costs to keep industry (and therefore jobs and welfare) in the EU |
b) quite adequate |
Free allocation has been key up to now to mitigate the negative impacts of a unilateral climate policy. However, the Cross Sectoral Correction Factor which kicks in already in 2013 reduces the free allocation, even for best players, and will dramatically increase in the future, reducing largely free allocation. This current system is unsustainable and should be changed in order to ensure that best performers receive 100% of their needs. |
a) it absolutely keeps the incentive |
Free allocation does not reduce the incentive to innovate because good performers still have allocation that they can sell on the market. |
b) quite proportionate |
Administrative burden is consequent, but it is necessary to maintain the free allocation system alive. On the other side, rules for new entrants are disproportionate to the objective. They are a real obstacle for new investments and should be simplified in the future. |
d) there should be no limit to overall free allocation to industry |
(see also answer to question 4). The current system with a cross sectoral correction factor reducing from 2013 the free allocation given to industry, even the best players, is unsustainable. it is therefore essential to have a higher share of free allocation in order to ensure that best performers can get 100% of what they need to produce in the EU. |
c) a lower share than in Phase 3 |
The first objective should be to ensure that best performers get 100% of their needs to produce in the EU. The money to finance such demonstration project s should in fact not come from the New Entrance Reserve, but from the auctioning revenue as suggested in the ETS directive (Art 10.3). |
a) yes |
Industrial innovation (focus on the process and on new energy sources for industry) should be promoted, using money from the auctioning revenue as suggested in the ETS directive (Art 10.3) |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Industrial innovation (focus on the process and on new energy sources for industry) should be promoted, using money from the auctioning revenue as suggested in the ETS directive (Art 10.3) |
a) yes |
Innovation support has to be enlarged. Also, a EU scheme for compensation of indirect costs due to higher electricity prices should be developed for manufacturing industry |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
In the absence of a global agreement, the whole manufacturing industry should be protected against the risks of carbon leakage as we face a global economy. |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
As long as there is no global level playing field, the whole manufacturing industry should be protected against the risks of carbon leakage as we face a global economy. |
b) other thresholds should be defined. Please specify below |
As long as there is no global level playing field, the whole manufacturing industry should be protected against the risks of carbon leakage as we face a global economy. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
As long as there is no global level playing field, the whole manufacturing industry should be protected against the risks of carbon leakage as we face a global economy. If this is not the option chosen by the legislator, it is indeed vital to keep some discretion is needed to cope with special cases. |
b) longer (please specify) |
As long as there is no global level playing field, the whole manufacturing industry should be protected against the risks of carbon leakage as we face a global economy. The duration should therefore be until there is a global agreement ensuring that all competitors face similar carbon costs. |
c) the approach should be less stringent (please specify) |
The benchmark curve does not always reflect a difference in terms of « best » or « worst » players, but a difference in terms of products produced, cullet availability, age of furnace, available fuels,.. Therefore, the 10% best is too stringent, and a 50% best should be preferred. |
a) yes (please specify how often) |
It seems logical to revise the benchmarks from time to time (as frequently as the BREF e.g.) to reflect improvements over time. |
c) other (please specify) |
Ex-ante allocation can only lead to overallocation in crisis times, and underallocation when the economy is growing. A better approach is to design an « ex post » system, where real allocation is corrected according to the real production. |
b) yes, there should be deviations with higher allowances for installations facing specific hardships |
It is important to have some specific rules for companies facing hardships, but this should remain an exception. |
d) yes, in the form of financial compensation at EU-level |
A differentiated approach by Member States is not acceptable from a competitiveness point of view. Financial compensation is the best option because free allocation should be kept aside to ensure full relief for direct emissions (best performers should receive 100% of their needs). |
Least important |
Less important |
Most important |
Important |
|
a) from the Member States' auction budgets |
Industrial innovation (focus on the process and on new energy sources for industry) should be promoted, using money from the auctioning revenue as suggested in the ETS directive (Art 10.3). |
Criteria for indirect compensation should be reviewed. |
a) Business |
BA Vidro is dedicated to production of glass packaging in Portugal. |
Sérgio Alexandre Sousa Av Vasco da Gama 8001 4434-508 Avintes Tel: +351 227860500 Fax: +351 227860501 email: ssousa@bavidro.com |
a) yes |
|
1) yes |
b) no |
Of course, further reductions in the glass industry are possible. What is important is the magnitude of this reduction. All official EU publications (see FWC “Sector Competitiveness Studies - Competitiveness of the Glass Sector. Within the Framework Contract of Sectoral Competitiveness Studies – ENTR/06/054. Final report, 14 October 2008” or more recently the Glass BREF and the BAT Conclusions) show that no breakthrough technology is currently available to reduce CO2 emissions to the extent imposed by the energy and climate package 2030 (-43% for ETS sectors between 2005 and 2030). Emissions reductions can not be repeated ad infinitum. There is a thermodynamic limit to the glass melting process which is an absolute limit, and that current technology is already approaching. This is why we have answered “no” to this question. In our mind, the ambition level of the package, applied unilaterally in the EU, will lead to relocation of production in countries with no CO2 constraints. |
b) no |
If the ETS was a global system, the answer to this question is “yes”, ETS can help improving energy efficiency. Unfortunately, being only applied in the EU, it rather favors production reduction in the EU and imports from non EU countries into the EU. It has also to be underlined that high energy prices in the EU compared to competitors (US, North Africa, Eastern countries,..) is already an incentive to increase energy efficiency, but is also a cause of relocation. |
a) yes |
(see also answer to question 1 and 2). EU industry already faces higher costs for energy, labour and raw materials. In the absence of a global agreement, it is absolutely vital to provide special measures to mitigate the financial impact on EU industry of unilateral CO2 costs to keep industry (and therefore jobs and welfare) in the EU |
b) quite adequate |
Free allocation has been key up to now to mitigate the negative impacts of a unilateral climate policy. However, the Cross Sectoral Correction Factor which kicks in already in 2013 reduces the free allocation, even for best players, and will dramatically increase in the future, reducing largely free allocation. This current system is unsustainable and should be changed in order to ensure that best performers receive 100% of their needs. |
a) it absolutely keeps the incentive |
Free allocation does not reduce the incentive to innovate because good performers still have allocation that they can sell on the market. |
b) quite proportionate |
Administrative burden is consequent, but it is necessary to maintain the free allocation system alive. On the other side, rules for new entrants are disproportionate to the objective. They are a real obstacle for new investments and should be simplified in the future |
d) there should be no limit to overall free allocation to industry |
(see also answer to question 4). The current system with a cross sectoral correction factor reducing from 2013 the free allocation given to industry, even the best players, is unsustainable. it is therefore essential to have a higher share of free allocation in order to ensure that best performers can get 100% of what they need to produce in the EU. |
c) a lower share than in Phase 3 |
The first objective should be to ensure that best performers get 100% of their needs to produce in the EU. The money to finance such demonstration project s should in fact not come from the New Entrance Reserve, but from the auctioning revenue as suggested in the ETS directive (Art 10.3). |
a) yes |
Industrial innovation (focus on the process and on new energy sources for industry) should be promoted, using money from the auctioning revenue as suggested in the ETS directive (Art 10.3) |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Industrial innovation (focus on the process and on new energy sources for industry) should be promoted, using money from the auctioning revenue as suggested in the ETS directive (Art 10.3) |
a) yes |
Innovation support has to be enlarged. Also, a EU scheme for compensation of indirect costs due to higher electricity prices should be developed for manufacturing industry |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
In the absence of a global agreement, the whole manufacturing industry should be protected against the risks of carbon leakage as we face a global economy. |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
As long as there is no global level playing field, the whole manufacturing industry should be protected against the risks of carbon leakage as we face a global economy. |
b) other thresholds should be defined. Please specify below |
As long as there is no global level playing field, the whole manufacturing industry should be protected against the risks of carbon leakage as we face a global economy. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
As long as there is no global level playing field, the whole manufacturing industry should be protected against the risks of carbon leakage as we face a global economy. If this is not the option chosen by the legislator, it is indeed vital to keep some discretion is needed to cope with special cases. |
b) longer (please specify) |
As long as there is no global level playing field, the whole manufacturing industry should be protected against the risks of carbon leakage as we face a global economy. The duration should therefore be until there is a global agreement ensuring that all competitors face similar carbon costs. |
c) the approach should be less stringent (please specify) |
The benchmark curve does not always reflect a difference in terms of « best » or « worst » players, but a difference in terms of products produced, cullet availability, age of furnace, available fuels,.. Therefore, the 10% best is too stringent, and a 50% best should be preferred. |
a) yes (please specify how often) |
It seems logical to revise the benchmarks from time to time (as frequently as the BREF e.g.) to reflect improvements over time. |
c) other (please specify) |
Ex-ante allocation can only lead to overallocation in crisis times, and underallocation when the economy is growing. A better approach is to design an « ex post » system, where real allocation is corrected according to the real production. |
b) yes, there should be deviations with higher allowances for installations facing specific hardships |
It is important to have some specific rules for companies facing hardships, but this should remain an exception. |
d) yes, in the form of financial compensation at EU-level |
A differentiated approach by Member States is not acceptable from a competitiveness point of view. Financial compensation is the best option because free allocation should be kept aside to ensure full relief for direct emissions (best performers should receive 100% of their needs). |
Least important |
Less important |
Most important |
Important |
|
a) from the Member States' auction budgets |
Industrial innovation (focus on the process and on new energy sources for industry) should be promoted, using money from the auctioning revenue as suggested in the ETS directive (Art 10.3). |
Criteria for indirect compensation should be reviewed. |
a) Business |
BASF SE ID-number Transparency Register: 7410939793-88 |
Susanne Kuschel BASF SE Rue Marie de Borgogne 58 1000 Brussels Belgium Susanne.kuschel@basf.com Phone: 0032- (0)2 7400353 |
a) yes |
|
1) yes |
a) yes |
The ability of EU industry to further reduce GHG emissions depends on global actions to create a level playing field which allows for investments in efficiency improvements and GHG abatement technologies without losing competitiveness. If set unilaterally, the expected high costs resulting from the proposed EU targets until 2030 – combined with further market interventions and the uncertainty regarding the future carbon leakage provisions - are an obstacle for any EU-investment, incl. energy efficiency improvements. In that way, reduction targets may reduce production, but will very likely slow down the growth of EU industry to serve the growing global market. That’s why the EU reduction targets need to be balanced with the EU target for a growing industry share. If by 2020 no global level playing field is achieved, the effort sharing between industry and other sectors needs to be corrected or the political commitment regarding the EU climate targets should be reviewed. |
b) no |
The ETS was designed as an effective and efficient market based instrument providing climate protection at the lowest cost. It has not increased competitiveness as energy efficiency has been high on the agenda in energy intensive industries even before the ETS was installed. Instead, the expected higher costs due to ETS will harm competitiveness and the willingness to invest in the EU. The unilateral absolute cap on emissions is limiting industrial growth potentials here, shifting it to other regions. Money from the ETS has to stay in the sector to spur innovation and should not be used for financing climate protection in other sectors. To improve energy efficiency in the ETS sector, carbon leakage measures must be revised to better protect competitiveness and set incentives for efficiency improvements while allowing for further growth. This purpose would be served by a fully benchmark based free allocation with no further reduction factors and based on current production volumes. |
a) yes |
As long as the ambitious EU Climate policy is not mirrored by comparable international efforts, the EU needs to minimize the unilateral cost burden for EU industry. These measures must be predictable and stable. The system of free allocation for direct emissions should be revised to a fully benchmark based system without further reduction factors and based on current production volumes while allowing for further growth. In addition, compensation schemes for indirect emissions which assure that energy efficient producers have no disadvantages compared to a no-EU producer – neither from their own production nor from cost passed over through the value chain – have to be in place. This is important from an economic and also from an environmental point of view: the EU emission reduction targets should not be achieved through carbon or investment leakage. Without a global agreement on climate change action which spurs a global level playing field, the EU ETS cap should be revised. |
b) quite adequate |
Free allocation is an adequate instrument to address the risk of carbon leakage. However, effectiveness should be optimised. Free allocation according to past emissions rewards a decrease in production and punishes growth. This effect slows down a market driven change of production systems and industrial growth in Europe, which could be avoided by a dynamic allocation. Free allocation should give a positive stimulation for good performers and enable bad performers to improve. Thus, free allocation must be based on: (1) realistic benchmark levels ; (2) the actual activity level (= production volume) (3) no correction factors. Besides, the indirect burden from rising electricity prices has to be adequately addressed as well. With such reforms, free allocation can minimise carbon leakage also at higher CO2-prices. Furthermore, the system needs fundamental revision if the EU remains isolated with its ambitious climate policy. In the medium- to long-term, an isolated ambitious climate |
a) it absolutely keeps the incentive |
With benchmark-based free allocation, the incentive for improvements is provided by the savings achievable through an investment. Companies which emit less than the benchmark can sell certificates when they reduce their emissions further. This incentive is distorted in the current design of free allocation based on historical instead of actual production data. Product substitution towards more carbon-efficient products is not achieved with free allocation as there is no full carbon cost pass-through into product prices. But the view should anyway be focused on the carbon-efficiency of the whole life-cycle, incl. the use-phase. Full carbon cost pass through is not compatible with the avoidance of carbon leakage. Energy costs and market development have been driving product replacements since a long time. While free allocation based on historic emissions hinders transition to new products, production-based allocation would help new, innovative products to grow and come onto the market. |
d) absolutely exaggerated |
The initial application for free allocation, the set-up of monitoring plans and the annual monitoring , reporting and verification is an enormous administrative burden for companies. The complexity of the system today results from • the rules to account for any changes between the historical base period and now. Here is massive red tape and administrative burden, which could be avoided by a better alternative: allocation based on actual production data. • Specificities of national implementation. Implementing authorities should only request those data which is actually necessary for compliance check. Establishing benchmarks has been a complex exercise (especially for the chemical industry) Therefore the BM should not be changed in its individual structure but revised regarding data. To ensure protection of confidence the BM should not be revised within a trading period. Dynamic allocation would rather reduce than increase complexity. |
d) there should be no limit to overall free allocation to industry |
The share of allowances dedicated to free allocation and compensation systems for indirect costs should be sufficient to avoid carbon leakage. That does not mean “a free ride for industry”, but sufficient allowances for efficient producers. In other words: free allocation based on realistic benchmarks and allowing for growth by dynamic allocation. An efficient producer in the EU should not have cost disadvantage from the EU ETS compared to competitors worldwide. This approach helps to stimulate efficient production in the EU and stimulates other regions to act accordingly. To allow for industrial growth even under an EU cap, dynamic allocation and an industry fund should be set up with the back-loaded allowances as a starting stock. This means when the allocation need is lower than the industry cap, the fund is filled and when it is higher, allowances are released from the fund. This also avoids another build-up of allowances in circulation in case of another economic crisis. |
d) there should be no such innovation support post-2020 |
Research and development in various technologies is crucial for the EU decarbonisation path towards 2050. Focus should be on the development of the most promising technologies in a cost efficient way. However, support and funding for these technologies should not depend on the auctioning income which varies with the carbon price. |
b) no |
Some technologies to meet the 2050 targets are not yet available or invented. Investment in innovation, leading to cost competitive technologies will drive improvements in energy efficiency and emissions reductions not only in Europe but also in other regions that positively contribute to EU’s economy with net added value and international competitive position. All ETS auctioning revenues should stay in industry to assist the decarbonisation of European industry without impairing its international competitiveness. Auctioning revenues not needed for free allocation should be used to pursue an active industrial policy (i.e. through a large breakthrough technology programme for innovation in energy intensive industry). However, such support must not cannibalise the free allocation volumes and carbon leakage provisions and policy-makers should refrain from raising the costs of decabornisation policies in order to increase revenues that would otherwise be needed to addressing those costs. |
c) other types of funding (please specify) |
Financial support for technologies and innovation should only be granted in the beginning of the technology. In case of market maturity subsidies should be avoided. Support of R&I could be realised via tax incentives. Auction revenues should be earmarked and ring-fenced for innovation purposes rather than going into national budgets. Funding support should be allocated to the most cost-efficient technology. Auction revenues should go back to industry, ensuring enough means are available for investments in production capacity and innovation. Therefore, innovation support should not counteract CL protection measures. Innovation centres are closely linked with production and therefore both need measures to keep production clusters in Europe and promote R&D. |
a) yes |
The following measures are needed: • A reform of the EU ETS providing more effective carbon leakage measures (see Q4). • An adequate compensation of the indirect CO2 costs. The current system does not compensate for the full CO2 costs in electricity prices. To minimise the total costs, politicians should commit to rethink the EU targets and the EU climate change policy (especially the ETS/non-ETS share) if a global level playing field is not be achieved by 2020. • The effort sharing between ETS and non-ETS sectors should be in line with the findings of the impact assessment for the Energy Efficiency Directive: accordingly, the remaining economic potential is much larger in other sectors (building, power, transport) than in industry. A decrease/lack of growth of industrial activities in EU shouldn’t be abused as cheap measure to fulfil climate targets as it doesn’t help global climate protection. • A more consistent – on EU and on MS level – overall energy and climate policy. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Manufacturing of e.g. basic building blocks may not directly qualify as an exposed sector under too strict parameters. However, these building blocks are essential to maintain end production and employment of entire value chains in Europe. Through the protection of whole value chains, treating all non-electricity generating installations as exposed is more effective in avoiding carbon leakage. Sub-sectors that are inherently linked up- or downstream with exposed sectors should be taken into account as well. Importantly, this approach also gives industry predictability about their carbon leakage status and therefore facilitates investments. The sharp consequences for individual sectors of changing the list are avoided (a sector gets 100% free allocation in one year and 0% the next year). Finally, this approach is simple and reduces the administrative burden for authorities. |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
Relevant are: • a comprehensive carbon/climate cost comparison of EU ETS costs vs. other major industrial world regions (including analysis of allocation rules for direct/ indirect emissions and compensation given for carbon costs otherwise) • a clear definition of “a decisive share of global production” (with the same carbon costs and price) • Sub-sectors not directly impacted but inherently linked with exposed sectors are not necessarily on the CL list. Qualitative assessments need to be done where relevant to add the necessary value chain aspect (including upstream costs, impact of CL position of upstream sectors on downstream sectors, (im)possibility of cost pass-through) • Full power price effects of climate policies must be taken into account: both the immediate ETS costs from power producers as well as induced costs from renewables policies. Marginal power plants should be used to calculate the indirect carbon cost. • a forward looking carbon price • tradability of a product |
b) other thresholds should be defined. Please specify below |
Other thresholds should be defined in order to assess exposure status correctly, incl. value chain effects, products’ tradability and other effects from European Energy and Climate policies (renewable policies, energy efficiency policies going beyond cost efficiency) . |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Qualitative criteria are needed in addition to quantitative criteria as the latter are based on historic data. Historic data does not in all cases reveal the current situation for competing products at the world market. The following parameters are proposed for a forward looking qualitative assessment: • All costs related to climate change policy along the value chain should be taken into account, in particular upstream costs. • The value chain analysis should also consider the implication for downstream sectors if an upstream sector is deleted from the carbon leakage list. • The inability to pass through locally imposed costs to sectors whose product prices are determined internationally (“price takers”) should be taken into account. |
d) in line with the duration of ETS Phase 4 |
The carbon leakage status is a fundamental parameter for investment decisions of companies because a change in the status has sharp consequences: the sector can get 100% free allocation in one year and 0% the next year. To avoid negative consequences for decisions to invest in maintaining or expanding manufacturing capacity in Europe, uncertainty about the carbon leakage status should be avoided. Therefore, planning instability deriving from political decision making should be minimised for industry. Regulations should be shortened / terminated only in case a global level playing field is reached. As a minimum, the carbon leakage list should be valid for the duration of the entire fourth trading period. |
c) the approach should be less stringent (please specify) |
The overarching question should be: Which benchmark provides an effective resistance to carbon leakage at forward looking carbon prices? According to studies for the chemical industry (Unlocking a competitive, low carbon and energy efficient future; Schyns at all.), benchmarks should be less stringent. Currently the allocation based on the already stringent top 10% benchmarks is significantly reduced through the cross-sectoral correction factor or the linear reduction factor (both 1.74% points per year). This adds costs even for the most efficient producers and thereby discourages investments and growth. This approach is not sustainable. The level of the benchmark should therefore better reflect the penetration of a given efficiency technology within industry. Furthermore, the stringency of the benchmarks should be comparable to benchmarks in other schemes globally. |
c) I don’t know |
An update of the benchmark must reflect the CL risk. It must be ensured that CL protection is fully provided, including the so-called fall-back benchmarks. In par¬ticular the heat benchmark has a substantial volume for especially the chemical industry. If considering a revision of benchmarks, the update should only take place between trading periods, not within a trading period. Frequent updating is detrimental for the carbon price signal for investments and undermines the planning of investment decisions. In case of more products in one sub-installation falling under the same fall-back benchmark, a spreadsheet should be used to establish the baseline production volumes (test: the combined production volumes shall be equal to the granted historical allocation for each fall-back benchmark method) The best support to foster investments in new, low-carbon production plants would be a stable political framework which allows for industrial growth. |
c) other (please specify) |
The system should be revised to a fully benchmark based system without further reduction factors and based on current production volumes This would better reflect the need for free allocation of the companies and allow for industrial growth. Over- and under-allocation to the most efficient producers and build-up of allowances in circulation in case of another economic crisis would be avoided. In contrast, the current ex-ante allocation is adding costs to the production of efficient plants thereby discouraging growth and perversely rewarding relocation to outside Europe. To allow for dynamic allocation, an industry fund should be set up with the back-loaded allowances as a starting stock. When the allocation need is lower than the cap, the fund is filled and when it is higher, allowances are released from the fund. In addition, compensation schemes for indirect emissions which assure that energy efficient producers have no disadvantages compared to a no-EU producer are needed as well |
b) yes, there should be deviations with higher allowances for installations facing specific hardships |
In general, there should be no deviations to ensure common rules for the establishment of a level playing field. A hardship could be included to avoid unjustified hardness for exceptional cases and in order to protect competitiveness sufficiently. |
d) yes, in the form of financial compensation at EU-level |
Direct and indirect emissions both are equally harmful for energy-intensive industries. Today, the treatment of indirect (electricity) emissions is based on an incomplete and in some cases inherently unstable system for financial compensation, based on historical figures and dependent on the availability of national budget and political decisions. The incompleteness regards the sectors covered, the reduction factors and the absence of this compensation in many Member States. A more solid and predictable alternative is needed. But member states and the EU should be aware, that higher budgets will be needed for compensation of indirect costs, especially in scenarios with increasing carbon prices. Care must be taken that carbon leakage can still be avoided. Otherwise the EU will lose those industries which provide the innovation and economic strength needed to achieve a low carbon future which truly is a global model. |
Important |
Most important |
Less important |
Least important |
The development of new technologies follows a pre-defined path (from development to deployment and commercialisation) where different types and levels of support are needed. It is important to adequately define the appropriateness of each type of aid. Support is necessary at the early stage in order to overcome market barriers and failures. |
d) other |
Free allocation has to protect against carbon leakage adequately. Therefore, the free allocation should not be used for innovation support. The revenues from auctioning should be reinvested for low carbon technology support in industry, as foreseen in the ETS Directive. ETS money should not be used to fund decarbonisation of other sectors. |
While the details regarding CL protection may be implemented in different ways, the principle must be respected that those EU producers producing at an appropriate benchmark level incur no additional costs due to ETS. Any decisions should allow for industrial growth and the climate change policy should fit with the EU’s industrial renaissance strategy. CL is yet a barely perceptible process, but has already started (Deutsche Bank Research, January 2014). This trend of de-industrialization must be stopped; functioning value chains have to be preserved. It is important to note that CL protection is not „nice to have“, it is not a treat for industry. CL protection is absolutely vital to compensate for serious disadvantages and cost burden that no other competitor outside the EU has to shoulder. The results of COP 21 and the commitment of the major world regions to climate change policies are a precondition that EU climate policies will have a future in the manner we see it today. |
a) Business |
Beatson Clark Ltd |
Tim Swetnam Beatson Cark The Glassworks Greasborough Rd Rotherham South Yorks England S60 1TZ +44 1709 834718 tim.swetnam@beatsonclark.co.uk |
a) yes |
|
1) yes |
c) I don’t know |
The glass industry is making continuous improvement in energy efficiencies and process technologies to reduce CO2, energy consumption and environmental impacts. While further reductions in the glass industry are possible, what is important is the magnitude of this reduction. All official EU publications such as the “Sector Competitiveness Studies - Competitiveness of the Glass Sector - Final report, 14 October 2008” or more recently the Glass BREF and the BAT Conclusions show that no breakthrough technology is currently available to reduce CO2 emissions to the extent imposed by the energy and climate package 2030 (-43% for ETS sectors between 2005 and 2030). Emissions reductions cannot be repeated ad infinitum. There is a thermodynamic limit to the glass melting process which is an absolute limit, and that current technology is already approaching. The high ambition level of the package, applied unilaterally in the EU, is likely to increase the risk of carbon leakage. |
b) no |
The main driver for energy efficiency improvements in the glass industry is the high share of energy costs within production costs. In fact, the glass industry has continuously improved energy efficiency over previous decades. Regulatory instruments and the EU ETS in particular, have only a marginal effect on energy efficiency improvements of glass melting activities, if any. Whilst there is no global ETS in place, the EU ETS is only a source of costs for glass industries (direct but also indirect CO2 costs linked to electricity), and therefore weakens the competitive position of European based glass industries vis-a-vis third country competitors. As such, it indirectly favors production reduction in the EU and rises in imports from non EU countries without carbon constraints into the EU. For these reasons, glass industries need to be fully protected against risks of carbon leakage. |
a) yes |
The EU glass industry faces higher costs for environmental protection, energy, labour and raw materials, than the majority of extra-EU competitors. In the absence of an international climate agreement and a level playing field between EU and extra EU competitors, the EU industry needs to be provided with measures to safeguard its competitiveness. Measures should center upon actions to avoid carbon leakage as a result of the EU ETS, these are therefore essential. Measures should cover both the direct and indirect CO2 costs. Such measures under the EU ETS must be established in a way that ensures the ETS’ coherence with the EU’s ambition to revitalize European manufacturing activities, as proposed in the EC Communication on Industrial Renaissance. |
c) quite inadequate |
Free allocation has been key up to now to mitigate the negative impacts of a unilateral climate policy. However, the Cross Sectoral Correction Factor which is applied already from 2013 reduces the free allocation, even for the most GHG efficient installations, and will dramatically increase in the future, thus further reducing free allocation. This current system is unsustainable and should be changed in order to ensure that the most GHG efficient installations receive 100% of their allowance needs. |
a) it absolutely keeps the incentive |
Free allocation does not reduce the incentive to innovate; on the contrary, the majority of installations in the sector (about 95%) do not have enough allowances, which encourages industry to invest in the efficiency of its plants to avoid having to purchase a high level of allowances, which would render the sector uncompetitive. For the installations under the benchmark (about 5%), they can sell their allowances on the market, which is also an incentive to continue reducing emissions. The incentive is therefore present. Below, we also call for a periodic revision of the benchmarks (in exchange of the cancellation of the cross-sectoral factor), which also provides for a strong incentive to improve. However this last incentive would be better preserved if the CSCF was not forcing an unrealistic and arbitrary reduction of the number of free allowances even for producers who are the most GHG efficient in the sector. |
b) quite proportionate |
Administrative burden is accepted, since it is necessary to maintain the free allocation system. However opportunities or improvement to this process should be considered. Conversely, the administration and calculation rules for new entrants are overly complex and can lead to under-allocation. They can therefore be seen as disproportionate and can be a disincentive to new investments. |
d) there should be no limit to overall free allocation to industry |
The current system is unsustainable (from a competition point of view) because the cross sectoral correction factor continually reduces the free allocation given to industry, even for the most GHG efficient installations. Ideally, installations whose efficiency is equal or better than the (periodically reviewed) benchmark should receive 100% of free allocations to produce in the EU and so there should be no limit. In practice, this is likely to lead to a higher share in phase IV. An increased level of EU ambition in terms of GHG reduction would require enhanced measures against carbon leakage and therefore an increase in total free allocations. |
e) I don’t know |
Overall financing for technological innovation (and not only connected with CO2 reductions) in manufacturing should be increased in the EU. However R & D should be funded via a mobilization of different sources of funding - including but not limited to - auctioning revenues. It should not come from the free entrants reserve or Free Allowances reserve. Allowances should be primarily used to ensure that the most GHG efficient installations get 100% of their needs to produce in the EU. Furthermore, financing for R&D and demonstration projects should be technology-neutral and not focused only on CCS or renewables. New technologies such as Carbon Capture and Use (CCU) and others should not be excluded. |
a) yes |
As stated above, industrial innovation, with a focus on the process and on new energy sources for industry, should be promoted. It should not be financed by shares of allowances reserved for free allocation or for new entrants, but rather from a mobilization of different sources, and not limited to auctioning revenues. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Industrial innovation should be promoted in a technology-neutral way. However this should not be done at the expense of free allocation which aims to provide effective support and protection against carbon leakage. Therefore it should be financed via other sources. This could include, among other sources, money from the auctioning revenues, as suggested in the ETS directive (Art 10.3). |
a) yes |
Unequitable carbon costs should not place EU industries at a competitive disadvantage with extra-EU competitors and this should be the ultimate objective pursued in order to achieve the EU’s ambition of 20% GDP realized by industrial activities in 2020. To that end, measures against carbon leakage are a pre-requisite but are not enough. An EU scheme for compensation of indirect costs due to higher electricity prices and some raw materials (e.g. soda ash, industrial gases, ..) should also be developed for Energy Intensive Industries. More generally, the EU needs to assess, and if needed reform, all its policies and in particular energy and environmental ones against the re-industrialisation objective. A longer term re-industrialisation objective for 2030 should be established. |
a) the present two groups should remain |
This binary model ensures that all sectors benefit from carbon leakage protection measures as soon as a risk is detected. This is essential to ensure that carbon leakage measures are effective and that protection is not granted too late, when industries are already in jeopardy. |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
The competitiveness of energy-intensive industries is sensitive to energy and carbon costs, therefore a risk exists for all these industries. For the sake of simplicity and consistency in legislation, all energy-intensive industries, as defined in Art 17 (1) a of the Energy taxation directive 2003/96/EC could be automatically placed on the carbon leakage list, i.e. An "energy-intensive business" shall mean a business entity, where either the purchases of energy products and electricity amount to at least 3,0 % of the production value or the national energy tax payable amounts to at least 0,5 % of the added value. In case ETS-specific criteria are maintained, they should continue being based on both the CO2 intensity and the trade intensity metrics. The CO2 cost metric should be made more relevant to analyze the impacts of carbon cost on sectors’ profitability. To that end, the CO2 cost over GVA criteria could be replaced by a CO2 cost over Gross Operating Surplus criteria.. |
b) other thresholds should be defined. Please specify below |
The competitiveness of energy-intensive industries is sensitive to energy and carbon costs, therefore a risk exists for all these industries. For the sake of simplicity and consistency in legislation, all energy-intensive industries, as defined in Art 17 (1) a of the Energy taxation directive 2003/96/EC could be automatically placed on the carbon leakage list, i.e. An "energy-intensive business" shall mean a business entity, (…) where either the purchases of energy products and electricity amount to at least 3,0 % of the production value or the national energy tax payable amounts to at least 0,5 % of the added value. In case ETS-specific criteria are maintained, thresholds must be maintained at their current levels even if the denominator of the carbon cost criteria is changed to Gross Operating Surplus. Raising thresholds would send a damaging signal to EU industries, meaning that fixing a cap to free allowances is more important than safeguarding industrial competitiveness . |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The current criteria under the quantitative assessment at NACE 3 or 4 level should be maintained and used as the first assessment option. When an assessment at NACE 3 or 4 level is not appropriate to identify the relevant industrial activities falling under the EU ETS, then a quantitative assessment at 6- or 8-digit should be carried as a second option. Finally, as a third option, a qualitative assessment must remain possible. Other parameters can be studied as part of qualitative assessments, such as methodology and evidences of investment leakage. |
d) in line with the duration of ETS Phase 4 |
As long as there are no equivalent GHG reduction measures taken by major trading partners, the list of sectors exposed to the risk of carbon leakage should remain valid. This is essential to provide predictability to industries faced with long investment cycles (typically > 15 years). |
c) the approach should be less stringent (please specify) |
Glass industries support ambitious benchmark levels, which reflect the technological capabilities of the sectors best performers using the best available and proven technologies in Europe. It must be kept in mind however that this approach also has limits. Indeed, benchmark curves do not always reflect a difference in terms of « best » (the least GHG emitters per tonne of glass) or « worst » GHG players, but a difference in terms of products produced, cullet availability, age of furnace, available fuels, etc. The 10% best GHG performers can therefore be regarded as extremely challenging, especially for plants producing a wider range of more sophisticated products with higher added-value (as this usually entails higher energy consumption). |
a) yes (please specify how often) |
It seems logical to revise the benchmarks from time to time to reflect GHG improvements over time. Revision cycles should be linked to ETS phases and remain unchanged over this period. Periodical revision of the benchmark should be based on the actual EU based installations. The periodic revision of benchmarks should be the sole instrument leading to a reduction of free allowances over time, as benchmarks reflect true possibilities of GHG improvements according to state-of-the-art technologies deployed in Europe. The periodic revision of benchmarks therefore justifies that the CSCF is abandoned. |
c) other (please specify) |
Ex-ante allocation can only lead to over-allocation in crisis times, and under-allocation when the economy is growing. A better approach is to design an « ex post » system, where real allocation is corrected according to the real production. |
a) no, there should be no deviations |
In principle, there shall be no deviation from the general harmonized allocation rules at the level of an individual installation as this could cause distortion of competition. Only in the case of very specific hardship, should deviations be envisaged for an entire sector after a careful assessment of the competitive effects of such deviations. |
d) yes, in the form of financial compensation at EU-level |
Rules for the compensation of indirect costs should be revised and need to be effective to reflect the real burden of CO2 included in electricity costs for industry. A differentiated compensation approach by Member States is not acceptable from a competitiveness point of view. A harmonized approach at EU level is therefore needed. The harmonized measure should take the form of financial compensation. Free allocation should be kept aside to ensure full relief for direct emissions (most GHG efficient installations should receive 100% of their needs). A compensation system should also be put in place to compensate for higher prices of some raw materials (e.g. soda ash) and industrial gases. |
Important |
Less important |
Most important |
Least important |
No comments |
a) from the Member States' auction budgets |
Allowances funding low-carbon innovation support should be financed from the Member States’ auction revenues and from a mobilization of additional sources. However, this should not be financed at the expense of free allocation or the new entrants reserve which must be principally used for measures against risks of carbon leakage. |
Generally speaking, glass industries welcome the opp' to express their views on carbon leakage measures post 2020 and appreciate that this discussion is held without further delay. It is however regrettable that industry is asked to comment on such measures whereas the rules for EUETS Phase 4 have not yet been fully decided.The glass industry wishes to reiterate that so long that there is no comparable ETS system operating in the world and in extraEU countries with glass industries, EU based glass industries will need to receive full and effective protection against carbon leakage. The recent assessment carried by DG on exposure to carbon leakage risks, i.e. the carbon leakage list of 2009 and its recent revision, shows that between 09 and 14, risks of carbon leakage has grown in most glass sectors. For these reasons, glass industries need effective protection moving forward. This should translate in more free allocation considering the increase in the EU’s GHG reduction target. |
a) Business |
Benteler Tube/Management GmbH |
Clas Landwehrmann Abteilung CC/SC Umweltmanagement / Arbeitssicherheit Residenzstrasse 1 D-33104 Paderbor +49 5254 81-202161 Clas.Landwehrmann@Benteler.de |
a) yes |
|
1) yes |
b) no |
Industrial sectors that participate in EU ETS have already reduced their greenhouse gases. For instance the greenhouse gas emissions per ton of crude steel decreased by 14 percent between 1990 and 2010 in the former 27 European Union countries. Meanwhile the steel industry has achieved the technical limit in the available technologies. The emissions of steel industry in Europe can only be reduced by 15 % by 2050 against 2010 in an economical matter because of the high share of process-related irreducible emissions (BCG study, 2013). So there is now an obligation for others not belonging to EU ETS to fulfill their responsibilities. |
b) no |
The steel industry as an energy intensive industry has an origin incentive to reduce energy consumption and therefore emissions to optimize its costs in an intensive international competition. Long before introduction of ETS, fundamental efforts have been visible. From this point of view, an additional steering effect is not to be expected. This is especially true because the benchmarks for crude iron and steel are well below the technically feasible level. On the other side, by the obligation to buy allowances the budget for investments is reduced so that there is also a counterproductive effect. The EU ETS is a big disadvantage for the steel producers in Europe. All of their competitors in third countries benefit from unilateral hurdles for the European producers. That means costs for direct emissions and for indirect effects for the European producers. There is clearly a loss of competitiveness for European steel producers through EU ETS. |
a) yes |
As long as there is no level-playing with competitors in other parts of the world, there has to be a special arrangement for European companies, which allows for competitive costs. |
a) very adequate |
See Answer question 3; As long as in other parts of the world there are no or not comparably binding ETS, free allocation is the only instrument to prevent massive cost disadvantages, carbon leakage and the loss of production and jobs. |
b) it largely keeps the incentive |
German Steel Producers are exposed to an intensive international competition. Cost disadvantages and cuts in the investment budget can only be avoided by free allocation. In order to maintain their market share, it is necessary to permanently improve the production and the products. This is a precondition in order to reduce costs and to reach new applications including technologies to reduce emissions. |
d) absolutely exaggerated |
There is indeed by far too much administrative burden to fulfill the conditions to ensure the free allocation. It should be the aim to minimize these bureaucratic hurdles. Nevertheless, the system of free allocation has to remain. |
d) there should be no limit to overall free allocation to industry |
From third countries there are only intentions known to reduce their greenhouse gas emissions. Indeed there are no comparably binding ETS implemented. Therefore free allocations are necessary post-2020. A continuing decrease of the cap without considering the technologies potentials of the industry would hamper the international competitiveness of the steel industry and already today the investment perspective. After all, it would be equivalent to a production decrease, leading to carbon leakage. Therefore, the allocation budget for energy intensive industries like steel has to been determined bottom-up, derived from technical feasible benchmarks and not reduced by a correction factor. |
d) there should be no such innovation support post-2020 |
The allowances from ETS should be first of all provided for a sufficient allocation for direct emissions and indirect effects. Innovation support is not as a priority of the ETS. |
b) no |
In the steel industry there is only a tiny potential to reduce greenhouse gas emissions in production processes. Nevertheless steel industry delivers solutions to reduce greenhouse gas emissions in new applications like in conventional power stations or in car production. Therefore programs like Horizon 2020 are currently good instruments. Much more important is the use of the allowances from ETS for free allocations for direct and indirect effects. Innovation support is not as a priority of the ETS. |
c) other types of funding (please specify) |
Actually funding should occur outside the ETS. If not avoidable, the NER should be chosen before new schemes are founded. See our answer to question 9. |
a) yes |
One necessary implicit measure is to redetermine benchmarks to a feasible level. For example for steel industry there is a benchmark for hot metal that no company worldwide is able to achieve. Waste gases should be completely included. Secondly, for energy intensive industries no correction factor may be applied. |
a) the present two groups should remain |
In the meantime the categories are appreciated. So the system should be remained. In each case every further differentiation is due to further administrative burden to be avoided. In this context the examination of the international level-playing-field is quite important. The European Union should avoid to be much more restrictive than third countries in exploring ETS. |
a) the present criteria should remain |
This system should not be made too complex by changing the modus. It should remain for the sake of planning certainty. The European Commission had determined in a transparent and logic manner plausible indicators for quantitative and qualitative criteria. These should be used also for the fourth trading period. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
See our answer to question 13. |
b) no, all criteria should be based on simple metrics and linked to clearly defined thresholds |
See answers to questions 13 and 14. |
d) in line with the duration of ETS Phase 4 |
The validity of the list for the post-2020 should be in line with the duration of ETS phase 4 for the sake of planning certainty and to avoid further administrative burden. The option of rechecking the list in a shorter period causes coordination costs and should therefore be left. |
a) the present approach of average of the 10% most efficient installations should remain |
Unfortunately the first sentence is not true, because there is a benchmark for hot metal that no steel company worldwide is able to fulfill. Nevertheless the principle, that the average of the 10% most efficient installations as benchmark should remain and if necessary an up-date every five years could be performed. |
a) yes (please specify how often) |
The benchmarks could be revised every five years based on the technical development of the 10% best installations. |
c) other (please specify) |
The allocation should performed in a dynamic manner. That means that historic data are not necessary any more. Every industrial company should obtain its allocation for direct emissions and indirect effects according to the actual production. It is for this purpose sufficient to have only the actual production data for the relevant year. |
a) no, there should be no deviations |
The system should be fixed so that for industrial companies free allocations for direct emissions and indirect effects in the whole fourth trade period are distributed. In this framework exemptions are redundant. |
a) no, the present approach should be maintained, i.e. that Member States can provide such compensation based on state aid guidelines |
The present approach is sufficient for the current trading period. The transparent guidelines of the Commission are giving a clear framework. They are plausible worked out. This approach should remain in considering its planning certitude. Moreover as long as there are different energy prices in the European Union with special exoneration mechanism in several Member States (e.g. through guaranteed fix prices for the industry or high refund for cut off capacities) as long is a national compensation scheme indispensable. Ideally, the indirect emissions are included in allocation starting from 2021. |
Important |
Less important |
Most important |
Least important |
For the steel industry the most important thing is to get further free allowances. The question of getting money for innovations and for which precise purposes could indeed be additionally seized. Nevertheless the potentials to reduce greenhouse gas emissions in the steel industry are limited according to the study of BCG, 2013: They can only be reduced by 15 % by 2050 against 2010 in an economical matter. |
d) other |
The allowances funding low-carbon innovation support should come from Horizon 2020. The compensation for indirect effects should come from the Member States auction budgets. |
The review of the EU ETS offers opportunities. We therefore welcome the proposal of the European Commission to reform the system for the time post-2020. Indeed, the current system represents a costly and bureaucratic instrument. The German Steel industry will suffer in the third trade period from an increasingly short allocation. The shortage of certificates is hampering the competitiveness of this industry, their competitors in third countries do not have. So it is very urgent to reform the EU ETS in a manner that the European steel companies will get in the fourth trading free allocation for direct emissions and indirect effects. This will include the absence of a correction factor as well as a dynamic allocation method. This should be the highest priority in the reform of the EU ETS post-2020. |
a) Business |
Birla Carbon |
gilles.moninot@adityabirla.com home office in France |
a) yes |
|
1) yes |
a) yes |
Energy recovery within the chemical industry is still far from optimum. |
a) yes |
I does not make the European Industry more competitive though as the EU ETS cost burden is still here. |
a) yes |
|
c) quite inadequate |
The EU ETS forces global corporations to consider carbon leakage and EU exit to neighboring countries. |
b) it largely keeps the incentive |
|
b) quite proportionate |
|
b) a higher share than in 2013-20 |
With the expected rise in the global economy, some industries will struggle sourcing the actual EUAs to be redeemed and the capital investment might not be worth it. Question then will need to be asked: staying in the EU or exiting? |
a) a substantially higher share than in Phase 3 |
|
b) no |
Let the industry take care of it. |
d) I don’t know |
|
a) yes |
A carbon tax on import could help for placing the EU industry at a level field. |
a) the present two groups should remain |
|
g) I don’t know |
|
c) I don’t know |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
b) longer (please specify) |
At least 10 years to justify investments. If the rules are potentially changing in five, investors will not be keen on upgrading production plants. |
c) the approach should be less stringent (please specify) |
Move to 25% as the benchmark does not take into account the specificity of the various types of product; e.g. carbon black which has many different and necessary grades. |
a) yes (please specify how often) |
every 10 years |
c) other (please specify) |
Difficult to answer as the last years have seen a low production volume due to the economic downturn. What about the future years? |
b) yes, there should be deviations with higher allowances for installations facing specific hardships |
|
b) no, and there is no need for financial compensation by Member States, either |
|
Least important |
Important |
Most important |
Less important |
a |
c) from both |
|
Is there any contemplation in linking the EU-ETS with other international trading systems? |
a) Business |
Boliden Group, an integrated producer of base metals such as zinc, copper and lead for industrial customers throughout Europe. The core expertise lies within exploration, mining, smelting and recycling. The Group has approximately 4,800 employees and production sites in Sweden, Finland, Norway and Ireland. |
Mr Christer Ryman, Director Group Climate & Environment, Boliden Group, P.O. Box 44, SE-10120 Stockholm Sweden, Phone +4686101557, e-mail christer.ryman@boliden.com, www.boliden.com |
a) yes |
|
1) yes |
b) no |
No, unless: 1. Extra cost due to climate policy is sufficiently compensated. Currently, a key carbon leakage prevention mechanism, compensation for ETS indirect costs, exists only on paper as only few member states established meaningful schemes. 2. We have a stable, predictable and investment friendly environment in Europe. 3. Conditions are put in place to ensure that EU industry can remain globally competitive so that it can continue to invest in innovation along its entire value chain. 4. Sector specific reduction potentials and technology availability are properly addressed, (when designing new policies). |
b) no |
Energy intensive industry has an innate incentive to become more energy efficient due to high energy cost, independently of the extra cost related to ETS. In these industries, however, the EU ETS may reduce the ability to become more energy efficient. Improvements will require investments, either in upgrading of existing capacity or in new plants. Extra cost due to climate policy is however insufficiently compensated and will reduce the margins of the industry. Shrinking margins lead to reduced energy efficiency investments. |
a) yes |
In most energy intensive industries, product prices are set in global markets. Until a significantly larger share of competitors is influenced by similar increases in energy cost, there is a need for such measures. Otherwise such industries will disappear from Europe. |
a) very adequate |
Compensation for direct and indirect costs, linked to actual output and realistic benchmarks, would be a very adequate measure to address the risk of carbon leakage (predictability and effectiveness is ensured in the long term for both direct and indirect costs). |
a) it absolutely keeps the incentive |
Full compensation for direct and indirect costs is absolutely necessary for the com-petitive position of Europe as a localisation of energy intensive industries. Compensation should be linked to actual output in order to provide an incentive for growth and to allow production flexibility through business cycles. Realistic benc¬marks are necessary for full compensation to new capacity and for the preservation of the undistorted environmental incentive. Expressed differently, allocation of free allowances will not reduce the environmental incentive for the recipient. On the contrary, full compensation for direct and indirect effects of ETS through allocation or otherwise is a precondition for investment in new capacity in Europe. |
b) quite proportionate |
The administrative burden is not insignificant, but proportionate in the sense that no better solutions to solve the carbon leakage issue have been proposed. |
d) there should be no limit to overall free allocation to industry |
Carbon leakage undermines the environmental efficiency of EU ETS as well as EU’s industrial growth. Certain industries have to be protected for unfair international competition until fair conditions are restored by an international climate agreement. Without a comprehensive international agreement giving the global competitors of European industry a similar cost element related to emissions and electricity consumption, the cost of carbon leakage mitigation will be more or less stable, whereas the number of allowances to cover this cost will gradually diminish. This is a cost that is directly linked to emission trading and should be covered by the ETS system itself before any money is taken out of the system. If in the future, there is an inadequate number of allowances available to cover the need for carbon leakage mitigation, compensation could be provided as a sum of money proportionate to a given number of allowances from another source of finance. |
c) a lower share than in Phase 3 |
Financing of CCS should not be a priority for the allowance budget. It is illogical to reserve a given share of the budget for this purpose: When the EUA prices are low the need for support is high and vice versa. Furthermore, the lack of stability in the EUA market creates a high project risk and high financing cost. This adds the project cost and the need for support. |
b) no |
ETS should be focused on emission trading and mitigating the effects of such trading. Financing is tight, and there is no room for further programs. |
c) other types of funding (please specify) |
ETS should be focused on emission trading and mitigating the effects of such trading. Auction income should not be diverted to general innovation support. |
a) yes |
The use of free allowances will also have to be extended to cover indirect effects through increased electricity prices. With significantly higher EUA prices, the present solution for indirect costs based on State Aid will: i) be insufficient for long term survival of these industries in Europe, ii) not create the predictability needed for investments, and, as well, iii) create significant disturbances in the internal market for energy intensive products. Effective carbon leakage prevention will also require exemption from extra costs related to other elements of climate policy like support to development of renewable electricity generation and extra grid costs related to transmission and balancing of electricity from renewable sources. |
b) more carbon leakage categories should be defined |
Electro-intensive industries are particularly exposed to carbon leakage and need full compensation of extra cost until a significant share of competitors is influenced by similar cost increases. EUA costs are passed on into electricity prices through the marginal cost of the marginal sources of electricity, and for these industries, electricity related cost make up a high share of total cost. Most electro-intensive products have a high value compared to their weight, and may be moved between markets at a cost that is small compared to their value. They are thus globally priced with only a minimal price differentiation between markets. Other industries may need compensation, but not necessarily to the same degree. Other trading systems, like the Australian one, have more than one category of industries receiving different degrees of compensation. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
A single carbon leakage list (with several categories) should be established. The list should be based on the combined effect of direct cost (emission allowances) and indirect costs (increases in electricity costs due to climate policy). The following set of criteria should be established: 1. The exposure to global competition. 2. The exposure to EUA cost. 3. The unit is in the most exposed category of the carbon leakage list if both criteria are met being simultaneously at a high threshold. If one or both of the criteria only meets a lower threshold, the unit will be in the less exposed category of the list. The intensity of trade with third countries is a weak proxy to competitive exposure, and should not be used in this context. |
b) other thresholds should be defined. Please specify below |
The levels of the thresholds should be based proper analysis of the proposed new set of categories and criteria (see response to Q12 and Q13). |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Justified cases could be: inability to pass through the CO2 costs to its global customers (i.e. price-taker industrial sector), economic activity of major importance for EU society (e.g. recycling as a contribution to the "circular society") |
d) in line with the duration of ETS Phase 4 |
Predictability is the key to incentive efficiency. There is reason to believe that the set of criteria described above will establish robust and stable lists. |
a) the present approach of average of the 10% most efficient installations should remain |
|
a) yes (please specify how often) |
Not to get stuck in old technology, the benchmarks have to be revised on a regular basis. However, to do this more often than the trading periods makes no sense, as investments in our industry are long-term and often very expensive. Ten years is a minimum span between revisions of the benchmark. The revision should be based on actual industry performance within EU. |
c) other (please specify) |
The main advice to be found in the literature is to use output based allocation linked to realistic benchmarks. For each industry, the baseline will then be set by the realistic benchmark. Indirect emission should also be set by realistic benchmarks and actual output. The compensation will be linked to a sum of two benchmarks, one derived from emissions and one derived from electricity consumption. |
a) no, there should be no deviations |
There should be no deviations linked to the short-term financial conditions of industries. There might however be a need to find special solutions for industries where it is impossible to establish sectorial benchmarks. |
c) yes, in the form of additional free allocation |
Compensation inside the EU ETS should be extended to cover indirect effects through increased electricity prices. With significantly higher EUA prices, the present solution for indirect costs based on State Aid will be insufficient for long term survival of these industries in Europe and, as well, create significant disturbances in the internal market. The cost of any compensation measures will be proportionate to the EUA price, thus corresponding to the value of free allowances. Compensation could be provided as free allowances or as a sum of money proportionate to a given number of allowances from another source of finance. |
Important |
Least important |
Most important |
Less important |
|
d) other |
ETS should be focused on emission trading and mitigating the undesirable effects of such trading. Innovation support should mainly come out of MS general budgets and not from auction income. |
|
a) Business |
Borealis AG |
Dr. Ir. Lieven Stalmans Borealis Group Manager Energy & Environment Industrieweg 148, 3583 Beringen, Belgium +32 475 516 837 lieven.stalmans@borealisgroup.com |
a) yes |
|
1) yes |
a) yes |
EU industry ability to further reduce GHG emissions i) depends on the political will and provisions to have a growing share of industry in the EU GDP (industrial policy) to allow investments in innovation and efficiency improvements and ii) requires a stable and predictable cost level playing field. High costs from the proposed EU 2030 targets combined with the uncertainty on future carbon leakage provisions are an obstacle for energy efficient growth and investments. Furthermore, industry needs a clear political commitment that EU climate policy - including targets - will be reviewed if by 2020 no global level playing field is achieved. GHG emission reduction potential and annual improvement rate varies strongly between (sub-) sectors. E.g. even the most energy efficient ammonia production will always result in CO2 release due to the chemical reaction, i.e. natural gas (CH4) delivers H2 for NH3 production and is thus the feedstock: 3 CH4 + 6 H2O + 4 N2 => 8 NH3 + 3 CO2. |
a) yes |
“Yes, provided…” Energy costs by itself have already long time been a driver for industry to continually improve energy efficiency. Emission trading on a global scale is an effective and efficient market based instrument for climate protection at lowest cost. But to contribute to EU industry competitiveness, EU ETS needs to set an economic incentive for carbon efficiency without increasing unilateral cost burden triggering carbon leakage. The incentive to reduce emissions is provided by the carbon price and the benchmark principle but current EU ETS design does not adequately protect against carbon leakage: reduction factors bring free allocation significantly below benchmark level, carbon leakage status is uncertain and the ex-ante principle hinders industry growth. EU ETS must be improved from ex-ante allocation - that incentivises production carbon leakage (lowering production) and causes investment carbon leakage due to uncertainties to get allowances for growth – into dynamic ETS. |
a) yes |
EU needs to provide for measures that minimise the unilateral cost burden of EU industry as long as the ambitious EU Climate policy is not mirrored by comparable international efforts and same or similar burdens of a vital share of global production. EU emission reduction targets should not be achieved through carbon leakage which is detrimental both from economic as well as environment viewpoint. EU climate policy must at the very least not add costs to efficient EU manufacturers: 100% free direct and indirect allocation according to realistic benchmarks is needed. Allocation should be dynamic according to actual production output in order to avoid over-allocation during recession and under-allocation during growth, thus not rewarding relocation outside Europe. We need a clear commitment that without comparable global climate action and burden as from or soon after 2020, the EU climate policy approach including the EU ETS cap must be reviewed. |
b) quite adequate |
Free allocation is essential to avoid carbon leakage but the allocation rules must be revised to prevent carbon leakage also at higher CO2-prices. We propose an improved setup with following crucial elements of a proper “dynamic allocation”: (1) Realistic benchmarks without correction factors (not top 10% benchmarks decreasing with CSCF/LRF; properly account for industrial carbon efficiency improvement rates). (2) Dynamic allocation (actual instead of fixed historical production volume; the current flawed new entrant rules form huge barriers and risks for growth, thus a clear incentive for carbon leakage). (3) Compensation indirect emissions by indirect allocation. (4) Allocation Supply Reserve. The system must be revisited if in 2020 or soon afterwards the EU remains isolated with its ambitious climate policy. An ambitious climate policy with an absolute cap and effective carbon leakage protection based on free allocation will inevitably in the longer run lead to friction. |
a) it absolutely keeps the incentive |
‘Free allocation’ should be 100% free for the best performer; today this is not the case due to too tight benchmarks, CSCF and ex ante allocation. With free allocation based on benchmarks, industry can remain competitive, while the incentives to improve carbon efficiency are fully preserved. The incentive does not depend on the absolute level of the benchmarks. Even more, too stringent benchmarks are not compatible with avoiding carbon leakage; present focus is too much on the “top 10%” figure. The incentive is also distorted in present EU ETS by the use of historical production data (cf. Q4). A normal update of the present top 10% benchmarks by the end of phase 3 would be detrimental for the incentive to reduce emissions (update problem), because emission reductions would then automatically lead to a lower allocation in phase 4. This point is further elaborated in Q18. Free allocation also keeps the financial means with companies to further improve energy efficiency and to innovate. |
b) quite proportionate |
Administrative burden could probably be simplified. Dynamic allocation will not lead to additional burden since reporting on manufacturing output is already done anyway. When implementing a dynamic system (cf. Q4), the complex rules for new entrants, extensions, cessation etc. would to a high degree become obsolete. Allocation on actual production (provisional production ex-post adjusted to actual production) will simplify the EU ETS and creates less administrative burdens while removing the incentives and risks for production and investment carbon leakage. This fulfils the three aims of the EU ETS reform put forward by DG Climate Action and Enterprise – simplicity, predictability and effectiveness. In our view such ex-post regime would not require an annual Commission Decision on allocation; also presently there is no Commission Decision (and checks) required to lower allocations because of the present partial cessation rules and closures. |
d) there should be no limit to overall free allocation to industry |
EU industry must not be unilaterally burdened with limits and constraints in the absence of equitable global action. A sound benchmark based allocation scheme incentives continual efficiency improvement (cf. Q5). Ex-ante allocation below the already ambitious top 10% benchmark level doesn’t adequately prevent carbon leakage; instead we propose a reform of EU ETS with “dynamic allocation” (cf. Q4): - Realistic benchmarks, improvement potential differentiated by sub-sector), and no decrease of the ambitious top 10% by unrealistic reduction factors (CSCF, LRF etc.). - Allocation based on actual production - Solution for the indirect allocation. - An adequate reserve for growth, along the concept of an Allocation Supply Reserve (ASR, cf. Ecofys study). Such ASR can accommodate excess volumes in periods of lower production (hence no need for further backloading etc.) and guarantee allocation for growth. |
b) the same share as in Phase 3 |
Carefulness is required for innovation support, not to pick wrong winners, or to overly subsidise maturing technologies, and technologies supported by separate national schemes don’t need additional funds. On the other hand cost efficient, reliable and publically acceptable carbon capture and storage is essential for reaching the long term emission reduction targets. Likewise decarbonising the power sector requires innovative renewable energy. A continuation of the NER300 program could be envisaged for CCS and innovative renewables, but in our view should be complemented with a similar scheme to stimulate industrial innovations & carbon reductions (see Q9), totalling to 600 million allowances in phase 4. This is well in line with the EU ETS Directive which already suggests up to 50% of revenues by Member States to be earmarked for such purposes. Allowances reservation for innovation support shall not lead to correction factors on the EU ETS allocation schemes to avoid carbon leakage. |
a) yes |
Such scheme (similar to NER300) could accelerate industrial innovations and reduction investments (cf. Q8). Prerequisite for an effective innovation support is that normal allocation will not drop after frontrunners have implemented innovative technologies (full implementation takes at least 2-3 decades) to avoid losing the additional innovation incentive. Such support scheme shall be with minimal administrative burden and proper criteria to select innovation & step-change reductions for which the carbon price signal by itself is not sufficient. It is surprising in fact that such support scheme has not yet been established as the EU ETS Directive already states that half of auctioning revenues should be spent on decarbonisation measures. Our concern remains that such support must not ’cannibalize’ free allocation volumes and carbon leakage provisions. Realistic benchmarks and sufficient allocation without correction factors are prerequisites. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
As already suggested in the current EU ETS Directive, auction revenues should be earmarked and ring-fenced for innovation purposes rather than going into national budgets. In view of the desired policy to keep industry by maintaining the present capacities and attracting new capacity investments in Europe (hence securing jobs and wealth), clear priority should be given for ETS auction revenues to go back to the industry to industrial abatement investments and industrial process technology innovations helping to reduce GHG emissions. This is even more important in the light of relatively high prices for natural gas, chemical feedstocks and electricity in Europe versus those of major trading partners. We call for attention that policy makers should refrain from the vicious circle of raising the costs of decarbonisation policies in order to increase revenues for support measures to address carbon leakage and maintaining an EU manufacturing industry. |
a) yes |
The requested EU ETS reform has been touched in Q4 already. (1) Realistic benchmarks (differentiated by sub-sector) and no decrease of the ambitious top 10% by unrealistic reduction factors (CSCF, LRF etc.). (2) Allocation based on actual production. (3) Harmonised full solution for the indirect CO2 Costs. (4) An adequate reserve for growth, along the concept of an Allocation Supply Reserve (ASR, cf. Ecofys study). Free allocation for indirect (electricity) emissions without undue reduction factors and restrictions is essential. It offers a more solid and predictable alternative to the present EU State-Aid guidelines for financial compensation for the indirect emissions are in fact a policy failure as i) just a few Member States have implemented the measure, and ii) the compensation is severely restricted, for products without a product benchmark to 80% x 75% aid intensity in 2020 equals only 60% compensation, and no account for growth. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Confidence & predictability to be recognised as exposed to the risk of carbon leakage is important for activity growth and new investments in EU. Basic building blocks remain essential for maintaining downstream production and employment of entire value chains that depend on thriving European manufacturing industry. A simplified carbon leakage approach considering all activities as exposed reduces administrative burden and is more effective. Though in the current debate it is often stated that the carbon leakage list should become more focused, meaning then fewer allowances are needed “to save industry”, there may be quite a few smaller sectors which are less exposed, but the impact on the needed allowances volume is rather small. Therefore, in case of absence of a true level playing field by or soon after 2020 the EU ETS target for and beyond 2030 and the modalities for free allocation for direct & indirect emissions should be revisited with all industry activities treated as exposed. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
Current methodology based on carbon costs, GVA and trade intensity shall be strengthened with essential new elements: - Forward looking carbon prices. - Treat (exceptional) years with negative GVA as ‘zero’ GVA in order not to distort calculations. - Full power price effects of climate change policies must be taken into account for the risk evaluation, i.e. both the immediate ETS costs from power producers as well as induced costs from renewables policies. - Comprehensive carbon cost comparison: ETS costs in Europe should be compared with those in other major industrial world regions (incl. analysis of allocation rules for direct and indirect emissions). - Clear definition of “a decisive share of global production” (with the same carbon costs). - Qualitative assessments where relevant to add the necessary value chain (upstream/downstream) aspects; sub-sectors that are not directly impacted but inherently linked with exposed sectors are today not necessarily on the list. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
If not all manufacturing ETS sectors are listed, then the present parameters should be maintained. Both the 30% carbon cost threshold as well as the 30% trade intensity threshold shall be kept. High trade intensity shows that markets are already very agile thus additional carbon costs will easily tip the balance. Few lesser energy intensive sub-sectors which are nevertheless highly trade intensive will have little impact on the volume of free allocation and thus on the volume of auctioning. In this context we refer back to our answer on Q12 suggesting the simple approach that all industry activities should be treated as exposed. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Past 2009-2014 CL exercise shows that some sectors are exposed to carbon leakage risk although they may not at first glance meet the quantitative criteria. This can be due to abatement potential, market characteristics, profit margins, or current situation rapidly changed from historic data. For sectors with complex manufacturing systems and interrelated value chains, it is justified and essential to apply qualitative criteria for the exposure assessment. A forward looking qualitative assessment may consider: - Future outlook on carbon costs and trade intensity - All costs related to climate change policy along the value chain, Both upstream costs, but also the implication for downstream sectors if an upstream sector would be deleted from the carbon leakage list shall be assessed. - The inability to pass through locally imposed costs for sectors whose product prices are determined internationally should be taken into account and the expected effect on profitability. |
d) in line with the duration of ETS Phase 4 |
The carbon leakage status is a fundamental parameter for investment decisions of companies. Any change here has sharp consequences: the sector can get 100% free allocation in one year and 0% the next year. To avoid negative consequences for decisions to invest in maintaining or expanding manufacturing capacity in Europe, uncertainty about the carbon leakage status should be avoided. Therefore, we need a rather long stable validity of the CL status of the involved players. Once per trading period could be an acceptable compromise, but this would then still be a much shorter time period compared to e.g. 15-20 years support and planning horizons that today apply for in most Member States’ support schemes for renewable energies investors. |
c) the approach should be less stringent (please specify) |
Current allocation based on stringent avg top 10% means that only abt. 5 from 100 installations get fully allocated. All others incur costs. The stringent benchmarks are further significantly reduced with the CSCF for incumbents and the 1.74%/yr LRF for new entrants (intended to increase up to 2.2%). This adds costs even for the most efficient producers hence discouraging efficient investments & growth. Cefic Roadmap 2050 indicates abt. 0.8%/year improvement for the average (top10% plant probably less!). E.g. for ammonia production, the benchmark combined with CSCF or LRF gives unrealistic low allocation: even the best performer will not receive sufficient allocation to cover the unavoidable feedstock related emission. The benchmark level should be designed to provide effective resistance to carbon leakage at forward looking higher carbon prices in longer term future; free allocation fully keeps the incentive to reduce GHG emissions irrespective of the benchmark stringency (cf.Q5). |
a) yes (please specify how often) |
“Yes, provided...” because carefulness is required to avoid undue effects from revising the benchmarks (so called “updating problem”). If considering a revision, an update of the benchmarks should only happen between and not within trading periods. If efficiency improvements lead to more stringent benchmarks, this provides a wrong incentive to delay investments; frequent updating of the benchmarks is detrimental for the carbon price signal for investments and undermines planning of investment decisions. In addition, benchmark updates must reflect the carbon leakage risk, i.e. carbon leakage protection shall not be compromised. We recommend policy analysis to judge between i) full benchmark revision based on actual installation performance, or ii) benchmark assessment based on expected and economically feasible technologies that could be implemented in existing plants by 2030. The latter approach offers simplicity and dampens the impact of the “updating problem”. |
c) other (please specify) |
Current 'frozen' ex-ante allocation adds costs to production of efficient plants thereby discouraging growth and perversely rewarding relocation to outside EU. This needs to be changed to dynamic allocation based on recent (actual) production. An Allocation Supply Reserve (ASR) should be adopted. At lower than historical production, over-supply flows back in ASR, at higher than historical production the extra needed allowances come from ASR. Advantages: (1) avoids over-allocation during recession, (2) removes the incentive for production carbon leakage until 49% of historical production and (3) removes the risk of investment carbon leakage due to barriers & risks for growth of the present NER allocation rules by avoiding under-allocation for growth. Dynamic allocation is simple (production data are simpler than emissions data), predictable and effective as incentive to reduce emissions (same as auctioning) while avoiding carbon leakage. No need for annual Commission Decision. |
a) no, there should be no deviations |
Harmonized treatment should be the principle rule. Our proposed EU ETS reform (cf. Q4) with revised allocation rules (dynamic allocation with realistic achievable benchmarks and actual production) is expected to be robust without a real need for deviations. |
c) yes, in the form of additional free allocation |
Direct and indirect (electricity) emissions must be treated equally; they both have a carbon cost impact to EU manufacturing industries hence imply carbon leakage risks. EU-level indirect allocation without undue reduction factors or restrictions is a solid and predictable alternative for the current diverse, inherently unstable and incomplete system of financial compensation on MS level. The current system has in fact introduced an unlevel playing field intra-EU, both in terms of incompleteness regarding the covered sectors and because it is actually established only in 5 countries. We consider a harmonised treatment for the indirect costs along with the allocation principles the preferred way forward, under the assumption that the indirect allocation shall not be at the expense of a full direct allocation (cf. Q4). A mandatory EU wide harmonised financial compensation scheme (from auctioning revenues) could be an alternative if indirect allocation is policy wise not an option. |
Less important |
Important |
Most important |
Least important |
Different types and levels of support might be appropriate at the different stages. Carefulness is required for innovation support, not to pick wrong winners, or to overly subsidise maturing technologies. Industrial process technology innovations are needed for deep absolute reductions. Only then the presently foreseen carbon efficiency improvement rates can be accelerated. Therefore, besides the already entered tracks on CCS and innovative renewable energies we appreciate if the EU Commission also enters into innovation support for industrial technology and process improvements and breakthroughs. Beyond CCS, the utilisation of CO2 (CCU) deserves proper exploration. |
a) from the Member States' auction budgets |
Free allocation has to protect against carbon leakage adequately. Therefore, the free allocation should not be used for innovation support. There should be no competition between carbon leakage protection and innovation support. The revenues from auctioning should be reinvested for low carbon technology support, as foreseen in the EU ETS Directive. See further the answer to Q 10. |
As the multiple choice response answer options often do not meet our precise position (e.g. “Yes, provided…), we strongly advise not to make a pure statistical consultation analysis only, but also consider the text motivations. The present allocation rules are very complex, partly illogical and pose huge barriers and risks for growth. Borealis would very much welcome to see DG Climate Action and the industry associations jointly embarking in a thorough ETS reform such that EU ETS phase 4 can be an ETS role model for a global approach. A simple and predictable system with dynamic allocations based on realistic benchmarks without correction factors - both for direct and indirect emissions - and with an allocation supply reserve will be capable to prevent carbon leakage in the absence of global climate action, also at higher CO2-prices. The effectiveness lies in the combined i) maintained incentive to reduce emissions (with benchmark-based allocation), and ii) avoidance of carbon leakage. |
a) Business |
Bormioli Rocco spa |
Viale Martiri della Libertà 1 Fidenza Parma Italy 00390524511418 chiara_ponti@bormiolirocco.com |
a) yes |
|
1) yes |
c) I don’t know |
The glass industry is making continuous improvement in energy efficiencies and process technologies to reduce CO2, energy consumption and environmental impacts. While further reductions in the glass industry are possible, what is important is the magnitude of this reduction. Glass BREF and BAT Conclusions show that no breakthrough technology is currently available to reduce CO2 emissions to the extent imposed by the energy and climate package 2030. Emissions reductions cannot be repeated ad infinitum. There is a thermodynamic limit to the glass melting process which is an absolute limit, and that current technology is already approaching. Further reductions will strongly depend upon external factors such as cullet availability and development of new energy sources. Investments in energy efficiency have also limits related to financial aspects and indexes. Finally, process emissionscannot be eliminated, limiting therefore the reduction potential of the glass industries. |
b) no |
The main driver for energy efficiency improvements in the glass industry is the high share of energy costs within production costs. In fact, the glass industry has continuously improved energy efficiency over previous decades. Regulatory instruments and the EU ETS in particular, have only a marginal effect on energy efficiency improvements of glass melting activities, if any. Whilst there is no global ETS in place, the EU ETS is only a source of costs for glass industries (direct but also indirect CO2 costs linked to electricity), and therefore weakens the competitive position of European based glass industries vis-a-vis third country competitors. As such, it indirectly favors production reduction in the EU and rises in imports from non EU countries without carbon constraints into the EU. For these reasons, glass industries need to be fully protected against risks of carbon leakage. |
a) yes |
The EU glass industry faces higher costs for environmental protection, energy, labour and raw materials, than the majority of extra-EU competitors. In the absence of an international climate agreement and a level playing field between EU and extra EU competitors, the EU industry needs to be provided with measures to safeguard its competitiveness. Measures to avoid carbon leakage under the EU ETS are therefore essential. Measures should cover both the direct and indirect CO2 costs. Such measures under the EU ETS must be established in a way that ensures the ETS’ coherence with the EU’s ambition to revitalize European manufacturing activities, as proposed in the EC Communication on Industrial Renaissance. |
b) quite adequate |
Free allocation has been key up to now to mitigate the negative impacts of a unilateral climate policy. However, the Cross Sectoral Correction Factor which is applied already from 2013 reduces the free allocation, even for the most GHG efficient installations, and will dramatically increase in the future, thus further reducing free allocation. This current system is unsustainable and should be changed in order to ensure that the most GHG efficient installations receive 100% of their allowance needs. |
a) it absolutely keeps the incentive |
Free allocation doesn't reduce the incentive to innovate; the majority of installations in the sector do not have enough allowances, which encourages industry to invest in the efficiency of its plants to avoid having to purchase a high level of allowances, which would render the sector uncompetitive. For the installations under the benchmark, they can sell their allowances on the market, which is also an incentive to continue reducing emissions. The incentive is therefore present. Below, we also call for a periodic revision of the benchmarks (in exchange of the cancellation of the cross-sectoral factor), which also provides for a strong incentive to improve. In addition, free allowances preserve investment capacity. Free allowances offer industry the incentive to purchase less CO2 allowances if they become more GHG efficient. |
b) quite proportionate |
Administrative burden is accepted, since it is necessary to maintain the free allocation system. However opportunities or improvement to this process should be considered. Conversely, the administration and calculation rules for new entrants are overly complex and can lead to under-allocation. They can therefore be seen as disproportionate and can be a disincentive to new investments. |
d) there should be no limit to overall free allocation to industry |
The current system is unsustainable (from a competition point of view) because the cross sectoral correction factor continually reduces the free allocation given to industry, even for the most GHG efficient installations. Ideally, installations whose efficiency is equal or better than the (periodically reviewed) benchmark should receive 100% of free allocations to produce in the EU and so there should be no limit. In practice, this is likely to lead to a higher share in phase IV. An increased level of EU ambition in terms of GHG reduction would require enhanced measures against carbon leakage and therefore an increase in total free allocations. |
e) I don’t know |
Overall financing for technological innovation (and not only connected with CO2 reductions) in manufacturing should be increased in the EU. However R & D should be funded via a mobilization of different sources of funding - including but not limited to - auctioning revenues. It should not come from the free entrants reserve or Free Allowances reserve. Allowances should be primarily used to ensure that the most GHG efficient installations get 100% of their needs to produce in the EU. Furthermore, financing for R&D and demonstration projects should be technology-neutral and not focused only on CCS or renewables. New technologies such as Carbon Capture and Use (CCU) and others should not be excluded. |
a) yes |
As stated above, industrial innovation, with a focus on the process and on new energy sources for industry, should be promoted. It should not be financed by shares of allowances reserved for free allocation or for new entrants, but rather from a mobilization of different sources, and not limited to auctioning revenues. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Industrial innovation should be promoted in a technology-neutral way. However this should not be done at the expense of free allocation which aims to provide effective support and protection against carbon leakage. Therefore it should be financed via other sources. This could include, among other sources, money from the auctioning revenues, as suggested in the ETS directive (Art 10.3). |
a) yes |
Unequitable carbon costs should not place EU industries at a competitive disadvantage with extra-EU competitors and this should be the ultimate objective pursued in order to achieve the EU’s ambition of 20% GDP realized by industrial activities in 2020. To that end, measures against carbon leakage are a pre-requisite but are not enough. An EU scheme for compensation of indirect costs due to higher electricity prices and some raw materials (e.g. soda ash, industrial gases, ..) should also be developed for Energy Intensive Industries. More generally, the EU needs to assess, and if needed reform, all its policies and in particular energy and environmental ones against the re-industrialisation objective. A longer term re-industrialisation objective for 2030 should be established. |
a) the present two groups should remain |
This binary model ensures that all sectors benefit from carbon leakage protection measures as soon as a risk is detected. This is essential to ensure that carbon leakage measures are effective and that protection is not granted too late, when industries are already in jeopardy. |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
The competitiveness of energy-intensive industries is sensitive to energy and carbon costs, therefore a risk exists for all these industries. For the sake of simplicity and consistency in legislation, all energy-intensive industries, as defined in Art 17 (1) a of the Energy taxation directive 2003/96/EC could be automatically placed on the carbon leakage list, i.e. An "energy-intensive business" shall mean a business entity, (…) where either the purchases of energy products and electricity amount to at least 3,0 % of the production value or the national energy tax payable amounts to at least 0,5 % of the added value. In case ETS-specific criteria are maintained, they should continue being based on both the CO2 intensity and the trade intensity metrics. The CO2 cost metric should be made more relevant to analyze the impacts of carbon cost on sectors’ profitability. To that end, the CO2 cost over GVA criteria could be replaced by a CO2 cost over Gross Operating Surplus (GOS) criteria. |
b) other thresholds should be defined. Please specify below |
The competitiveness of energy-intensive industries is sensitive to energy and carbon costs, therefore a risk exists for all these industries. For the sake of simplicity and consistency in legislation, all energy-intensive industries, as defined in Art 17 (1) a of the Energy taxation directive 2003/96/EC could be automatically placed on the carbon leakage list, i.e. An "energy-intensive business" shall mean a business entity, (…) where either the purchases of energy products and electricity amount to at least 3,0 % of the production value or the national energy tax payable amounts to at least 0,5 % of the added value. In case ETS-specific criteria are maintained, thresholds must be maintained at their current levels even if the denominator of the carbon cost criteria is changed to Gross Operating Surplus. Raising thresholds would send a damaging signal to EU industries, meaning that fixing a cap to free allowances is more important than safeguarding industrial competitiveness. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The current criteria under the quantitative assessment at NACE 3 or 4 level should be maintained and used as the first assessment option. When an assessment at NACE 3 or 4 level is not appropriate to identify the relevant industrial activities falling under the EU ETS, then a quantitative assessment at 6- or 8-digit should be carried as a second option. Finally, as a third option, a qualitative assessment must remain possible. Other parameters can be studied as part of qualitative assessments, such as methodology and evidences of investment leakage. |
d) in line with the duration of ETS Phase 4 |
As long as there are no equivalent GHG reduction measures taken by major trading partners, the list of sectors exposed to the risk of carbon leakage should remain valid. This is essential to provide predictability to industries faced with long investment cycles (typically > 15 years). |
c) the approach should be less stringent (please specify) |
Glass industries support ambitious benchmark levels, which reflect the technological capabilities of the sectors best performers using the best available and proven technologies in Europe. It must be kept in mind however that this approach also has limits. Indeed, benchmark curves do not always reflect a difference in terms of « best » (the least GHG emitters per tonne of glass) or « worst » GHG players, but a difference in terms of products produced, cullet availability, age of furnace, available fuels, etc. The 10% best GHG performers can therefore be regarded as extremely challenging, especially for plants producing a wider range of more sophisticated products with higher added-value (as this usually entails higher energy consumption). |
a) yes (please specify how often) |
It seems logical to revise the benchmarks from time to time to reflect GHG improvements over time. Revision cycles should be linked to ETS phases and remain unchanged over this period. Periodical revision of the benchmark should be based on the actual EU based installations. The periodic revision of benchmarks should be the sole instrument leading to a reduction of free allowances over time, as benchmarks reflect true possibilities of GHG improvements according to state-of-the-art technologies deployed in Europe. The periodic revision of benchmarks therefore justifies that the CSCF is abandoned. |
c) other (please specify) |
Ex-ante allocation can only lead to over-allocation in crisis times, and under-allocation when the economy is growing. A better approach is to design an « ex post » system, where real allocation is corrected according to the real production. |
a) no, there should be no deviations |
In principle, there shall be no deviation from the general harmonized allocation rules at the level of an individual installation as this could cause distortion of competition. Only in the case of very specific hardship, should deviations be envisaged for an entire sector after a careful assessment of the competitive effects of such deviations. |
d) yes, in the form of financial compensation at EU-level |
Rules for the compensation of indirect costs should be revised and need to be effective to reflect the real burden of CO2 included in electricity costs for industry. A differentiated compensation approach by Member States is not acceptable from a competitiveness point of view. A harmonized approach at EU level is therefore needed. The harmonized measure should take the form of financial compensation. Free allocation should be kept aside to ensure full relief for direct emissions (most GHG efficient installations should receive 100% of their needs). A compensation system should also be put in place to compensate for higher prices of some raw materials (e.g. soda ash) and industrial gases. |
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a) from the Member States' auction budgets |
Allowances funding low-carbon innovation support should be financed from the Member States’ auction revenues and from a mobilization of additional sources. However, this should not be financed at the expense of free allocation or the new entrants reserve which must be principally used for measures against risks of carbon leakage. |
The glass industry wishes to reiterate that so long that there is no comparable ETS system (which means that similar costs are born by competitors) operating in most part of the world and in extra-EU countries with glass industries, EU based glass industries will need to receive full and effective protection against carbon leakage. The recent assessment carried by DG CLIMA on exposure to carbon leakage risks, i.e. the carbon leakage list of 2009 and its recent revision, shows that between 2009 and 2014, risks of carbon leakage has grown in most glass sectors. For these reasons, glass industries need effective protection moving forward. This should translate in more free allocation considering the increase in the EU’s GHG reduction target. |
a) Business |
BorsodChem Zrt. (BorsodChem Ltd - Chemistry for generations) |
Bolyai tér 1. H-3700 Kazincbarcika (Hungary) T: +36-48 511 563 F: +36-48 310 720 lajos.balint@borsodchem.eu www.borsodchem-group.com www.borsodchem-hu.com |
a) yes |
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1) yes |
b) no |
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a) yes |
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a) yes |
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b) quite adequate |
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b) it largely keeps the incentive |
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c) quite exaggerated |
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b) a higher share than in 2013-20 |
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e) I don’t know |
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a) yes |
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b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
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a) yes |
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a) the present two groups should remain |
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a) the present criteria should remain |
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a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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d) in line with the duration of ETS Phase 4 |
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a) the present approach of average of the 10% most efficient installations should remain |
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a) yes (please specify how often) |
5 évente |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
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d) both b) and c) |
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c) yes, in the form of additional free allocation |
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Least important |
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b) from free allocation |
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a) Business |
BP |
Rond-Point Schuman 11, Etterbeek, Brussels 1040, Belgium +32 228 780 70 simon.worthington@bp.com |
a) yes |
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1) yes |
c) I don’t know |
Some industries may be able to further reduce emissions through additional energy efficiency improvements. However, these should be expected to reduce over time unless investment is forthcoming. The EU refining industry has already used most of the options to improve its energy efficiency cost-effectively - the GHG intensity of Western European refineries is already world leading, as measured by the Solomon Carbon Emissions Index (CEITM). With offshore facilities, there can often be a very high base-load energy usage (e.g. gas compression) and therefore the potential for energy efficiency is more limited. With the added complexity of both location and logistics, the scope for additional GHG reductions via technology is also limited. Our response of ‘I don’t know’ is the only one available because theoretically GHG improvements in some sectors could improve GHG emission efficiency, but in other sectors this is not considered likely. |
a) yes |
Reporting and monitoring emissions does quantify emissions at installation level. The carbon price does incentivise industrial installations to reduce emissions and improve efficiency. However, for the refining sector, this is only a marginal factor as a material driver for such improvements remains the high proportion of energy costs in total operating costs (63% on average for EU-28 refineries according to Solomon). For upstream activities, particularly offshore, the cost of retrofitting can be disproportionately high due to location and logistics. The production profile for such facilities is also typically one of rapid decline, so it is even more challenging to identify robust short-term remedial efficiency options. Note that EU ETS is an additional cost to EU industry and not to its non-EU competitors, which is potentially damaging for competitiveness. This is why industry needs sufficient carbon leakage protection that is not eroded by a Cross Sectoral Correction Factor. |
a) yes |
Until there are equivalent carbon pricing policies in competing sectors, support for EU industrial sectors exposed to carbon leakage must continue as a core element of the EU’s post-2020 climate policy framework. Removing carbon leakage protection would likely result in a sudden decrease in free allocation: from allocation at 100% at the benchmark to 80% in 2013 to 30% in 2020 and zero by 2027. For EU refining, competing regions include Russia, Middle East, USA, and parts of Asia so support measures should remain until these key refining competitors adopt equivalent measures. For crude oil and chemical sectors, competitors from outside EU ETS competing in international markets with EU ETS installations also make EU competitiveness a key issue - particularly if additional EU compliance costs and charges are also imposed. A recent study from Vivid Economics - commissioned by UK DECC, confirms that EU refining is, on average, less emissions-intensive than its non- EU competitors. |
b) quite adequate |
In the absence of an international climate agreement, we strongly agree that in principle enhanced free allocation (free allocation at 100% of the benchmark) best mitigates installations against carbon costs for exposed sectors. However, if the current Phase 3 system is merely extended, protection is expected in practice to be further eroded due the decreasing industry cap and the CSCF (by 2030, even the most efficient installations would be left with only 60% free allocation if a 2.2% Linear Reduction Factor is to be applied) without taking into account likely improvements in future energy efficiency. The EU ETS therefore needs to be reformed so that in practice it provide sufficient levels of protection to industry until carbon leakage is addressed through a successfully implemented international climate change agreement. |
a) it absolutely keeps the incentive |
The main financial incentive for reducing emission in Refining, Power Generation, and Chemicals sectors is reducing energy costs. Carbon cost does add to this incentive but to a lesser degree. The financial incentive for any EU ETS installation with the capacity for cost effective emissions reduction is the carbon price: either avoiding buying allowance or being able to sell their surplus allowances whether these are received free or not. Furthermore, the transition from a grandfathering to benchmarking approach supports the premise that that those who are best in class and/or have been early movers are rewarded. Therefore, free allocation is used to protect industry from carbon leakage while keeping the incentive intact. |
b) quite proportionate |
In the refining and chemicals sector with large scale complex installations, implementation of the CWT and other benchmarking provisions was a major undertaking and involved considerable work by the sector, national governments and the Commission. Given the importance of the competitive threat, the work to create an accurate and fair system is considered proportionate to the objectives. However, if the system could be simplified, we would be willing to work with the Commission to achieve this. |
d) there should be no limit to overall free allocation to industry |
There is no centralised post 2020 allowance budget - control of proceeds from auctioning is delegated to Member States, with some redistribution via the solidarity and growth provisions. Underneath the cap, there should be no limit to overall free allocation. Until the issue of carbon leakage is addressed through an international climate change agreement, sufficient levels of protection to industry are needed. To provide an adequate protection for the European refining industry, a CSCF should not be employed to avoid reductions in the amount of free allocation. If the intention is to provide carbon leakage protection to industry, then the number of allowances needs to fully cover direct and indirect emissions for best performing installations – hence ‘no limit to overall free allocation’ response. |
e) I don’t know |
In principle, we favour greater innovation support by the EU and its Member States by way of transitional incentives. But we do not believe that the use of ETS revenues is the right mechanism for this. We supported the NER 300 programme for CCS, but in hindsight it has been complex to execute, had a market impact of releasing allowances onto the market early, and has not delivered large scale EU CCS demonstration projects. In Phase 3 and beyond, auctioning is expected to generate substantial revenue to governments; these revenues should be returned to the economy without creating distortions between energy sources and between technologies. |
b) no |
The NER 300 programme fund is dependent on market pricing. There should be more innovation support for new and low carbon technologies that benefit from greater funding stability. Thus existing funds such as Horizon 2020, 7th Framework and SET programmes should be augmented, rather than creating new funding frameworks. To facilitate transparency and learning, an audit of the NER 300 programme investments to determine which gave results and which did not, would be a helpful first step to inform the debate. |
c) other types of funding (please specify) |
We believe appropriate government policy and transitional incentives are necessary to encourage production while lowering costs. Support for innovative low-carbon technologies should be technology neutral as well as time- and cost- limited. Rather than establishing new bureaucracies, existing funds such as Horizon 2020, 7th Framework and SET programmes should, where required, be augmented by EU and Member State funding. |
a) yes |
EU industry exposed to carbon leakage will need protection until there are equivalent carbon pricing policies in competing sectors. To remain competitive this should be via free allocations. There are currently no EU ETS measures addressing carbon leakage post-2020. Thus, the ETS Directive needs to be reviewed to make sure that levels of free allocation after 2020 adequately reflect the risk of carbon leakage. The current indirect emissions compensation system should be reformed to allow free allocation for all electricity consumed. Where electricity generation is off-grid it should receive free allocation to minimise competitive distortions with other energy sources. In general, the strategic importance of manufacturing industries, such as Refining, and key energy production sectors such as oil and gas, need to be sufficiently reflected across all EU policies. This includes considering the cumulative impact of EU legislation and its implementation. |
a) the present two groups should remain |
The key issue is that a system of carbon leakage risk protection be embedded in the EU ETS. This system must give full protection at the benchmark to sectors/sub sectors at risk of carbon leakage exposure. While the current two-group, binary system works well to mitigate the risk of carbon leakage, the cumulative impacts of the CSCF on free allocation does diminish protection in Phase 3. |
a) the present criteria should remain |
For refining, as a mixed sector, both trade and GVA exposure and thresholds are very important. Refining is a ‘margin business’, acting between two international and open commodity markets: crude oil market and refined products market. EU refining is also open to traded imports so that pass through of EU carbon costs is limited by non- or less-regulated trading partners. This becomes more difficult as imports rise. The ‘other organic chemicals sector’ additionally qualifies as exposed to intensity of trade with third countries demonstrating the heightened risk of carbon leakage exposure. Thus for carbon leakage assessment, it is necessary to keep focused at the effect of carbon costs on Gross Value Added rather than production costs, and to take sectors’ trade intensity into account. Carbon costs should cover both direct and indirect carbon costs due to their cumulative impact on competitiveness. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
If the current carbon leakage criteria are tightened thus reducing the number of sectors/sub-sectors on the list, some key strategic sectors for the EU’s economy risk being excluded from carbon leakage protection. This will have a potentially negative spill-over effects on other industries (e.g. for the oil Refining industry and the petro-chemical industry), which are strongly inter-connected). Carbon leakage is also about future investment decisions. Therefore the GVA criteria carbon price must reflect future projected EUA prices and not current prices. This is common industry practice in evaluating major projects. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
We support the use of qualitative assessments around the carbon leakage list threshold point because EU public data used in assessment is not always timely or accurate. Legislative requirements on the quality of fuels (e.g. marine fuels specifications) and the conversion of heavy residues into lighter products result in the increase of refineries’ energy intensity and GHG emissions. If the Refining sector undergoes a qualitative assessment this so- called “Refining paradox” would need to be taken into account. |
d) in line with the duration of ETS Phase 4 |
Mid-period review is detrimental to investment certainty, given the significant difference in the levels of free allocation. The difference between sectors/sub sectors on current carbon leakage list, and those not is between allocation at 100% at the benchmark vs. 80% in 2013 declining to 30% in 2020 and zero by 2027. Long term visibility is essential for investment decisions in energy intensive industry sectors including the refining, chemicals, and the oil & gas exploration and production sectors. |
c) the approach should be less stringent (please specify) |
A benchmark should adequately describe a particular sector /sub sector. Excluding sector outlying installations would take account of typical carbon leakage exposure rather than average of top 10% which may be atypical in character, depending on sector. This is particularly important as EU benchmarks do not rate performance of installations outside the EU, thus potentially penalising EU installations that are more efficient than their non EU competitors. Potential effects on EU strategic industrial sectors including those integral to the supply chains of other sectors must be considered. The current benchmark has turned out to be penalising for the refining sector, both in absolute terms and in comparison with other sectors. In combination with the CSCF, carbon leakage protection currently covers less than 80% of emissions to the refining sector which is subject to carbon leakage. |
b) no |
To provide free allocation in an effective way, a sector benchmark should accurately reflect the performance of ETS installations across a sector/sub sector. However we do not support a revision of the benchmarks based on the technological state of the art, as the latter is subject to interpretation (e.g. do we look at progress worldwide where verified data is lacking, or only the situation in the EU?). Integrating state of the art technologies implies a change in refinery and chemical sector configuration, which is likely to be challenging and extremely costly due to physical and other operational constraints. Investments into such technologies have to pay their way. |
c) other (please specify) |
The free allocation mechanism should reflect economic reality at installation level. Relevant data should be robust and verified. Free allocation should reflect installations’ economic activity based on representative years. In the case of refineries, chemical plant and upstream oil & gas sectors a regular turn-around period is required for regulatory inspection, maintenance and capital projects. If this is not taken into account, installations will be penalised in terms of future allocation. Alternative approaches such as extending baseline periods or some form of dynamic allocation should be considered. |
a) no, there should be no deviations |
General harmonised allocation rules should continue to apply for all carbon leakage installations in the same manner. |
c) yes, in the form of additional free allocation |
Carbon leakage protection should also include free allocations for EU ETS indirect cost pass-through in electricity prices for all sectors exposed to carbon leakage in a harmonised fashion. The absence of an EU harmonised indirect compensation system creates a single market distortion, as leaving decisions to Member States allows many of them not to grant such compensation. The scheme should be reformed to allow free allocation for all electricity consumed in installations (e.g. net power used). If a sector is deemed at risk of direct carbon leakage, then free allocation should automatically be given for indirect carbon emissions to all installations in that sector. Where an installation is not physically connected to the grid, all activity should be eligible for free allocation. |
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Less important |
The assumption is that a large-scale pilot would be a full-sized demonstration project in the case of CCS, as even this stage is still some way from commercialisation. |
d) other |
We are in favour of greater innovation support by the EU and its Member States, but we do not believe that the use of ETS revenues is the right mechanism. Additional innovation should be supported by augmentation of existing funds such as Horizon 2020, 7th Framework and SET programmes. |
Competitiveness and carbon leakage risk to EU ETS installations must be kept under constant assessment. While an assessment of evidence that carbon leakage has occurred or that competitiveness is already damaged is useful, it is the assessment of the level of future risk that is most important. Any allocation system must not penalise economic recovery or growth. Regarding the format of the questionnaire, we believe that some of the questions lack neutrality and lead the respondents to make pre- defined responses. By not being open and neutral the validity and effectiveness of the questionnaire as a communication tool is undermined. |
a) Business |
BRIQUETERIES DU NORD 9ème Rue - Port Fluvial CS 30117 59025 LILLE CEDEX |
Gilles BERNARD Président-Directeur général gilles.bernard@bdn.fr +33 (0) 611644313 |
a) yes |
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1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improve |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. This would limit the list to sectors really exposed and would eliminate the risk of a carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
As explained above, all energy intensive sectors as defined in the Energy Taxation Directive should be considered as exposed to the carbon leakage risk. As an alternative, trade and carbon intensity criteria should be used considering the following elements. First, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS. Second, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
a: Most important b: Important c: Less important d: Least important e: I don't know To implement a small-scale prototype: a b c d e At the conception stage a b c d e To implement a large-scale pilot a b c d e At the commercialisation a b c d e |
a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
a) Business |
British Ceramic Tile Ltd |
Mr Tim Chadwick, Technical Manager, British Ceramic Tile Ltd, Heathfield, Newton Abbot, Devon, TQ12 6RF UK. +44 1626 831498 tim.chadwick@britishceramictile.com |
a) yes |
|
1) yes |
a) yes |
In recent decades, the European Ceramics industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore. process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw mwterials. The Cermic industry Roadmap 2050 provides an analysis of the key technologies which could be applied ascross the sector. The document shows that breakthrough technologies are essential and that access to low Carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost effectively. In some cases, a CO2 target and an energy efficiency target can contradict each other, e.g. pore forming agents used in the clay block industry can contribute to a lower fuel consumption but can raise the CO2 output. The full impact of EU ETS on the competitiveness of industry can only be judged if all elements are considered. In the medium to long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high Carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third world countries, such unilateral costs will further jeopardise the competitiveness of the EU industry which is highly energy intensive such as our production plant here in the UK. |
a) yes |
EU ETS creates costs for European industry including British Cermaic Tile and this creates a high risk of relocation to countries with less ambitious or even no climate policy. The resulting loss of manufacturing not only costs jobs but can also give rise to an increase in global ebergy use and emissions through the use of inferior production processes, more Carbon intensive electricity and greater transportation of goods. In the absence of a legally binding agreement it is essential that mitigation measures for industries such as ours covered by the EU ETS are forthcoming. Post 2020 Carbon leakage measures should be in line with the adopted level of ambition. There should also be an increased level of ambition towards 2030 that should lead to increased protection against Carbon leakage. |
d) very inadequate |
Free allocation has proved to be unfair and at British Ceramic Tile the baseline year to which calculations were based have proved irrelevant. In future, free allocation must be based on realistic benchmarks. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate due to the unrealistic targets. Consequently having to purchase allowances provides an incentive for us to reduce emissions. It should also be noted that free allocation is not aimed at creating incentives for reducing emissions but at preventing Carbon leakage for 'at risk' sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error prone and require extensive guidance. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocationes we were entitled to. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid Carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 Carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against Carbon leakage and not a decrease. Rules on the industry cap and cross sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low Carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programmes. In the first instance, dedicated funds, independent from the price of Carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support renewables in Member States. |
a) yes |
EU ETS could be a tool for the development of a wide range of low Carbon technologies (including those identified in the Ceramic industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher Carbon prices will impose higher costs for the industry and potentially increase the risk of Carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation shoudl not be done at the expense of free allocations for the industry or by arbitrarily manipulating the Carbon price through policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
The current free allocationsystem does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be litigated for all sectors that are at risk of of Carbon leakage, including thise that are currently not listed on Annex II of the EU ETS state aid guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be expected. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 Carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against Carbon leakage. Therefore, at least all energy intensive sectors to which we belong should be considered as exposed to the risk of Carbon leakage until a global auctioning system is established. A global system would eliminate the risk of Carbom leakage exposure for these sectors, therby giving industry regulatory certianty to facililitate long term planning and investments. Furthermore, a very selective Carbon leakage list could distort fair competition on the EU internal market between sectors on the list an dsectors not on the list, thereby favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
All energy intensive sectors as defined in the Energy Taxation Directive must be considered as exposed to the Carbon leakage risk. Nevertheless, if trade and Carbon intensity criteria are to be used, they need to be adapted. GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry incllduing British Ceramic Tile. GVA consists of both labour costs and the 'Gross operating surplus' (GOS). Average labour costs can be extremely high for some ceramic sectors. Therefore, using GVA is misleading and the real impact of ETS related costs can be better estimated if it is compared with GOS. |
b) other thresholds should be defined. Please specify below |
The current criteria enables to either have 1. a trade intensity of ≥ 30% or a Carbon intensity ≥ 30% or 2. a trade intensity ≥ 10% combined with a Carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintianed and a third set of criteria introduced. i.e. trade intensity ≥ 5% combined with a Carbon intensity ≥ 10%. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of Carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector. its ability to pass through Carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artifical limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector that includes British Ceramic Tile is a capital intensive industry with long term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predicatoble legal framework in order to underpin contimnued investment in Europe. Consequently, the validity period for the Carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most Carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross sectoral correction factor. The application of this correction factor means even the most Carbon efficient benchmark installations within the sector face a shortage of free allowances and thus an increased risk of Carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have limited impact since no major breakthrough technologies have been implemented following the intial benchmarking exercise. Furthermore, benchmark revision would entail a major administrative burden. |
c) other (please specify) |
Allocation should definitely be based on the most current production data particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, ther are great concerns over increased bureaucracy and this would need addressing. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
The free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors including British Ceramic Tile that are at risk of Carbon leakage, including those that are currently not listed on Annex II of the EU ETS state aid guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
|
a) Business |
Budapesti Erőmű ZRt. (Budapest Power Plant Ltd) |
1117. Budapest, Budafoki út 52. HUNGARY www.budapestieromu.hu Tel: 0036-1-577-84-39 Email: balazs.major@bert.hu |
a) yes |
|
1) yes |
a) yes |
Lehet csökkenteni, az egy másik kérdés, hogy szabad-e. De visszatérve a kérdésre, nem hiszem, hogy a megújulók „mindenáron történő” elterjesztése lenne a megoldás, sokkal inkább a modern, energia hatékony berendezések alkalmazása. Ezek az eszközök ma is léteznek, csak sok esetben elérhetetlenek a jelenlegi gazdasági helyzetben. Azonban támogatásokkal és szemléletváltással elérhető. |
b) no |
Azt gondolom, hogy mindkét kérdésre nemleges a válasz. Jelenlegi helyzetben olyan extra kiadásokkal jár az EU ETS az üzemeltetők számára (villamos-energiatermelők egyértelműen), ami hátrányt okoz a versenyképességben. Ez kihat a beruházásokra és a berendezések üzemeltetésére is, gondolok itt pl. karbantartások ütemezésére. |
a) yes |
Igen, szükség van rá, csak innentől kezdve megkérdőjeleződik az egész rendszer szükségessége! |
b) quite adequate |
Az ingyenes kiosztás az kell szerintem, a megemeltmennyiség viszont talán felesleges. Annyi egységet kell kiosztani, ami éppen elég az üzemeltetéséhez. A megemelt mennyiséggel megint csak a piac felborulását okoznánk. |
a) it absolutely keeps the incentive |
A késztetés fennmarad, hiszen egy beruházás terv része az egység értékesítésből befolyó összeg. Sok esetben ennek köszönhetően tud megtérülővé válni egy beruházás. |
d) absolutely exaggerated |
|
f) I don’t know |
Ez egy nagyon nehéz kérdés. Ha minden résztvevő megkapja az üzemeltetéséhez szükséges egységet, akkor mi értelme van az ETS-re? Az lenne, ami volt/van is, hogy az egységek ára rendkívül alacsony lenne és nincs igazából érdemi kibocsátás csökkentés. Ha meg mindenkinek meg kellene venni az egységeket, akkor az egyértelmű versenyhátrányt okozna. Ráadásul az így képződő plusz költségeket a vállalkozások beépítenék az áraikba, hiszen valakinek ki kell fizetni az egységeket! |
a) a substantially higher share than in Phase 3 |
|
a) yes |
|
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
|
a) yes |
Az ETS csak egy a sok közül, ami miatt a szénszivárgás végbemegy. Adók, munkaerőpiac, stb. mind-mind hatással van erre a folyamatra és Európában nem a pozitív oldal a jellemző! |
b) more carbon leakage categories should be defined |
Hiszen vannak olyan ágazatok is, akik nem közvetetten,vagy egyértelműen kitettek a szénszivárgásnak, de érintettek és ezzel hátrányba kerülnek. Pl. távfűtés esetében nem a termelés helyeződik át egy másik országba, hanem egyszerűen leválnak lakóházak létesítve egy olyan berendezést, ami méretéből adódóan nem tartozik az ETS hatálya alá, holott a kibocsátása ugyan úgy meg van. |
g) I don’t know |
|
c) I don’t know |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
a) five years |
Maradjon az öt év, de szükség van a rendszeres felülvizsgálatra és annak eredménye alapján az esetleges módosításra. |
d) I don’t know |
|
a) yes (please specify how often) |
Legalább minden kereskedési időszakban, de szerintem 5 évente sem lenne gyakori. |
c) other (please specify) |
Én egyértelműen rossznak tartom a múltbeli számok alapján történő egység meghatározást. A gazdaság teljesen változó, a jövőt nem lehet a múlt számaira alapozni. Irány lehet, de figyelembe kell venni a tendenciákat és a jövőbeni előrejelzéseket. |
d) both b) and c) |
Igen, ez jó ötlet, csak az a kérdés, ki és hogyan kezdeményezheti. Lehetőséget kell biztosítani az üzemeltetőknek is, hogy egyes esetekben, indokoltan kérelmet terjeszthessenek elő. |
a) no, the present approach should be maintained, i.e. that Member States can provide such compensation based on state aid guidelines |
|
Important |
Most important |
Less important |
Least important |
|
b) from free allocation |
|
|
a) Business |
BUDAPESTI TÁVHŐSZOLGÁLTATÓ ZRT. (Budapest District Heat Provider Ltd) |
1116 Budapest, Kalotaszeg utca 31. HUNGARY TEL: +36 1 700 6226 WEB: www.fotav.hu E-MAIL: torban@fotav.hu |
a) yes |
|
1) yes |
a) yes |
|
a) yes |
|
a) yes |
|
b) quite adequate |
|
b) it largely keeps the incentive |
|
c) quite exaggerated |
|
b) a higher share than in 2013-20 |
|
a) a substantially higher share than in Phase 3 |
|
a) yes |
|
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
|
b) no |
|
b) more carbon leakage categories should be defined |
|
c) the share of 'carbon costs' in the GVA should be maintained, but 'carbon costs' should be taken into account to the extent that they can't be recuperated in product prices |
|
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
d) in line with the duration of ETS Phase 4 |
|
c) the approach should be less stringent (please specify) |
A hatékony távfűtés és távhűtés európai szinten történő jelentős bővülése eredményesen járul hozzá a megújuló energiaforrások részarányának növekedéséhez és az energiahatékonyság fokozásához. Ezáltal a távhőszektor érdemben járul hozzá az Európai Unió klíma-, környezet- és energiapolitika célkitűzéseinek a megvalósításához. A távhőellátásnak, mint hatékony klíma- és energiapolitikai eszköznek a támogatása érdekében szükséges kevésbé szigorú megközelítés. |
a) yes (please specify how often) |
Kereskedési időszakonként. |
c) other (please specify) |
A 3. kereskedési időszak 2 legnagyobb termelési adatával rendelkező évét kellene figyelembe venni a bázisidőszak szempontjából. |
d) both b) and c) |
|
c) yes, in the form of additional free allocation |
|
Most important |
Less important |
Least important |
Important |
|
a) from the Member States' auction budgets |
|
|
a) Business |
Cabot Reinforcement Materials/Carbon Black Cabot B.V. United Chemical France S.A.S. Cabot Italia S.p.A CS Cabot s.r.a. |
Cabot Switzerland GmbH Norbert Krummen Mühlentalstrasse 36 8200 Schaffhausen Switzerland +41 52 630 38 19 norbert.krummen@cabotcorp.com |
a) yes |
|
1) yes |
c) I don’t know |
Very much dependend on industry sector |
a) yes |
Very much dependend on industry sector |
a) yes |
|
a) very adequate |
|
a) it absolutely keeps the incentive |
Industry will continue innovation for overall competetiveness reasons |
c) quite exaggerated |
|
c) a constant share as in 2013-20 |
|
a) a substantially higher share than in Phase 3 |
As allowances vary significantly in price, a fixed amount is more appropriate |
a) yes |
To support the industry for advanced technologies |
c) other types of funding (please specify) |
Funding scheme outside the EU ETS |
a) yes |
Further increase influence on countries outside the EU on emission reductions |
a) the present two groups should remain |
|
a) the present criteria should remain |
|
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
b) longer (please specify) |
Innovative measures take longer than 5 years. 10 years might be adequate |
a) the present approach of average of the 10% most efficient installations should remain |
|
b) no |
|
a) no, the same baseline period chosen for allocation in Phase 3 should be maintained also for post 2020 (Phase 4) allocation |
|
b) yes, there should be deviations with higher allowances for installations facing specific hardships |
|
c) yes, in the form of additional free allocation |
|
Less important |
Important |
Least important |
Most important |
|
d) other |
Funding system independent from auction and free allocations |
|
a) Business |
Cal de Castilla, S.A. |
María Luisa Balerdi Torrecilla Egileor auzoa, 101 20.268 Altzo Gipuzkoa Spain mbalerdi@calcinor.com |
a) yes |
|
1) yes |
b) no |
Around 70% of the total CO2 emissions generated in lime production are "process emissions": they come from our raw material, limestone. These process emissions cannot be avoided without changing the quality of the final lime product which is however essential to serve specific applications. Currently, the most energy efficient kiln is near the thermodynamic minimum required for the chemical reaction needed for producing lime. The heat of the reaction for typical quicklime quality is 3.03 GJ/tonne, and the average fuel use 4.25. The energy consumption of the best available lime kiln (a Parallel Flow Regenerative Kiln, PFRK) is between 3.2 and 4.2 GJ/tonne. This type of kiln is already the most widely spread kiln technology today. However, one should keep in mind that horizontal rotary kilns (less energy efficient) provide a certain quality of lime and permit to optimize the extracted limestone due to their ability to treat the different sizes of stones. |
b) no |
The EU ETS will only remain the best solution for reducing CO2 emissions as long as the GHG reduction target is set at a level which is both technically and economically feasible. The current economic crisis and the further shrinking of the demand for lime products makes that there is at the moment a lot of “idle” production capacity in the EU. These installations are completely amortized which makes production in these installations cheaper than in a new one. A higher carbon price would not be a solution, as it would only draw money away from producers without enabling them to make an investment. When assessing the potential further ETS amendment in a sector, it is necessary to take account of the lifespan and replacement rate of kilns. Most of the time, investments costs always assume an investment in a new capacity (replacing the old capacity before its end of life). However, for the lime sector, kilns receive big maintenance periodically. |
a) yes |
Carbon Leakage will remain a big concern after 2020 in the absence of an international agreement putting forward a similar CO2 burden. Cal de Castilla believes that all energy intensive industries should be protected against carbon leakage, and that any increased level of ambition of Europe towards 2030 should lead to increased and not decreased protection against carbon leakage. Furthermore, the EU ETS is NOT addressing the following concerns: - The GHG reduction deficit (shortage of free allowances even for the installations with the best GHG performance. - Energy costs represent on average 40% of the lime industry’s manufacturing costs. Having access to energy at a reasonable cost is an essential condition for operating in the EU and for maintaining lime's competitiveness. - Further adequate incentives for low carbon investments is needed, with auctioning revenues being targeted for low carbon investment toward the industry |
c) quite inadequate |
The current carbon leakage mitigation measures do not take into account of: The importance of CO2 embodied in imports A unilateral reduction of CO2 emissions in Europe will not help fighting against climate change if a subsequent rise of imports from third countries is created. Carbon Trust, amongst others, demonstrated that the reduction in production-related CO2 is largely compensated by CO2 embodied in imports. The cumulative burden of the EU framework Several other EU legislations have an impact on the EU's industry competitiveness (renewables, energy efficiency). The Commission should ensure an integrated approach with no overlap. Energy costs Energy costs represent on average 40% of the lime industry’s manufacturing costs. Like for any energy intensive industry, having access to energy at a reasonable cost is an essential condition for operating in the EU and for maintaining its competitiveness. |
b) it largely keeps the incentive |
It is important to remind that the Commission has calculated product specific benchmarks based on the average GHG emissions of the 10% best performers. A comparison of these benchmark values with the minimum values that are technically feasible shows that the remaining potential in some sectors, like lime, is actually quite low. The current best available and most energy-efficient kilns (the Parallel Flow Regenerative Kiln, PFRK) is close to the thermodynamic minimum required for the chemical reaction needed for producing lime. In other words, no further breakthrough technologies in energy efficiency are expected. The drive towards the most energy efficient solutions can easily be explained by the fact that energy costs represent on average around 40% of the lime sector’s production costs. Outside the deployment of a commercially and technically feasible Carbon Capture and Storage solution, there is little margin for further CO2 abatement in the lime sector. |
c) quite exaggerated |
Lime is the most impacted sector by the EU ETS. The production of 1 tonne of lime generates 1 to 1.6 tonne of CO2. This means that the EU ETS has a strong impact on the sector, up to 35% of impact of the CO2 costs on Gross Value Added (Hourcade et al, 2008). Therefore, the full impact of carbon costs would have serious consequences in terms of carbon leakage for the lime industry. While the lime industry advocates in favor of less red tape and less administrative burden, it recognizes the importance of the free allocation for maintaining a competitive industry in the EU. |
d) there should be no limit to overall free allocation to industry |
There is still a need today for an international climate agreement that would bring a level playing field to EU manufacturing companies. In the absence of such agreement, and considering that several countries in the EU neighborhood are not following the EU’s climate leadership, there should be no limit to the overall free allocations to the industry. Furthermore, Cal de Castilla believes that all energy intensive industries should be protected against carbon leakage, and that any increased level of ambition of Europe towards 2030 should lead to increased and not decreased protection against carbon leakage. The most GHG Efficient installations should receive 100% of their needs for free. The industry cap should be adjusted so that the CSCF and linear reduction factor do not reduce the free allocations. |
c) a lower share than in Phase 3 |
It seems that the current state of efforts regarding the development of CCS (including the NER 300 program) will not reach the ambition to develop, by 2020, a commercially and technically available solution for the capture and storage of carbon. In 2012 TNO calculated for EuLA the costs of capturing CO2 at different kinds of lime kilns. For the state-of-the-art solvent (MEA) costs to capture CO2 were €94 per ton of avoided CO2. The cost to capture CO2 would more than double the production costs of around €60/ton lime. Currently, lime plants are typically located right next to the deposit, not clustered in large industrial agglomerations. Transport costs from the capture to the storage can add significantly to the capture costs. This is why Cal de Castilla believes that further R&D is necessary, but that it should be funded via a mobilization of different sources including auctioning revenues but not the new entrants' reserve. |
a) yes |
The auctioning revenues should be used to encourage low carbon investments. As a general principle, revenues should go back to industry to enable investments in low carbon solutions. Part of the revenues could for example be used to provide cheaper loans for low carbon investments in installations falling under the EU ETS. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The auctioning revenues should be used to encourage low carbon investments. As a general principle, revenues should go back to industry to enable investments in low carbon solutions. Part of the revenues could for example be used to provide cheaper loans for low carbon investments in installations falling under the EU ETS. |
a) yes |
Cal de Castilla strongly favors a level playing field within the EU and outside Europe. This is why Cal de Castilla believes that the EU should maintain its efforts to achieve an internationally accepted and legally-binding agreement proportionate to the burden in the EU. In the absence of such agreement, the EU should safeguard the competitiveness of the EU industry with any appropriate measure. Cal de Castilla has serious doubts that the current legal framework will ensure a level playing field beyond 2020. |
a) the present two groups should remain |
Cal de Castilla believes that no further complexity and calculations should be added to an already complex scheme. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
1. Share of carbon costs in the GVA should be maintained 2. Trade intensity should take especially into account the trade with EU's neighborhood In an internal survey realized by the lime sector (NERA " Energy and transport cost comparison of the EU lime industry to 10 non-EU regions"), it has been established that the threat for lime producers mainly come from the EU neighbor countries such as Russia, Maghreb and Middle east. 3. Energy / climate requirements in Free Trade Agreements should be taken into account “Energy and climate” clauses should be part of any Free Trade Agreement, especially if the trading partner in question has not assumed any carbon reduction commitments. 4. Fuel mix price should be taken into account Finally, Cal de Castilla recommends that the EU defines an affordable and available “fuel mix” for 2030, assesses its accessibility and compares its costs with the costs of the fuel mix used by the main EU competitors. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
It is important to point out that the revision of NACE code list (v2) implied that the assessment of the carbon leakage criteria for the lime sector is now done at a new disaggregation level, which includes not only lime but also plasters and aggregates. Cal de Castilla believes that this assessment should be done at the appropriate level of disaggregation, since that the industrial activities that are included in the NACE v2 code for lime do not share the same fundamentals (in terms of energy intensity and carbon intensity for instance). |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Cal de Castilla believes that it is important to maintain a certain level of discretion in the system for justified cases. This concerns both the qualitative criteria and the possibility to conduct the assessment at the appropriate level of disaggregation (Prodcom 8). |
b) longer (please specify) |
The time validity of the list of sectors exposed to carbon leakage should take into account the investment cycles of the industry. It is also necessary to take account of the lifespan and replacement rate of kilns. Most of the time, investments costs always assume an investment in a new capacity (replacing the old capacity before its end of life). However, for the lime sector, kilns receive big maintenance periodically. It is therefore important to ensure that the investments made now will not become "stranded assets" in the future due to an unexpected change in the carbon leakage list. Furthermore, any trade intensity assessment for the carbon leakage list should take into account the impact of trade with EU neighbouring countries. |
a) the present approach of average of the 10% most efficient installations should remain |
|
a) yes (please specify how often) |
The most GHG efficient producers have to be defined with ambitious, fact-based and realistic benchmarks to be periodically reviewed per commitment period so as to reflect technological progress and uptake of new proven technologies in the EU. It is however important to understand that the technological state of the art is not representative of what can be achieved in practice. Lime characteristics are so vast that multiple uses can be done from the same material. It is also highly dependent of the stone quality from the quarry. The benchmarks should only take into account innovations that have been proved to be commercially viable and that can be implemented on site. |
c) other (please specify) |
In the case of the current ex-ante system, the reference year should be adapted, and the baseline should be a longer period without offering a choice between different periods, and not known in advance. However Cal de Castilla believes that free allocation should reflect economic reality per installation based on the most recent years and should not be frozen by historic production. In this regards, Cal de Castilla suggests to the European Commission to start working on the development of a dynamic system that could replace the current system, under the condition that no correction factor (CSCF) should be applied in addition to a dynamic system. Also, such system should take into account the administrative burden, the robustness of the control of the declared production, and the confidentiality of commercially sensitive information. |
a) no, there should be no deviations |
|
d) yes, in the form of financial compensation at EU-level |
Cal de Castilla defends a Full off-setting of CO2 costs pass through in electricity prices with a harmonised approach in all EU Member States. |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
|
|
a) Business |
Calcidrata - lime industry |
Estrada 5 de Outubro Pé da Pedreira 2025-161 Alcanede +35124340903030 nuno.baptista@calcidrata.pt |
a) yes |
|
1) yes |
b) no |
|
a) yes |
|
a) yes |
|
c) quite inadequate |
|
b) it largely keeps the incentive |
|
b) quite proportionate |
|
b) a higher share than in 2013-20 |
|
b) the same share as in Phase 3 |
|
a) yes |
|
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
|
a) yes |
|
b) more carbon leakage categories should be defined |
|
c) the share of 'carbon costs' in the GVA should be maintained, but 'carbon costs' should be taken into account to the extent that they can't be recuperated in product prices |
|
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
a) five years |
|
a) the present approach of average of the 10% most efficient installations should remain |
|
b) no |
|
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
|
c) yes, there should be deviations with lower allowances for installations enjoying very favourable circumstances |
|
d) yes, in the form of financial compensation at EU-level |
|
Most important |
Important |
Less important |
Least important |
|
c) from both |
|
|
a) Business |
Calera de Alzo, S.L. |
María Luisa Balerdi Torrecilla Egileor auzoa, 101 20.268 Altzo Gipuzkoa Spain mbalerdi@calcinor.com |
a) yes |
|
1) yes |
b) no |
Around 70% of the total CO2 emissions generated in lime production are "process emissions": they come from our raw material, limestone. These process emissions cannot be avoided without changing the quality of the final lime product which is however essential to serve specific applications. Currently, the most energy efficient kiln is near the thermodynamic minimum required for the chemical reaction needed for producing lime. The heat of the reaction for typical quicklime quality is 3.03 GJ/tonne, and the average fuel use 4.25. The energy consumption of the best available lime kiln (a Parallel Flow Regenerative Kiln, PFRK) is between 3.2 and 4.2 GJ/tonne. This type of kiln is already the most widely spread kiln technology today. However, one should keep in mind that horizontal rotary kilns (less energy efficient) provide a certain quality of lime and permit to optimize the extracted limestone due to their ability to treat the different sizes of stones. |
b) no |
The EU ETS will only remain the best solution for reducing CO2 emissions as long as the GHG reduction target is set at a level which is both technically and economically feasible. The current economic crisis and the further shrinking of the demand for lime products makes that there is at the moment a lot of “idle” production capacity in the EU. These installations are completely amortized which makes production in these installations cheaper than in a new one. A higher carbon price would not be a solution, as it would only draw money away from producers without enabling them to make an investment. When assessing the potential further ETS amendment in a sector, it is necessary to take account of the lifespan and replacement rate of kilns. Most of the time, investments costs always assume an investment in a new capacity (replacing the old capacity before its end of life). However, for the lime sector, kilns receive big maintenance periodically. |
a) yes |
Carbon Leakage will remain a big concern after 2020 in the absence of an international agreement putting forward a similar CO2 burden. Calera de Alzo believes that all energy intensive industries should be protected against carbon leakage, and that any increased level of ambition of Europe towards 2030 should lead to increased and not decreased protection against carbon leakage. Furthermore, the EU ETS is NOT addressing the following concerns: - The GHG reduction deficit (shortage of free allowances even for the installations with the best GHG performance. - Energy costs represent on average 40% of the lime industry’s manufacturing costs. Having access to energy at a reasonable cost is an essential condition for operating in the EU and for maintaining lime's competitiveness. - Further adequate incentives for low carbon investments is needed, with auctioning revenues being targeted for low carbon investment toward the industry |
c) quite inadequate |
The current carbon leakage mitigation measures do not take into account of: The importance of CO2 embodied in imports A unilateral reduction of CO2 emissions in Europe will not help fighting against climate change if a subsequent rise of imports from third countries is created. Carbon Trust, amongst others, demonstrated that the reduction in production-related CO2 is largely compensated by CO2 embodied in imports. The cumulative burden of the EU framework Several other EU legislations have an impact on the EU's industry competitiveness (renewables, energy efficiency). The Commission should ensure an integrated approach with no overlap. Energy costs Energy costs represent on average 40% of the lime industry’s manufacturing costs. Like for any energy intensive industry, having access to energy at a reasonable cost is an essential condition for operating in the EU and for maintaining its competitiveness. |
b) it largely keeps the incentive |
It is important to remind that the Commission has calculated product specific benchmarks based on the average GHG emissions of the 10% best performers. A comparison of these benchmark values with the minimum values that are technically feasible shows that the remaining potential in some sectors, like lime, is actually quite low. The current best available and most energy-efficient kilns (the Parallel Flow Regenerative Kiln, PFRK) is close to the thermodynamic minimum required for the chemical reaction needed for producing lime. In other words, no further breakthrough technologies in energy efficiency are expected. The drive towards the most energy efficient solutions can easily be explained by the fact that energy costs represent on average around 40% of the lime sector’s production costs. Outside the deployment of a commercially and technically feasible Carbon Capture and Storage solution, there is little margin for further CO2 abatement in the lime sector. |
c) quite exaggerated |
Lime is the most impacted sector by the EU ETS. The production of 1 tonne of lime generates 1 to 1.6 tonne of CO2. This means that the EU ETS has a strong impact on the sector, up to 35% of impact of the CO2 costs on Gross Value Added (Hourcade et al, 2008). Therefore, the full impact of carbon costs would have serious consequences in terms of carbon leakage for the lime industry. While the lime industry advocates in favor of less red tape and less administrative burden, it recognizes the importance of the free allocation for maintaining a competitive industry in the EU. |
d) there should be no limit to overall free allocation to industry |
There is still a need today for an international climate agreement that would bring a level playing field to EU manufacturing companies. In the absence of such agreement, and considering that several countries in the EU neighborhood are not following the EU’s climate leadership, there should be no limit to the overall free allocations to the industry. Furthermore, Calera de Alzo believes that all energy intensive industries should be protected against carbon leakage, and that any increased level of ambition of Europe towards 2030 should lead to increased and not decreased protection against carbon leakage. The most GHG Efficient installations should receive 100% of their needs for free. The industry cap should be adjusted so that the CSCF and linear reduction factor do not reduce the free allocations. |
c) a lower share than in Phase 3 |
It seems that the current state of efforts regarding the development of CCS (including the NER 300 program) will not reach the ambition to develop, by 2020, a commercially and technically available solution for the capture and storage of carbon. In 2012 TNO calculated for EuLA the costs of capturing CO2 at different kinds of lime kilns. For the state-of-the-art solvent (MEA) costs to capture CO2 were €94 per ton of avoided CO2. The cost to capture CO2 would more than double the production costs of around €60/ton lime. Currently, lime plants are typically located right next to the deposit, not clustered in large industrial agglomerations. Transport costs from the capture to the storage can add significantly to the capture costs. This is why Calera de Alzo believes that further R&D is necessary, but that it should be funded via a mobilization of different sources including auctioning revenues but not the new entrants' reserve. |
a) yes |
The auctioning revenues should be used to encourage low carbon investments. As a general principle, revenues should go back to industry to enable investments in low carbon solutions. Part of the revenues could for example be used to provide cheaper loans for low carbon investments in installations falling under the EU ETS. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The auctioning revenues should be used to encourage low carbon investments. As a general principle, revenues should go back to industry to enable investments in low carbon solutions. Part of the revenues could for example be used to provide cheaper loans for low carbon investments in installations falling under the EU ETS. |
a) yes |
Calera de Alzo strongly favors a level playing field within the EU and outside Europe. This is why Calera de Alzo believes that the EU should maintain its efforts to achieve an internationally accepted and legally-binding agreement proportionate to the burden in the EU. In the absence of such agreement, the EU should safeguard the competitiveness of the EU industry with any appropriate measure. Calera de Alzo has serious doubts that the current legal framework will ensure a level playing field beyond 2020. |
a) the present two groups should remain |
Calera de Alzo believes that no further complexity and calculations should be added to an already complex scheme. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
1. Share of carbon costs in the GVA should be maintained 2. Trade intensity should take especially into account the trade with EU's neighborhood In an internal survey realized by the lime sector (NERA " Energy and transport cost comparison of the EU lime industry to 10 non-EU regions"), it has been established that the threat for lime producers mainly come from the EU neighbor countries such as Russia, Maghreb and Middle east. 3. Energy / climate requirements in Free Trade Agreements should be taken into account “Energy and climate” clauses should be part of any Free Trade Agreement, especially if the trading partner in question has not assumed any carbon reduction commitments. 4. Fuel mix price should be taken into account Finally, Calera de Alzo recommends that the EU defines an affordable and available “fuel mix” for 2030, assesses its accessibility and compares its costs with the costs of the fuel mix used by the main EU competitors. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
It is important to point out that the revision of NACE code list (v2) implied that the assessment of the carbon leakage criteria for the lime sector is now done at a new disaggregation level, which includes not only lime but also plasters and aggregates. Calera de Alzo believes that this assessment should be done at the appropriate level of disaggregation, since that the industrial activities that are included in the NACE v2 code for lime do not share the same fundamentals (in terms of energy intensity and carbon intensity for instance). |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Calera de Alzo believes that it is important to maintain a certain level of discretion in the system for justified cases. This concerns both the qualitative criteria and the possibility to conduct the assessment at the appropriate level of disaggregation (Prodcom 8). |
b) longer (please specify) |
The time validity of the list of sectors exposed to carbon leakage should take into account the investment cycles of the industry. It is also necessary to take account of the lifespan and replacement rate of kilns. Most of the time, investments costs always assume an investment in a new capacity (replacing the old capacity before its end of life). However, for the lime sector, kilns receive big maintenance periodically. It is therefore important to ensure that the investments made now will not become "stranded assets" in the future due to an unexpected change in the carbon leakage list. Furthermore, any trade intensity assessment for the carbon leakage list should take into account the impact of trade with EU neighbouring countries. |
a) the present approach of average of the 10% most efficient installations should remain |
|
a) yes (please specify how often) |
The most GHG efficient producers have to be defined with ambitious, fact-based and realistic benchmarks to be periodically reviewed per commitment period so as to reflect technological progress and uptake of new proven technologies in the EU. It is however important to understand that the technological state of the art is not representative of what can be achieved in practice. Lime characteristics are so vast that multiple uses can be done from the same material. It is also highly dependent of the stone quality from the quarry. The benchmarks should only take into account innovations that have been proved to be commercially viable and that can be implemented on site. |
c) other (please specify) |
In the case of the current ex-ante system, the reference year should be adapted, and the baseline should be a longer period without offering a choice between different periods, and not known in advance. However Calera de Alzo believes that free allocation should reflect economic reality per installation based on the most recent years and should not be frozen by historic production. In this regards, Calera de Alzo suggests to the European Commission to start working on the development of a dynamic system that could replace the current system, under the condition that no correction factor (CSCF) should be applied in addition to a dynamic system. Also, such system should take into account the administrative burden, the robustness of the control of the declared production, and the confidentiality of commercially sensitive information. |
a) no, there should be no deviations |
|
d) yes, in the form of financial compensation at EU-level |
Calera de Alzo defends a Full off-setting of CO2 costs pass through in electricity prices with a harmonised approach in all EU Member States. |
Less important |
Important |
Most important |
Least important |
|
a) from the Member States' auction budgets |
|
|
a) Business |
Cales de la Plana, S.A. |
María Luisa Balerdi Torrecilla Egileor auzoa, 101 20.268 Altzo Gipuzkoa Spain mbalerdi@calcinor.com |
a) yes |
|
1) yes |
b) no |
Around 70% of the total CO2 emissions generated in lime production are "process emissions": they come from our raw material, limestone. These process emissions cannot be avoided without changing the quality of the final lime product which is however essential to serve specific applications. Currently, the most energy efficient kiln is near the thermodynamic minimum required for the chemical reaction needed for producing lime. The heat of the reaction for typical quicklime quality is 3.03 GJ/tonne, and the average fuel use 4.25. The energy consumption of the best available lime kiln (a Parallel Flow Regenerative Kiln, PFRK) is between 3.2 and 4.2 GJ/tonne. This type of kiln is already the most widely spread kiln technology today. However, one should keep in mind that horizontal rotary kilns (less energy efficient) provide a certain quality of lime and permit to optimize the extracted limestone due to their ability to treat the different sizes of stones. |
b) no |
The EU ETS will only remain the best solution for reducing CO2 emissions as long as the GHG reduction target is set at a level which is both technically and economically feasible. The current economic crisis and the further shrinking of the demand for lime products makes that there is at the moment a lot of “idle” production capacity in the EU. These installations are completely amortized which makes production in these installations cheaper than in a new one. A higher carbon price would not be a solution, as it would only draw money away from producers without enabling them to make an investment. When assessing the potential further ETS amendment in a sector, it is necessary to take account of the lifespan and replacement rate of kilns. Most of the time, investments costs always assume an investment in a new capacity (replacing the old capacity before its end of life). However, for the lime sector, kilns receive big maintenance periodically. |
a) yes |
Carbon Leakage will remain a big concern after 2020 in the absence of an international agreement putting forward a similar CO2 burden. Cales de la Plana believes that all energy intensive industries should be protected against carbon leakage, and that any increased level of ambition of Europe towards 2030 should lead to increased and not decreased protection against carbon leakage. Furthermore, the EU ETS is NOT addressing the following concerns: - The GHG reduction deficit (shortage of free allowances even for the installations with the best GHG performance. - Energy costs represent on average 40% of the lime industry’s manufacturing costs. Having access to energy at a reasonable cost is an essential condition for operating in the EU and for maintaining lime's competitiveness. - Further adequate incentives for low carbon investments is needed, with auctioning revenues being targeted for low carbon investment toward the industry |
c) quite inadequate |
The current carbon leakage mitigation measures do not take into account of: The importance of CO2 embodied in imports A unilateral reduction of CO2 emissions in Europe will not help fighting against climate change if a subsequent rise of imports from third countries is created. Carbon Trust, amongst others, demonstrated that the reduction in production-related CO2 is largely compensated by CO2 embodied in imports. The cumulative burden of the EU framework Several other EU legislations have an impact on the EU's industry competitiveness (renewables, energy efficiency). The Commission should ensure an integrated approach with no overlap. Energy costs Energy costs represent on average 40% of the lime industry’s manufacturing costs. Like for any energy intensive industry, having access to energy at a reasonable cost is an essential condition for operating in the EU and for maintaining its competitiveness. |
b) it largely keeps the incentive |
It is important to remind that the Commission has calculated product specific benchmarks based on the average GHG emissions of the 10% best performers. A comparison of these benchmark values with the minimum values that are technically feasible shows that the remaining potential in some sectors, like lime, is actually quite low. The current best available and most energy-efficient kilns (the Parallel Flow Regenerative Kiln, PFRK) is close to the thermodynamic minimum required for the chemical reaction needed for producing lime. In other words, no further breakthrough technologies in energy efficiency are expected. The drive towards the most energy efficient solutions can easily be explained by the fact that energy costs represent on average around 40% of the lime sector’s production costs. Outside the deployment of a commercially and technically feasible Carbon Capture and Storage solution, there is little margin for further CO2 abatement in the lime sector. |
b) quite proportionate |
Lime is the most impacted sector by the EU ETS. The production of 1 tonne of lime generates 1 to 1.6 tonne of CO2. This means that the EU ETS has a strong impact on the sector, up to 35% of impact of the CO2 costs on Gross Value Added (Hourcade et al, 2008). Therefore, the full impact of carbon costs would have serious consequences in terms of carbon leakage for the lime industry. While the lime industry advocates in favor of less red tape and less administrative burden, it recognizes the importance of the free allocation for maintaining a competitive industry in the EU. |
d) there should be no limit to overall free allocation to industry |
There is still a need today for an international climate agreement that would bring a level playing field to EU manufacturing companies. In the absence of such agreement, and considering that several countries in the EU neighborhood are not following the EU’s climate leadership, there should be no limit to the overall free allocations to the industry. Furthermore, Cales de la Plana believes that all energy intensive industries should be protected against carbon leakage, and that any increased level of ambition of Europe towards 2030 should lead to increased and not decreased protection against carbon leakage. The most GHG Efficient installations should receive 100% of their needs for free. The industry cap should be adjusted so that the CSCF and linear reduction factor do not reduce the free allocations. |
c) a lower share than in Phase 3 |
It seems that the current state of efforts regarding the development of CCS (including the NER 300 program) will not reach the ambition to develop, by 2020, a commercially and technically available solution for the capture and storage of carbon. In 2012 TNO calculated for EuLA the costs of capturing CO2 at different kinds of lime kilns. For the state-of-the-art solvent (MEA) costs to capture CO2 were €94 per ton of avoided CO2. The cost to capture CO2 would more than double the production costs of around €60/ton lime. Currently, lime plants are typically located right next to the deposit, not clustered in large industrial agglomerations. Transport costs from the capture to the storage can add significantly to the capture costs. This is why Cales de la Plana believes that further R&D is necessary, but that it should be funded via a mobilization of different sources including auctioning revenues but not the new entrants' reserve. |
a) yes |
The auctioning revenues should be used to encourage low carbon investments. As a general principle, revenues should go back to industry to enable investments in low carbon solutions. Part of the revenues could for example be used to provide cheaper loans for low carbon investments in installations falling under the EU ETS. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The auctioning revenues should be used to encourage low carbon investments. As a general principle, revenues should go back to industry to enable investments in low carbon solutions. Part of the revenues could for example be used to provide cheaper loans for low carbon investments in installations falling under the EU ETS. |
a) yes |
Cales de la Plana strongly favors a level playing field within the EU and outside Europe. This is why Cales de la Plana believes that the EU should maintain its efforts to achieve an internationally accepted and legally-binding agreement proportionate to the burden in the EU. In the absence of such agreement, the EU should safeguard the competitiveness of the EU industry with any appropriate measure. Cales de la Plana has serious doubts that the current legal framework will ensure a level playing field beyond 2020. |
a) the present two groups should remain |
Cales de la Plana believes that no further complexity and calculations should be added to an already complex scheme. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
1. Share of carbon costs in the GVA should be maintained 2. Trade intensity should take especially into account the trade with EU's neighborhood In an internal survey realized by the lime sector (NERA " Energy and transport cost comparison of the EU lime industry to 10 non-EU regions"), it has been established that the threat for lime producers mainly come from the EU neighbor countries such as Russia, Maghreb and Middle east. 3. Energy / climate requirements in Free Trade Agreements should be taken into account “Energy and climate” clauses should be part of any Free Trade Agreement, especially if the trading partner in question has not assumed any carbon reduction commitments. 4. Fuel mix price should be taken into account Finally, Cales de la Plana recommends that the EU defines an affordable and available “fuel mix” for 2030, assesses its accessibility and compares its costs with the costs of the fuel mix used by the main EU competitors. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
It is important to point out that the revision of NACE code list (v2) implied that the assessment of the carbon leakage criteria for the lime sector is now done at a new disaggregation level, which includes not only lime but also plasters and aggregates. Cales de la Plana believes that this assessment should be done at the appropriate level of disaggregation, since that the industrial activities that are included in the NACE v2 code for lime do not share the same fundamentals (in terms of energy intensity and carbon intensity for instance). |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Cales de la Plana believes that it is important to maintain a certain level of discretion in the system for justified cases. This concerns both the qualitative criteria and the possibility to conduct the assessment at the appropriate level of disaggregation (Prodcom 8). |
b) longer (please specify) |
The time validity of the list of sectors exposed to carbon leakage should take into account the investment cycles of the industry. It is also necessary to take account of the lifespan and replacement rate of kilns. Most of the time, investments costs always assume an investment in a new capacity (replacing the old capacity before its end of life). However, for the lime sector, kilns receive big maintenance periodically. It is therefore important to ensure that the investments made now will not become "stranded assets" in the future due to an unexpected change in the carbon leakage list. Furthermore, any trade intensity assessment for the carbon leakage list should take into account the impact of trade with EU neighbouring countries. |
a) the present approach of average of the 10% most efficient installations should remain |
|
a) yes (please specify how often) |
The most GHG efficient producers have to be defined with ambitious, fact-based and realistic benchmarks to be periodically reviewed per commitment period so as to reflect technological progress and uptake of new proven technologies in the EU. It is however important to understand that the technological state of the art is not representative of what can be achieved in practice. Lime characteristics are so vast that multiple uses can be done from the same material. It is also highly dependent of the stone quality from the quarry. The benchmarks should only take into account innovations that have been proved to be commercially viable and that can be implemented on site. |
c) other (please specify) |
In the case of the current ex-ante system, the reference year should be adapted, and the baseline should be a longer period without offering a choice between different periods, and not known in advance. However Cales de la Plana believes that free allocation should reflect economic reality per installation based on the most recent years and should not be frozen by historic production. In this regards, Cales de la Plana suggests to the European Commission to start working on the development of a dynamic system that could replace the current system, under the condition that no correction factor (CSCF) should be applied in addition to a dynamic system. Also, such system should take into account the administrative burden, the robustness of the control of the declared production, and the confidentiality of commercially sensitive information. |
a) no, there should be no deviations |
|
d) yes, in the form of financial compensation at EU-level |
Cales de la Plana defends a Full off-setting of CO2 costs pass through in electricity prices with a harmonised approach in all EU Member States. |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
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|
a) Business |
Cales de Llierca, S.A. |
María Luisa Balerdi Torrecilla Egileor auzoa 101, 20.268 Altzo Gipuzkoa Spain mbalerdi@calcinor.com |
a) yes |
|
1) yes |
b) no |
Around 70% of the total CO2 emissions generated in lime production are "process emissions": they come from our raw material, limestone. These process emissions cannot be avoided without changing the quality of the final lime product which is however essential to serve specific applications. Currently, the most energy efficient kiln is near the thermodynamic minimum required for the chemical reaction needed for producing lime. The heat of the reaction for typical quicklime quality is 3.03 GJ/tonne, and the average fuel use 4.25. The energy consumption of the best available lime kiln (a Parallel Flow Regenerative Kiln, PFRK) is between 3.2 and 4.2 GJ/tonne. This type of kiln is already the most widely spread kiln technology today. However, one should keep in mind that horizontal rotary kilns (less energy efficient) provide a certain quality of lime and permit to optimize the extracted limestone due to their ability to treat the different sizes of stones. |
b) no |
The EU ETS will only remain the best solution for reducing CO2 emissions as long as the GHG reduction target is set at a level which is both technically and economically feasible. The current economic crisis and the further shrinking of the demand for lime products makes that there is at the moment a lot of “idle” production capacity in the EU. These installations are completely amortized which makes production in these installations cheaper than in a new one. A higher carbon price would not be a solution, as it would only draw money away from producers without enabling them to make an investment. When assessing the potential further ETS amendment in a sector, it is necessary to take account of the lifespan and replacement rate of kilns. Most of the time, investments costs always assume an investment in a new capacity (replacing the old capacity before its end of life). However, for the lime sector, kilns receive big maintenance periodically. |
a) yes |
Carbon Leakage will remain a big concern after 2020 in the absence of an international agreement putting forward a similar CO2 burden. Cales de Llierca believes that all energy intensive industries should be protected against carbon leakage, and that any increased level of ambition of Europe towards 2030 should lead to increased and not decreased protection against carbon leakage. Furthermore, the EU ETS is NOT addressing the following concerns: - The GHG reduction deficit (shortage of free allowances even for the installations with the best GHG performance. - Energy costs represent on average 40% of the lime industry’s manufacturing costs. Having access to energy at a reasonable cost is an essential condition for operating in the EU and for maintaining lime's competitiveness. - Further adequate incentives for low carbon investments is needed, with auctioning revenues being targeted for low carbon investment toward the industry |
c) quite inadequate |
The current carbon leakage mitigation measures do not take into account of: The importance of CO2 embodied in imports A unilateral reduction of CO2 emissions in Europe will not help fighting against climate change if a subsequent rise of imports from third countries is created. Carbon Trust, amongst others, demonstrated that the reduction in production-related CO2 is largely compensated by CO2 embodied in imports. The cumulative burden of the EU framework Several other EU legislations have an impact on the EU's industry competitiveness (renewables, energy efficiency). The Commission should ensure an integrated approach with no overlap. Energy costs Energy costs represent on average 40% of the lime industry’s manufacturing costs. Like for any energy intensive industry, having access to energy at a reasonable cost is an essential condition for operating in the EU and for maintaining its competitiveness. |
b) it largely keeps the incentive |
It is important to remind that the Commission has calculated product specific benchmarks based on the average GHG emissions of the 10% best performers. A comparison of these benchmark values with the minimum values that are technically feasible shows that the remaining potential in some sectors, like lime, is actually quite low. The current best available and most energy-efficient kilns (the Parallel Flow Regenerative Kiln, PFRK) is close to the thermodynamic minimum required for the chemical reaction needed for producing lime. In other words, no further breakthrough technologies in energy efficiency are expected. The drive towards the most energy efficient solutions can easily be explained by the fact that energy costs represent on average around 40% of the lime sector’s production costs. Outside the deployment of a commercially and technically feasible Carbon Capture and Storage solution, there is little margin for further CO2 abatement in the lime sector. |
c) quite exaggerated |
Lime is the most impacted sector by the EU ETS. The production of 1 tonne of lime generates 1 to 1.6 tonne of CO2. This means that the EU ETS has a strong impact on the sector, up to 35% of impact of the CO2 costs on Gross Value Added (Hourcade et al, 2008). Therefore, the full impact of carbon costs would have serious consequences in terms of carbon leakage for the lime industry. While the lime industry advocates in favor of less red tape and less administrative burden, it recognizes the importance of the free allocation for maintaining a competitive industry in the EU. |
d) there should be no limit to overall free allocation to industry |
There is still a need today for an international climate agreement that would bring a level playing field to EU manufacturing companies. In the absence of such agreement, and considering that several countries in the EU neighborhood are not following the EU’s climate leadership, there should be no limit to the overall free allocations to the industry. Furthermore, Cales de Llierca believes that all energy intensive industries should be protected against carbon leakage, and that any increased level of ambition of Europe towards 2030 should lead to increased and not decreased protection against carbon leakage. The most GHG Efficient installations should receive 100% of their needs for free. The industry cap should be adjusted so that the CSCF and linear reduction factor do not reduce the free allocations. |
c) a lower share than in Phase 3 |
It seems that the current state of efforts regarding the development of CCS (including the NER 300 program) will not reach the ambition to develop, by 2020, a commercially and technically available solution for the capture and storage of carbon. In 2012 TNO calculated for EuLA the costs of capturing CO2 at different kinds of lime kilns. For the state-of-the-art solvent (MEA) costs to capture CO2 were €94 per ton of avoided CO2. The cost to capture CO2 would more than double the production costs of around €60/ton lime. Currently, lime plants are typically located right next to the deposit, not clustered in large industrial agglomerations. Transport costs from the capture to the storage can add significantly to the capture costs. This is why Cales de Llierca believes that further R&D is necessary, but that it should be funded via a mobilization of different sources including auctioning revenues but not the new entrants' reserve. |
a) yes |
The auctioning revenues should be used to encourage low carbon investments. As a general principle, revenues should go back to industry to enable investments in low carbon solutions. Part of the revenues could for example be used to provide cheaper loans for low carbon investments in installations falling under the EU ETS. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The auctioning revenues should be used to encourage low carbon investments. As a general principle, revenues should go back to industry to enable investments in low carbon solutions. Part of the revenues could for example be used to provide cheaper loans for low carbon investments in installations falling under the EU ETS. |
a) yes |
Cales de Llierca strongly favors a level playing field within the EU and outside Europe. This is why Cales de Llierca believes that the EU should maintain its efforts to achieve an internationally accepted and legally-binding agreement proportionate to the burden in the EU. In the absence of such agreement, the EU should safeguard the competitiveness of the EU industry with any appropriate measure. Cales de Llierca has serious doubts that the current legal framework will ensure a level playing field beyond 2020. |
a) the present two groups should remain |
Cales de Llierca believes that no further complexity and calculations should be added to an already complex scheme. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
1. Share of carbon costs in the GVA should be maintained 2. Trade intensity should take especially into account the trade with EU's neighborhood In an internal survey realized by the lime sector (NERA " Energy and transport cost comparison of the EU lime industry to 10 non-EU regions"), it has been established that the threat for lime producers mainly come from the EU neighbor countries such as Russia, Maghreb and Middle east. 3. Energy / climate requirements in Free Trade Agreements should be taken into account “Energy and climate” clauses should be part of any Free Trade Agreement, especially if the trading partner in question has not assumed any carbon reduction commitments. 4. Fuel mix price should be taken into account Finally, Cales de Llierca recommends that the EU defines an affordable and available “fuel mix” for 2030, assesses its accessibility and compares its costs with the costs of the fuel mix used by the main EU competitors. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
It is important to point out that the revision of NACE code list (v2) implied that the assessment of the carbon leakage criteria for the lime sector is now done at a new disaggregation level, which includes not only lime but also plasters and aggregates. Cales de Llierca believes that this assessment should be done at the appropriate level of disaggregation, since that the industrial activities that are included in the NACE v2 code for lime do not share the same fundamentals (in terms of energy intensity and carbon intensity for instance). |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Cales de Llierca believes that it is important to maintain a certain level of discretion in the system for justified cases. This concerns both the qualitative criteria and the possibility to conduct the assessment at the appropriate level of disaggregation (Prodcom 8). |
b) longer (please specify) |
The time validity of the list of sectors exposed to carbon leakage should take into account the investment cycles of the industry. It is also necessary to take account of the lifespan and replacement rate of kilns. Most of the time, investments costs always assume an investment in a new capacity (replacing the old capacity before its end of life). However, for the lime sector, kilns receive big maintenance periodically. It is therefore important to ensure that the investments made now will not become "stranded assets" in the future due to an unexpected change in the carbon leakage list. Furthermore, any trade intensity assessment for the carbon leakage list should take into account the impact of trade with EU neighbouring countries. |
a) the present approach of average of the 10% most efficient installations should remain |
|
a) yes (please specify how often) |
The most GHG efficient producers have to be defined with ambitious, fact-based and realistic benchmarks to be periodically reviewed per commitment period so as to reflect technological progress and uptake of new proven technologies in the EU. It is however important to understand that the technological state of the art is not representative of what can be achieved in practice. Lime characteristics are so vast that multiple uses can be done from the same material. It is also highly dependent of the stone quality from the quarry. The benchmarks should only take into account innovations that have been proved to be commercially viable and that can be implemented on site. |
c) other (please specify) |
In the case of the current ex-ante system, the reference year should be adapted, and the baseline should be a longer period without offering a choice between different periods, and not known in advance. However Cales de Llierca believes that free allocation should reflect economic reality per installation based on the most recent years and should not be frozen by historic production. In this regards, Cales de Llierca suggests to the European Commission to start working on the development of a dynamic system that could replace the current system, under the condition that no correction factor (CSCF) should be applied in addition to a dynamic system. Also, such system should take into account the administrative burden, the robustness of the control of the declared production, and the confidentiality of commercially sensitive information. |
a) no, there should be no deviations |
|
d) yes, in the form of financial compensation at EU-level |
Cales de Llierca defends a Full off-setting of CO2 costs pass through in electricity prices with a harmonised approach in all EU Member States. |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
|
|
a) Business |
Carlton Main Brickworks Limited |
Mr Pat Furr Carlton Main Brickworks Limited Clayburn Road Grimethorpe Barnsley S.Yorkshire S72 7BE 01226 715000 |
a) yes |
|
1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. In some cases, a CO2 target and an energy efficiency target can contradict each other, e.g. pore forming agents used in the clay block industry can contribute to a lower fuel consumption but can raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improvements |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS are forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States and where it has been used (such as here in the UK) the scheme remains complicated. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support renewables in Member States. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies. |
a) yes |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support renewables in Member States. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs > 3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. A global system would eliminate the risk of carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
As explained above, all energy intensive sectors as defined in the Energy Taxation Directive must be considered as exposed to the carbon leakage risk Nevertheless, if trade and carbon intensity criteria are to be used, they need to be adapted: Firstly, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). Average, labour costs can be up to 70% for some ceramic sectors. Therefore, using GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with GOS Secondly, the current criteria entail either: i) to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or ii) a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) introduced |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have: i) a trade intensity ≥ 30% or a carbon intensity ≥ 30%, or ii) a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. The application of this correction factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have limited impact since no major breakthrough technologies have been implemented following the initial benchmarking exercise. Furthermore, benchmark revision would entail a major administrative burden, especially for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
a) Business |
Carmeuse |
Bd de Lauzelle, 65 - B-1348 Louvain-la-Neuve +32.10.48.16.00 damien.gregoire@carmeuse.com |
a) yes |
|
1) yes |
b) no |
Not significantly. Around 70% of the total CO2 emissions generated in lime production are "process emissions": they come from our raw material, limestone. These process emissions cannot be avoided without changing the quality of the final lime product which is however essential to serve specific applications. Currently, the most energy efficient kiln is near the thermodynamic minimum required for the chemical reaction needed for producing lime. The heat of the reaction for typical quicklime quality is 3.03 GJ/tonne, and the average fuel use 4.25. The energy consumption of the best available lime kiln (a Parallel Flow Regenerative Kiln, PFRK) is between 3.2 and 4.2 GJ/tonne. This type of kiln is already the most widely spread kiln technology today. However, one should keep in mind that horizontal rotary kilns (less energy efficient) provide a certain quality of lime and permit to optimize the extracted limestone due to their ability to treat the different sizes of stones. |
b) no |
The EU ETS will only remain the best solution for reducing CO2 emissions as long as the GHG reduction target is set at a level which is both technically and economically feasible. The current economic crisis and the further shrinking of the demand for lime products makes that there is at the moment a lot of “idle” production capacity in the EU. These installations are completely amortized which makes production in these installations cheaper than in a new one. A higher carbon price would not be a solution, as it would only draw money away from producers without enabling them to make an investment. |
a) yes |
Carbon Leakage will remain a big concern after 2020 in the absence of an international agreement putting forward a similar CO2 burden. The European Lime Association (EuLA) believes that all energy intensive industries that are truly at risk of carbon leakage should be protected against carbon leakage, and that any increased level of ambition of Europe towards 2030 should lead to increased and not decreased protection against carbon leakage. Furthermore, the EU ETS is not addressing the following concerns: - The GHG reduction deficit (shortage of free allowances even for the installations with the best GHG performance) - Energy costs represent on average 40% of the lime industry’s manufacturing costs. Having access to energy at a reasonable cost is an essential condition for operating in the EU and for maintaining lime's competitiveness. - Further adequate incentives for low carbon investments is needed, with auctioning revenues targeted for low carbon investment for the industry |
b) quite adequate |
The current carbon leakage mitigation measures do not take into account of: The importance of CO2 embodied in imports A unilateral reduction of CO2 emissions in Europe will not help fighting against climate change if a subsequent rise of imports from third countries is created. Carbon Trust, amongst others, demonstrated that the reduction in production-related CO2 is largely compensated by CO2 embodied in imports. The cumulative burden of the EU framework Several other EU legislations have an impact on the EU's industry competitiveness (renewables, energy efficiency). The Commission should ensure an integrated approach with no overlap. Energy costs Energy costs represent on average 40% of the lime industry’s manufacturing costs. Like for any energy intensive industry, having access to energy at a reasonable cost is an essential condition for operating in the EU and for maintaining its competitiveness. |
b) it largely keeps the incentive |
It is important to remind that the Commission has calculated product specific benchmarks based on the average GHG emissions of the 10% best performers. A comparison of these benchmark values with the minimum values that are technically feasible shows that the remaining potential in some sectors, like lime, is actually quite low. The current best available and most energy-efficient kilns (the Parallel Flow Regenerative Kiln, PFRK) is close to the thermodynamic minimum required for the chemical reaction needed for producing lime. In other words, no further breakthrough technologies in energy efficiency are expected. The drive towards the most energy efficient solutions can easily be explained by the fact that energy costs represent on average around 40% of the lime sector’s production costs. Outside the deployment of a commercially and technically feasible Carbon Capture and Storage solution, there is little margin for further CO2 abatement in the lime sector. |
c) quite exaggerated |
Lime is the most impacted sector by the EU ETS. The production of 1 tonne of lime generates 1 to 1.6 tonne of CO2. This means that the EU ETS has a strong impact on the sector, up to 35% of impact of the CO2 costs on Gross Value Added (Hourcade et al, 2008). Therefore, the full impact of carbon costs would have serious consequences in terms of carbon leakage for the lime industry. While the lime industry advocates in favor of less red tape and less administrative burden, it recognizes the importance of the free allocation for maintaining a competitive industry in the EU. |
d) there should be no limit to overall free allocation to industry |
There is still a need today for an international climate agreement that would bring a level playing field to EU manufacturing companies. In the absence of such agreement, and considering that several countries in the EU neighborhood are not following the EU’s climate leadership, there should be no limit to the overall free allocations to the industry. Furthermore, EuLA believes that all energy intensive industries that are truly at risk of carbon leakage should be protected against carbon leakage, and that any increased level of ambition of Europe towards 2030 should lead to increased and not decreased protection against carbon leakage. The most GHG Efficient installations should receive 100% of their needs for free. The industry cap should be adjusted so that the CSCF and linear reduction factor do not reduce the free allocations. |
a) a substantially higher share than in Phase 3 |
The current state of efforts regarding the development of CCS (including the NER 300 program) will not reach the ambition to develop, by 2020, a commercially and technically available solution for the capture and storage of carbon. EuLA believes that further R&D is necessary for CCS, but that it should be funded via a mobilization of different sources including auctioning revenues, not through the new entrants' reserve. The New Entrant Reserve should be reserved to new entrants and the expected growth of the EU industry. In 2012 TNO calculated for EuLA the costs of capturing CO2 at different kinds of lime kilns. For the state-of-the-art solvent (MEA) costs to capture CO2 were €94 per ton of avoided CO2. The cost to capture CO2 would more than double the production costs of around €60/ton lime. Currently, lime plants are typically located right next to the deposit, not clustered in large industrial agglomerations. Transport costs can add significantly to the capture costs. |
a) yes |
The auctioning revenues should be used to encourage low carbon investments. As a general principle, revenues should go back to industry to enable investments in low carbon solutions. Part of the revenues could for example be used to provide cheaper loans for low carbon investments in installations falling under the EU ETS. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The auctioning revenues should be used to encourage low carbon investments. As a general principle, revenues should go back to industry to enable investments in low carbon solutions. Part of the revenues could for example be used to provide cheaper loans for low carbon investments in installations falling under the EU ETS. |
a) yes |
EuLA strongly favors a level playing field within the EU and outside Europe. This is why EuLA believes that the EU should maintain its efforts to achieve an internationally accepted and legally-binding agreement proportionate to the burden in the EU. In the absence of such agreement, the EU should safeguard the competitiveness of the EU industry with any appropriate measure. EuLA has serious doubts that the current legal framework will ensure a level playing field beyond 2020. |
a) the present two groups should remain |
EuLA believes that no further complexity and calculations should be added to an already complex scheme. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
1. Share of carbon costs in the GVA should be maintained 2. Trade intensity should take especially into account the trade with EU's neighborhood In an internal survey realized by the lime sector (NERA " Energy and transport cost comparison of the EU lime industry to 10 non-EU regions"), it has been established that the threat for lime producers mainly come from the EU neighbor countries such as Russia, Maghreb and Middle east. 3. Energy / climate requirements in Free Trade Agreements should be taken into account “Energy and climate” clauses should be part of any Free Trade Agreement, especially if the trading partner in question has not assumed any carbon reduction commitments. 4. Fuel mix price should be taken into account Finally, EuLA recommends that the EU defines an affordable and available “fuel mix” for 2030, assesses its accessibility and compares its costs with the costs of the fuel mix used by the main EU competitors. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
It is important to point out that the revision of NACE code list (v2) implied that the assessment of the carbon leakage criteria for the lime sector is now done at a new disaggregation level, which includes not only lime but also plasters and aggregates. EuLA believe that this assessment should be done at the appropriate level of disaggregation, since that the industrial activities that are included in the NACE v2 code for lime do not share the same fundamentals (in terms of energy intensity and carbon intensity for instance). |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
EuLA believes that it is important to maintain a certain level of discretion in the system for justified cases. This concerns both the qualitative criteria and the possibility to conduct the assessment at the appropriate level of disaggregation (Prodcom 8). |
b) longer (please specify) |
The time validity of the list of sectors exposed to carbon leakage should take into account the investment cycles of the industry. It is also necessary to take account of the lifespan and replacement rate of kilns. Most of the time, investments costs always assume an investment in a new capacity (replacing the old capacity before its end of life). However, for the lime sector, kilns receive big maintenance periodically. It is therefore important to ensure that the investments made now will not become "stranded assets" in the future due to an unexpected change in the carbon leakage list. Furthermore, any trade intensity assessment for the carbon leakage list should take into account the impact of trade with EU neighbouring countries. |
a) the present approach of average of the 10% most efficient installations should remain |
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b) no |
The benchmark exercise created an important workload on both the industry and the administration, and also triggered some issues regarding sensitive information. EuLA believes that any update should only been undertaken when sufficient evidence exist of technological progress. It is important to underline that the technological state of the art is not representative of what can be achieved in practice. Lime characteristics are so vast that multiple uses can be done from the same material. It is also highly dependent of the stone quality from the quarry. Any update in the benchmarks should only take into account innovations that have been proved to be commercially viable and that have been implemented on site. These benchmarks should further take into account each sectors characteristics into account, such as the existence of several end-products, the thermal energy efficiency of the sector, and its process CO2 emissions. |
c) other (please specify) |
In the case of the current ex-ante system, the reference year should be adapted, and the baseline should be a longer period without offering a choice between different periods, and not known in advance. However EuLA believes that free allocation should reflect economic reality per installation based on the most recent years and should not be frozen by historic production. In this regards, EuLA suggest to the European Commission to start working on the development of a dynamic system that could replace the current system, under the condition that no correction factor (CSCF) should be applied in addition to a dynamic system. Also, such system should take into account the administrative burden, the robustness of the control of the declared production, and the confidentiality of commercially sensitive information. |
a) no, there should be no deviations |
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d) yes, in the form of financial compensation at EU-level |
EuLA defends a Full off-setting of CO2 costs pass through in electricity prices with a harmonised approach in all EU Member States. |
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a) from the Member States' auction budgets |
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a) Business |
CARPATCEMENT Holding |
Gabriela Niculae Bucharest Business Park, Sos Bucuresti-Ploiesti 1A, 013681, Bucharest, Romania |
a) yes |
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1) yes |
a) yes |
Our company as operator of European cement installations is fully committed to reducing GHG emissions in line with overall EU policy objectives. In order to do this, our company needs to make investments and in this respect a fundamental role is played by the policy framework and the legal regulations. In order to develop we need a stable legal framework with predictable CO2 prices in order to justify and allocate the investment funds to realize CO2 emission reduction ambitions. 2030 targets have to take into account each sector specific situation and objectives. Differentiated levels of efforts are needed for different sectors (manufacturing industry, power, building, and transport) based on the ability to pass the cost on to the end user. |
b) no |
Cement industry has a specific characteristic, due to the fact that the majority of GHG emissions are not caused by energy use from fuel combustion but come from the raw materials themselves: around 60% of total CO2 emissions from clinker production are released directly from limestone and this is the quota of inherent emissions. On the other hand the energy related cost is very high in our industry due especially to the increase in electricity prices as a result of passing the costs of power generators to the electricity consumers. |
a) yes |
Climate change is a global problem that needs a global solution. Different countries and regions have different policies and approaches concerning this issue and we appreciate the high aspiration of EU of being in the frontline of fighting climate change. Nevertheless we consider that European industry should not be penalized in terms of costs and competitiveness in the international arena. This is the reason why transitional measures are needed to bridge the gap between the EU and other countries and we consider that free allocation is the most effective transitional mechanism. |
b) quite adequate |
We consider free allocations as adequate, as previously mentioned, but it should be considered that the restrictive applications rules (cross sectoral reduction factor which reduces the free allocation bellow the benchmark technically possible, base year activity considered for allocations) make free allocation just a part of “full free allocation”. Furthermore, the indirect costs of ETS have not been selected for compensation for cement in the Commission guidelines creating a distortion of competition with competitors. So, not only does the cement industry face the full indirect costs of ETS but competing construction sectors are able to be compensated for their additional costs related to indirect CO2. |
a) it absolutely keeps the incentive |
With the actual free allocation method based on benchmarks, the incentive to innovate is provided by the benchmark. In order to reach the benchmark value or at least to get close to it the operator is forced to search the best way to reduce the emission and to innovate. |
b) quite proportionate |
Overall, the administrative burden is quite proportionate but the system is disproportionate sometimes for small combustion sources (especially minor sources). |
d) there should be no limit to overall free allocation to industry |
If an international agreement assuring a global level playing field is not signed, there should be free allocation. Transitional arrangements for European industry need to be maintained until an international agreement is in place. |
e) I don’t know |
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a) yes |
A financial support for industrial innovation would provide incentive for searching new solution in a cost effective manner. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
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a) yes |
Additional measures might be considered to take into consideration not only the direct emission, but also the indirect emission cost impact. Do to the fact that the process emissions are impossible to be reduced (decarbonation of limestone is inherent) full allocation for these emission might be considered. |
a) the present two groups should remain |
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a) the present criteria should remain |
The present criteria should remain as they take into consideration the most important factors, in the same time being quite simple and predictable. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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d) in line with the duration of ETS Phase 4 |
We consider the predictability of the system one of the most important elements for an industry with high capital costs, like cement industry. Especially within a trading period changes have not to impede the decision on investments and their putting in place. |
c) the approach should be less stringent (please specify) |
The benchmark should be calculated in a statistically solid way and be updated periodically to ensure predictability. It should be set at an ambitious but reasonable level and should not be distorted by statistical outliers. This can be achieved by defining percentile (e.g. 10%-percentile) or e.g. the average of a range including the 5% to 15% top performers of specific direct emissions (excluding the extreme outliers between 0% and 5%). |
a) yes (please specify how often) |
Benchmark should be updated between two trading periods based on what has been achieved but not during one trading period. A special treatment for process emissions has to be considered e.g. full free allocation as those emissions are not linked to energy efficiency and are irreducible by their very nature. |
c) other (please specify) |
In our opinion the free allocation should be based on a system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. |
a) no, there should be no deviations |
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c) yes, in the form of additional free allocation |
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a) from the Member States' auction budgets |
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a) Business |
CASALGRANDE PADANA S.P.A. INDUSTRY PRODUCING CERAMIC TILES FOR WALLS AND FLOORS |
DOTT. MATTEO BELLI STRADA STATALE 467, NR. 73 42013 CASALGRANDE (RE) ITALY +3905229901 acquisti@casalgrandepadana.it |
a) yes |
1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output.The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improvements |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
b) quite proportionate |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. This would limit the list to sectors really exposed and would eliminate the risk of a carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
All energy intensive sectors as defined in the Energy Taxation Directive should be considered as exposed to the carbon leakage risk. As an alternative, trade and carbon intensity criteria should be used considering the following elements.First, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus.On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS. Second, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%.Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced. |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
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a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
a) Business |
CELSA GROUP |
CELSA GROUP C/ FERRALLA 11 08755 CASTELLBISBAL BARCELONA, SPAIN Tel. 00 34 93 7730400 email: cabajo@gcelsa.com |
a) yes |
1) yes |
b) no |
There is a little room for improvements. All the steel sector has yet got a reduction of 20% in comparison with 1990 values per ton of steel. We expect to obtain in a future a reduction margin of 5-15% based on energy efficiency. With the current technology is not possible to go beyond this figures. Only by reducing production in our sector we would be able to reduce emissions. This should be taken into account since this production will be moved to somewhere with higher CO2 intensity. Steel is improving in searching potencial reductions in other sectors/activities where the steel is used. |
b) no |
Due to the little room for improvement in CO2 reductions, CO2 costs (direct and indirect through electricity prices) only help to reduce the competitiveness of EU industry. EU ETS as currently designed, would erode the competitiveness of EU industry in long term. The system right now does not ensure that the most efficient plants in Europe would receive 100% of CO2 free allowances for its entire production and also it does not fully consider the impact of CO2 of other source of energy as electricity In a nutshell, the curren EU ETS just represent a very good business to the electricity generators which can make business out of the windfall profits due to an increased marginal price which is transeferred to all the kWh. |
a) yes |
It is necessary that the most energy efficient plants could produce at its maximum capacity without need to penalize due to the CO2 (direct and indirect) costs. This mean full carbon leakage provisions plus compulsory full electricity extra cost compensation. This scheme (0 CO2 costs) could be extended to all the efficient production in Europe in comparison with the production somewhere else. Carbon leakage provision could be lowered if there were a real and comparable international agreement with similar constrain in the main producers of steel sometwhere else and all of them would participate in a similar market. |
a) very adequate |
Very adequate for the current EU-ETS scheme, since it represents the better tool to address risk of delocalizing due to CO2 cost together with a "non harmonised" electricity compensation Other point could be reviweing the electricity market to set up the require provisions to prevent carbon price to became a business for electricity utilities |
b) it largely keeps the incentive |
Free allocation proportion is to be based in a benchmarking methodology. It should consider also indirect emissions from electricity, at least. If carbon leakage allocation is increased, eg, as an application of the Cross sectoral Correction factor, the effect is that even the better performance for a well developed benchmark will not receive 100% of allocation for free. All the companies would suffer a decrease in profit margins, and the financial availability for investment in whatever further measure available in the future. All these comments are gone in parallel to the legislative uncertainty that an unstable and unfair EU-ETS scheme is generating for (attracting/diverging) industrial investments. |
b) quite proportionate |
Probably the Commission should make the templates more specific for each sectors instead of trying every company to fulfill the same one which, at the end, is empty at a 98% in many cases. We should not misconfuse the requirements for allocation with those for the carbon leakage consideration |
d) there should be no limit to overall free allocation to industry |
EU-ETS should not endanger any energy efficient industrial production in EU. It should not be any preset cap. We suggest a bottom up approach for allocation to the industry Revision of benchmark should be part of the process with a frequency either of 5 years or ones before every trading period stars. A new ETS should not forget the risk of carbon leakage due to indirect CO2 cost for electricity consumption. There might be a compulsory and realistic compensation scheme, considering actual market situation for each country, analyzing what is the situation of electricity purchase in each country. Even the most reasonable way is through the access of additional CO2 allowances. All the companies with a reasonable proximity to the benchmark should have not any extra cost due to the CO2 either direct or indirect A special care should be considered to avoid offset the emissions if changing raw materials more intensive in CO2 or displacing another consumers |
e) I don’t know |
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a) yes |
Yes, and it should not entitle additional cost for the industry. Additionally, if there were found any probed and economically viable results, there should be some support for deployment in Europe. Nevertheless development and deployment of CO2/energy efficient technologies should not hide state aids for unviable companies |
c) other types of funding (please specify) |
There could be several funding sources. Energy efficiency programs, research programs, etc. It preferably should not come from auctioning of allowances of the ETS scheme itself since it would artificially increase the price of the CO2 , and then reducing financing possibilities of the less efficient companies which require investing most. |
a) yes |
Yes, but the EU ETS should be changed to make it attractive for third countries to join. Currently, there is no incentive at all in this sense for any company from a third country to join An energy efficient installation should have no any extra cost due to the ETS scheme. It should include the compensation for indirect electricity extra cost based on the marginal pass through cost to the electricity prices. It is scarier the huge differences on the actual electricity compensation schemes currently in Europe, if any. The situation in relation to the EU economic downturn is generating yet another additional competitiveness handicap in the industry of those countries which are suffering the most in relation against other European competing ones. This ranks from current full offsetting schemes with compensation between 3-5€/MWh to “0 (or almost 0)” compensation. This originates additional competing discrepancies over factors out of control of the companies. In addition, Europe had much |
a) the present two groups should remain |
At this moment on time, the list of exposed sectors is reasonable. There is an additional mechanism for any needed sector to be included. |
a) the present criteria should remain |
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a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
There are sectors really complex in its layouts, structures, boundaries and products statistical data is not as reliable as needed for the evaluation. Therefore this option should be kept in mind. |
b) longer (please specify) |
Investing decisions are based on redemption time which for very large investments can reach 15 years. 3-8 for “small” ones. These investments need a lower legal and economical uncertainty as reasonable possible. |
a) the present approach of average of the 10% most efficient installations should remain |
There should be an incentive to become one of the best performers Nevertheless, the sector at carbon leakage risk should receive a true 100% harmonized compensation due to the undue carbon price cost past through to the electricity marginal price |
a) yes (please specify how often) |
Yes, before every trading period. These revisions should take into acount CO2 emissions and electricity consumption. These are not necessary the same of the environmental wider impacts and local consideration taken in into account for the definition of the Best Available Techniques |
c) other (please specify) |
The reference should be based on recent actual production data since they give a lesser uncertainty for regulator, and reflect the economic evolution in a realistic way. It could even be corrected by ex-post data every year |
a) no, there should be no deviations |
|
d) yes, in the form of financial compensation at EU-level |
It does not matter if it is a financial compensation of electricity price transferred to the marginal price of the market (pool) based on allowances or a financial scheme, or whatever other alternative, as long as there is a harmonized one which account for a full actual extra-cost |
Most important |
Important |
Less important |
Least important |
|
e) I don't know |
The important aspect is that there is a harmonised support for R+D+I, and even deployment, and not where it comes from |
|
a) Business |
Celtejo - Empresa de Celulose do Tejo S.A. |
6030 Vila Velha de Ródão - Portugal +351272540100 nelson.camelo@altri.pt |
a) yes |
1) yes |
b) no |
The pulp industry, already invested significantly to reduce its GHG emissions. Major investments on actual available technologies have already been made across the sector. The potential for improvement with available technologies is very limited and makes little economic sense: they will only increase the competitive gap with international competitors. Technological breakthroughs are needed in order to further reduce GHG emission. This requires time and financial support (research and investment cycles). Furthermore, please do not confuse energy efficiency measures with downgrading of products and quality products. Forcing the companies to produce poor quality products which require less energy is not energy efficiency and it goes on the opposite direction of making the European industry more competitive |
b) no |
Key is the long-term investment cycle. The high costs of energy and the related tax burden already act like an incentive for the pulp, paper and board manufacturing industry to reduce energy costs, thus reduce GHG emissions. Moreover, due to the energy price in Europe it is not a question of GHG reduction but a question of competitiveness. The EU ETS adds further costs that competitors outside the EU do support. In addition, the continuous interventions to modify the regulatory framework create additional risks, thus costs, to industry. Overall, the EU ETS severely impairs our industry competitiveness. It provides short-term visibility to industry (rules set for single trading periods) which does not give the long-term investment visibility needed to industry. |
a) yes |
Since the EU ETS was set up in 2005, the international economic context dramatically changed: the shale gas production in the USA offered a significant competitive edge to the American industry, the oil price increased dramatically, the debt crisis in Europe further increased the tax burden, the very low margins of the pulp, paper and board industry impaired its ability to invest, etc. The European countries suffer from a deficit of competitiveness on the international playing field. The EU ETS adds a substantial cost that is unmatched by industry in other parts of the world, thus negatively impacting on EU competitiveness. In a world of growing asymmetries in climate change policies, measures to support EU industry are a must. |
b) quite adequate |
The free allocation has been a shield for the competitiveness of the EU industry and helped maintain economic activity within EU borders. However, competitiveness is not secured over the short and medium term as the fast decrease of free allocation, the CSCF, the inadequate compensation for indirect costs, and the expected increase in carbon prices are a threat the EU industry faces in the future. Without a global agreement (that could lead to comparable burdens for competing industrial installations around the world), Europe will have to mitigate the impact of its policies for industries producing globally trading goods. Overall, mechanisms should be set up to help the EU industry improve its energy efficiency and reduce its GHG emissions. In addition, regarding the carbon leakage issue, the objective should be to attract more industrial activity while reducing the GHG emission and not only to avoid the decrease of industrial activity. |
b) it largely keeps the incentive |
There is no direct correlation between free allocation and the incentive to innovate to reduce GHG emissions. The GHG emissions still represents a significant cost for the pulp, paper and board industry which companies try to minimize. Hence the EU ETS being a major concern. In addition, free allocation is a counterpart to the investments conceded to reduce GHG emission. No free allocation would mean a lot less ability to invest in CAPEX for GHG emissions reduction. As explained above, further incentive should come as funding investments and research aiming at low GHG emission production of energy-intensive goods. |
b) quite proportionate |
One of the main causes of administrative burden has been the continuous changes in ETS framework and implementing rules. This has caused uncertainty among industry. There is an urgent need for a more stable and consistent ETS policy. The initial burden is very high. Afterwards, it depends on Member States. Constant changes, almost every year, in MRV rules, without delivering any environmental benefits. |
b) a higher share than in 2013-20 |
There is only one overall EU allowance budget. If there is a risk of carbon leakage due to EU energy-climate policies, this has to be prevented with additional credits available in the system, including the ones covering indirect costs for increased electricity prices. In fact, carbon leakage would mean failure of the EU ETS to contain global GHG emission. Thus, the avoidance of carbon leakage should be an absolute priority. Given the current economic context, a higher share of allowances is needed to ensure growth in Europe and prevent businesses from moving abroad. Looking at current rules, the linear factor and correction factor makes that even being carbon leakage installations are allocated bellow benchmarks values. Moreover, there is a need to reconsider the need to provide free allocation to electricity produce in industrial CHP, as it is considered a BAT for energy efficiency in industry. |
b) the same share as in Phase 3 |
It is not so much a matter of budget allocated, but of policy uncertainty. |
a) yes |
All EU ETS revenues from auctioning to be returned exclusively to the industry in a way that supports the transition to a low GHG emission economy. This should include subsides for low GHG emission investments and funding of low GHG emission technology research. The EU ETS only will not be sufficient to improve energy efficiency and GHG emission reduction. The support of energy savings and GHG reduction investments will be a determinant factor of success of the EU ETS. Therefore, the development of new low-carbon technologies for industrial innovation should be as transversal as possible. |
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
Prevention of carbon leakage is a pre-requisite for innovation. As explained above, EU ETS auctioning revenues should be returned to the EU industry to support low GHG emission investments and research projects. |
a) yes |
Energy intensive sectors, in particular the pulp sector suffer from a lack of competitiveness partly due to high energy cost, high level of taxation and high direct and indirect GHG emission reduction cost relative to their competitors outside EU. A global agreement (that could lead to comparable burdens for competing industrial installations around the world) would be the most effective way to address the risk of carbon leakage. In the absence of that, EU-wide harmonised measures addressing indirect costs should include both the rising of electricity costs due to energy-climate related policies (ETS + Ren.) and rising of wood raw material costs. Specifically ETS and renewables provide an incentive to burn wood instead of fossil fuels. It has strongly increased demand of wood for energy use. Hence today even round wood suitable as raw material for forest industry is increasingly burnt across Europe. As result, there is growing pressure for higher price of pulp wood. |
a) the present two groups should remain |
There is no need for a revision of the carbon leakage list. The pulp, paper & board manufacturing industry needs stability in the regulatory framework. |
a) the present criteria should remain |
The current criteria should remain. HOWEVER the “carbon costs” criteria should be expanded to include the cost of rising wood raw material cost due to ETS (see answer to Question 11). Move to NACE 3 level in assessing integrated sectors, such as the pulp and paper. As a way to simplify the system, all energy intensive industries could be considered by default at risk of carbon leakage. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
See comment above (question 14) |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
b) longer (please specify) |
Stability is crucial for investments in Europe. Fiscal and legislative instability triggers insecurity of return on investment and should therefore be avoided. The validity of the carbon leakage list should then be extended to reflect typical investment cycles (10 to 15 years) and should remain unchanged until global climate agreement (which would guarantee equal competition conditions). |
a) the present approach of average of the 10% most efficient installations should remain |
Fiscal and legislative stability is important for investment and decision-making. Therefore, we advise not to revise the benchmark. Moreover, revising the benchmarks would greatly reduce the benefits that industrial installations should receive for their last energy-saving and GHG reduction investments, resulting in a loss of confidence and thus a decrease in investments. It should be reminded that the ETS in general, and the benchmarks in particular, should reward installations and sectors reducing GHG emissions. Revising benchmarks will only penalize the most virtuous sectors, rewarding the most carbon intensive. |
b) no |
Fiscal and legislative stability is important for investment and decision-making. Therefore, we advise not to revise the benchmark. Moreover, revising the benchmarks would greatly reduce the benefits that industrial installations should receive for their last energy-saving and GHG reduction investments, resulting in a loss of confidence and thus a decrease in investments. It should reminded that the ETS in general, and the benchmarks in particular, should reward installations and sectors reducing GHG emissions Revising benchmarks will only penalise the most virtuous sectors, rewarding the most carbon intensive. |
c) other (please specify) |
Three year average of relevant period could be OK, but there should be some flexibility in the reference years to take into consideration economic activities. Nevertheless, it should be kept the possibility to revise according to the state of the economy, crises, catastrophes etc. The allocation system should not constrain economic growth. |
a) no, there should be no deviations |
|
d) yes, in the form of financial compensation at EU-level |
Any system should be mandatory and harmonised for all the states. |
Important |
Most important |
Less important |
Least important |
|
c) from both |
Any support for innovation in industry should not come at the expenses of carbon leakage protection. Allowances for innovation will have to come on top of free allowances for industry. |
To mitigate climate change the EU should focus on promoting industrial production in Europe, which is good for the environment and climate. The average CO2-emissions caused by electricity production in Europe are low in global comparison. Hence, the more industry produces in Europe, the lower the global CO2-emissions. |
a) Business |
Cementos Alfa, S.A.
Jose Abascal, 59 28003 Madrid. Spain
Tel: +34 91 396 01 00
http://www.valderrivas.es |
Francisco Zunzunegui Fernández
Director Negocio España/UK
Jose Abascal, 59 28003 Madrid. Spain
Tel: +34 91 396 01 00
Email:fran.zunzunegui@gcpv.com |
a) yes |
1) yes |
a) yes |
The cement industry is fully committed to reducing Greenhouse Gas emissions in line with overall EU policy objectives. This has been demonstrated by investments over the past 20 years which have driven down CO2 emissions from clinker production and by our roadmap to go much further in the coming decades. To achieve this, the industry needs to innovate and invest. This requires a return on investment above the cost of capital and a policy framework that promotes the competitiveness of the sector and allows for a secure access to raw materials and affordable energy prices. The cement companies in Europe need a stable legal framework with predictable CO2 pricing in order to justify and allocate scarce investment funds to realize carbon emission reduction ambitions. 2030 targets have to take into account each sector specific roadmap. The Commission’s proposals for a Climate Change Policy in 2030 imposes a proportionately higher reduction burden on energy-intensive sectors compared to other sectors such as transport and households and do not take into account the abatement potential per sector. Therefore, the proposed rules will only serve to reduce competitiveness and preclude the essential investment to drive down emissions, secure jobs and innovate in the years to come. This is unsustainable and will lead to progressive atrophy of the industry. |
b) no |
Measures to decrease energy consumption and improve resources efficiency will de facto reduce CO2 emissions. Some industries like cement have very high energy costs as a proportion of GVA or profit which means that energy efficiency is an integral part of manufacturing. The EU ETS emphasis is GHG efficiency and in this regard it does put pressure on businesses to become more GHG efficient. In doing so EU ETS places CO2 costs on power generators and these costs are passed on to electricity consumers. There are limitations to which added costs act as a driver for efficiency before imports become more attractive. Furthermore, the cement and lime industry are unique due to the fact that the majority of GHG emissions are not caused by energy use from fuel combustion but come from the raw materials themselves. Around 60% of total CO2 emissions from clinker production are released directly from limestone. On the other hand, energy efficiency and CO2 reduction represents conflicting goals when looking e.g. at CCS. With the current ETS design, the energy efficiency achieved by the industry is not valued, focusing only on the CO2 emissions direct, so it penalizes the most efficient facilities because they have not guaranteed it´s 100% free allocation limiting their ability to compete. |
a) yes |
The EU has aspirations of leading on CC policy but globally unequal carbon pricing has the ability to shift trade patterns. In order to direct investments to growth and jobs in Europe, the cement industry needs a global level playing field, including imports and exports: climate change is a global problem that needs a global solution. EU policy can only incentivize companies to aggressively work on further emissions reduction if there is predictability in and equality in carbon prices and if it is part of an overall industrial policy ensuring companies to be competitive in the international arena. This also applies to energy costs. For cement, energy costs are especially important representing 30 % of operational costs with European costs being substantially higher than in the US, Russia and plants in North Africa. Transitional measures are needed to bridge the gap between the EU and other countries. Free allocation is the most effective transitional mechanism. Take into account that there is no binding international climate agreement which imposes similar burdens on operators in the major cement producing jurisdictions; countries such as China, whose emissions account for 29% of global emissions, have already reached per capita emissions equal to the EU average and also they have increased their emissions by 290% from 1990. |
b) quite adequate |
As long as emissions do not have the same cost in different countries, a level playing field can be achieved most effectively by equalising measures such as free allocation. The limited evidence of leakage and empirical studies demonstrates (see the report by Vivid Economics last June), in part, that free allocation is working. However, it should not be assumed that free allocation is insulating operators from all of the ETS costs as it does not mean ‘full free allocation’ because of the CSRF and as some operators will face higher costs than others depending on the allocation base year activity. Furthermore, the indirect costs of ETS have not been selected for compensation for cement in the Commission guidelines creating a distortion of competition with competitors. So, not only does the cement industry face the full indirect costs of ETS but competing construction sectors are able to be compensated for their additional costs related to indirect CO2. Prices have risen to unprecedented levels in Europe at a time when our main competitor, the United States, is benefitting from increasingly lower energy prices. These price variations are affecting industrial competitiveness and leading to “investment leakage” with new investments in manufacturing sectors progressively moving outside Europe For cement manufacture, energy costs are especially important representing 30 % of operational costs with European costs being substantially higher than in the US, Russia and plants in North Africa. |
a) it absolutely keeps the incentive |
With free allocation based on benchmark, the incentive to invest is provided by the benchmark. The magnitude of the residual incentive is a function of carbon costs as a proportion of GVA. Cement has one of the highest CO2 costs/GVA of any industrial sector so the residual effort is greater than in most sectors. In its search for a legal framework that fosters a competitive environment, CEMBUREAU has considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The EU cement industry has a relatively flat benchmark curve indicating that there is a narrow gap between the best and the worst performers; this limited level of abatement potential makes the task of emissions reduction more difficult in the cement sector compared to many other sectors. |
b) quite proportionate |
Overall, the administrative burden is quite proportionate but the system is extremely disproportionate for small/trivial combustion sources. In many cases these minor sources were not part of the benchmarking exercise and should not be included in reporting. |
d) there should be no limit to overall free allocation to industry |
There should be free allocation if there isn’t an international agreement which places all competing manufacturers on an equal footing. Until certain conditions can be met with regard to the veracity of the schemes within other countries then transitional arrangements need to be maintained. Free allocation is the most effective transitional arrangement. The share of allowances dedicated to free allocation should be sufficient to avoid carbon leakage. To uphold this principle that carbon leakage should be minimized, the cross sectoral correction factor should be replaced by an adjustment to the auctioned amount to maintain the cap trajectory. That does not mean “a free ride for industry” but it would mean that sufficient allowances are provided for the most efficient producers because at present the CSCF has the ability to reduce free allocation beyond what is technically possible. Full compensation through free allocation must allow the most efficient companies to be globally competitive without being penalised by direct carbon costs. |
e) I don’t know |
There are too many uncertainties on what the post 2020 allowances budget will be for the cement industry to be able to decide what share of the budget should be dedicated to such innovation support. The EU ETS does not encourage investment in new technology. The rules for accessing NER allowances discourage investment due to the uncertainty of the postcommissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) yes |
To date, the NER 300 has been ineffective at stimulating novel CO2 reduction projects in the cement industry. The power generation sector which is passing on investment costs has benefitted most from the NER 300. The cement sector is not experiencing the same level of investment de-risking. The cement industry needs - an investment enhancing climate should encourage investments over long term (30 y) cycles in a capital intensive industry. Legal stability and CO2 price predictability are key to achieve this goal - safeguards against price fluctuations in market based policy instruments; which objectives, if kept, should be clearly defined and not be prone to abuse for speculation purposes - an innovation policy which provides clear incentives for breakthrough technologies in a cost-effective way. Policy makers should consider hypothecation (earmarking) of revenues from allowance auctions and direct innovation support to those sectors facing the greatest abatement challenges. The cement industry needs an innovation policy which provides clear incentives for breakthrough technologies for CO2 reduction in a cost-effective way. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Given the high costs associated with breakthrough technologies, funding from auctioning revenues should account for both capital and operational cost of projects. There should in addition be a ring fenced fund for the manufacturing industry. |
a) yes |
In its search for a legal framework that fosters a competitive environment, OFICEMEN has considered an improved ETS with a performance based free allocation for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions cost impacts. In order to protect “carbon leakage” sectors’ competitiveness, the system could foresee either an adjustment to the overall cap to the auction amount or a sectoral cap with the inclusion of importers. However, a carbon pricing mechanism which is market-based and prone to wide fluctuations militates against effective investment. OFICEMEN is ready to explore mechanisms which deliver price stabilization and global carbon price convergence to engage in a thorough reflection of a climate policy and energy policy that is fully integrated in a single industrial growth policy. |
a) the present two groups should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. One should consider a special treatment for process emissions e.g. full free allocation as those emissions are not linked to energy efficiency and are irreducible by their very nature. |
a) the present criteria should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. Nevertheless, as a static indicator trade intensity is of limited validity/conclusiveness. It is based solely on historic data and does not reflect future developments, i.e. resulting from changing cost patterns, at all. The competitiveness of European industry has deteriorated significantly as a result of the deep economic crisis and rising energy and electricity costs, caused by a combination of a non-integrated European electricity market and distribution network, support schemes for renewables that need to be cross-subsidized by energyintensive industries and pass through of CO2 prices by the power sector; it imperative to preserve industry’s competitiveness in order to guarantee survival of the industry in Europe in the years to come. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria e.g. a complete loss of 30% of GVA is normally economically not acceptable for any industry or sector. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
EU trade and economic data is not always exact and its comparability with the EUITL CO2 data not always appropriate so there will always be a need to hear special cases. |
d) in line with the duration of ETS Phase 4 |
It is essential for the predictability of the system to introduce as little changes as possible in the course of a trading period; hence the validity of the list of sector exposed should be in line with the duration of the ETS phase 4. Review list of sectors deemed to be exposed to a significant risk of 'carbon leakage' every five years give great uncertainty for companies leading to a lack of investment confidence for a capital-intensive industry with long-term investment cycles, like the cement industry, caused by the constant unpredictability of the regulatory framework. |
c) the approach should be less stringent (please specify) |
The benchmark would be calculated in a statistically solid way and be updated periodically to ensure predictability. It should be set at an ambitious but reasonable level and should not be distorted by statistical outliers. This can be achieved by defining percentile (e.g. 10%-percentile) or e.g. the average of a range including the 5% to 15% top performers of specific direct emissions (excluding the extreme outliers between 0% and 5%). Only this way, the benchmarking methodology will achieve sufficient statistical robustness for international application in ETS system. |
a) yes (please specify how often) |
Benchmark should be updated between two trading periods depending on what has been achieved but not during one trading period. |
c) other (please specify) |
In its search for a legal framework that fosters a competitive environment, OFICEMEN has considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The historic activity level (HAL) should be more closely aligned to recent production to avoid surplus allocation e.g. the average of the preceding 3 years. In this context, OFICEMEN considers the recently released EcoFys study (Dynamic allocation for the EU Emissions Trading System, Enabling sustainable growth, 20 June 2014) and its allowances allocation reserve as an interesting step forward. However, a more recent HAL has its potential downsides for installations that have extended shutdowns or breakdowns, provision will be necessary to deal with exceptional HAL circumstances. |
a) no, there should be no deviations |
A more recent HAL e.g. preceding 3 years average, has its potential downsides for installations that have extended shutdowns or breakdowns, provision will be necessary to deal with exceptional HAL circumstances. |
c) yes, in the form of additional free allocation |
OFICEMEN believes that EU Compensation should be granted for indirect emission impact where carbon leakage vulnerability is a combination of direct plus indirect emission cost. There is no need for two state aid guidelines and the compensation for indirect costs could be internalized in the ETD by providing free allocation for indirect CO2. |
Less important |
Important |
Most important |
I don't know |
OFICEMEN regrets the focus on carbon capture and storage and believes that carbn capture and re-use should be equally considered. OFICEMEN believes that funding should be technology neutral. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) from the Member States' auction budgets |
a) Business |
Cementos Portland Valderrivas, S.A.
Jose Abascal, 59 28003 Madrid. Spain
Tel: +34 91 396 01 00
http://www.valderrivas.es |
Francisco Zunzunegui Fernández
Director Negocio España/UK
Jose Abascal, 59 28003 Madrid. Spain
Tel: +34 91 396 01 00
Email:fran.zunzunegui@gcpv.com |
a) yes |
1) yes |
a) yes |
The cement industry is fully committed to reducing Greenhouse Gas emissions in line with overall EU policy objectives. This has been demonstrated by investments over the past 20 years which have driven down CO2 emissions from clinker production and by our roadmap to go much further in the coming decades. To achieve this, the industry needs to innovate and invest. This requires a return on investment above the cost of capital and a policy framework that promotes the competitiveness of the sector and allows for a secure access to raw materials and affordable energy prices. The cement companies in Europe need a stable legal framework with predictable CO2 pricing in order to justify and allocate scarce investment funds to realize carbon emission reduction ambitions. 2030 targets have to take into account each sector specific roadmap. The Commission’s proposals for a Climate Change Policy in 2030 imposes a proportionately higher reduction burden on energy-intensive sectors compared to other sectors such as transport and households and do not take into account the abatement potential per sector. Therefore, the proposed rules will only serve to reduce competitiveness and preclude the essential investment to drive down emissions, secure jobs and innovate in the years to come. This is unsustainable and will lead to progressive atrophy of the industry. |
b) no |
Measures to decrease energy consumption and improve resources efficiency will de facto reduce CO2 emissions. Some industries like cement have very high energy costs as a proportion of GVA or profit which means that energy efficiency is an integral part of manufacturing. The EU ETS emphasis is GHG efficiency and in this regard it does put pressure on businesses to become more GHG efficient. In doing so EU ETS places CO2 costs on power generators and these costs are passed on to electricity consumers. There are limitations to which added costs act as a driver for efficiency before imports become more attractive. Furthermore, the cement and lime industry are unique due to the fact that the majority of GHG emissions are not caused by energy use from fuel combustion but come from the raw materials themselves. Around 60% of total CO2 emissions from clinker production are released directly from limestone. On the other hand, energy efficiency and CO2 reduction represents conflicting goals when looking e.g. at CCS. With the current ETS design, the energy efficiency achieved by the industry is not valued, focusing only on the CO2 emissions direct, so it penalizes the most efficient facilities because they have not guaranteed it´s 100% free allocation limiting their ability to compete. |
a) yes |
The EU has aspirations of leading on CC policy but globally unequal carbon pricing has the ability to shift trade patterns. In order to direct investments to growth and jobs in Europe, the cement industry needs a global level playing field, including imports and exports: climate change is a global problem that needs a global solution. EU policy can only incentivize companies to aggressively work on further emissions reduction if there is predictability in and equality in carbon prices and if it is part of an overall industrial policy ensuring companies to be competitive in the international arena. This also applies to energy costs. For cement, energy costs are especially important representing 30 % of operational costs with European costs being substantially higher than in the US, Russia and plants in North Africa. Transitional measures are needed to bridge the gap between the EU and other countries. Free allocation is the most effective transitional mechanism. Take into account that there is no binding international climate agreement which imposes similar burdens on operators in the major cement producing jurisdictions; countries such as China, whose emissions account for 29% of global emissions, have already reached per capita emissions equal to the EU average and also they have increased their emissions by 290% from 1990. |
b) quite adequate |
As long as emissions do not have the same cost in different countries, a level playing field can be achieved most effectively by equalising measures such as free allocation. The limited evidence of leakage and empirical studies demonstrates (see the report by Vivid Economics last June), in part, that free allocation is working. However, it should not be assumed that free allocation is insulating operators from all of the ETS costs as it does not mean ‘full free allocation’ because of the CSRF and as some operators will face higher costs than others depending on the allocation base year activity. Furthermore, the indirect costs of ETS have not been selected for compensation for cement in the Commission guidelines creating a distortion of competition with competitors. So, not only does the cement industry face the full indirect costs of ETS but competing construction sectors are able to be compensated for their additional costs related to indirect CO2. Prices have risen to unprecedented levels in Europe at a time when our main competitor, the United States, is benefitting from increasingly lower energy prices. These price variations are affecting industrial competitiveness and leading to “investment leakage” with new investments in manufacturing sectors progressively moving outside Europe For cement manufacture, energy costs are especially important representing 30 % of operational costs with European costs being substantially higher than in the US, Russia and plants in North Africa. |
a) it absolutely keeps the incentive |
With free allocation based on benchmark, the incentive to invest is provided by the benchmark. The magnitude of the residual incentive is a function of carbon costs as a proportion of GVA. Cement has one of the highest CO2 costs/GVA of any industrial sector so the residual effort is greater than in most sectors. In its search for a legal framework that fosters a competitive environment, CEMBUREAU has considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The EU cement industry has a relatively flat benchmark curve indicating that there is a narrow gap between the best and the worst performers; this limited level of abatement potential makes the task of emissions reduction more difficult in the cement sector compared to many other sectors. |
b) quite proportionate |
Overall, the administrative burden is quite proportionate but the system is extremely disproportionate for small/trivial combustion sources. In many cases these minor sources were not part of the benchmarking exercise and should not be included in reporting. |
d) there should be no limit to overall free allocation to industry |
There should be free allocation if there isn’t an international agreement which places all competing manufacturers on an equal footing. Until certain conditions can be met with regard to the veracity of the schemes within other countries then transitional arrangements need to be maintained. Free allocation is the most effective transitional arrangement. The share of allowances dedicated to free allocation should be sufficient to avoid carbon leakage. To uphold this principle that carbon leakage should be minimized, the cross sectoral correction factor should be replaced by an adjustment to the auctioned amount to maintain the cap trajectory. That does not mean “a free ride for industry” but it would mean that sufficient allowances are provided for the most efficient producers because at present the CSCF has the ability to reduce free allocation beyond what is technically possible. Full compensation through free allocation must allow the most efficient companies to be globally competitive without being penalised by direct carbon costs. |
e) I don’t know |
There are too many uncertainties on what the post 2020 allowances budget will be for the cement industry to be able to decide what share of the budget should be dedicated to such innovation support. The EU ETS does not encourage investment in new technology. The rules for accessing NER allowances discourage investment due to the uncertainty of the postcommissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) yes |
To date, the NER 300 has been ineffective at stimulating novel CO2 reduction projects in the cement industry. The power generation sector which is passing on investment costs has benefitted most from the NER 300. The cement sector is not experiencing the same level of investment de-risking. The cement industry needs - an investment enhancing climate should encourage investments over long term (30 y) cycles in a capital intensive industry. Legal stability and CO2 price predictability are key to achieve this goal - safeguards against price fluctuations in market based policy instruments; which objectives, if kept, should be clearly defined and not be prone to abuse for speculation purposes - an innovation policy which provides clear incentives for breakthrough technologies in a cost-effective way. Policy makers should consider hypothecation (earmarking) of revenues from allowance auctions and direct innovation support to those sectors facing the greatest abatement challenges. The cement industry needs an innovation policy which provides clear incentives for breakthrough technologies for CO2 reduction in a cost-effective way. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Given the high costs associated with breakthrough technologies, funding from auctioning revenues should account for both capital and operational cost of projects. There should in addition be a ring fenced fund for the manufacturing industry. |
a) yes |
In its search for a legal framework that fosters a competitive environment, OFICEMEN has considered an improved ETS with a performance based free allocation for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions cost impacts. In order to protect “carbon leakage” sectors’ competitiveness, the system could foresee either an adjustment to the overall cap to the auction amount or a sectoral cap with the inclusion of importers. However, a carbon pricing mechanism which is market-based and prone to wide fluctuations militates against effective investment. OFICEMEN is ready to explore mechanisms which deliver price stabilization and global carbon price convergence to engage in a thorough reflection of a climate policy and energy policy that is fully integrated in a single industrial growth policy. |
a) the present two groups should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. One should consider a special treatment for process emissions e.g. full free allocation as those emissions are not linked to energy efficiency and are irreducible by their very nature. |
a) the present criteria should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. Nevertheless, as a static indicator trade intensity is of limited validity/conclusiveness. It is based solely on historic data and does not reflect future developments, i.e. resulting from changing cost patterns, at all. The competitiveness of European industry has deteriorated significantly as a result of the deep economic crisis and rising energy and electricity costs, caused by a combination of a non-integrated European electricity market and distribution network, support schemes for renewables that need to be cross-subsidized by energyintensive industries and pass through of CO2 prices by the power sector; it imperative to preserve industry’s competitiveness in order to guarantee survival of the industry in Europe in the years to come. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria e.g. a complete loss of 30% of GVA is normally economically not acceptable for any industry or sector. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
EU trade and economic data is not always exact and its comparability with the EUITL CO2 data not always appropriate so there will always be a need to hear special cases. |
d) in line with the duration of ETS Phase 4 |
It is essential for the predictability of the system to introduce as little changes as possible in the course of a trading period; hence the validity of the list of sector exposed should be in line with the duration of the ETS phase 4. Review list of sectors deemed to be exposed to a significant risk of 'carbon leakage' every five years give great uncertainty for companies leading to a lack of investment confidence for a capital-intensive industry with long-term investment cycles, like the cement industry, caused by the constant unpredictability of the regulatory framework. |
c) the approach should be less stringent (please specify) |
The benchmark would be calculated in a statistically solid way and be updated periodically to ensure predictability. It should be set at an ambitious but reasonable level and should not be distorted by statistical outliers. This can be achieved by defining percentile (e.g. 10%-percentile) or e.g. the average of a range including the 5% to 15% top performers of specific direct emissions (excluding the extreme outliers between 0% and 5%). Only this way, the benchmarking methodology will achieve sufficient statistical robustness for international application in ETS system. |
a) yes (please specify how often) |
Benchmark should be updated between two trading periods depending on what has been achieved but not during one trading period. |
c) other (please specify) |
In its search for a legal framework that fosters a competitive environment, OFICEMEN has considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The historic activity level (HAL) should be more closely aligned to recent production to avoid surplus allocation e.g. the average of the preceding 3 years. In this context, OFICEMEN considers the recently released EcoFys study (Dynamic allocation for the EU Emissions Trading System, Enabling sustainable growth, 20 June 2014) and its allowances allocation reserve as an interesting step forward. However, a more recent HAL has its potential downsides for installations that have extended shutdowns or breakdowns, provision will be necessary to deal with exceptional HAL circumstances. |
a) no, there should be no deviations |
A more recent HAL e.g. preceding 3 years average, has its potential downsides for installations that have extended shutdowns or breakdowns, provision will be necessary to deal with exceptional HAL circumstances. |
c) yes, in the form of additional free allocation |
OFICEMEN believes that EU Compensation should be granted for indirect emission impact where carbon leakage vulnerability is a combination of direct plus indirect emission cost. There is no need for two state aid guidelines and the compensation for indirect costs could be internalized in the ETD by providing free allocation for indirect CO2. |
Less important |
Important |
Most important |
I don't know |
OFICEMEN regrets the focus on carbon capture and storage and believes that carbn capture and re-use should be equally considered. OFICEMEN believes that funding should be technology neutral. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) from the Member States' auction budgets |
a) Business |
CEMEX |
FRANCISCO JAVIER MERLE PONS Corporate Environmental Manager - VP Global Technology & Safety Office : +34(91)3779359 Fax: +34(91)3779529 Mobile: +34 616933152 CEMEX Net: 803429359 Address: c/Hernandez de Tejada nº 3 - 28027 MADRID e-Mail: javier.merle@cemex.com www.cemex.com |
a) yes |
|
1) yes |
a) yes |
The cement industry is fully committed to reducing GHG emissions in line with overall EU policy objectives. This has been demonstrated by investments over the past 20 years which have driven down CO2 emissions from clinker production and by our roadmap to go much further in the coming decades. To achieve this, industry needs to innovate and invest. This requires a return on investment above the cost of capital and a policy framework that promotes the competitiveness of the sector and allows for a secure access to raw materials and affordable energy prices. The cement industry in Europe needs a stable legal framework with predictable CO2 prices in order to justify and allocate scarce investment funds to realize CO2 emission reduction ambitions. 2030 targets have to take into account each sector specific roadmap. Differentiated levels of efforts are needed for different sectors (manufacturing industry, power, building, and transport) based on the ability to pass the cost on to the end us |
b) no |
Measures to decrease energy consumption and improve resources efficiency will de facto reduce CO2 emissions. Some industries like cement have very high energy costs as a proportion of GVA or profit which means that energy efficiency is an integral part of manufacturing. The EU ETS emphasis is GHG efficiency and in this regard it does put pressure on businesses to become more GHG efficient. In doing so EU ETS places CO2 costs on power generators and these costs are passed on to electricity consumers. There are limitations to which added costs act as a driver for efficiency before imports become more attractive. Furthermore, the cement and lime industry are unique due to the fact that the majority of GHG emissions are not caused by energy use from fuel combustion but come from the raw materials themselves. Around 60% of total CO2 emissions from clinker production are released directly from limestone. On the other hand, energy efficiency and CO2 reduction represents conflicting goals when |
a) yes |
The EU has aspirations of leading on CC policy but globally unequal carbon pricing has the ability to shift trade patterns. In order to direct investments to growth and jobs in Europe, the cement industry needs a global level playing field, including imports and exports: climate change is a global problem that needs a global solution. EU policy can only incentivise companies to aggressively work on further emissions reduction if there is predictability in and equality in carbon prices and if it is part of an overall industrial policy ensuring companies to be competitive in the international arena. This also applies to energy costs. For cement, energy costs are especially important representing 30 % of operational costs with European costs being substantially higher than in the US, Russia and plants in North Africa. Transitional measures are needed to bridge the gap between the EU and other countries. Free allocation is the most effective transitional mechanism. |
b) quite adequate |
As long as emissions do not have the same cost in different countries, a level playing field can be achieved most effectively by equalising measures such as free allocation. The limited evidence of leakage and empirical studies demonstrates (see the report by Vivid Economics last June), in part, that free allocation is working. However, it should not be assumed that free allocation is insulating operators from all of the ETS costs as it does not mean ‘full free allocation’ because of the CSRF and as some operators will face higher costs than others depending on the allocation base year activity. Furthermore, the indirect costs of ETS have not been selected for compensation for cement in the Commission guidelines creating a distortion of competition with competitors. So, not only does the cement industry face the full indirect costs of ETS but competing construction sectors are able to be compensated for their additional costs related to indirect CO2. |
a) it absolutely keeps the incentive |
With free allocation based on benchmark, the incentive to invest is provided by the benchmark. The magnitude of the residual incentive is a function of carbon costs as a proportion of GVA. Cement has one of the highest CO2 costs/GVA of any industrial sector so the residual effort is greater than in most sectors. In its search for a legal framework that fosters a competitive environment, CEMBUREAU has considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The EU cement industry has a relatively flat benchmark curve indicating that there is a narrow gap between the best and the worst performers; this limited level of abatement potential makes the task of emissions reduction more difficult in the cement sector compared to many other sectors. |
b) quite proportionate |
Overall, the administrative burden is quite proportionate but the system is extremely disproportionate for small/trivial combustion sources. In many cases these minor sources were not part of the benchmarking exercise and should not be included in reporting. |
d) there should be no limit to overall free allocation to industry |
There should be free allocation if there isn’t an international agreement which places all competing manufacturers on an equal footing. Until certain conditions can be met with regard to the veracity of the schemes within other countries then transitional arrangements need to be maintained. Free allocation is the most effective transitional arrangement. The share of allowances dedicated to free allocation should be sufficient to avoid carbon leakage. To uphold this principle that carbon leakage should be minimized, the cross sectoral correction factor should be replaced by an adjustment to the auctioned amount to maintain the cap trajectory. That does not mean “a free ride for industry” but it would mean that sufficient allowances are provided for the most efficient producers because at present the CSCF has the ability to reduce free allocation beyond what is technically possible. |
e) I don’t know |
There are too many uncertainties on what the post 2020 allowances budget will be for the cement industry to be able to decide what share of the budget should be dedicated to such innovation support. The EU ETS does not encourage investment in new technology. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) yes |
To date, the NER 300 has been ineffective at stimulating novel CO2 reduction projects in the cement industry. The power generation sector which is passing on investment costs has benefitted most from the NER 300. The cement sector is not experiencing the same level of investment de-risking. The cement industry needs - an investment enhancing climate should encourage investments over long term (30 y) cycles in a capital intensive industry. Legal stability and CO2 price predictability are key to achieve this goal - Safeguards against price fluctuations in market based policy instruments; which objectives, if kept, should be clearly defined and not be prone to abuse for speculation purposes - an innovation policy which provides clear incentives for breakthrough technologies in a cost-effective way. Policy makers should consider hypothecation (earmarking) of revenues from allowance auctions and direct innovation support to those sectors facing the greatest abatement challenges. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Given the high costs associated with breakthrough technologies, funding from auctioning revenues should account for both capital and operational cost of projects. There should in addition be a ring fenced fund for the manufacturing industry. |
a) yes |
In its search for a legal framework that fosters a competitive environment, CEMEX considers an improved ETS with a performance based free allocation for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions cost impacts. In order to protect “carbon leakage” sectors’ competitiveness, the system could foresee either an adjustment to the overall cap to the auction amount or a sectoral cap with the inclusion of importers. However, a carbon pricing mechanism which is market-based and prone to wide fluctuations militates against effective investment. CEMEX is ready to explore mechanisms which deliver price stabilization and global carbon price convergence. |
a) the present two groups should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price.One should consider a special treatment for process emissions e.g. full free allocation as those emissions are not linked to energy efficiency and are irreducible by their very nature. |
a) the present criteria should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. Nevertheless, as a static indicator trade intensity is of limited validity/conclusiveness. It is based solely on historic data and does not reflect future developments, i.e. resulting from changing cost patterns, at all |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria e.g. a complete loss of 30% of GVA is normally economically not acceptable for any industry or sector. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
EU trade and economic data is not always exact and its comparability with the EUITL CO2 data not always appropriate so there will always be a need to hear special cases. |
d) in line with the duration of ETS Phase 4 |
It is essential for the predictability of the system to introduce as little changes as possible in the course of a trading period; hence the validity of the list of sector exposed should be in line with the duration of the ETS phase 4. |
c) the approach should be less stringent (please specify) |
The benchmark would be calculated in a statistically solid way and be updated periodically to ensure predictability. It should be set at an ambitious but reasonable level and should not be distorted by statistical outliers. This can be achieved by defining percentile (e.g. 10%-percentile) or e.g. the average of a range including the 5% to 15% top performers of specific direct emissions (excluding the extreme outliers between 0% and 5%). Only this way, the benchmarking methodology will achieve sufficient statistical robustness for international application in ETS system. |
a) yes (please specify how often) |
Benchmark should be updated between two trading periods depending on what has been achieved but not during one trading period. One should consider a special treatment for process emissions e.g. full free allocation as those emissions are not linked to energy efficiency and are irreducible by their very nature. |
c) other (please specify) |
In its search for a legal framework that fosters a competitive environment, CEMEX has considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The historic activity level (HAL) should be more closely aligned to recent production to avoid surplus allocation e.g. the average of the preceding 3 years. In this context, CEMEX considers the recently released EcoFys study (Dynamic allocation for the EU Emissions Trading System, Enabling sustainable growth, 20 June 2014) and its allowances allocation reserve as an interesting step forward. However, a more recent HAL has its potential downsides for installations that have extended shutdowns or breakdowns, provision will be necessary to deal with exceptional HAL circumstances. |
a) no, there should be no deviations |
A more recent HAL e.g. preceding 3 years average, has its potential downsides for installations that have extended shutdowns or breakdowns, provision will be necessary to deal with exceptional HAL circumstances |
c) yes, in the form of additional free allocation |
CEMEX believes that EU Compensation should be granted for indirect emission impact where carbon leakage vulnerability is a combination of direct plus indirect emission cost. There is no need for two state aid guidelines and the compensation for indirect costs could be internalized in the ETD by providing free allocation for indirect CO2. |
Less important |
Important |
Most important |
I don't know |
CEMEX regrets the focus on carbon capture and storage and believes that carbn capture and re-use should be equally considered. CEMEX believes that funding should be technology neutral. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) from the Member States' auction budgets |
|
See full CEMEX position papers in the answer from CEMBUREAU to this questionnaire Annex - Post 2020 Climate and Energy Legislation - The cement industry's reflections on a post-2020 climate policy & POST 2020 CLIMATE AND ENERGY LEGISLATION PROPOSAL BY THE EUROPEAN CEMENT INDUSTRY In addition, CEMEX believes that the debate on the MSR should not be carried out in isolation from the broader ETS structural reform. |
a) Business |
CEMEX Polska Sp. z o.o. |
Ul. Łopuszańska 38D 02-232 Warszawa tel. +48 601 656 303 email: jacek.adamowski@cemex.com |
a) yes |
|
1) yes |
a) yes |
Reduction potential in cement sector is limited by technology and production process conditions, but we are fully committed to reducing GHG emissions in line with overall EU policy objectives. This has been demonstrated by investments over the past 20 years which have driven down CO2 emissions from clinker production and we will not stop at this. To achieve it, we need to be innovative and invest. This requires a return on investment above the cost of capital and a policy framework that promotes the competitiveness of the sector and allows for a secure access to raw materials and affordable energy prices. Cement industry in Europe needs a stable legal framework with predictable CO2 prices in order to justify and allocate scarce investment funds to realize CO2 emission reduction ambitions. 2030 targets have to take into account each sector specific roadmap. Different levels of efforts are needed for different sectors, based on the ability to pass the cost on the end user. |
b) no |
Some industries like cement have very high energy costs as a proportion of GVA or profit which means that energy efficiency is an integral part of manufacturing. The EU ETS puts pressure on businesses to become more GHG efficient. In doing so EU ETS places CO2 costs on power generators and these costs are passed on to electricity consumers. There are limitations to which added costs act as a driver for efficiency before imports become more attractive. Furthermore, cement and lime industry are unique due to the fact that the majority of GHG emissions are not caused by energy use from fuel combustion but come from the raw materials themselves. Around 63% of total CO2 emissions from clinker production are released directly from limestone. On the other hand, energy efficiency and CO2 reduction represents conflicting goals when looking e.g. at CCS. These emissions cannot be avoided in any technological way. The only way to reduction of these emissions is reduction of production. |
a) yes |
The EU has aspirations of leading on CC policy but globally unequal carbon pricing has the ability to shift trade patterns. In order to direct investments to growth and jobs in Europe, the cement industry needs a global level playing field, including imports and exports: climate change is a global problem that needs a global solution. EU policy can only incentivise companies to aggressively work on further emissions reduction if there is predictability in and equality in carbon prices and if it is part of an overall industrial policy ensuring companies to be competitive in the international arena. This also applies to energy costs. For cement, energy costs are especially important representing 30 % of operational costs with European costs being substantially higher than in the US, Russia and plants in North Africa. Transitional measures are needed to bridge the gap between the EU and other countries. Free allocation is the most effective transitional mechanism. |
b) quite adequate |
As long as emissions do not have the same cost in different countries, a level playing field can be achieved most effectively by equalising measures such as free allocation. The limited evidence of leakage and empirical studies demonstrates (see the report by Vivid Economics last June), in part, that free allocation is working. However, it should not be assumed that free allocation is insulating operators from all of the ETS costs as it does not mean ‘full free allocation’ because of the CSRF and as some operators will face higher costs than others depending on the allocation base year activity. Furthermore, the indirect costs of ETS have not been selected for compensation for cement in the Commission guidelines creating a distortion of competition with competitors. So, not only does the cement industry face the full indirect costs of ETS but competing construction sectors are able to be compensated for their additional costs related to indirect CO2. |
b) it largely keeps the incentive |
With free allocation based on benchmark, the incentive to invest is provided by the benchmark. The magnitude of the residual incentive is a function of carbon costs as a proportion of GVA. Cement has one of the highest CO2 costs/GVA of any industrial sector so the residual effort is greater than in most sectors. In its search for a legal framework that fosters a competitive environment, European cement industry has considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The EU cement industry has a relatively flat benchmark curve indicating that there is a narrow gap between the best and the worst performers; this limited level of abatement potential makes the task of emissions reduction more difficult in the cement sector compared to many other sectors. |
b) quite proportionate |
Overall, the administrative burden is quite proportionate but the system is extremely disproportionate for small/trivial combustion sources. In many cases these minor sources were not part of the benchmarking exercise and should not be included in reporting. |
d) there should be no limit to overall free allocation to industry |
There should be free allocation if there isn’t an international agreement which places all competing manufacturers on an equal footing. Until certain conditions can be met with regard to the veracity of the schemes within other countries then transitional arrangements need to be maintained. Free allocation is the most effective transitional arrangement. The share of allowances dedicated to free allocation should be sufficient to avoid carbon leakage. To uphold this principle that carbon leakage should be minimized, the cross sectoral correction factor should be replaced by an adjustment to the auctioned amount to maintain the cap trajectory. That does not mean “a free ride for industry” but it would mean that sufficient allowances are provided for the most efficient producers because at present the CSCF has the ability to reduce free allocation beyond what is technically possible. |
e) I don’t know |
There are too many uncertainties on what the post 2020 allowances budget will be for the cement industry to be able to decide what share of the budget should be dedicated to such innovation support. The EU ETS does not encourage investment in new technology. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) yes |
To date, the NER 300 has been ineffective at stimulating novel CO2 reduction projects in the cement industry. The power generation sector which is passing on investment costs has benefitted most from the NER 300. The cement sector is not experiencing the same level of investment de-risking. The cement industry needs: - an investment enhancing climate should encourage investments over long term (30 y) cycles in a capital intensive industry. Legal stability and CO2 price predictability are key to achieve this goal - Safeguards against price fluctuations in market based policy instruments; which objectives, if kept, should be clearly defined and not be prone to abuse for speculation purposes - an innovation policy which provides clear incentives for breakthrough technologies in a cost-effective way. Policy makers should consider hypothecation (earmarking) of revenues from allowance auctions and direct innovation support to those sectors facing the greatest abatement challenges. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Given the high costs associated with breakthrough technologies, funding from auctioning revenues should account for both capital and operational cost of projects. There should in addition be a ring fenced fund for the manufacturing industry. |
a) yes |
In its search for a legal framework that fosters a competitive environment, European cement industry has considered an improved ETS with a performance based free allocation for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions cost impacts. In order to protect “carbon leakage” sectors’ competitiveness, the system could foresee either an adjustment to the overall cap to the auction amount or a sectoral cap with the inclusion of importers. However, a carbon pricing mechanism which is market-based and prone to wide fluctuations militates against effective investment. European cement industry is ready to explore mechanisms which deliver price stabilization and global carbon price convergence. Some of the initial reflection is further elaborated in the annex to this paper and cement industry is ready to engage in a thorough reflection of a climate policy and energy policy that is fully integrated |
a) the present two groups should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. |
a) the present criteria should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria e.g. a complete loss of 30% of GVA is normally economically not acceptable for any industry or sector. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
EU trade and economic data is not always exact and its comparability with the EUITL CO2 data not always appropriate so there will always be a need to hear special cases. |
d) in line with the duration of ETS Phase 4 |
It is essential for the predictability of the system to introduce as little changes as possible in the course of a trading period, hence the validity of the list of sector exposed should be in line with the duration of the ETS phase 4. |
c) the approach should be less stringent (please specify) |
The benchmark would be calculated in a statistically solid way and be updated periodically to ensure predictability. It should be set at an ambitious but reasonable level and should not be distorted by statistical outliers. This can be achieved by defining percentile (e.g. 10%-percentile) or e.g. the average of a range including the 5% to 15% top performers of specific direct emissions (excluding the extreme outliers between 0% and 5%). Only this way, the benchmarking methodology will achieve sufficient statistical robustness for international application in ETS system. Benchmarks cannot be lower than process emissions. Measures should take into account scale of plants (access to adequate share of biomass, additives, alternative raw materials). |
a) yes (please specify how often) |
Benchmark should be updated between two trading periods depending on what has been achieved but not during one trading period. |
c) other (please specify) |
In its search for a legal framework that fosters a competitive environment, European cement industry has considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The historic activity level (HAL) should be more closely aligned to recent production to avoid surplus allocation e.g. the average of the preceding 3 years. In this context, European cement industry considers the recently released EcoFys study (Dynamic allocation for the EU Emissions Trading System, Enabling sustainable growth, 20 June 2014) and its allowances allocation reserve as an interesting step forward. However, a more recent HAL has its potential downsides for installations that have extended shutdowns or breakdowns, provision will be necessary to deal with exceptional HAL circumstances. |
a) no, there should be no deviations |
A more recent HAL e.g. preceding 3 years average, has its potential downsides for installations that have extended shutdowns or breakdowns, provision will be necessary to deal with exceptional HAL circumstances. |
e) I don’t know |
European cement industry believes that EU Compensation should be granted for indirect emission impact where carbon leakage vulnerability is a combination of direct plus indirect emission cost. There is no need for two state aid guidelines and the compensation for indirect costs could be internalized in the ETD by providing free allocation for indirect CO2. Scheme should not be fully harmonized. It should include regional fuel mix to be correlated with regional average electricity price. |
Less important |
Important |
Most important |
I don't know |
European cement industry regrets the focus on carbon capture and storage and believes that carbon capture and re-use should be equally considered. Industry believes that funding should be technology neutral. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) from the Member States' auction budgets |
|
Carbon leakage sectors must have secured free allowances for process emissions in case they are still included in post 2020 period. |
a) Business |
CERACASA, S.A. |
Adress: CTRA CASTELLÓN-TERUEL, KM 19 12110 ALCORA (CASTELLÓN) - SPAIN Telephone: +34 964361611 email: jpla@ceracasa.com |
a) yes |
|
1) yes |
b) no |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improvement |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
a) the present two groups should remain |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value) which are subject to international competition should be considered as exposed to the risk of carbon leakage, until an international agreement is established. It is important to limit the list to sectors that really compete globally, and thus it is vital to maintain an assessment based on trade intensity with third countries. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
The present criteria should be used, considering the following element. GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
a) Business |
ceramiche atlas concorde spa |
Davide Carra, via Canaletto 11 - 41042 Spezzano di Fiorano (MO) - ITALY |
a) yes |
|
1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place . |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross- sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. This would limit the list to sectors really exposed and would eliminate the risk of a carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
As explained above, all energy intensive sectors as defined in the Energy Taxation Directive should be considered as exposed to the carbon leakage risk. As an alternative, trade and carbon intensity criteria should be used considering the following elements. First, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS. Second, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
|
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
a) Business |
cerlat s.a. |
ctra onda ribesalbes km6 12200 onda españa |
a) yes |
|
1) yes |
b) no |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to alower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improv |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage.However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective.Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross- sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
a) the present two groups should remain |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value) which are subject to international competition should be considered as exposed to the risk of carbon leakage, until aninternational agreement is established. It is important to limit the list to sectors that really compete globally, and thus it is vital to maintain an assessment based on trade intensity with third countries. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
The present criteria should be used, considering the following element. GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists ofboth labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimatedif it is compared with the GOS. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
b) no, all criteria should be based on simple metrics and linked to clearly defined thresholds |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended(at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarksare set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yetsince the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier toindustrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored.This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concernsassociated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines There should be a harmonised EU-wide support for the indirect costs in order toavoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
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a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
a) Business |
ČEZ, a.s. |
ČEZ, a. s. Duhová 2/1444 140 53 Praha 4 Telephone: 211 041 111 Fax: 211 042 001 e-mail: cez@cez.cz |
a) yes |
|
1) yes |
a) yes |
As a matter of fact the EU industry has already contributed significantly to lowering GHG emissions (according to both UNFCCC and EEA data, in 2012 the reductions made 21% compared to the 1990 reference year). In that vein, the efforts should be split in a more balanced way meaning that important contributions to the EU reduction target have to take place outside the current EU ETS scope. Still, the potential for further reductions made on the side of the industry is a question of costs and availability of techniques of each individual subsector combined with right incentives (ideally based on market via price of carbon or targeted assistance). |
a) yes |
To neglect the burden caused by the introduction of the carbon regulation, two things are needed. A temporary special treatment for those that might be most endangered by the regulation due to their exposure to the external environment without the regulation in place and a transparent, predictable regulation itself bringing along a real price of carbon reflecting the abatement cost of the subjects under the regulation. However, the latter is not the case of the EU ETS now, neither its short history. |
a) yes |
See the explanation above. In addition to the strengthened and well-working EU ETS, transitional measures might be inevitable in order to keep some sectors competitive, at least until international carbon trading is put in place. On the other hand, it is fair to say that Member states have a number of measures, to some extent even harmonised at the EU level, to be taken and to ease the burden for some industries. |
b) quite adequate |
As proved by a number of studies dealing with the issue of carbon leakage, free allocation or more specifically free output based allocation may be a very effective tool to tackle the issue of carbon leakage for certain sectors. At the same time, it is also efficient due to the existence of the opportunity costs stemming from the use of emission rights. |
b) it largely keeps the incentive |
A balanced approach must be found between the cost efficiency and environmental efficiency (due to the negative effect of effective carbon price). Regarding the latter point, one needs also to take into account the effect of imported carbon when evaluating the environmental performance. |
b) quite proportionate |
To some extent, less administrative burden embodied by more simplicity would come at the expense of the universality of the current approach respecting the specificities of a number of sectors and subsectors. |
c) a constant share as in 2013-20 |
It is not the case of concrete volumes stated or agreed ex ante but rather a matter of correct application of rules, including those connected to the eligibility. Furthermore, output based allocation may be a good solution of sufficient free allocation to the sectors exposed to carbon leakage. |
d) there should be no such innovation support post-2020 |
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a) yes |
Traditionally, Europe has been a heavy industrialized continent, with the industry at the forefront of its competitiveness. Promoting growth and competitiveness of Europe is the core of its development strategies. Thus, Europe cannot afford to stay aside regarding the promotion of industrial and green innovations. However, not in a way it has been done until now under the NER300. CCS does not, in terms of energy efficiency, sound like an innovation. |
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
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a) yes |
More needs to be done in terms of indirect emissions. Member states may take measures under the scope of EU ETS state aid guidance published in 2012, however, a more EU levelized approach might prove appropriate. |
a) the present two groups should remain |
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a) the present criteria should remain |
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a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
A combination of both qualitative as well as quantitative criteria is a good approach to assess the carbon leakage exposure. However, the assessment should also reflect the real economic performance of a given sector in order to prevent from either under and over allocation. |
d) in line with the duration of ETS Phase 4 |
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a) the present approach of average of the 10% most efficient installations should remain |
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a) yes (please specify how often) |
A review should take place well ahead of the start of each trading period while taking into account also the investment/innovation cycles. |
c) other (please specify) |
Experience gained so far suggests that more flexible allocation base on the performance of a given sector may be more appropriate. This idea is now strongly promoted by the industry itself and deserves proper consideration. |
d) both b) and c) |
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d) yes, in the form of financial compensation at EU-level |
See answer 11. |
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b) from free allocation |
The principle applied for NER300 should be taken. |
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a) Business |
CIMPOR – Indústria de Cimentos, S.A. |
Rodrigo da Fonseca (Environmental Manager) Rua Alexandre Herculano, 35 | 1290-009 LISBOA Tel: +351 21 311 83 54 - Email: rfonseca@cimpor.com |
a) yes |
|
1) yes |
a) yes |
Over the last 20 years, in order to reduce GHG emissions in line with overall EU policy objectives, cement industry made investments that have driven down CO2 emissions from clinker production. Additionally, prepared a roadmap to go much further in the coming decades, what obliges to further investment and innovation and requires a return on investment above the cost of capital and a stable legal framework, with predictable CO2 pricing, that promotes the competitiveness of the sector and allows for a secure access to raw materials and affordable energy prices. 2030 targets have to take into account each sector specific roadmap. |
b) no |
The cement industry is CO2, energy and material intensive. Focusing on energy efficiency, the power costs will be higher, which can imply lack of competitiveness of intensive energy industries vs importing. Although measures to decrease energy consumption and improve resources efficiency may be applied to reduce CO2 emissions, cement and lime industry are unique due to the fact that around 60% of total CO2 emissions from clinker production are released directly from limestone. These emissions come from raw materials themselves, not caused by energy use from fuel combustion. On the other hand, energy efficiency and CO2 reduction represents conflicting goals when looking e.g. at CCS. |
a) yes |
The cement industry needs a global level playing field, including for exports and imports, in order to direct investments to growth and jobs in Europe. To incentivize companies on further reduction of their emissions, predictability in carbon pricing is crucial as part of an overall industrial policy, as well as an adequate free allocations scheme, ensuring companies, namely those performing better than their sector Benchmark, to be competitive in the international arena (export market). This also applies to energy costs, representing 30% of operational costs (substantially higher than in the US, Russia and plants in North Africa). Beyond this, the maintenance of jobs (direct and indirect) will be at risk, particularly in sectors which have a local structure, that are using European raw materials and that have an important role in terms of local or regional employment and development (high level of regional or national added value). |
b) quite adequate |
As long as emissions do not have the same cost in different countries, a level playing field can be achieved most effectively by equalization measures such as free allocation. The limited evidence of leakage demonstrates that free allocation is working. However, it should not be assumed that free allocation is insulating operators from all of the ETS costs. Free allocation does not mean ‘full free allocation’ and some operators will face higher costs than others depending on the allocation base year activity. Furthermore, in the case of the cement sector, the indirect costs of ETS have not been selected for compensation in the Commission guidelines. Not only the cement industry is electrical energy intensive, is at risk of carbon leakage and is facing the full indirect costs of ETS as other directly competing construction materials sectors are on the contrary able to be compensated. |
a) it absolutely keeps the incentive |
Being free allocation based on benchmark, the incentive to invest is provided by the benchmark. Additionally, cement has one of the highest CO2 costs/GVA of any industrial sector so the residual effort is greater than in most sectors. Looking for a legal framework that fosters a competitive environment, cement industry has considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The EU cement industry has a relatively flat benchmark curve indicating that as a result of early actions and past investments in energy efficiency there is now a narrow gap between the best and the worst performers; this limited level of abatement potential makes the task of emissions reduction more difficult in the cement sector compared to many other sectors. |
b) quite proportionate |
Overall, the administrative burden is quite proportionate but the system is extremely disproportionate for small/trivial combustion sources. In many cases these minor sources were not part of the benchmarking exercise and should not be included in reporting. |
d) there should be no limit to overall free allocation to industry |
There should be free allocation if there isn’t an international agreement which places all competing manufacturers on an equal footing. Until certain conditions (namely rules in terms of verification and monitoring) can be met with regard to the veracity of the schemes within other countries then transitional arrangements need to be maintained. If a global agreement, between the great majority of Kyoto countries, including the largest emitters, is achieved, and only in this very case, there should be no free allocation to industry since the carbon leakage risk will then be eliminated. The share of allowances dedicated to free allocation has to be determined in function of the number of industrial sectors subject to carbon leakage risk and should be sufficient to avoid carbon leakage. That does not mean “a free ride for industry” but sufficient allowances for efficient producers. CSCF should be replaced by an adjustment to the auctioned amount to maintain the cap trajectory. |
e) I don’t know |
There are too many uncertainties on what the post 2020 allowances budget will be for the cement industry to be able to decide what share of the budget should be dedicated to such innovation support. The EU ETS does not encourage investment in new technology due to a continuous change of the rules of the game. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment |
a) yes |
To date, the NER 300 hasn’t been useful for cement sector. The power generation sector which is passing through investment costs has benefitted the most from the NER 300. The cement sector is not experiencing the same level of investment de-risking. The cement industry needs: an investment enhancing policy climate should encourage investments over long term (30 years) cycles in a capital intensive industry. Legal stability and CO2 price predictability are key to achieve this goal / Safeguards against price fluctuations in market based policy instruments; the objective of these instruments, if kept, should be clearly defined and not be prone to abuse for speculation purposes / An innovation policy which provides clear incentives for breakthrough technologies for CO2 reduction in a cost-effective way. Policy makers should consider hypothecation (earmarking) of revenues from allowance auctions and direct innovation support to those sectors facing the greatest abatement challenges. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Given the high costs associated with breakthrough technologies, funding from auctioning revenues should account for both capital and operational cost of projects. There should in addition be a ring fenced fund for the manufacturing industry. |
a) yes |
Cement industries considers the need of the following additional measures: An improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production, with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts / An adjustment to the overall cap to the auction amount or a sectoral cap with the inclusion of importers, in order to protect “carbon leakage” sectors’ competitiveness / However, a carbon pricing mechanism which is market-based and prone to wide fluctuations has a negative impact on effective investment / Cement industry is ready to explore mechanisms which deliver price stabilization and is ready to engage in a thorough reflection of a climate policy and energy policy that is fully integrated in a single industrial growth policy. |
a) the present two groups should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion (GVA) is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price |
a) the present criteria should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential. Therefore, the cost intensity criterion (GVA) is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. Nevertheless, as a static indicator trade intensity is of limited validity/conclusiveness. It is based solely on historic data and does not reflect future developments, i.e. resulting from changing cost patterns, at all. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion (GVA) is the most important of the current two criteria e.g. a complete loss of 30% of GVA is normally economically not acceptable for any industry or sector. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
EU trade and economic data is not always exact and its comparability with the EUITL CO2 data isn’t always appropriate so there will always be a need to hear special cases. These cases, even not on the scope of quantitative criteria, must be considered. |
d) in line with the duration of ETS Phase 4 |
It is essential for the predictability of the system to introduce as less changes as possible in the course of one ETS phase, which means that the list of sectors exposed to the risk of carbon leakage should be fully in line with the duration of ETS Phase 4. |
c) the approach should be less stringent (please specify) |
The benchmark would be calculated in a statistically solid way and be updated periodically to ensure predictability. It should be set at an ambitious but reasonable level and should not be distorted by statistical outliers. This can be achieved by defining percentile (e.g. 10%-percentile) or e.g. the average of a range including the 5% to 15% top performers of specific direct emissions (excluding the extreme outliers between 0% and 5%). Only this way, the benchmarking methodology will achieve sufficient statistical robustness for international application in ETS system. |
a) yes (please specify how often) |
Benchmark should be updated between two trading periods depending on each sector reduction potential, not during one trading period. One should also consider a special treatment for process emissions e.g. full free allocation as those emissions are not linked to energy efficiency and are irreducible by their very nature. Only when the technology CCS will be available, probably after 2030, the cement industry will be able to tackle this issue of process emissions. |
c) other (please specify) |
Allocation should be more dynamic. The sector has considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. Historic activity level (HAL) should be closely aligned to recent production to avoid surplus allocation e.g. the average of the preceding 3 years. The sector considers EcoFys study (Dynamic allocation for the EU Emissions Trading System, Enabling sustainable growth, 20 June 2014) and its allowances allocation reserve as an interesting step forward, in order to compensate CSCF elimination. Notwithstanding this, we should be cautious in approaching situations of cement market growth. If this situation is not duly tackled an installation might be forced to buy allowances to support this market growth during a certain year until it gets the compensation for its production increase the year after. |
a) no, there should be no deviations |
A more recent HAL e.g. preceding 3 years average has its potential downsides for installations that have extended shutdowns or breakdowns, provision will be necessary to deal with exceptional HAL circumstances. |
c) yes, in the form of additional free allocation |
Cement industry believes that EU Compensation should be granted for indirect emission impact where carbon leakage vulnerability is a combination of direct plus indirect emission cost. The compensation for indirect costs should be internalized in the ETD by providing free allocation for indirect CO2, in order to harmonize the procedure of compensation in Europe. |
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I don't know |
Cement industry regrets the focus on carbon capture and storage and believes that carbon capture and re-use should be considered in an equal footing. We believe that funding should be technology neutral. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) from the Member States' auction budgets |
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As Cembureau members, we support the prepared position papers: “Post 2020 Climate and Energy Legislation - The cement industry's reflections on a post-2020 climate policy” and “Post 2020 Climate and Energy Legislation Proposal by the European Cement Industry”. In addition, cement industry believes that the debate on the MSR should not be carried out in isolation from the broader ETS structural reform. |
a) Business |
Coal mining |
ul. Damrota 16 40-022 Katowice tel. +48327573069 |
a) yes |
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1) yes |
b) no |
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b) no |
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a) yes |
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a) very adequate |
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e) I don’t know |
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c) quite exaggerated |
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b) a higher share than in 2013-20 |
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b) the same share as in Phase 3 |
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a) yes |
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a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
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b) no |
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a) the present two groups should remain |
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a) the present criteria should remain |
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a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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b) no, all criteria should be based on simple metrics and linked to clearly defined thresholds |
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a) five years |
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c) the approach should be less stringent (please specify) |
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b) no |
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a) no, the same baseline period chosen for allocation in Phase 3 should be maintained also for post 2020 (Phase 4) allocation |
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a) no, there should be no deviations |
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d) yes, in the form of financial compensation at EU-level |
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Least important |
Less important |
Important |
Most important |
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a) from the Member States' auction budgets |
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a) Business |
Confederation of Hungarian Employers and Industrialists |
VADÁSZ Borbála Confederation of Hungarian Employers and Industrialists MGYOSZ / BUSINESSHUNGARY 1055 Budapest, Kossuth Lajos tér 6-8. Hungary vadasz.borbala@mgyosz.hu Tel.: 00-36-1-474-2054 www.mgyosz.hu |
a) yes |
1) yes |
c) I don’t know |
We cannot make estimations about the entire EU industry. While some industries may be able to reduce emissions, for most energy intensive industries, achieving the proposed reduction target for ETS sectors (-43% by 2030 vs. 2005) is not realistic unless it further reduces capacity and transfers it outside the EU. In the case of refining, this would be detrimental for security of supply. While there are individual installations where improvements are possible, there are no credible technologies available could achieve such an emissions reduction in that timeframe for the full refining or cement sector, involving top performers, who are the least carbon intensive in the world. |
a) yes |
The EU ETS does assist energy efficency improvements by precisely measuring and putting a price on emissions, but those improvements are primarily driven by other, more important factors such as the comparatively high European energy prices that constitute a high share of total operating costs. Regarding competitiveness, factors other than energy efficiency also play a key role. We therefore object to directly equating energy efficiency gains with competitiveness improvements. For the latter, an appropriate level of carbon leakage protection remains a key requirement. |
a) yes |
The EU has the most stringent climate and environment policies of all industrialised regions in the world. Any new EU policy further increasing energy prices would thus mainly not promote more energy savings, but could drive energy-intensive investments out of Europe. Until key competing regions such as Russia, Middle East, and parts of Asia adopt appropriate carbon pricing, a robust and long-term carbon leakage protection regime should complement any future target. If carbon leakage was missing, allocation levels would drop from 100% free allocation at the benchmark to below 30% of the benchmark already in 2020. Competitiveness disadvantages also remain a concern within the EU. The level playing field of the single market was negatively affected by national allocation in previous trading periods, as it is today by national renewable support or indirect ETS cost compensation schemes. |
b) quite adequate |
The free allocation system serves its purpose fundamentally well. In the absence of an international climate agreement, MGYOSZ prefers both free allocation, and free allocation for exposed sectors to protect them from the risk of carbon leakage. However, flaws remain. The long-term effects of the Cross-sectorial Correction Factor will be significant. Secondly, the effect of the EU ETS benchmarks differ strongly from one sector to the other. This unfair situation should be analyzed and addressed |
a) it absolutely keeps the incentive |
As the majority of installations are below the benchmark, they are absolutely incentivized to decrease their quota shortage. All the more so since the allocation system (specifically grandfathering) fixes the competitive position of installations within the sector for the duration of the carbon leakage list, therefore any technological improvement is not reflected in gaining more free allocation, but only in decreasing the shortage that needs to be covered by purchased quotas. For energy intensive industries (cement, glass manufacturing, refining, etc.) sector, the main incentive for reducing emissions remains reducing energy costs. We need to recall that under current projections, free allocation volumes will drop significantly due to not only the decreasing industry cap but also the CSCF: by 2030, even the most efficient installations would be left with only 60% free allocation. |
b) quite proportionate |
The administrative burden was significant in 2008-2009 when the benchmarking system was developed, but since that, managing free allocation is a business-as-usual task that is well integrated into the processes of our member companies. |
c) a constant share as in 2013-20 |
The carbon leakage protection should be maintained at Phase3 levels (unless the issue of carbon leakage is addressed through an international climate agreement). The progressive decrease of the cap, as foreseen by the EU ETS directive’s current setup (and the CSCF), will decrease the industry’s free allocation by 2030 to only 60% free allocation. To avert this risk, the industry cap should be maintained at the 2020 level. Only such a solution can safeguard the competitiveness of European industries exposed to carbon leakage. |
e) I don’t know |
We are strongly in favor of more innovation financing by on both European and member state level. The NER300 programme did not prove to be very successful as it has not delivered large scale CCS demonstration project, and significant part of the fund remains unspent. In Phase 3, auctioning is expected to generate substantial revenue to governments. These revenues should, as a matter of principle, be returned to the economy in a technology-neutral way, and focusing on innovation in the R&D phase. Any other solution risks to distort the single market. |
a) yes |
We believe that the scope of the NER300 programme should be extended to cover this area. Existing funds such as Horizon 2020, 7th Framework and SET programmes could also be augmented. |
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
New funds should definitely not be set up as a number of relevant funds already exist. Besides augmenting existing funds, the scope of the NER300 programme should be extended. In all cases, support for innovative low-carbon technologies should be technology neutral as well as time- and cost- limited. All energy sources should be integrated under normal market conditions, without subsidies as soon as possible. |
a) yes |
We support the current architecture of carbon leakage protection, that is to say via free allocation to exposed sectors. It should be maintained after 2020 (unless a proper international agreement is reached) in its current form, with smaller improvements – not a fundamental revision. In particular, the current indirect emissions compensation system, administered at member state level is unsuitable. It should be reformed to be uniform across the EU, and allow free allocation for all electricity consumed within the boundaries of installations. |
a) the present two groups should remain |
We support the current architecture of carbon leakage protection. It is important to recall that industrial capacity in the EU is declining (share of manufacturing in GDP has fallen from 15.4% in 2012 to 15.1% in 2013, according to the Commission Communication for a European industrial renaissance). The current two groups of carbon leakage categories should remain until progress is achieved in the international arena to level the competitive playing field by introducing similar carbon pricing in other regions that are the EU’s main trade partners. |
a) the present criteria should remain |
We support the current architecture of carbon leakage protection. Several of the sectors where our member companies operate are mixed sectors where both trade and GVA exposure and thresholds are very important. Imports of most product category are set to increase, therefore the ability to pass carbon costs on to consumers is very limited. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
We support the current architecture of carbon leakage protection. Any measure to tighten the criteria or to reduce the number of sectors on the list to maintain acceptable levels of free allocation will exclude some key strategic sectors for the EU’s economy from carbon leakage protection. This would be very detrimental for the competitiveness of European industries or indeed security of supply in the case of refining. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
In some sectors, exposure to risk can clearly only be assessed on the basis of specific market characteristics, and a simple pass/fail test would be insufficient. Therefore maintaining the secondary, qualitative assessment is fully justified. For example, should the refining sector in the future undergo a qualitative assessment, the so-called “Refining paradox” mentioned above would need to be taken into account. |
d) in line with the duration of ETS Phase 4 |
Aligning the two periods is a logical choice. Such alignment would increase the predictability and simplicity of the EU ETS system, which would benefit related investments. |
c) the approach should be less stringent (please specify) |
We support the current architecture of carbon leakage protection, therefore only some fine-tuning of the current benchmarks is warranted. For some sectors, the benchmark is considerably more stringent for installations on average than in other industrial sectors, as shown by analysis of 2013 verified data. This may mean that there benchmark could be tightened for some other sectors. In general, this unfair situation should be analyzed and addressed. |
b) no |
In energy-intensive industries investments aiming for technological improvements have long time horizons from the Final Investment Decision to actual utilization of the new asset. Life-cycles of the assets are also very long, and the structure of a refinery is not easily changed: the typical upgrade is a step change every 30-40 years instead of incremental, smaller changes. This has to be taken into account when considering any regular revision of the benchmarks. |
c) other (please specify) |
The growth potential of Central-East European industrial sectors should not be inhibited when economic recovery takes place. While this potential is, to a limited extent, provided by the using the currently defined baseline years that preceded the economic crisis, they will still function as a growth ceiling once the pre-crisis activity levels are reached. Therefore eventually free allocation should reflect economic reality per installation based on the more recent yearly data. |
a) no, there should be no deviations |
The post-2020 system should not leave any relevant question regarding allocation rules to a member state discretion (i.e such as compensation for indirect emission costs passed through via electricity). Any such deviation would result in an unequal competitive position within Europe and gravely distort the single market. |
c) yes, in the form of additional free allocation |
State aid mechanisms applicable for large enterprises (if any) should be devised at EU level with transparent EU wide criteria and automatic application to all energy intensive installations that meet such criteria all over the EU. We urge the Commission to consider the serious risks inherent in making aid schemes available on indicative manner based on national criteria. Permitting aid schemes on indicative manner would inevitably lead to a certain degree of distortion of the European level playing field which the internal energy market aims to achieve. Such an approach carries a risk of dividing European countries depending on their ability to subsidize their industries. |
Important |
Most important |
Less important |
Least important |
Innovation support, as a matter of principle, should be provided to the economy in a technology-neutral way, and focusing on the R&D phase. It should not be extended into the commercialization stage, as that would risk to distort the single market. |
a) from the Member States' auction budgets |
We support to use the entirety of Member States’ auctioning revenues to support investments in low-carbon technology. Under current projections, free allocation volumes will drop significantly due to not only the decreasing industry cap but also the CSCF: by 2030, even the most efficient installations would be left with only 60% free allocation. |
In general, future carbon leakage assessments should not look for evidence that carbon leakage has occurred in the past (such as ECORYS’s ‘Carbon leakage evidence project’). The latter would mean that the industry’s competitiveness has already been damaged. Instead, the level of the risk in the future should be assessed. |
a) Business |
Confederation of Swedish Enterprise Largest business organiszation i Sweden, representing 60 000 companies and 49 sub-sectors. |
maria.suner.fleming@svensktnaringsliv.se SE-11482 Stockholm Sweden |
a) yes |
1) yes |
a) yes |
There are ways for the industry sector as a whole to increase energy efficiency and exchange fuels. It has to be underlined that for some sectors with process related emissions it is very difficult in short to medium term (e.g. steel, cement, mining, chemicals). The important question is how this can be done without harming competitiveness. The European industry can not endure higher costs due to EU energy and climate policy goals. Compensation for increased cost is therefore essential. This means both free allocation to cover actual emissions and compensation for indirect effect on electricity prices. Technological breakthroughs are often needed in order to further reduce GHG emission. This requires time and financial support (research and investment cycles). The focus of EU policy should be on total decreased emissions, not only from industry. Other sectors (outside EU ETS) many times have lower hanging fruit. |
b) no |
The high costs of energy and the related tax burden already act like an incentive to reduce energy costs, thus reduce GHG emissions. This industry also competes with companies around the world, with very low possibility to increase the market prices. Increasing the cost of CO2-emissions has a negative impact on efficiency since the amount of money to invest in more efficient technology decreases with decreased revenues for the industry. Overall, the EU ETS severely impairs industry’s competitiveness. It provides short-term visibility to industry (rules set for single trading periods) which does not give the long-term investment visibility needed to industry. Key is the long-term investment cycle. |
a) yes |
Since the EU ETS was set up in 2005, the international economic context dramatically changed: the shale gas production in the USA offered a significant competitive edge to the American industry, the oil price increased dramatically, the debt crisis in Europe further increased the tax burden, the very low margins of the pulp, paper and board industry impaired its ability to invest, etc. Sectors that compete on a global market needs to be protected from politically increased costs that cannot be transferred onto the product price. Until there is a global agreement, and relevant markets around the world meet the same cost increase, the European industry needs measures that shield from increased costs. |
a) very adequate |
Without a global agreement (that could lead to comparable burdens for competing industrial installations around the world), Europe will have to mitigate the impact of its policies for industries producing globally trading goods. Without free allocation a great cost disadvantage is introduced. The free allocation should be based on relevant BM and relevant production, the best performing installation should receive 100 % free allocation. In addition, regarding the carbon leakage issue, the objective should be to attract more industrial activity while reducing the GHG emission and not only to avoid the decrease of industrial activity. |
a) it absolutely keeps the incentive |
EU ETS should reduce CO2-emissions in a cost-efficient manner. If 100 % free allocation is given, there is still an incentive for the companies to decrease their emissions since they can then sell the left over allowances. It should also be pointed out that “not having to pay for increased cost does not mean there is a revenue”.In addition, free allocation is a counterpart to the investments conceded to reduce GHG emission. No free allocation would mean a lot less ability to invest in CAPEX for GHG emissions reduction. |
a) absolutely proportionate |
One of the main causes of administrative burden has been the continuous changes in ETS framework and implementing rules. This has caused uncertainty among industry. There is an urgent need for a more stable and consistent ETS policy. The initial burden is very high. Afterwards, it depends on Member States. Constant changes, almost every year, in MRV rules, without delivering any environmental benefits. The fines used for making a wrong entry or failing to produce necessary reports on time are much too high. With spreadsheets being altered and the system changed frequently there should be a greater acceptance for errors. |
d) there should be no limit to overall free allocation to industry |
It has to be possible for industry to gropw in Europe, therfore no limit is possible if the reason for a greater need of free allowances is groing and new industries. If there is a risk of carbon leakage due to EU energy-climate policies, this has to be prevented with additional credits available in the system, including the ones covering indirect costs for increased electricity prices. In fact, carbon leakage would mean failure of the EU ETS to contain global GHG emission. Thus, the avoidance of carbon leakage should be an absolute priority. Today European industry suffer from increased costs induced by EU ETS. This cost increase must be minimized Given the current economic context, a higher share of allowances is needed to ensure growth in Europe and prevent businesses from moving abroad. Looking at current rules, the linear factor and correction factor makes that even being carbon leakage installations are allocated bellow benchmarks values. |
a) a substantially higher share than in Phase 3 |
CCS is the only option for some industrial sectors and innovation in this area has to be in greater focus. However. there should be an overview of the projects reciving NER300 allowances, some of the investments has not been made. This is not due to the amount of allowances used for NER300 but to the low credibility of the European energy and climate policy. To increase the amount of NER300 allowances will not change this, a clear, transparent and stringent policy would mean much more. |
a) yes |
Even though that also could come from other sources it must be a focus area. To handle that inside EU ETS might not be the best solution. Industrial innovation and deployment of new low-carbon technologies should primatly be fundes from support schemes outside EUETS, but could be part of a larger package including the EU ETS. |
c) other types of funding (please specify) |
Primarly other sources of funding are nedded, but revenues from auctioning could partly be used. |
a) yes |
A global agreement (that could lead to comparable burdens for competing industrial installations around the world) would be the most effective way to address the risk of carbon leakage. In the absence of that, EU-wide harmonized measures addressing indirect costs should include both the rising of electricity costs due to energy-climate related policies (ETS + Renewables). |
a) the present two groups should remain |
There is no need for a revision of the carbon leakage list. The industry needs stability in the regulatory framework. Further categories will result in greater administration, the increased benefit is questionable, it is important that the criteria used to determine CL-status is right. |
a) the present criteria should remain |
The current criteria should remain. HOWEVER the “carbon costs” criteria should be expanded to include the cost of rising wood raw material cost due to ETS (see answer to Question 11). As a way to simplify the system, all energy intensive industries could be considered by default at risk of carbon leakage. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
There will always be companies with production that does not fit into the bulk of the relevant sector. For these companies there should be a possibility to argue a case built on qualitative criteria. |
d) in line with the duration of ETS Phase 4 |
The long-term certainty is of great importance in order not to harm investments |
a) the present approach of average of the 10% most efficient installations should remain |
Fiscal and legislative stability is important for investment and decision-making. Therefore, we advise not to revise the benchmark. Moreover, revising the benchmarks would greatly reduce the benefits that industrial installations should receive for their last energy-saving and GHG reduction investments, resulting in a loss of confidence and thus a decrease in investments. It should be reminded that the ETS in general, and the benchmarks in particular, should reward installations and sectors reducing GHG emissions. Revising benchmarks will only penalise the most virtuous sectors, rewarding the most carbon intensive. |
b) no |
The purpose of free allocation within EU ETS is to maintain competitiveness of European industry. Forcing even the best industry in EU to invest in state of the art technology to get full allocation does not accomplish this. |
c) other (please specify) |
The best option is to base the allocation on actual production for each year. That also would help the problem of "over-allocation" when there is an ecpnomic downturn and less production than estemited. The allocation system should not constrain economic growth. |
a) no, there should be no deviations |
long-term reliability is the key to credibility for the system, no alterations should be made to the system during an ongoing Phase. |
d) yes, in the form of financial compensation at EU-level |
auctioning revenues should be used for the compensation of indirect effects, since different MS get very varying shares of the revenues, and since these shares has no correlation to the amount of energy intensive industry harmed by the indirect effect, this compensation should be at EU-level .Any system should be mandatory and harmonized for all the states. |
Least important |
Less important |
Important |
Most important |
|
d) other |
|
To get the competativeness secured for the industrial sectors in the EUETS is absolutely key for the further development of ETS. All options must be explored, like new intitatives like "dynamic allocation" and other initiatives in order to safeguard competativenss.This is a key issue for Europe. |
a) Business |
Cooperativa Ceramica d'Imola s.c. |
Cooperativa Ceramica d'Imola s.c. Via Vittorio Veneto, 13 40026 Imola (Bo) +390542601601 marcello.marchetti@ccimola.it |
a) yes |
|
1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improve |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. This would limit the list to sectors really exposed and would eliminate the risk of a carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
As explained above, all energy intensive sectors as defined in the Energy Taxation Directive should be considered as exposed to the carbon leakage risk. As an alternative, trade and carbon intensity criteria should be used considering the following elements. First, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS. Second, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensit |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
a) Business |
Cristal Union route d'Arcis sur Aube 10 700 VILLETTE sur Aube |
Cristal Union ZAC de la Croix Blandin 8 rue René Francart - CS 80008 51 100 REIMS Sébastien GUILLEMIN sguillemin@cristal-union.fr phone: 33 6 24 87 45 93 |
a) yes |
|
1) yes |
b) no |
I insist on physical constraints and if you have lower emissions than benchmarks consider that in principle BM are the top ten percent! |
b) no |
ETS is sometimes contradictory with efficiency. We insist on costs (direct and indirect) that are disproportionate (industry is heavily monitored and carbon finance is not at all monitored) |
a) yes |
Those measures have to persist as long as there is competition distortion. At some time reduction is simply not physically possible to industry. |
b) quite adequate |
|
c) it largely compromises the incentive |
|
e) I don’t know |
|
d) there should be no limit to overall free allocation to industry |
|
d) there should be no such innovation support post-2020 |
|
b) no |
|
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
|
a) yes |
|
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
|
b) only the share of 'carbon costs' in the GVA should be maintained |
|
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
b) longer (please specify) |
|
c) the approach should be less stringent (please specify) |
|
b) no |
|
c) other (please specify) |
A dynamic system is necessary to be able to adapt to longer campaign durations that should be eligible to supplementary free allocations |
a) no, there should be no deviations |
|
c) yes, in the form of additional free allocation |
|
Most important |
Important |
Least important |
I don't know |
|
e) I don't know |
|
|
a) Business |
Danesi Latertech Spa |
Ing. Filippo Martinelli, Sede amministrativa: via Bindina, 8 - 26029 Soncino (Cremona) - Cell. 366/5840313 - Fax. 0374/83030 - filippo.martinelli@danesilaterizi.it |
a) yes |
|
1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improve |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. This would limit the list to sectors really exposed and would eliminate the risk of a carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
As explained above, all energy intensive sectors as defined in the Energy Taxation Directive should be considered as exposed to the carbon leakage risk. As an alternative, trade and carbon intensity criteria should be used considering the following elements. First, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS. Second, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensit |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
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a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
a) Business |
Dolomitas del Norte, S.A. (Donosa) |
María Luisa Balerdi Torrecilla Egileor auzoa 101, 20.268 Altzo Gipuzkoa Spain mbalerdi@calcinor.com |
a) yes |
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1) yes |
b) no |
Around 70% of the total CO2 emissions generated in lime production are "process emissions": they come from our raw material, limestone. These process emissions cannot be avoided without changing the quality of the final lime product which is however essential to serve specific applications. Currently, the most energy efficient kiln is near the thermodynamic minimum required for the chemical reaction needed for producing lime. The heat of the reaction for typical quicklime quality is 3.03 GJ/tonne, and the average fuel use 4.25. The energy consumption of the best available lime kiln (a Parallel Flow Regenerative Kiln, PFRK) is between 3.2 and 4.2 GJ/tonne. This type of kiln is already the most widely spread kiln technology today. However, one should keep in mind that horizontal rotary kilns (less energy efficient) provide a certain quality of lime and permit to optimize the extracted limestone due to their ability to treat the different sizes of stones. |
b) no |
The EU ETS will only remain the best solution for reducing CO2 emissions as long as the GHG reduction target is set at a level which is both technically and economically feasible. The current economic crisis and the further shrinking of the demand for lime products makes that there is at the moment a lot of “idle” production capacity in the EU. These installations are completely amortized which makes production in these installations cheaper than in a new one. A higher carbon price would not be a solution, as it would only draw money away from producers without enabling them to make an investment. When assessing the potential further ETS amendment in a sector, it is necessary to take account of the lifespan and replacement rate of kilns. Most of the time, investments costs always assume an investment in a new capacity (replacing the old capacity before its end of life). However, for the lime sector, kilns receive big maintenance periodically. |
a) yes |
Carbon Leakage will remain a big concern after 2020 in the absence of an international agreement putting forward a similar CO2 burden. Donosa believes that all energy intensive industries should be protected against carbon leakage, and that any increased level of ambition of Europe towards 2030 should lead to increased and not decreased protection against carbon leakage. Furthermore, the EU ETS is NOT addressing the following concerns: - The GHG reduction deficit (shortage of free allowances even for the installations with the best GHG performance. - Energy costs represent on average 40% of the lime industry’s manufacturing costs. Having access to energy at a reasonable cost is an essential condition for operating in the EU and for maintaining lime's competitiveness. - Further adequate incentives for low carbon investments is needed, with auctioning revenues being targeted for low carbon investment toward the industry |
c) quite inadequate |
The current carbon leakage mitigation measures do not take into account of: The importance of CO2 embodied in imports A unilateral reduction of CO2 emissions in Europe will not help fighting against climate change if a subsequent rise of imports from third countries is created. Carbon Trust, amongst others, demonstrated that the reduction in production-related CO2 is largely compensated by CO2 embodied in imports. The cumulative burden of the EU framework Several other EU legislations have an impact on the EU's industry competitiveness (renewables, energy efficiency). The Commission should ensure an integrated approach with no overlap. Energy costs Energy costs represent on average 40% of the lime industry’s manufacturing costs. Like for any energy intensive industry, having access to energy at a reasonable cost is an essential condition for operating in the EU and for maintaining its competitiveness. |
b) it largely keeps the incentive |
It is important to remind that the Commission has calculated product specific benchmarks based on the average GHG emissions of the 10% best performers. A comparison of these benchmark values with the minimum values that are technically feasible shows that the remaining potential in some sectors, like lime, is actually quite low. The current best available and most energy-efficient kilns (the Parallel Flow Regenerative Kiln, PFRK) is close to the thermodynamic minimum required for the chemical reaction needed for producing lime. In other words, no further breakthrough technologies in energy efficiency are expected. The drive towards the most energy efficient solutions can easily be explained by the fact that energy costs represent on average around 40% of the lime sector’s production costs. Outside the deployment of a commercially and technically feasible Carbon Capture and Storage solution, there is little margin for further CO2 abatement in the lime sector. |
c) quite exaggerated |
Lime is the most impacted sector by the EU ETS. The production of 1 tonne of lime generates 1 to 1.6 tonne of CO2. This means that the EU ETS has a strong impact on the sector, up to 35% of impact of the CO2 costs on Gross Value Added (Hourcade et al, 2008). Therefore, the full impact of carbon costs would have serious consequences in terms of carbon leakage for the lime industry. While the lime industry advocates in favor of less red tape and less administrative burden, it recognizes the importance of the free allocation for maintaining a competitive industry in the EU. |
d) there should be no limit to overall free allocation to industry |
There is still a need today for an international climate agreement that would bring a level playing field to EU manufacturing companies. In the absence of such agreement, and considering that several countries in the EU neighborhood are not following the EU’s climate leadership, there should be no limit to the overall free allocations to the industry. Furthermore, Donosa believes that all energy intensive industries should be protected against carbon leakage, and that any increased level of ambition of Europe towards 2030 should lead to increased and not decreased protection against carbon leakage. The most GHG Efficient installations should receive 100% of their needs for free. The industry cap should be adjusted so that the CSCF and linear reduction factor do not reduce the free allocations. |
c) a lower share than in Phase 3 |
It seems that the current state of efforts regarding the development of CCS (including the NER 300 program) will not reach the ambition to develop, by 2020, a commercially and technically available solution for the capture and storage of carbon. In 2012 TNO calculated for EuLA the costs of capturing CO2 at different kinds of lime kilns. For the state-of-the-art solvent (MEA) costs to capture CO2 were €94 per ton of avoided CO2. The cost to capture CO2 would more than double the production costs of around €60/ton lime. Currently, lime plants are typically located right next to the deposit, not clustered in large industrial agglomerations. Transport costs from the capture to the storage can add significantly to the capture costs. This is why Donosa believes that further R&D is necessary, but that it should be funded via a mobilization of different sources including auctioning revenues but not the new entrants' reserve. |
a) yes |
The auctioning revenues should be used to encourage low carbon investments. As a general principle, revenues should go back to industry to enable investments in low carbon solutions. Part of the revenues could for example be used to provide cheaper loans for low carbon investments in installations falling under the EU ETS. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The auctioning revenues should be used to encourage low carbon investments. As a general principle, revenues should go back to industry to enable investments in low carbon solutions. Part of the revenues could for example be used to provide cheaper loans for low carbon investments in installations falling under the EU ETS. |
a) yes |
Donosa strongly favors a level playing field within the EU and outside Europe. This is why Donosa believes that the EU should maintain its efforts to achieve an internationally accepted and legally-binding agreement proportionate to the burden in the EU. In the absence of such agreement, the EU should safeguard the competitiveness of the EU industry with any appropriate measure. Donosa has serious doubts that the current legal framework will ensure a level playing field beyond 2020. |
a) the present two groups should remain |
Donosa believes that no further complexity and calculations should be added to an already complex scheme. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
1. Share of carbon costs in the GVA should be maintained 2. Trade intensity should take especially into account the trade with EU's neighborhood In an internal survey realized by the lime sector (NERA " Energy and transport cost comparison of the EU lime industry to 10 non-EU regions"), it has been established that the threat for lime producers mainly come from the EU neighbor countries such as Russia, Maghreb and Middle east. 3. Energy / climate requirements in Free Trade Agreements should be taken into account “Energy and climate” clauses should be part of any Free Trade Agreement, especially if the trading partner in question has not assumed any carbon reduction commitments. 4. Fuel mix price should be taken into account Finally, Donosa recommends that the EU defines an affordable and available “fuel mix” for 2030, assesses its accessibility and compares its costs with the costs of the fuel mix used by the main EU competitors. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
It is important to point out that the revision of NACE code list (v2) implied that the assessment of the carbon leakage criteria for the lime sector is now done at a new disaggregation level, which includes not only lime but also plasters and aggregates. Donosa believes that this assessment should be done at the appropriate level of disaggregation, since that the industrial activities that are included in the NACE v2 code for lime do not share the same fundamentals (in terms of energy intensity and carbon intensity for instance). |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Donosa believes that it is important to maintain a certain level of discretion in the system for justified cases. This concerns both the qualitative criteria and the possibility to conduct the assessment at the appropriate level of disaggregation (Prodcom 8). |
b) longer (please specify) |
The time validity of the list of sectors exposed to carbon leakage should take into account the investment cycles of the industry. It is also necessary to take account of the lifespan and replacement rate of kilns. Most of the time, investments costs always assume an investment in a new capacity (replacing the old capacity before its end of life). However, for the lime sector, kilns receive big maintenance periodically. It is therefore important to ensure that the investments made now will not become "stranded assets" in the future due to an unexpected change in the carbon leakage list. Furthermore, any trade intensity assessment for the carbon leakage list should take into account the impact of trade with EU neighbouring countries. |
a) the present approach of average of the 10% most efficient installations should remain |
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a) yes (please specify how often) |
The most GHG efficient producers have to be defined with ambitious, fact-based and realistic benchmarks to be periodically reviewed per commitment period so as to reflect technological progress and uptake of new proven technologies in the EU. It is however important to understand that the technological state of the art is not representative of what can be achieved in practice. Lime characteristics are so vast that multiple uses can be done from the same material. It is also highly dependent of the stone quality from the quarry. The benchmarks should only take into account innovations that have been proved to be commercially viable and that can be implemented on site. |
c) other (please specify) |
In the case of the current ex-ante system, the reference year should be adapted, and the baseline should be a longer period without offering a choice between different periods, and not known in advance. However Donosa believes that free allocation should reflect economic reality per installation based on the most recent years and should not be frozen by historic production. In this regards, Dolomitas del Norte suggests to the European Commission to start working on the development of a dynamic system that could replace the current system, under the condition that no correction factor (CSCF) should be applied in addition to a dynamic system. Also, such system should take into account the administrative burden, the robustness of the control of the declared production, and the confidentiality of commercially sensitive information. |
a) no, there should be no deviations |
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d) yes, in the form of financial compensation at EU-level |
Dolomitas del Norte defends a Full off-setting of CO2 costs pass through in electricity prices with a harmonised approach in all EU Member States. |
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a) from the Member States' auction budgets |
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a) Business |
DS SMITH KAYSERSBERG |
serge.moll@dsskay.com |
a) yes |
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1) yes |
b) no |
In France, Pulp Industry has allready made effort to reduce GHG emissions. Potential to improve is limited (unless innovations). |
b) no |
Costs energy are enough high by themselves to drive paper industry to improve energy efficiency. We do not need additionnal cost (EU ETS). We need to increase the competitiveness of European Industry in the short term! |
a) yes |
See question 2: European industry needs to increase competitiveness in short term. |
b) quite adequate |
European Industry needs free allocation due to competitiveness disadvantages. But the fast decrease of free allocation is dangerous and the risk of carbon leakage higher. |
a) it absolutely keeps the incentive |
Free allocation doesn't decrease the effort to reduce emissions. Costs energy are enough high for paper industry. |
b) quite proportionate |
Not so easy to implemente (so not so proportionate!), but now the rules are known and understood. Please do not change the rules! |
b) a higher share than in 2013-20 |
Carbon leakage is a high risk. European Industry has made effort and investments to reduce emissions. |
b) the same share as in Phase 3 |
Innovation support is important. Results are needed. |
a) yes |
Deployment of new low-carbon technologies should be usefull. The share "300 million of allowances" should be used for this matter. |
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
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a) yes |
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a) the present two groups should remain |
We should avoid to change the rules... |
a) the present criteria should remain |
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a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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b) longer (please specify) |
10-15 years. |
c) the approach should be less stringent (please specify) |
10% Best performing installations benchmark was very high demand. No change in the rules and we will see if more installations have rised the level: more than 10% will show the progress. If the benchmark is allways 10% best performing we will not see the progress. |
b) no |
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a) no, the same baseline period chosen for allocation in Phase 3 should be maintained also for post 2020 (Phase 4) allocation |
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a) no, there should be no deviations |
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e) I don’t know |
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a) from the Member States' auction budgets |
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To compare 10% best performing installation in Europe to situations in rest of word. |
a) Business |
DSM Fine Chemicals GmbH NfG & CoKG |
DSM Fine Chemicals GmbH NfG & Co KG St. Peter Str. 25 4020 Linz +4373269163937 |
a) yes |
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1) yes |
a) yes |
electricity production can be shifted from coal to gas or renewables at social cost fossil based processes have a chemical limit efficiency gains are possible but limited -80 to 90% Carbon as a society meens a lot of change and needs defining socioeconomic success differently than today |
b) no |
CO2 efficiency gains come with energy or material cost reduction/efficiency gains, CO2 is by far not a decision driver but a cost driver in the % range in our field |
a) yes |
any % difference in production cost counts. e.g. US industry starts to ship products to Europe due to low transport cost and low energy/raw material cost in the US. Not the export quota is relevant for exposure to carbon leackage but the import ratio. a 5 y review is to lagging as logistics and sales infrastructure needs months to build up not years. |
b) quite adequate |
free allocation is focused on historical activity and does not provide the most efficient (best in class) with 100% allocation, where it should provide positive incentives to be best in class, not punishing. e.g reallocate emission cost to the best in class like Swedish NOx tax. |
a) it absolutely keeps the incentive |
tailor made free allocation does for shure keep the resulting incentive |
c) quite exaggerated |
high labor effort for first time and yearly monitoring, reporting and evaluation and for the last 1% in precision of emission. |
b) a higher share than in 2013-20 |
a market need a physical limit, thats why I do not answer "no limit" |
d) there should be no such innovation support post-2020 |
innovation should not finance itself from the uncertain market price but the actual ecosocietal contribution it can bring, otherwise we only plan innovation based on current prices |
a) yes |
innovation should help to reduce socioeconomic cost related to GHG/climate change |
c) other types of funding (please specify) |
redistribution system to best in class and to innovation projects (mix b and c) |
a) yes |
redistribute to best in class, compare Swedish NOx tax system |
b) more carbon leakage categories should be defined |
the relevant exposure to import in the specific subsector should be added additionally to the rise in cost and export quota; low transport cost and different raw material cost does change import fast |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
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b) other thresholds should be defined. Please specify below |
lower threshholds than now |
b) no, all criteria should be based on simple metrics and linked to clearly defined thresholds |
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d) in line with the duration of ETS Phase 4 |
open a possibility to get in the carbon leakage schema to adapt for external changes but not fall out (planning cycles in industry are around 10y) |
c) the approach should be less stringent (please specify) |
full free allocation (or more!) to best performer needed |
a) yes (please specify how often) |
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c) other (please specify) |
updateneeded after 10y down the road. Allocation should be clear timely (3 y before ETS4 starts) so 2015, 16 should be the base and the system ready in 2017 |
a) no, there should be no deviations |
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d) yes, in the form of financial compensation at EU-level |
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d) other |
generally redistribute to best performers and innovators and only deduct system cost (compare swedish NOX tax |
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a) Business |
E.ON Energiatermelő Kft. (E.ON Energiatermelő Ltd) |
info@eon-hungaria.com 1051 Budapest, Széchenyi tér 7-8. HUNGARY Tel: +36 1 472 2300 www.eon-hungaria.com |
a) yes |
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1) yes |
b) no |
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b) no |
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a) yes |
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b) quite adequate |
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b) it largely keeps the incentive |
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b) quite proportionate |
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b) a higher share than in 2013-20 |
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a) a substantially higher share than in Phase 3 |
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a) yes |
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d) I don’t know |
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a) yes |
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a) the present two groups should remain |
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a) the present criteria should remain |
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c) I don’t know |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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a) five years |
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d) I don’t know |
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a) yes (please specify how often) |
5 évente a szénszivárgási listával összhangban |
c) other (please specify) |
Az üzemeltetők választhassanak a 2016-2018 és a 2013-2015 közül |
a) no, there should be no deviations |
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e) I don’t know |
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a) from the Member States' auction budgets |
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a) Business |
E.ON SE E.ON Platz 1 40479 Düsseldorf Germany |
Juergen Rosenow E.ON SE Political Affairs and Corporate Communications Political & Regulatory Affairs T +49-211-45 79- 902 F +49-211-45 79- 1902 M Juergen.Rosenow@eon.com |
a) yes |
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1) yes |
a) yes |
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a) yes |
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a) yes |
As long as the EU's main international trading partners do not make equivalent efforts to price CO2 in order to reduce greenhouse gas emissions, carbon leakage remains an important issue. |
b) quite adequate |
The system of free allocation must be maintained as a transitional instrument to address direct carbon leakage. The system must reflect progress being made in the international climate change negotiations with respect to the competitive situation of the affected industry sectors in the competing markets. It should be based on an efficiency benchmark approach (as currently designed). The allocation of free emission allowances should be based on EU-wide harmonized efficiency benchmarks that provide incentives for reductions in greenhouse gas emissions and for application of energy efficient techniques and should not provide incentives to increase emissions. Open for discussion is the level of ambitious with the benchmark since a less tough benchmark raises need for a cross sectoral correction factor. Furthermore the question of up-dating the production data perhaps coupled with additional allocation from the MSR may be considered. |
a) it absolutely keeps the incentive |
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b) quite proportionate |
There is still room for improvement to reduce the administrative burden for small emitters. The deadline for plant operators for informing the competent authorities on a “partial cessation of operations of an installation” in accordance with Art 23 of the Benchmarking decision should be extended to 31 March of the following year. This issue is of particular relevance for district heat producers that supply district heat to carbon leakage affected Non-ETS installations. The required information is usually not available before March. |
f) I don’t know |
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a) a substantially higher share than in Phase 3 |
The share should be increased since an European level to support F&E in climate efficient investment may be appropriate. Funds on national level have to compete with other needs and political targets in the general allocation of the budget funds, therefore the EU should build on the experience of the NER300 a technology fund. The administrative burden for project application should be reduced and the decision procedures for granting support must be faster and much more efficient to avoid insecurities and delays for the operators. The application of cross-border projects involving several member states and companies should be more facilitated. |
a) yes |
A re-channeling of funds to industry for innovative investments may increase the acceptance of the ETS. A financial support scheme on EU level may be less distortive than one on national level and furthermore funds of these supports scheme do not compete with conflicting national financial interests. Also COM believes that an EU funds may be more technology neutral than possible national funds where auction revenues also have to compete with general budget needs. On national level tax incentives for R&D in low carbon might also support this target. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Main arguments please see Q 9: An European approach may be more technology neutral and does not conflict with national interest in allocating scarce national budgets. |
a) yes |
Besides measures for addressing direct carbon leakage, the continuation of compensation schemes for addressing indirect carbon leakage is also needed. See also answer to Question n° 21. |
b) more carbon leakage categories should be defined |
The number of European CL categories depends on their international exposure after considering regional or multinational Climate agreements. The pure existence of an agreement is of minor importance, more important is a comparison of the effective carbon pricing with the main competitors on the global market. In those cases the system of transitional free allocation needs to be re-assessed. In some cases it might be justified to reduce the share of free allocation to a certain extent to take into account equivalent carbon pricing in other major industrialized or emerging countries. For this purpose, the system of carbon leakage provisions must be more flexible to be able to react to gradual improvements of the competitive situation with major EU competitors. |
g) I don’t know |
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c) I don’t know |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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a) five years |
Given the legislative process of any change and the sight of forward markets to get an impression on price developments five years seem to be a good compromise. |
a) the present approach of average of the 10% most efficient installations should remain |
Any less stringent benchmark may impose the threat of an unilateral cross srectoral reduction factor. In combination with the discussion of updated production figure a more stringent approach may be chosen. In any case, the benchmarks have to be realistic on widely proven and accepted technology and not be orientated at some outstanding ones which seems to be the case for the steel sector. |
a) yes (please specify how often) |
Benchmarks should be revised every five years in line with the corresponding revision of the carbon leakage list and to reflect technical progress in accordance with corresponding sector roadmaps and BREF documents on Best Available Technology. |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
The activity data should reflect the recent data from the third trading period. However, adequate provisions need to be established to take into account significant capacity changes and new built before the beginning of the fourth trading period. |
a) no, there should be no deviations |
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d) yes, in the form of financial compensation at EU-level |
The present approach based on the state aid guidelines should be maintained, but to avoid market distortions the compensation system should be as far as possible extended to cover all industrial installations in the member states affected by indirect carbon leakage. The list of industrial sectors deemed to be exposed to indirect carbon leakage should be periodically revised using the same frequency and intervals like the revision procedure for updating the list of sectors exposed to direct carbon leakage. |
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The conception stage should be preferably addressed at individual member state level. The commercialization stage should in principle not be subject to the EU’s innovation support schemes, but should fall under the responsibility of the respective plant operators. |
a) from the Member States' auction budgets |
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All provisions for addressing carbon leakage and/or granting free carbon allowances must be designed in a way to avoid or minimize distortions of competition within the Community. Hence, they should avoid undue distortions of competition on the markets for electricity and heating and cooling supplied to industrial installations in particular between industrial activities carried out in installations operated by a single operator (“auto-producer”) and production in out sourced installations (“energy supplier”). Those rules should equally apply to new entrants, significant capacity extensions and existing installations as well as to heat deliveries by ETS installations to carbon leakage affected industrial installations outside the scope of the community system. |
a) Business |
EDF EN France |
Address : Philippe VEYAN EDF EN France 100 Esplanade du General de Gaulle Coeur Defense Tour B 92932 PARIS LA DEFENSE CEDEX email: philippe.veyan@edf-en.com Phon: +33 6 25 44 01 34 |
a) yes |
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1) yes |
c) I don’t know |
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c) I don’t know |
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c) I don’t know |
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e) I don’t know |
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e) I don’t know |
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e) I don’t know |
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f) I don’t know |
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b) the same share as in Phase 3 |
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a) yes |
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a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
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c) I don’t know |
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e) I don’t know |
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g) I don’t know |
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c) I don’t know |
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c) I don’t know |
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e) I don’t know |
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d) I don’t know |
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c) I don’t know |
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d) I don’t know |
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e) I don’t know |
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e) I don’t know |
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Crossing the valley of depth, ie technology and small-scale pilot validated but moving to a commercial product / offer is where most of the innovations fail. Higher support needed, market opportunities extended to larger zones, leverage effect : all this is needed and can be provided in the EU frame. The scope of the present NER300 mechanism is perfectly adequate. |
e) I don't know |
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EDF EN clearly supports NER300 Program and its continuation after 2014 EDF EN is suggesting to incorporate more flexibility into NER300 rules, accounting for the high risk character of the projects Projects' ranking and selection process should be more transparent for developers |
a) Business |
EL BARCO, S.L |
CTRA ALCORA N2 12200 ONDA(CASTELLÓN) SPAIN PHONE: 0034964600147 JOSECARLOS@ELBARCO.COM |
a) yes |
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1) yes |
b) no |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
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a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage.However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective.Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
a) the present two groups should remain |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value) which are subject to international competition should be considered as exposed to the risk of carbon leakage, until aninternational agreement is established. It is important to limit the list to sectors that really compete globally, and thus it is vital to maintain an assessment based on trade intensity with third countries. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
The present criteria should be used, considering the following element. GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists ofboth labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimatedif it is compared with the GOS. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended(at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarksare set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yetsince the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier toindustrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored.This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concernsassociated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
b) no, and there is no need for financial compensation by Member States, either |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. |
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a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
a) Business |
Elektrárny Opatovice, a.s. |
Opatovice nad Labem Pardubice 2 532 13 Czech Republic tel: +420 467 633 123 email: jhilbert@eop.cz |
a) yes |
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1) yes |
b) no |
According to UNFCCC and EEA data, EU-28 already lowered GHGs emission in 2012 by 21% compared to baseyear 1990. in 2013 EU industry already lowered since 2005 (start of EU ETS) its GHGs emissions by 13,4 %, so most of the reduction potential in the covered industry is already tapped. Main reduction efforts should be targeted at sectors currently outside the EU ETS scope, where potential for cost effective GHGs savings still exists. |
b) no |
EU ETS introduced new externality – “price of carbon” to industrial production and thus lowered competitiveness of EU industry (covered by EU ETS) compared to regions/countries without such a tool. |
a) yes |
As long as there will be no worldwide carbon market, there is a need for addressing competitiveness distortions caused by the tool. Special attention should be also paid for “internal carbon leakage” and accompanied competitiveness disadvantages of EU ETS installations (e.g. heat market and position of EU ETS heat installations compared to ones outside the scope). |
a) very adequate |
Instrument (free allocation) should be also in the future (after 2020) focused on sectors not deemed to be exposed to risk of carbon leakage but still facing competition disadvantages on respective markets such as district heating. |
a) it absolutely keeps the incentive |
Instrument (free allocation) does not interfere with incentive to innovation because it is driven by competition. Incentive for innovation is compromised by different approaches to climate change issues worldwide. |
b) quite proportionate |
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d) there should be no limit to overall free allocation to industry |
Carbon leakage and competitiveness budget should not be administratively limited, number of free allowances should be derived from number of relevant installations and their production data. |
c) a lower share than in Phase 3 |
Innovation support via NER300 (or similar mechanisms) should be limited in next Phase. These approaches were proven not to be most effective mainly thanks to fluctuating price of carbon/subsidy. |
a) yes |
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b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
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b) no |
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b) more carbon leakage categories should be defined |
There is urgent need for new category which should cover internal carbon leakage such as heat production sector where installations within EU ETS and outside EU ETS compete. GHGs emission limits imposed just to one segment of the heat market leads to unfair competitiveness distortions. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
Current criteria could be maintained for current two categories of sectors. For new category there should be only criterium incurred carbon costs compared to competitors on same market – e.g. carbon costs for district heating installations included in EU ETS compared to heat installations outside the scope of EU ETS, excessive carbon costs for EU ETS installations should be compensated by free allocation. |
b) other thresholds should be defined. Please specify below |
Current criteria could be maintained for current two categories of sectors. For new category there should be no minimum (threshold) for inclusion to “endangered sectors” category. Until alternative approach for covering GHGs emissions for sectors outside EU ETS will emerge (e.g. “Carbon tax” etc.), EU ETS installations with proven excessive carbon costs (in comparison with competitor on the same market) should be compensated by free allocation. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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d) in line with the duration of ETS Phase 4 |
Validity of the list should be liked with Phase duration in order not to change the rules in the middle of the period |
c) the approach should be less stringent (please specify) |
Approach should be less stringent in terms of increasing the percentage from 10% to at least 20% of best performing installations in the EU for a given product to cover higher variability among installations thanks to development since 2008 – increasing share of RES, energy efficiency measures, more variety in technological solutions etc. |
b) no |
However approach to benchmark should be revised in order to take into account more variety in technological solutions (see above). |
a) no, the same baseline period chosen for allocation in Phase 3 should be maintained also for post 2020 (Phase 4) allocation |
Phase 4 allocation should be derived from same historical production data (2005-2008 or 2009-2010 period) in order to keep continuity in legislative tools in respective Directive. Historical production levels already determined allocation also for Phase 4 in certain sectors (such as district heating). |
b) yes, there should be deviations with higher allowances for installations facing specific hardships |
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d) yes, in the form of financial compensation at EU-level |
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Least important |
I don't know |
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a) from the Member States' auction budgets |
Innovation support (if any) should be funded from Member States’ auction budgets not from free allocation, which serves as a remedial tool for competition distortions. |
ETS should be complemented by carbon tax for non-ETS installations in order to provide for level playing field on internal EU market between large and small installations. Current setting where carbon price is paid only by large installations disadvantages district heating, CHP and other low carbon technologies. |
a) Business |
ENCI B.V. |
Christoph Reissfelder, Assistant Biodiversity & Public Affairs, 185 Chaussée de la Hulpe, BE-1170 Brussels, Tel: +32 2 678 34 16, Mail: christoph.reissfelder@heidelbergcement.com |
a) yes |
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1) yes |
a) yes |
The cement industry is fully committed to reducing GHG emissions in line with overall EU policy objectives. This has been demonstrated by investments over the past 20 years which have driven down CO2 emissions from clinker production and by our roadmap to go much further in the coming decades. To achieve this, industry needs to innovate and invest. This requires a return on investment above the cost of capital and a policy framework that promotes the competitiveness of the sector and allows for a secure access to raw materials and affordable energy prices. The cement industry in Europe needs a stable legal framework with predictable CO2 prices in order to justify and allocate scarce investment funds to realize CO2 emission reduction ambitions. 2030 targets have to take into account each sector specific roadmap. Differentiated levels of efforts are needed for different sectors (manufacturing industry, power, building, and transport) based on the ability to directly pass through costs. |
b) no |
Measures to decrease energy consumption and improve resources efficiency will de facto reduce CO2 emissions. Some industries like cement have very high energy costs as a proportion of GVA or profit which means that energy efficiency is an integral part of manufacturing. EU ETS emphasis is GHG efficiency and in this regard it does put pressure on businesses to become more GHG efficient. In doing so EU ETS places CO2 costs on power generators and these costs are passed on to electricity consumers. There are limitations to which added costs act as a driver for efficiency before imports become more attractive. Furthermore, the cement and lime industry are unique due to the fact that the majority of GHG emissions are not caused by energy use from fuel combustion but come from the raw materials themselves. Around 60% of total CO2 emissions from clinker production are released directly from limestone. Energy efficiency and CO2 reduction represents conflicting goals when looking e.g. at CCS. |
a) yes |
The EU has aspirations of leading on CC policy but globally unequal carbon pricing has the ability to shift trade patterns. In order to direct investments to growth and jobs in Europe, the cement industry needs a global level playing field, including imports and exports: climate change is a global problem that needs a global solution. EU policy can only incentivise companies to aggressively work on further emissions reduction if there is predictability in and equality in carbon prices and if it is part of an overall industrial policy ensuring companies to be competitive in the international arena. This also applies to energy costs. For cement, energy costs are especially important representing 30 % of operational costs with European costs being substantially higher than in the US, Russia and plants in North Africa. Transitional measures are needed to bridge the gap between the EU and other countries. Free allocation is the most effective transitional mechanism. |
b) quite adequate |
As long as emissions do not have the same cost in different countries, a level playing field can be achieved most effectively by equalising measures such as free allocation. The limited evidence of leakage and empirical studies demonstrates (see the report by Vivid Economics last June), in part, that free allocation is working. However, it should not be assumed that free allocation is insulating operators from all of the ETS costs as it does not mean ‘full free allocation’ because of the CSRF and as some operators will face higher costs than others depending on the allocation base year activity. Furthermore, the indirect costs of ETS have not been selected for compensation for cement in the Commission guidelines creating a distortion of competition with competitors. So, not only does the cement industry face the full indirect costs of ETS but competing construction sectors are able to be compensated for their additional costs related to indirect CO2. |
a) it absolutely keeps the incentive |
With free allocation based on benchmark, the incentive to invest is provided by the benchmark. The magnitude of the residual incentive is a function of carbon costs as a proportion of GVA. Cement has one of the highest CO2 costs/GVA of any industrial sector so the residual effort is greater than in most sectors. In its search for a legal framework that fosters a competitive environment, CEMBUREAU has considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The EU cement industry has a relatively flat benchmark curve indicating that there is a narrow gap between the best and the worst performers; this limited level of abatement potential makes the task of emissions reduction more difficult in the cement sector compared to many other sectors. |
b) quite proportionate |
Overall, the administrative burden is quite proportionate but the system is extremely disproportionate for small/trivial combustion sources. In many cases these minor sources were not part of the benchmarking exercise and should not be included in reporting. |
d) there should be no limit to overall free allocation to industry |
There should be free allocation if there isn’t an international agreement which places all competing manufacturers on an equal footing. Until certain conditions can be met with regard to the veracity of the schemes within other countries then transitional arrangements need to be maintained. Free allocation is the most effective transitional arrangement. The share of allowances dedicated to free allocation should be sufficient to avoid carbon leakage. To uphold this principle that carbon leakage should be minimized, the cross sectoral correction factor should be replaced by an adjustment to the auctioned amount to maintain the cap trajectory. That does not mean “a free ride for industry” but it would mean that sufficient allowances are provided for the most efficient producers because at present the CSCF has the ability to reduce free allocation beyond what is technically possible. |
e) I don’t know |
There are too many uncertainties on what the post 2020 allowances budget will be for the cement industry to be able to decide what share of the budget should be dedicated to such innovation support. The EU ETS does not encourage investment in new technology. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) yes |
To date, the NER 300 has been ineffective at stimulating novel CO2 reduction projects in the cement industry. The power generation sector, which is passing on investment costs, has benefitted most from the NER 300. The cement sector is not experiencing the same level of investment de-risking. The cement industry needs: - An investment enhancing climate should encourage investments over long term (30 y) cycles in a capital intensive industry. Legal stability and CO2 price predictability are key to achieve this goal. - Safeguards against price fluctuations in market based policy instruments; whose objectives, if kept, should be clearly defined and not be prone to abuse for speculation purposes. - An innovation policy which provides clear incentives for breakthrough technologies in a cost-effective way. Policy makers should consider hypothecation (earmarking) of revenues from allowance auctions and direct innovation support to those sectors facing the greatest abatement challenges. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Given the high costs associated with breakthrough technologies, funding from auctioning revenues should account for both capital and operational cost of projects. There should in addition be a ring fenced fund for the manufacturing industry. |
a) yes |
In its search for a legal framework that fosters a competitive environment, ENCI B.V. has considered an improved ETS with a performance based free allocation for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions cost impacts. In order to protect “carbon leakage” sectors’ competitiveness, the system could foresee either an adjustment to the overall cap to the auction amount or a sectoral cap with the inclusion of importers. However, a carbon pricing mechanism which is market-based and prone to wide fluctuations militates against effective investment. ENCI B.V. is ready to explore mechanisms which deliver price stabilization and global carbon price convergence. Some of the initial reflection is further elaborated in the annex to this paper and ENCI B.V. is ready to engage in a thorough reflection of a climate policy and energy policy that is fully integrated in a single industrial growth policy. |
a) the present two groups should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. One should consider a special treatment for process emissions e.g. full free allocation as those emissions are not linked to energy efficiency and are irreducible by their very nature. |
a) the present criteria should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. Nevertheless, as a static indicator trade intensity is of limited validity/conclusiveness. It is based solely on historic data and does not reflect future developments, i.e. resulting from changing cost patterns, at all. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria e.g. a complete loss of 30% of GVA is normally economically not acceptable for any industry or sector. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
EU trade and economic data is not always exact and its comparability with the EUITL CO2 data not always appropriate so there will always be a need to hear special cases. |
d) in line with the duration of ETS Phase 4 |
It is essential for the predictability of the system to introduce as little changes as possible in the course of a trading period; hence the validity of the list of sector exposed should be in line with the duration of the ETS phase 4. |
c) the approach should be less stringent (please specify) |
The benchmark would be calculated in a statistically solid way and be updated periodically to ensure predictability. It should be set at an ambitious but reasonable level and should not be distorted by statistical outliers. This can be achieved by defining percentile (e.g. 10%-percentile) or e.g. the average of a range including the 5% to 15% top performers of specific direct emissions (excluding the extreme outliers between 0% and 5%). Only this way, the benchmarking methodology will achieve sufficient statistical robustness for international application in ETS system. |
a) yes (please specify how often) |
The benchmark should be updated between two trading periods depending on what has been achieved but not during one trading period. One should consider a special treatment for process emissions e.g. full free allocation as those emissions are not linked to energy efficiency and are irreducible by their very nature. |
c) other (please specify) |
In search for a legal framework that fosters a competitive environment we have considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The historic activity level (HAL) should be more closely aligned to recent production to avoid surplus allocation e.g. the average of the preceding 3 years. In this context, we consider the recently released EcoFys study (Dynamic allocation for the EU Emissions Trading System, Enabling sustainable growth, 20 June 2014) and its allowances allocation reserve as an interesting step forward. However, a more recent HAL has its potential downsides for installations that have extended shutdowns or breakdowns, provision will be necessary to deal with exceptional HAL circumstances. |
b) yes, there should be deviations with higher allowances for installations facing specific hardships |
A more recent HAL e.g. preceding 3 years average, has its potential downsides for installations that have extended shutdowns or breakdowns, provision will be necessary to deal with exceptional HAL circumstances. |
c) yes, in the form of additional free allocation |
We believe that EU compensation should be granted for indirect emission impact where carbon leakage vulnerability is a combination of direct plus indirect emission cost. There is no need for two state aid guidelines and the compensation for indirect costs could be internalized in the ETD by providing free allocation for indirect CO2. |
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I don't know |
We believe that carbon capture and re-use should be equally considered next to carbon capture and storage. Funding should be technology neutral. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) from the Member States' auction budgets |
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We believe that the debate on the MSR should not be carried out in isolation from the broader ETS structural reform. |
a) Business |
Eneco |
Eneco P.O.Box 9150, 3007 AD Rotterdam Maarten.Sessink@Eneco.com +31 (0)6 - 2036 8967 |
a) yes |
1) yes |
a) yes |
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b) no |
The incentive for industry to become more efficient is cost reduction. The EU ETS could help to deliver a substantial CO2 price that would incentivise industry to reduce costs, but it is currently not working because of the very low CO2-price. |
a) yes |
Yes, there should be substantial compensation to companies in order to address carbon leakage risks, but compensation should only be given to those companies that run a proven risk of CL. A critical assessment of the current CL-list is therefore necessary and ambitious benchmarks should be set to incentivise CL-companies to innovate and invest in low carbon solutions. |
e) I don’t know |
The adequacy of the policy instrument of free allocation is not clear yet. A critical assessment of the current CL-list is necessary to provide this clarity. But the current system of free allocation seems to be a blunt and imprecise instrument and a contributor to the oversupply that resulted in the enormous surplus of allowances. A better way to allocate allowances could be an ex-post allocation based on actual output. |
e) I don’t know |
Free allocation could incentivise CL companies to innovate, as long as there is an ambitious benchmark. |
e) I don’t know |
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f) I don’t know |
The share of the post-2020 allowance budget to be dedicated to CL and competitiveness purposes should be based on the amount of companies on the CL-list after a critical assessment and an ambitious benchmark for these companies. |
e) I don’t know |
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b) no |
Full implementation of structural measures to strengthen the ETS should lead to a higher CO2 price. A higher CO2-price should lead to less need for innovation subsidies and should lead to investments. |
d) I don’t know |
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b) no |
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a) the present two groups should remain |
But only companies that are truly exposed to carbon leakage should be in the first group and on the CL-list. |
d) only the intensity of trade with third countries should be maintained |
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b) other thresholds should be defined. Please specify below |
A threshold based only on the intensity of trade with third countries (see answer to 13). |
b) no, all criteria should be based on simple metrics and linked to clearly defined thresholds |
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d) in line with the duration of ETS Phase 4 |
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b) the approach should be more stringent (please specify) |
The benchmarks should be determined after a critical assessment of the current CL-list and benchmarks. |
a) yes (please specify how often) |
At least once per trading period and before ETS phase 4. |
c) other (please specify) |
If stringent benchmarks are implemented and the CL list has been critically reviewed, allocation could be based on actual production data instead of historical data. |
a) no, there should be no deviations |
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c) yes, in the form of additional free allocation |
Based on stringent benchmarks in the sector and critically reviewed CL list. |
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e) I don't know |
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One option to increase innovation in CO2 reduction in general has not been mentioned is a European floor price for CO2. An ambitious European floor price for CO2 would create a stable climate for investments and innovation in low carbon technologies. |
a) Business |
ENI |
Piazzale Enrico Mattei, 1 00144 Rome Tel. +39 06598.21 www.eni.com Transparency Register n. 99578067285-35 |
1) yes |
a) yes |
Eni considers that the European industry could further reduce greenhouse gas emissions without reducing its production. A higher carbon price could increase the economic return of several emissions abatement measures, such as the use of natural gas instead of more carbon intensive fuels for industrial operations.
However, it is important to keep into account that Europe’s industry is very diverse, both in relation to the potential of reducing GHG emissions of each sector, and in terms of market conditions. Currently, for several sectors - such as refinery or petrochemical - the negative market conjuncture is preventing fruitful investments in emissions reduction and energy efficiency programs. For these reasons, Eni believes that a sector-based approach to the de-carbonization of the European industry would be more suitable, as it would evenly distribute the efforts between sectors, without compromising their competitiveness. This could be achieved, for instance, with a clear, long-term roadmap determined in accordance with the EU’s climate objectives. |
a) yes |
Eni supports the EU-ETS and believes that it is the most efficient instrument to reduce Europe’s GHG emissions and to drive Europe’s economy towards a low carbon future. Currently the EU-ETS is one of the drivers of energy efficiency investments in Europe, though it does not contribute effectively to increasing the long term competitiveness of European industry. Regarding the first point, today, the impact of the EU-ETS and carbon prices is less significant compared to the cost of electricity and fuel, which are actually driving the choices of companies, due to low carbon prices.
As regards competitiveness, the EU-ETS is currently perceived by the industry as an additional cost affecting the competitiveness of Europe’s industry. This is due to the market crisis affecting several European industrial sectors, the uneven compensation of indirect carbon costs across Europe and the uncertainty regarding the future international agreement on climate change. |
a) yes |
Europe should provide transitional measures to support the industry as long as a sector is negatively affected by the asymmetry of climate policies between Europe and its international competitors. This is certainly necessary to effectively tackle carbon leakage. Moreover, the increasing delocalization of certain sectors outside the EU, such as refining and basic chemicals manufacturing, would also have negative effects on global GHG emissions, since European installations are less carbon intensive than the rest of the global average. For this reason, even in case of an international agreement for the post-2020 period, special provisions should remain in place. |
b) quite adequate |
Free allocation is a suitable measure to protect energy intensive industrial sectors from the risk of carbon leakage. Nevertheless, the application of the Cross Sectoral Correction Factor risks undermining the functionality of the free allowances as a protection measure for sectors affected by Carbon Leakage. The CSFC reduces the level of free allowances below the threshold defined by the best 10% performers, therefore damaging its effectiveness. Moreover, today, free allocation rules are not able to compensate for the indirect costs of the EU-ETS across Europe. Since measures are not homogenously applied in all Member States, market distortions and internal carbon leakage risks emerge. |
b) it largely keeps the incentive |
In theory, EU-ETS, and in particular free allocations linked to the benchmark, encourage European industries to innovate in order to reduce emissions. The higher the carbon price, the higher is the incentive to reduce emissions and monetize the allowances’ surplus generated. However, in the case of sectors exposed to carbon leakage, the current application of the Cross Sectoral Correction Factor undermines the principle that a best performer should not be subject to charges related to EU-ETS. |
c) quite exaggerated |
In principle, the administrative burden should be commensurate with the complexity of the scheme and with objectives foreseen. Currently, the burden associated to ensuring free allocations is not proportionate with some unilateral application such as the existence of an industrial cap. Therefore, Eni is in favour of a simplification of the administrative burden of the Emission Trading Scheme. |
d) there should be no limit to overall free allocation to industry |
Eni is against the application of such a factor and believes that there should be no limit to overall free allocation, also in consideration that additional quotas would be required for the compensation of additional indirect costs of electricity. The unlimited overall free application should be taken into consideration, in particular in case of a weak international agreement. |
d) there should be no such innovation support post-2020 |
Eni considers Carbon Capture and Storage (CCS) as a viable technology for attaining Europe’s low carbon objectives in the long-term. Nevertheless, the fundings aimed at guaranteeing the commercial deployment of CCS and of other low carbon technologies should not be taken from the stock of free allocation but rather from the action revenues. For this reason, Eni suggests to end such a scheme in the third phase. |
a) yes |
A specific scheme for supporting industrial innovation toward de-carbonisation is needed. This scheme should be managed at European level, in order to avoid any fragmentation of resources or inconsistencies between Member States. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Free allowances should be considered as a provision to protect Europe’s industrial competitiveness, rather than a way increase revenues. For this reason, Eni believes that any sort of fund for low-carbon technology should come from the Member States’ auction revenues. In particular, Eni believes that a share of this funding and, especially, the one related to industrial innovation, should be managed at European level to avoid any form of internal asymmetry of competitiveness. |
a) yes |
Eni believes that, in addition to the free allocation and the innovation support to address the risk of carbon leakage, the EU should centralize the process related to the compensation of indirect costs due to the increase of electricity prices. The latter is not only related to ETS but also to carbon taxes and incentives to renewables.
In addition, Eni believes that a further evaluation of the Border Adjustment Mechanism should be taken into account, as well as the enhanced use of international offset credits. |
a) the present two groups should remain |
a) the present criteria should remain |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
b) no, all criteria should be based on simple metrics and linked to clearly defined thresholds |
d) in line with the duration of ETS Phase 4 |
Private companies with capital intensive investments and long lifecycle periods need clear rules to invest. A short-term revision cycle of the carbon leakage rules does not enable companies to evaluate investments with a long-term perspective. For this reason, Eni believes that the post-2020 Carbon Leakage list should be valid throughout phase 4 (and the same principle should be applied to the subsequent phases) to guarantee a stable regulatory framework and to tackle uncertainties surrounding future regulatory constraints. Nevertheless, Eni believes that a special assessment during each phase should be considered due to the exceptional circumstances (major policy changes in competitor countries or significant economic structural changes) |
c) the approach should be less stringent (please specify) |
Eni agrees with the benchmark approach but believes that the threshold of 10% is not enough to protect industrial sectors from carbon leakage, especially in a context where investing GHG emissions’ reduction is not possible due to a negative economic conjuncture. Eni supports a more flexible threshold for benchmarks (e.g. 20%) as long as it is representative of a congruous share of installations. In addition, different thresholds should be considered for sectors with a limited number of installations (in some cases less than ten). In these cases, a less stringent threshold would be more suitable. |
b) no |
The benchmark revision represents both an excessive burden for the industry and a low value-added effort. Indeed, in several industrial sectors, a revision of the technological state-of-the-art would not produce any significant differentiation with respect to the current one, especially due to the low investment rate in these years, dominated by the economic crisis and by the shrinking demand. |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
Starting from 2008, several European industrial sectors have been facing a negative market environment and even nowadays the historical quantities of production are not reached. For this reason, in case of an industrial recovery, Eni believes that an update of the production data using the end of Phase 3 should be performed. Alternatively, historical emission data should be used to better protect these sectors from the risk of carbon leakage. |
a) no, there should be no deviations |
In order to maximize the transparency and predictability of the scheme, as well as to ensure a similar level playing field for specific sectors, Eni supports harmonized rules, with no deviations for singular installations. |
d) yes, in the form of financial compensation at EU-level |
Currently, indirect costs of the EU-ETS represent a small share of electricity costs for European industries, this, however, is likely to change in the coming years, especially in a context of growing EUA prices.
The current EU guidelines for the financial compensation of indirect costs are not sufficient to solve the problem, since their application varies amongst Member States, thus distorting competition between EU Member States. Eni reckons that an EU-wide compensation scheme is necessary. This scheme could be used to grant either financial or free EUAs compensation. This harmonized compensation scheme should also take into account other climate policy instruments with a significant impact on electricity prices, such as national incentives for renewable sources or carbon taxes, which generate market distortions across Europe.
Moreover, Eni believes that, in principle, all sectors on the carbon leakage list should be eligible for this kind of compensation, without any additional differentiation. |
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a) from the Member States' auction budgets |
Free allowances should be considered as a provision to protect industrial competitiveness and not as a way of funding low carbon innovation. For this reason, Eni believes that funding for low-carbon innovation should stem from the revenues generated by Member States’ auctions, so to prevent the misuse of free allowances (as done with the NER300 programme). Furthermore, a share of this funding (especially the one related to industrial innovation) should be managed at European level in order to prevent market distortions. |
The EU should address carbon leakage in the broader context of the discussion on the 2030 Climate and Energy Framework, in order to align climate targets and measures aimed at restoring industrial competitiveness. Furthermore, Eni urges the European Commission to lead the climate change debate towards a global agreement during the upcoming Climate Summit in Paris in 2015. |
a) Business |
ERAMET is a worldwide Group focused on mining (Nickel, Manganese), metallurgy (production of FeNi, FeMn and SiMn, other Mn alloys and production of stainless steel and superalloys products) It employs 15 000 people including around 6 000 people in the EU All its processes are energy-intensive |
Jean-François BERJON, corporate climate change delegate inside the Communication and Sustanaible Development Department (DC2D) Tour Maine-Montparnasse, 33 avenue du Maine, 75755 PARIS Cedex 15, France Tel: + 33 6 79 94 99 66 E-mail: jean-francois.berjon@erametgroup.com |
a) yes |
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1) yes |
b) no |
In the ferro-alloys sector, the abatement potential is very limited. The production process goes along with incompressible emissions. The European ferro-alloys industry has been an early mover and the thermodynamic limits for CO2 emissions have almost been reached. Beyond these limits, process emissions cannot be further reduced with the state-of-the-art technologies. Through EUROALLIAGES we have provided DG CLIMA with calculations on stoichiometry in April 2010 and is available to present scientific evidence again. Besides, the last digits are the most expensive to reach and the global competitiveness of the European ferro-alloys sector will be even more under pressure. Innovation is most certainly a key to further abatement and the industry needs support in this direction, especially with the high cost that goes along with it. However, for the design of EU policy, ERAMET do not see as realistic an approach relying on potential breakthrough technologies. |
a) yes |
ERAMET, through EUROALLIAGES, supports the EU ETS, however the system needs improvements. To contribute to industry’s competitiveness, the economic incentive for carbon efficiency must not increase the unilateral cost burden and the risk of carbon leakage. Today, the incentive is distorted by the ex-ante allocation. The current ETS design does not adequately protect against carbon leakage because reduction factors reduce free allocation, the carbon leakage status of industry is uncertain and the ex-ante principle undermines growth and efficiency. Energy efficiency is a natural path for an energy-intensive sector like ours and it is being exploited where economically viable. It however requires big investments which are partly hindered by the EU ETS: in the case of heat recovery, the potential free emission allowances attached to the heat are transferred to the utilities which purchase the recovered energy while the financial effort lies in the industrial plants. |
a) yes |
As long as the ambitious European climate policy is not mirrored by equivalent international efforts, creating a real level playing field, the EU needs to ensure that the unilateral cost burden on EU industry is minimised. This is important not only from an economic viewpoint but also with an environmental consideration: the EU emission reduction targets should not be achieved through production relocation. The international efforts must not only be comparable; the cost for the industry must be the same in the main competing regions. Although ETS-like systems are emerging elsewhere, they are far from the EU ambitions and they generally offer a higher level of protection of industrial competitiveness. Until a real level playing field is reached, European industry needs not only transitional provisions, but also a stable framework which allows investments. |
b) quite adequate |
The tool is adequate but implementation flaws reduce its effectiveness. The principle should be that free allocation allows positive stimulation for good performers and enables bad performers to improve. Today, the allocation calculated based on best performers is decreased through correction factors. The decrease of 1.74%/year is higher than the usual rate of carbon efficiency improvements which makes the allocation not adapted to the reality of best available technologies. Besides, the compensation for indirect emissions is restricted and uncertain. Moreover, the allocation rules must be revised to also prevent carbon leakage at higher CO2-prices. The system especially needs fundamental revision if the EU remains isolated with its ambitious climate policy. In the medium- to long-term, an ambitious climate policy and the necessary effective protection against carbon leakage cannot rely only on a transitional measure such as free allocation. |
b) it largely keeps the incentive |
The incentive to reduce emissions is provided by the carbon price and the best performers principle. The benchmark principle gives carbon-efficient producers an economic advantage compared to less carbon-efficient ones. In other words, the incentive to make efficiency improvement investments is only strengthened by the cost difference achievable through an investment. However, this incentive is distorted in the current EU ETS design through the use of historical production data. Free allocation should be based on actual production instead. It must also be remembered that producers in the sectors exposed to a high risk of carbon leakage cannot pass through their carbon costs into product prices. |
c) quite exaggerated |
The red tape could be avoided by the introduction of an alternative free allocation mechanism, based on actual production (instead of historical). It would not only reduce the administrative burden, but also help avoid investment leakage. |
d) there should be no limit to overall free allocation to industry |
Free allocation to industry should exist as long as necessary and at a sufficient level to avoid carbon leakage. The calculation should be based on realistic performances taking into account available technologies. A good European performer should have no disadvantage compared to its competitors in other parts of the world. It must not be forgotten that global competitiveness and carbon leakage are intrinsically linked. |
e) I don’t know |
Renewable energies are already supported by separate national schemes, so the ETS funds should not play a role in this area anymore. CCS can be a useful tool to decarbonise the power sector and also the industry. In addition, CCU is also a concept which deserves attention. R&D in these technologies is necessary, but it should be independent from the auctioning incomes. It is impossible to answer on the level of support: the NER support volume cannot be fixed upfront since it is related to the carbon price. |
a) yes |
There is an inconsistency between the EU emission reduction targets and the abatement potential of the ferro-alloys and silicon sector. The technologies which would be required to achieve the EU targets are not available today. Therefore the R&D and innovation must be further supported. However, the balance must be carefully drawn and this support should not be made at the expense of competitiveness; it should come on top of free allocation with regard to carbon leakage. A possibility for a support scheme is also to allocate additional free allowances. |
c) other types of funding (please specify) |
A fund for industrial innovation is clearly needed. It should be set up at EU level, because going to national level only means scaling down and fragmenting innovation. Earmarking part of the auctioning revenues does not seem to be a good solution. It means collecting money from the companies and then giving some back to part of them (usually the best lobbyists). The funds should be left in the companies to be invested in innovation. It should not be forgotten that in the vast majority of cases innovation takes place in the private sector. However additional support is still needed from EU level. |
a) yes |
Compensation for indirect emissions must also be covered at EU level through additional free allocation. For the ferro-alloys sector, which is energy-intensive, this is of crucial importance. Carbon leakage is very much due to energy costs; therefore there should be action to alleviate the rise in energy prices and the costs for industry. The cap for industry under the EU ETS must not be absolute but take into account the (realistic) abatement potential. It must also be subject to equivalent commitments at global level. With regard to free allocation, the principle should be to base it on actual production and not on historical data, which would improve the system (please see above). |
a) the present two groups should remain |
Ferro-alloys are globally priced and are price takers; hence the European producers are faced with competitors who do not abide by the same rules. As long as there is no operational global binding climate agreement with equal commitments, the carbon leakage risk will subsist for European industry. Therefore the list and the measures must be kept. In principle, all energy-intensive industries should be on the list. Value chains need to stay in Europe and no sector should be replaced by imports. Once an industry has left Europe, it does not come back. Investment leakage, which is currently undeniably occurring, should be better reflected in the list and the measures. It represents the first step to carbon leakage. The carbon leakage list should also cover indirect emissions, which represent an important cost for European industry and a crucial one for energy-intensive industries. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
Both current criteria should remain into place since they both clearly reflect the risk of carbon leakage, but they need to be strengthened with essential new elements: - a carbon costs comparison Europe vs. other major industrial regions (CO2, RES, grid and back-up costs); - the use of the marginal power plants for the indirect carbon cost; - an auctioning factor that is not too sharp; - the impact of value chain effects; - a forward-looking carbon price. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The current criteria and the thresholds are well designed to reflect the risk of carbon leakage. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The following parameters are proposed for a forward-looking qualitative assessment: - All costs related to climate change policy along the value chain, in particular upstream costs, should be taken into account; - The value chain analysis should also consider the implication for downstream sectors if an upstream sector is removed from the carbon leakage list; - The inability to pass through locally imposed costs for sectors whose product prices are determined globally should be taken into account. |
b) longer (please specify) |
Investment decisions require a longer planning period that what is currently offered within the EU ETS. Uncertainty and lack of predictability are elements that drive investments out of Europe. Planning stability should be ensured as long as there is no functional binding global climate agreement with equivalent commitments. Predictability with regard to carbon leakage should be ensured at least for the duration of EU ETS Phase 4. |
c) the approach should be less stringent (please specify) |
The stringency of the benchmarks should be related to comparisons at global level. The level of the benchmarks should be designed to provide an effective resistance to carbon leakage at forward-looking higher carbon prices in the longer term future. Benchmarks should be set at weighted average with a realistic annual carbon efficiency improvement rate. This has been the approach of other ETS-like systems emerging around the globe, which have certainly learned from the mistakes of the first ETS adopted by the EU. As far as the ferro-alloys sector is concerned, it is covered by fall-back approaches. A global comparison would allow the elaboration of a benchmark which will help take into account essential characteristics of this industry instead of making it subject to discretionary calculations. |
b) no |
A revision of the benchmarks would harm the predictability necessary to investments (see answer to question 16). Only the commercialisation of a breakthrough technology changing the face of a sector would justify such a revision in the coming years. Until a binding global climate agreement with equivalent commitments is made functional, changing this parameter of protection against carbon leakage would be counter-productive. The ferro-alloys sector, which is subject to fall-back approaches, is looking forward to the adoption of a global climate agreement at the abovementioned conditions, which would allow the elaboration of a benchmark and help take into account essential characteristics of this industry. |
c) other (please specify) |
Actual production data should be used to determine the allocation (see answers to questions 5 and 6). Free allocation should reflect economic reality of the plant. |
a) no, there should be no deviations |
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c) yes, in the form of additional free allocation |
Direct and indirect emissions must be treated in parallel since they both harm installations covered by the EU ETS. Indirect emissions are a perverse effect of a policy element not designed to impact European industry. Power producers are price-makers and European industry does not have any power to alleviate this effect. Today, the treatment of indirect emissions is based on an intrinsically unstable system for financial compensation (depending on available budget, political decisions, decided on a yearly basis). It should derive from a more solid and predictable system, at EU level, through additional free allocation and without undue reduction factors. Only at these conditions will European industry be effectively protected against carbon leakage. |
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a) from the Member States' auction budgets |
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The entry into function of a binding global climate agreement which entails equal commitments from all parties is of major importance for the European system of protection against carbon leakage. As long as there is no joint action, unilateral increases of European emission reduction targets will harm more and more European industry. Therefore the protection against carbon leakage granted at European level must be in line with the European level of ambition. |
a) Business |
Esse Elle Laterizi Srl |
Ing. Filippo Martinelli, Sede amministrativa: via S.P. 343 Asolana, 25 - 26041 Casalmaggiore (Cremona) - Cell. 366/5840313 - Fax. 0375/40120 - qsa@grupposereni.it |
a) yes |
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1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improve |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. This would limit the list to sectors really exposed and would eliminate the risk of a carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
As explained above, all energy intensive sectors as defined in the Energy Taxation Directive should be considered as exposed to the carbon leakage risk. As an alternative, trade and carbon intensity criteria should be used considering the following elements. First, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS. Second, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensit |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
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Least important |
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a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
a) Business |
EVONIK AGROFERM ZRt. (EVONIK AGROFERM Ltd) |
4183 Kaba , Nádudvari útfél HUNGARY TEL + 36-54-520-104 FAX +36-54-520-150 Email: laszlo.csoma@evonik.com |
a) yes |
|
1) yes |
c) I don’t know |
|
b) no |
|
a) yes |
|
b) quite adequate |
|
b) it largely keeps the incentive |
|
c) quite exaggerated |
Különösen a kisebb volumenű kibocsátások esetén. |
b) a higher share than in 2013-20 |
|
e) I don’t know |
|
a) yes |
|
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
|
c) I don’t know |
|
a) the present two groups should remain |
|
a) the present criteria should remain |
|
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
c) I don’t know |
|
d) in line with the duration of ETS Phase 4 |
|
a) the present approach of average of the 10% most efficient installations should remain |
|
a) yes (please specify how often) |
5-8 years |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
|
e) I don’t know |
|
c) yes, in the form of additional free allocation |
|
Less important |
Least important |
Most important |
Important |
|
a) from the Member States' auction budgets |
|
|
a) Business |
FABRICACION ESPAÑOLA SANITARIA, S.A. CIF A-12007068 |
CTRA. DE ARGELITA, S/N 12120 LUCENA DEL CID (CASTELLON) ESPAÑA TELEFONO +34 964 38 0011 luiscarda@fabresa.com |
a) yes |
|
1) yes |
b) no |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improve |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010 |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored |
a) the present two groups should remain |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value) which are subject to international competition should be considered as exposed to the risk of carbon leakage, until an international agreement is established. It is important to limit the list to sectors that really compete globally, and thus it is vital to maintain an assessment based on trade intensity with third countries. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
The present criteria should be used, considering the following element. GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4 |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU- wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated |
a) Business |
FBM Fornaci Briziarelli Marsciano SPA |
Via 24 Maggio, 1 Marsciano (Perugia) - ITALY +39 075-87461 email: fbm@fbm.it |
a) yes |
|
1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improvement |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. This would limit the list to sectors really exposed and would eliminate the risk of a carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
As explained above, all energy intensive sectors as defined in the Energy Taxation Directive should be considered as exposed to the carbon leakage risk. As an alternative, trade and carbon intensity criteria should be used considering the following elements. First, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS. Second, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
a) Business |
FERROPEM FR Activities: -Silicon metal and Silica fume (Silicon metal is used in aluminum industry and in chemical industry to produce silicones, semiconductor and in the production of photovoltaic cells for solar panels) -Foundry alloys (inoculants, nodularisers ),(to improve strength and wear resistance of cast iron) -Ferrosilicon (Improve the strength and quality of iron and steel products) All ferroalloys are produced in submerged electric arc furnaces All processes are energy-intensive |
Bernard PLASSE Secretary General of FERROPEM 517 avenue de la Boisse 73000 CHAMBERY (FRANCE) Tel +33479683100 email:bernard.plasse@pemsil.com |
a) yes |
|
1) yes |
b) no |
In the ferro-alloys and silicon sector, the abatement potential is very limited. The production process goes along with incompressible emissions. The European ferro-alloys and silicon industry has been an early mover and the thermodynamic limits for CO2 emissions have almost been reached. Beyond these limits, process emissions cannot be further reduced with the state-of-the-art technologies. FERROPEM provided DG CLIMA with calculations on stoichiometry in April 2010 and is available to present scientific evidence again. Besides, the last digits are the most expensive to reach and the global competitiveness of the European ferro-alloys and silicon sector will be even more under pressure. Innovation is most certainly a key to further abatement and the industry needs support in this direction, especially with the high cost that goes along with it. However, for the design of EU policy, FERROPEM does not see as realistic an approach relying on potential breakthrough technologies. |
a) yes |
FERROPEM supports the EU ETS, however the system needs improvements. To contribute to industry’s competitiveness, the economic incentive for carbon efficiency must not increase the unilateral cost burden and the risk of carbon leakage. Today, the incentive is distorted by the ex-ante allocation. The current ETS design does not adequately protect against carbon leakage because reduction factors reduce free allocation, the carbon leakage status of industry is uncertain and the ex-ante principle undermines growth and efficiency. Energy efficiency is a natural path for an energy-intensive sector like ours and it is being exploited where economically viable. It however requires big investments which are partly hindered by the EU ETS: in the case of heat recovery, the potential free emission allowances attached to the heat are transferred to the utilities which purchase the recovered energy while the financial effort lies in the industrial plants. |
a) yes |
As long as the ambitious European climate policy is not mirrored by equivalent international efforts, creating a real level playing field, the EU needs to ensure that the unilateral cost burden on EU industry is minimised. This is important not only from an economic viewpoint but also with an environmental consideration: the EU emission reduction targets should not be achieved through production relocation. The international efforts must not only be comparable; the cost for the industry must be the same in the main competing regions. Although ETS-like systems are emerging elsewhere, they are far from the EU ambitions and they generally offer a higher level of protection of industrial competitiveness. Until a real level playing field is reached, European industry needs not only transitional provisions, but also a stable framework which allows investments. |
b) quite adequate |
The tool is adequate but implementation flaws reduce its effectiveness. The principle should be that free allocation allows positive stimulation for good performers and enables bad performers to improve. Today, the allocation calculated based on best performers is decreased through correction factors. The decrease of 1.74%/year is higher than the usual rate of carbon efficiency improvements which makes the allocation not adapted to the reality of best available technologies. Besides, the compensation for indirect emissions is restricted and uncertain. Moreover, the allocation rules must be revised to also prevent carbon leakage at higher CO2-prices. The system especially needs fundamental revision if the EU remains isolated with its ambitious climate policy. In the medium- to long-term, an ambitious climate policy and the necessary effective protection against carbon leakage cannot rely only on a transitional measure such as free allocation. |
b) it largely keeps the incentive |
The incentive to reduce emissions is provided by the carbon price and the best performers principle. The benchmark principle gives carbon-efficient producers an economic advantage compared to less carbon-efficient ones. In other words, the incentive to make efficiency improvement investments is only strengthened by the cost difference achievable through an investment. However, this incentive is distorted in the current EU ETS design through the use of historical production data. Free allocation should be based on actual production instead. It must also be remembered that producers in the sectors exposed to a high risk of carbon leakage cannot pass through their carbon costs into product prices. |
c) quite exaggerated |
|
d) there should be no limit to overall free allocation to industry |
Free allocation to industry should exist as long as necessary and at a sufficient level to avoid carbon leakage. The calculation should be based on realistic performances taking into account available technologies. A good European performer should have no disadvantage compared to its competitors in other parts of the world. It must not be forgotten that global competitiveness and carbon leakage are intrinsically linked. |
e) I don’t know |
|
a) yes |
|
c) other types of funding (please specify) |
A fund for industrial innovation is clearly needed. It should be set up at EU level, because going to national level only means scaling down and fragmenting innovation. Earmarking part of the auctioning revenues does not seem to be a good solution. It means collecting money from the companies and then giving some back to part of them (usually the best lobbyists). The funds should be left in the companies to be invested in innovation. It should not be forgotten that in the vast majority of cases innovation takes place in the private sector. However additional support is still needed from EU level. |
a) yes |
Compensation for indirect emissions must also be covered at EU level through additional free allocation. For the ferro-alloys and silicon sector, which is energy-intensive, this is of crucial importance. Carbon leakage is very much due to energy costs; therefore there should be action to alleviate the rise in energy prices and the costs for industry. The cap for industry under the EU ETS must not be absolute but take into account the (realistic) abatement potential. It must also be subject to equivalent commitments at global level. With regard to free allocation, the principle should be to base it on actual production and not on historical data, which would improve the system (please see above). |
a) the present two groups should remain |
Ferro-alloys and silicon are globally priced and are price takers; hence the European producers are faced with competitors who do not abide by the same rules. As long as there is no operational global binding climate agreement with equal commitments, the carbon leakage risk will subsist for European industry. Therefore the list and the measures must be kept. In principle, all energy-intensive industries should be on the list. Value chains need to stay in Europe and no sector should be replaced by imports. Once an industry has left Europe, it does not come back. Investment leakage, which is currently undeniably occurring, should be better reflected in the list and the measures. It represents the first step to carbon leakage. The carbon leakage list should also cover indirect emissions, which represent an important cost for European industry and a crucial one for energy-intensive industries. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
Both current criteria should remain into place since they both clearly reflect the risk of carbon leakage, but they need to be strengthened with essential new elements: - a carbon costs comparison Europe vs. other major industrial regions (CO2, RES, grid and back-up costs); - the use of the marginal power plants for the indirect carbon cost; - an auctioning factor that is not too sharp; - the impact of value chain effects; - a forward-looking carbon price. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The current criteria and the thresholds are well designed to reflect the risk of carbon leakage. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
b) longer (please specify) |
Investment decisions require a longer planning period that what is currently offered within the EU ETS. Uncertainty and lack of predictability are elements that drive investments out of Europe. Planning stability should be ensured as long as there is no functional binding global climate agreement with equivalent commitments. Predictability with regard to carbon leakage should be ensured at least for the duration of EU ETS Phase 4. |
c) the approach should be less stringent (please specify) |
The stringency of the benchmarks should be related to comparisons at global level. The level of the benchmarks should be designed to provide an effective resistance to carbon leakage at forward-looking higher carbon prices in the longer term future. Benchmarks should be set at weighted average with a realistic annual carbon efficiency improvement rate. This has been the approach of other ETS-like systems emerging around the globe, which have certainly learned from the mistakes of the first ETS adopted by the EU. As far as the ferro-alloys and silicon sectors are concerned, they are covered by fall-back approaches. A global comparison would allow the elaboration of a benchmark which will help take into account essential characteristics of this industry instead of making it subject to discretionary calculations. |
b) no |
|
c) other (please specify) |
Actual production data should be used to determine the allocation (see answers to questions 5 and 6). Free allocation should reflect economic reality of the plant. |
a) no, there should be no deviations |
|
c) yes, in the form of additional free allocation |
|
Less important |
Most important |
Important |
Least important |
|
a) from the Member States' auction budgets |
|
|
a) Business |
Fertiberia, S.A. |
Francisca Galindo Paniagua, Adress: Paseo de la Castellana, 259-D, 28046-Madrid, Spain. Tel: +34 915865828 email: fragal@fertiberia.es |
a) yes |
|
1) yes |
a) yes |
When it comes to the EU fertilizer industry, GHG reductions by end of pipe, as for example the N2O abatement have been implemented in many plants already. This resulted in an overall reduction by more than 80% in the N2O emissions since 2004. Further reduction of GHG emissions via energy efficiency is more difficult and will require the construction of new plants with the newest technology.In the case of ammonia production, even the most energy efficient production will always result in the release of CO2 due to the chemical reaction taking place, i.e. natural gas (CH4) delivers H2 for the NH3 production and is thus the feedstock:3 CH4 + 6 H2O + 4 N2 à 8NH3 + 3 CO2 The unavoidable process GHG release from feedstock in ammonia production should therefore be excluded from ETS. Ammonia producers should only be penalized on energy related emissions. Given the poor competitive position of Europe due to high energy costs, this type of investments are not likely to happen in Europe. |
b) no |
EU ETS motivates the industry to become more energy efficient. The EU ammonia industry is already the most efficient in the world. However, the extra ETS costs do not increase the competitiveness of the European industry, if the cost becomes excessive (cost of implementing and operating new technology and/or cost of CO2 allowances) compared to the cost for industries operating in countries with less ambitious climate policy. High EU ETS costs may lead to closure of European industries and carbon leakage. |
a) yes |
Special measures (100 % free allocations according to achievable benchmarks without correction factors) must be provided to EU industries that are exposed to carbon leakage. This allocation should be based on actual production (instead of historical production). This support must exist as long as international agreements are not reached and the European industry is facing stricter regulations than others. |
a) very adequate |
Free allocation is the best tool available under ETS to avoid carbon leakage. Free allocation should be regulated in such a way that it fully protects industries exposed to carbon leakage, especially energy intensive industries, from higher climate costs compared to industries located in other parts of the world with less strict climate regulation. |
a) it absolutely keeps the incentive |
‘Free allocation’ should be 100% free for the best performer Today this is not the case due to too tight benchmarks, CSCF and ex ante allocation system. Even if the best performers get 100% free allocation fFor the large majority of ETS production sites the system will be a driver for innovation of more efficient technology and use of renewables. |
b) quite proportionate |
Allocation on actual production levels will not lead to an additional administrative burden since reporting on manufacturing output is already done anyway. |
d) there should be no limit to overall free allocation to industry |
Energy intensive industries should have an unlimited free allocation based on actual production and achievable benhmarks without correction factor to compensate for differences in climate policies of countries with less ambitious targets than EU. The EU industry must not be unilaterally burdened with limits and constraints. The incentive to continue improving energy efficiency is guaranteed by a benchmark-based allocation. |
a) a substantially higher share than in Phase 3 |
Cost efficient, reliable and publically acceptable carbon capture and storage is essential for reaching the long term emission reduction targets. |
a) yes |
It is highly surprising that such a support scheme has not yet been established, since the challenge of climate change is of major importance. However, such a scheme should not be a large administrative burden and cover the project development phase rather than the operational stag (see answer to question 22). |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
ETS revenues should be directed back to the industry to continue promoting research and project helping to reduce GHG emissions. |
a) yes |
In addition: - compensation of indirect carbon costs associated with the consumption of electricity - development of an energy pricing system which is competitive with the energy pricing in other parts of the world |
b) more carbon leakage categories should be defined |
Sectors that are severely exposed to the risk of carbon leakage, should be placed in a separate category and given preferential treatment. |
a) the present criteria should remain |
The present criteria include the use of a specific carbon price to calculate the share of carbon costs in their GVA. The carbon price must be kept at the current level; otherwise it will be unclear if an industry will be compensated for the carbon costs in the future. This uncertainty will negatively influence investment and maintenance costs. The system should also be modified such as “process emissions” should be exempted from ETS. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
d) in line with the duration of ETS Phase 4 |
The validity should be long to come to a consistent and predictable policy for the industry sectors. A review of the carbon leakage list together with the review of the ETS is therefore a logical choice. |
c) the approach should be less stringent (please specify) |
In a less stringent system the benchmarks should be based on the weighted average and not on the top 10%. If the present approach (10%) is decided, the benchmark levels should remain unchanged at the present levels. Moreover, the combination of the 10% benchmark and the application of a CSCF or linear reduction factor results in unrealistic low free allocations. For the ammonia industry even the best performing plant will not receive enough free allocation to compensate for the unavoidable feedstock related emission and they will face additional costs. These costs can only be avoided by reduction of the production (to max.49%) and import of the product from outside the EU, which is carbon leakage. This is fully undesired for the company, the environment and the EU economy. |
b) no |
Benchmarks should describe the level of performance of the industry and not the state of the art (which for many industry sectors will never materialize in Europe given the fact that the state of the art technology can only be implemented in new plants.) The competitive environment in Europe (energy costs, climate cost, changing climate legislation every 8-10 years) is prohibitive for multibillion investments with long payback times. Revising benchmark would also punish the early adaptors of innovations and will stop them innovating again. |
c) other (please specify) |
Historical production data should not be used. Instead, production data for the year of concern should be the basis for issuing allowances. |
a) no, there should be no deviations |
There should be no deviations as long as (1) industries severely exposed to the risk of carbon leakage are placed in a special category with preferential treatment, (2) the benchmarks remain at the present levels, and (3) actual production data is used for calculating allowances. |
d) yes, in the form of financial compensation at EU-level |
A harmonised EU-wide compensation scheme avoids discrepancies between Member States and ensures equal competition between EU industries. The indirect costs are invoice in euros (as integral part of the electricity invoice) and not in emission rights. Therefore the compensations should also be given in euros. |
Important |
Less important |
Most important |
Least important |
|
a) from the Member States' auction budgets |
Climate change is a global challenge of utmost importance to address today through technology developments. It seems unwise to limit the funding only from auction budgets and free allocations. The challenge demands a special EU R&D technology agenda |
|
a) Business |
Fincibec Spa |
Via Valle d'Aosta n° 47, Sassuolo , Modena , Italia. Production of tiles. Fioretini STefano , Email: Fiorentini.stefano @fincibec.it , +39 0536 861300 |
a) yes |
|
1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improvemen |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. This would limit the list to sectors really exposed and would eliminate the risk of a carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
As an alternative, trade and carbon intensity criteria should be used considering the following elements. First, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS. Second, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
a) Business |
FORNACE LATERIZI CARENA SRL |
VIA CAMPORELLE 50, 10020 CAMBIANO (TO) - +39 011 9440127 - pierluigi@fornacecarena.it |
a) yes |
|
1) yes |
b) no |
|
b) no |
Energy is very expensive, furthermore for those industries who fall under the ETS jurisdiction, and those industries are already encouraged to be energy efficient and, consequently, economically efficient. Moreover ETS is costly (time and money to manage). Nevertheless energy efficiency is among the most important assets for the future of the environment and for the businesses linked to the environmental field. |
a) yes |
outsoursing is a very strong and Always more frequent policy. |
b) quite adequate |
|
b) it largely keeps the incentive |
|
c) quite exaggerated |
|
c) a constant share as in 2013-20 |
|
b) the same share as in Phase 3 |
|
a) yes |
|
d) I don’t know |
|
a) yes |
|
b) more carbon leakage categories should be defined |
|
g) I don’t know |
|
c) I don’t know |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
a) five years |
|
d) I don’t know |
|
c) I don’t know |
|
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
|
a) no, there should be no deviations |
|
b) no, and there is no need for financial compensation by Member States, either |
|
Important |
Most important |
Least important |
Less important |
|
e) I don't know |
|
|
a) Business |
Fornace Mosso Paolo srl |
Mosso Guido via Asti 15 - 10026 Santena tel +39.011.9492531 fax +39.011.9491692 gm@fornacemosso.it |
a) yes |
|
1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improvement |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. This would limit the list to sectors really exposed and would eliminate the risk of a carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
As explained above, all energy intensive sectors as defined in the Energy Taxation Directive should be considered as exposed to the carbon leakage risk. As an alternative, trade and carbon intensity criteria should be used considering the following elements. First, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS. Second, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
a) Business |
FORNACE TORRICELLA LATERIZI SRL |
Giuliano Pezzotti - Via Fornace P. 18 - 2602 Ostiano - Italy - tel. +393476040156 fax +390372840407 - fornacetorricella@libero.it |
a) yes |
|
1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive.This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improveme |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. This would limit the list to sectors really exposed and would eliminate the risk of a carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
As explained above energy intensive sectors as defined in the Energy Taxation Directive should be considered as exposed to the carbon leakage risk.As an alternative trade and carbon intensity criteria should be used considering the following elements. GVA is not an appropriate indicator to reflect the impact ofCO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus GOS. On average labour costs represent up to70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with theGOS. Second, the current criteria enable either to have a trade intensity ≥30%, or a carbon intensity ≥30%, or a trade intensity ≥10% combined with a carbon intensity ≥5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥5% combined with a carbon intensity ≥10%should be introdu |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
a) Business |
Fornaci Laterizi Danesi Spa |
Ing. Filippo Martinelli Sede amministrativa: via Bindina, 8 - 26029 Soncino (Cremona) - Cell. 366/5840313 - Fax. 0374/83030 filippo.martinelli@danesilaterizi.it |
a) yes |
|
1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improve |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. This would limit the list to sectors really exposed and would eliminate the risk of a carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
As explained above, all energy intensive sectors as defined in the Energy Taxation Directive should be considered as exposed to the carbon leakage risk. As an alternative, trade and carbon intensity criteria should be used considering the following elements. First, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS. Second, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensit |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
a) Business |
Fortum Corporation |
Fortum Corporation P.OB 1, Keilaniementie 1 FI-00048 Fortum Finland Contact person: Kari Kankaanpää, Senior Manager, Climate Affairs Tel. +358 50 4532330 kari.t.kankaanpaa@fortum.com |
a) yes |
|
1) yes |
a) yes |
Solutions do exist to deliver improvements in carbon and resource efficiency. The policymakers should however identify ways to incentivise innovation, product development and process improvements. The global market for resource efficient industrial products are huge and an innovative policy in this area could drive strong competitive advantage for EU companies in global markets. |
a) yes |
The EU ETS sets a price on carbon dioxide emissions and encourages to reduce emissions and improve energy efficiency. Enhanced energy efficiency contributes to reduction of fuel and raw material cost and consequently increases the competitiveness. |
a) yes |
Industrial customers are a key for the electricity sector and their competitiveness has to be secured. However, the EU ETS as a mechanism should be preserved intact and we should continue applying it in an uniform and objective way across all ETS sectors. As long as we lack a global regime and carbon constraint, European industry has to be compensated for the cost of the climate policy. Measures to support industry should be implemented outside the ETS (e.g. compensation of increased energy costs) in order to avoid watering down the steering effect of ETS. Also, measures to support the industry shall be based on a careful, fact-based assessment. Experience to date does not reveal clear carbon leakage for the industrial sectors (ref. e.g. Carbon Leakage Evidence Project, 2013). Indeed, labor costs and local market conditions (like tax structure, regulatory environment) are far more relevant factors in industrial investment decisions than costs of climate policies. |
a) very adequate |
The free allocation is the most appropriate form of direct support. The main goal of free allocation in the two first phases of the ETS was to avoid carbon leakage and apparently this was successful. During the operation of the ETS energy intensive industries have built up a major reserve of allowances that they received for free. This reserve is expected to grow further up to 2020 and can also be used for compliance post-2020. - In fact, free allocation has proved to be over-adequate resulting in significant over-allocation for the industry in many cases. In the future, a more dynamic allocation based on the real demand should be considered. |
c) it largely compromises the incentive |
Abundant and continued free allocation means that there is no carbon cost for the operations concerned. It may compromise or at least reduce and postpone the incentives and measures for reducing emissions. |
a) absolutely proportionate |
The data required for the implementation of benchmarking provisions does exist in the companies anyhow and the administrative burden is reasonable. |
a) a lower share than in 2013-20 |
As the climate targets get more and more ambitious, all sectors should be involved in reducing the emissions. Target must be a global carbon market and commitments for all major emitters. |
b) the same share as in Phase 3 |
Immature technology should be subject to research, development and demonstration (RDD) support also in the future. The experience from NER300 programme has shown that the technology development can be unpredictable. CCS has not developed as planned and almost all the NER300 financing has been directed towards renewable energy. Originally the purpose of the NER300 was vice versa. However, it has to be noticed that RDD support as such does not result in commercialization of technologies. Right market conditions (like strong carbon price and smooth licencing procedures) encouraging investments are needed to get new technologies into the market. |
b) no |
Not in the framework of the ETS. RDD support for emerging technologies is a necessity, but it should be managed outside the ETS. NER300 has been dedicated for CCS and RES only, but all carbon free and low-carbon technologies should be in the framework of the support. |
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
In order to improve long-term competitiveness of the EU and companies it is crucial to continue to allocate funding on the basis of competitive calls and using excellence as the decisive selection criteria. Regarding selection criteria, priority should be given to research projects that have the biggest potential for cost-efficient carbon reduction and the potential for market viability in the medium term while reserving also a reasonable share of the funds to radical innovations and projects covering the whole innovation chain. |
a) yes |
The indirect cost (impact of carbon price on energy prices) may need compensation also in the future. Perception of the future carbon prices plays a role in investment and relocation decisions by the industry. Therefore planned policies and regulatory certainty are of utmost importance. |
a) the present two groups should remain |
The rules should be as simple as possible. |
c) the share of 'carbon costs' in the GVA should be maintained, but 'carbon costs' should be taken into account to the extent that they can't be recuperated in product prices |
Industry has been able to pass on costs related to the EU ETS to the product prices and thus to consumers. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The rules should be as simple as possible. |
b) no, all criteria should be based on simple metrics and linked to clearly defined thresholds |
Keep it simple! The risk of carbon leakage should in any case diminish in the future as the climate change mitigation actions should become more and more global. The criteria should be simplified, not made more complicated. |
d) in line with the duration of ETS Phase 4 |
The certainty of the future policy and rules is important for investment decisions. |
a) the present approach of average of the 10% most efficient installations should remain |
|
a) yes (please specify how often) |
Once in a trading period |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
When using an ex-post approach, the data should be as up-to-date as possible |
a) no, there should be no deviations |
Keep it simple! |
d) yes, in the form of financial compensation at EU-level |
The compensation should be handled so that the functioning of the ETS itself is not disturbed and that there is no subsidy competition between member states. Ideally, such (national) compensation should be based on EU level criteria. Funding for compensation should originate from auctioning revenues or VAT on electricity, as these revenues increase together with rising carbon and electricity prices. An EU level fund similar to NER300 could be one option. |
Least important |
Important |
Most important |
Less important |
Regarding the EU innovation support, it is important to make sure that funding is available also for large-scale demonstration projects, as the scale and risks of such projects are often too big to be covered by private funding. |
c) from both |
All sectors should participate in the funding of innovations. |
|
a) Business |
GDC Group Ltd- Coopers Bank Works |
Matthew Dodd, Kiln Manager at GDC Group Ltd- Coopers Bank Works Coopers Bank Road Pensnett Brierley Hill West Midlands DY5 4TY 01384 255141 matthew.dodd@glendimplex.com |
a) yes |
|
1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. In some cases, a CO2 target and an energy efficiency target can contradict each other, e.g. pore forming agents used in the clay block industry can contribute to a lower fuel consumption but can raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improvements |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS are forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States and where it has been used (such as here in the UK) the scheme remains complicated. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support renewables in Member States. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies. |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs > 3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. A global system would eliminate the risk of carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
As explained above, all energy intensive sectors as defined in the Energy Taxation Directive must be considered as exposed to the carbon leakage risk Nevertheless, if trade and carbon intensity criteria are to be used, they need to be adapted: Firstly, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). Average, labour costs can be up to 70% for some ceramic sectors. Therefore, using GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with GOS Secondly, the current criteria entail either: i) to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or ii) a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) introduced |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have: i) a trade intensity ≥ 30% or a carbon intensity ≥ 30%, or ii) a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. The application of this correction factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have limited impact since no major breakthrough technologies have been implemented following the initial benchmarking exercise. Furthermore, benchmark revision would entail a major administrative burden, especially for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
a) Business |
Górażdże Cement S.A. |
Marek Lepucki – Head of Environmental Department Poland, Chorula ul. Cementowa 1, 47-316 Górażdże, tel: +48 77 777 85 60, email: marek.lepucki@gorazdze.pl |
a) yes |
|
1) yes |
a) yes |
The cement industry is fully committed to reducing GHG emissions in line with overall EU policy objectives. This has been demonstrated by investments over the past 20 years which have driven down CO2 emissions from clinker production and by our roadmap to go much further in the coming decades. To achieve this, industry needs to innovate and invest. This requires a return on investment above the cost of capital and a policy framework that promotes the competitiveness of the sector and allows for a secure access to raw materials and affordable energy prices. The cement industry in Europe needs a stable legal framework with predictable CO2 prices in order to justify and allocate scarce investment funds to realize CO2 emission reduction ambitions. 2030 targets have to take into account each sector specific roadmap. Differentiated levels of efforts are needed for different sectors (manufacturing industry, power, building, transport) based on the ability to pass the cost on to the end user. |
b) no |
Measures to decrease energy consumption and improve resources efficiency will de facto reduce CO2 emissions. Some industries like cement have very high energy costs as a proportion of GVA or profit which means that energy efficiency is an integral part of manufacturing. The EU ETS emphasis is GHG efficiency and in this regard it does put pressure on businesses to become more GHG efficient. In doing so EU ETS places CO2 costs on power generators and these costs are passed on to electricity consumers. There are limitations to which added costs act as a driver for efficiency before imports become more attractive. Furthermore, the cement and lime industry are unique due to the fact that the majority of GHG emissions are not caused by energy use from fuel combustion but come from the raw materials themselves. Around 60% of total CO2 emissions from clinker production are released directly from limestone. |
a) yes |
The EU has aspirations of leading on CC policy but globally unequal carbon pricing has the ability to shift trade patterns. In order to direct investments to growth and jobs in Europe, the cement industry needs a global level playing field, including imports and exports: climate change is a global problem that needs a global solution. EU policy can only incentivise companies to aggressively work on further emissions reduction if there is predictability in and equality in carbon prices and if it is part of an overall industrial policy ensuring companies to be competitive in the international arena. This also applies to energy costs. For cement, energy costs are especially important representing 30 % of operational costs with European costs being substantially higher than in the US, Russia and plants in North Africa. Transitional measures are needed to bridge the gap between the EU and other countries. Free allocation is the most effective transitional mechanism. |
b) quite adequate |
As long as emissions do not have the same cost in different countries, a level playing field can be achieved most effectively by equalising measures such as free allocation. The limited evidence of leakage and empirical studies demonstrates (see the report by Vivid Economics last June), in part, that free allocation is working. However, it should not be assumed that free allocation is insulating operators from all of the ETS costs as it does not mean ‘full free allocation’ because of the CSRF and as some operators will face higher costs than others depending on the allocation base year activity. Furthermore, the indirect costs of ETS have not been selected for compensation for cement in the Commission guidelines creating a distortion of competition with competitors. So, not only does the cement industry face the full indirect costs of ETS but competing construction sectors are able to be compensated for their additional costs related to indirect CO2. |
a) it absolutely keeps the incentive |
With free allocation based on benchmark, the incentive to invest is provided by the benchmark. The magnitude of the residual incentive is a function of carbon costs as a proportion of GVA. Cement has one of the highest CO2 costs/GVA of any industrial sector so the residual effort is greater than in most sectors. In its search for a legal framework that fosters a competitive environment, CEMBUREAU has considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The EU cement industry has a relatively flat benchmark curve indicating that there is a narrow gap between the best and the worst performers; this limited level of abatement potential makes the task of emissions reduction more difficult in the cement sector compared to many other sectors. |
b) quite proportionate |
Overall, the administrative burden is quite proportionate but the system is extremely disproportionate for small/trivial combustion sources. In many cases these minor sources were not part of the benchmarking exercise and should not be included in reporting. |
d) there should be no limit to overall free allocation to industry |
There should be free allocation if there isn’t an international agreement which places all competing manufacturers on an equal footing. Until certain conditions can be met with regard to the veracity of the schemes within other countries then transitional arrangements need to be maintained. Free allocation is the most effective transitional arrangement. The share of allowances dedicated to free allocation should be sufficient to avoid carbon leakage. To uphold this principle that carbon leakage should be minimized, the cross sectoral correction factor should be replaced by an adjustment to the auctioned amount to maintain the cap trajectory. That does not mean “a free ride for industry” but it would mean that sufficient allowances are provided for the most efficient producers because at present the CSCF has the ability to reduce free allocation beyond what is technically possible. |
e) I don’t know |
There are too many uncertainties on what the post 2020 allowances budget will be for the cement industry to be able to decide what share of the budget should be dedicated to such innovation support. The EU ETS does not encourage investment in new technology. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) yes |
To date, the NER 300 has been ineffective at stimulating novel CO2 reduction projects in the cement industry. The power generation sector which is passing on investment costs has benefitted most from the NER 300. The cement sector is not experiencing the same level of investment de-risking. The cement industry needs - an investment enhancing climate should encourage investments over long term (30 y) cycles in a capital intensive industry. Legal stability and CO2 price predictability are key to achieve this goal - Safeguards against price fluctuations in market based policy instruments; which objectives, if kept, should be clearly defined and not be prone to abuse for speculation purposes - an innovation policy which provides clear incentives for breakthrough technologies in a cost-effective way. Policy makers should consider hypothecation (earmarking) of revenues from allowance auctions and direct innovation support to those sectors facing the greatest abatement challenges. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Given the high costs associated with breakthrough technologies, funding from auctioning revenues should account for both capital and operational cost of projects. There should in addition be a ring fenced fund for the manufacturing industry. |
a) yes |
In its search for a legal framework that fosters a competitive environment, CEMBUREAU has considered an improved ETS with a performance based free allocation for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions cost impacts. In order to protect “carbon leakage” sectors’ competitiveness, the system could foresee either an adjustment to the overall cap to the auction amount or a sectoral cap with the inclusion of importers. However, a carbon pricing mechanism which is market-based and prone to wide fluctuations militates against effective investment. CEMBUREAU is ready to explore mechanisms which deliver price stabilization and global carbon price convergence. Some of the initial reflection is further elaborated in the annex to this paper and CEMBUREAU is ready to engage in a thorough reflection of a climate policy and energy policy that is fully integrated in a single industrial growth policy. |
a) the present two groups should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. One should consider a special treatment for process emissions e.g. full free allocation as those emissions are not linked to energy efficiency and are irreducible by their very nature. |
a) the present criteria should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. Nevertheless, as a static indicator trade intensity is of limited validity/conclusiveness. It is based solely on historic data and does not reflect future developments, i.e. resulting from changing cost patterns, at all. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria e.g. a complete loss of 30% of GVA is normally economically not acceptable for any industry or sector. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
EU trade and economic data is not always exact and its comparability with the EUITL CO2 data not always appropriate so there will always be a need to hear special cases. |
d) in line with the duration of ETS Phase 4 |
It is essential for the predictability of the system to introduce as little changes as possible in the course of a trading period; hence the validity of the list of sector exposed should be in line with the duration of the ETS phase 4. |
c) the approach should be less stringent (please specify) |
The benchmark would be calculated in a statistically solid way and be updated periodically to ensure predictability. It should be set at an ambitious but reasonable level and should not be distorted by statistical outliers. This can be achieved by defining percentile (e.g. 10%-percentile) or e.g. the average of a range including the 5% to 15% top performers of specific direct emissions (excluding the extreme outliers between 0% and 5%). Only this way, the benchmarking methodology will achieve sufficient statistical robustness for international application in ETS system. |
a) yes (please specify how often) |
Benchmark should be updated between two trading periods depending on what has been achieved but not during one trading period. One should consider a special treatment for process emissions e.g. full free allocation as those emissions are not linked to energy efficiency and are irreducible by their very nature. |
c) other (please specify) |
In its search for a legal framework that fosters a competitive environment, CEMBUREAU has considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The historic activity level (HAL) should be more closely aligned to recent production to avoid surplus allocation e.g. the average of the preceding 3 years. In this context, CEMBUREAU considers the recently released EcoFys study (Dynamic allocation for the EU Emissions Trading System, Enabling sustainable growth, 20 June 2014) and its allowances allocation reserve as an interesting step forward. However, a more recent HAL has its potential downsides for installations that have extended shutdowns or breakdowns, provision will be necessary to deal with exceptional HAL circumstances. |
a) no, there should be no deviations |
|
c) yes, in the form of additional free allocation |
Górażdże Cement S.A. believes that EU Compensation should be granted for indirect emission impact where carbon leakage vulnerability is a combination of direct plus indirect emission cost. There is no need for two state aid guidelines and the compensation for indirect costs could be internalized in the ETD by providing free allocation for indirect CO2. |
Less important |
Important |
Most important |
I don't know |
Górażdże Cement S.A. regrets the focus on carbon capture and storage and believes that carbon capture and re-use should be equally considered. Górażdże Cement S.A. believes that funding should be technology neutral. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) from the Member States' auction budgets |
|
Carbon leakage sectors must have secured free allowances for process emissions in case they are still included in post 2020 period. |
a) Business |
Grupa Ozarów S.A. ul.Ks.I.Skorupki 5, 00 -950 Warszawa |
Andrzej Ptak, Managing Director tel:15 839 11 06 andrzej.ptak@ozarow.com.pl |
a) yes |
1) yes |
a) yes |
Now, reduction potential in cement sector is very limited by technology and production process but the industry is fully committed to reducing GHG emissions. This has been demonstrated by investments over the past 20 years which have driven down CO2 emissions from clinker production and by our roadmap to go much further in the coming decades. To achieve this, industry needs to innovate and invest. This requires a return on investment above the cost of capital and a policy framework that promotes the competitiveness of the sector and allows for a secure access to raw materials and affordable energy prices. The cement industry in Europe needs a stable legal framework with predictable CO2 prices in order to justify and allocate scarce investment funds to realize CO2 emission reduction. 2030 targets have to take into account each sector specific roadmap. Differentiated levels of efforts are needed for different industry sectors based on the on the ability to pass the cost on the end user. |
b) no |
EU ETS is not a key factor in investments decisions. Lack of predictability of economic conditions even hampers investments. Measures to decrease energy consumption and improve resources efficiency will reduce CO2 emissions. Cement industry have very high energy costs as a proportion of GVA or profit. The EU ETS emphasis is GHG efficiency and in this regard it does put pressure on businesses to become more GHG efficient. The EU ETS places CO2 costs on power generators and these costs are passed on to electricity consumers. There are limitations to which added costs act as a driver for efficiency before imports become more attractive. Furthermore, the cement and lime industry are unique due to the fact that the majority of GHG emissions come from the raw materials usage. Around 63% of total CO2 emissions from clinker production are released from limestone.These emissions cannot be avoided in an technological way. The only way to reduction of these emissions is reduction of production. |
a) yes |
The EU has aspirations of leading on CC policy but globally unequal carbon pricing has the ability to shift trade patterns. In order to direct investments to growth and jobs in Europe, the cement industry needs a global level playing field, including imports and exports: climate change is a global problem that needs a global solution. EU policy can only incentivise companies to aggressively work on further emissions reduction if there is predictability in and equality in carbon prices and if it is part of an overall industrial policy ensuring companies to be competitive in the international arena. This also applies to energy costs. For cement, energy costs are especially important representing 30 % of operational costs with European costs being substantially higher than in the US, Russia and plants in North Africa. Transitional measures are needed to bridge the gap between the EU and other countries. Free allocation is the most effective transitional mechanism. |
b) quite adequate |
As long as emissions do not have the same cost in different countries, a level playing field can be achieved most effectively by equalising measures such as free allocation. The limited evidence of leakage and empirical studies demonstrates (see the report by Vivid Economics last June), in part, that free allocation is working. However, it should not be assumed that free allocation is insulating operators from all of the ETS costs as it does not mean ‘full free allocation’ because of the CSRF and as some operators will face higher costs than others depending on the allocation base year activity. Furthermore, the indirect costs of ETS have not been selected for compensation for cement in the Commission guidelines creating a distortion of competition with competitors. So, not only does the cement industry face the full indirect costs of ETS but competing construction sectors are able to be compensated for their additional costs related to indirect CO2. |
b) it largely keeps the incentive |
With free allocation based on benchmark, the incentive to invest is provided by the benchmark. The magnitude of the residual incentive is a function of carbon costs as a proportion of GVA. Cement has one of the highest CO2 costs/GVA of any industrial sector so the residual effort is greater than in most sectors. In its search for a legal framework that fosters a competitive environment, European cement industry has considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The EU cement industry has a relatively flat benchmark curve indicating that there is a narrow gap between the best and the worst performers; this limited level of abatement potential makes the task of emissions reduction more difficult in the cement sector compared to many other sectors. |
b) quite proportionate |
Overall, the administrative burden is quite proportionate but the system is extremely disproportionate for small/trivial combustion sources. In many cases these minor sources were not part of the benchmarking exercise and should not be included in reporting. |
b) a higher share than in 2013-20 |
There should be free allocation if there isn’t an international agreement which places all competing manufacturers on an equal footing. Until certain conditions can be met with regard to the veracity of the schemes within other countries then transitional arrangements need to be maintained. Free allocation is the most effective transitional arrangement. The share of allowances dedicated to free allocation should be sufficient to avoid carbon leakage. To uphold this principle that carbon leakage should be minimized, the cross sectoral correction factor should be replaced by an adjustment to the auctioned amount to maintain the cap trajectory. That does not mean “a free ride for industry” but it would mean that sufficient allowances are provided for the most efficient producers because at present the CSCF has the ability to reduce free allocation beyond what is technically possible. |
b) the same share as in Phase 3 |
There are too many uncertainties on what the post 2020 allowances budget will be for the cement industry to be able to decide what share of the budget should be dedicated to such innovation support. The EU ETS does not encourage investment in new technology. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) yes |
To date, the NER 300 has been ineffective at stimulating novel CO2 reduction projects in the cement industry. The power generation sector which is passing on investment costs has benefitted most from the NER 300. The cement sector is not experiencing the same level of investment de-risking. The cement industry needs - an investment enhancing climate should encourage investments over long term (30 y) cycles in a capital intensive industry. Legal stability and CO2 price predictability are key to achieve this goal - Safeguards against price fluctuations in market based policy instruments; which objectives, if kept, should be clearly defined and not be prone to abuse for speculation purposes - an innovation policy which provides clear incentives for breakthrough technologies in a cost-effective way. Policy makers should consider hypothecation (earmarking) of revenues from allowance auctions and direct innovation support to those sectors facing the greatest abatement challenges. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Given the high costs associated with breakthrough technologies, funding from auctioning revenues should account for both capital and operational cost of projects. There should in addition be a ring fenced fund for the manufacturing industry. |
a) yes |
In its search for a legal framework that fosters a competitive environment, European cement industry has considered an improved ETS with a performance based free allocation for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions cost impacts. In order to protect “carbon leakage” sectors’ competitiveness, the system could foresee either an adjustment to the overall cap to the auction amount or a sectoral cap with the inclusion of importers. However, a carbon pricing mechanism which is market-based and prone to wide fluctuations militates against effective investment. European cement industry is ready to explore mechanisms which deliver price stabilization and global carbon price convergence. Some of the initial reflection is further elaborated in the annex to this paper and cement industry is ready to engage in a thorough reflection of a climate policy and energy policy that is fully integrated. |
a) the present two groups should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. |
a) the present criteria should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria e.g. a complete loss of 30% of GVA is normally economically not acceptable for any industry or sector. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
EU trade and economic data is not always exact and its comparability with the EUITL CO2 data not always appropriate so there will always be a need to hear special cases. |
d) in line with the duration of ETS Phase 4 |
It is essential for the predictability of the system to introduce as little changes as possible in the course of a trading period, hence the validity of the list of sector exposed should be in line with the duration of the ETS phase 4. |
c) the approach should be less stringent (please specify) |
The benchmark would be calculated in a statistically solid way and be updated periodically to ensure predictability. It should be set at an ambitious but reasonable level and should not be distorted by statistical outliers. This can be achieved by defining percentile (e.g. 10%-percentile) or e.g. the average of a range including the 5% to 15% top performers of specific direct emissions (excluding the extreme outliers between 0% and 5%). Only this way, the benchmarking methodology will achieve sufficient statistical robustness for international application in ETS system. Benchmarks cannot be lower than process emissions. Measures should take into account scale of plants (access to adequate share of biomass, additives, alternative raw materials). |
a) yes (please specify how often) |
Benchmark should be updated between two trading periods depending on what has been achieved but not during one trading period. |
c) other (please specify) |
In its search for a legal framework that fosters a competitive environment, European cement industry has considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The historic activity level (HAL) should be more closely aligned to recent production to avoid surplus allocation e.g. the average of the preceding 3 years. In this context, European cement industry considers the recently released EcoFys study (Dynamic allocation for the EU Emissions Trading System, Enabling sustainable growth, 20 June 2014) and its allowances allocation reserve as an interesting step forward. However, a more recent HAL has its potential downsides for installations that have extended shutdowns or breakdowns, provision will be necessary to deal with exceptional HAL circumstances. |
a) no, there should be no deviations |
A more recent HAL e.g. preceding 3 years average, has its potential downsides for installations that have extended shutdowns or breakdowns, provision will be necessary to deal with exceptional HAL circumstances |
e) I don’t know |
European cement industry believes that EU Compensation should be granted for indirect emission impact where carbon leakage vulnerability is a combination of direct plus indirect emission cost. There is no need for two state aid guidelines and the compensation for indirect costs could be internalized in the ETD by providing free allocation for indirect CO2. Scheme should not be fully harmonized. It should include regional fuel mix to be correlated with regional average electricity price. |
Less important |
Important |
Most important |
Least important |
European cement industry regrets the focus on carbon capture and storage and believes that carbon capture and re-use should be equally considered. Industry believes that funding should be technology neutral. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) from the Member States' auction budgets |
|
Carbon leakage sectors must have secured free allowances for process emissions in case they are still included in post 2020 period |
a) Business |
Gruppo Ceramiche Ricchetti Spa Produzione di piastrelle ceramiche in porcellanato nelle forme usualmente commercializzate |
Via Trebbo 109 Maranello (MO) 0536 - 942711 claudio.depietri@ricchetti-group.com |
a) yes |
|
1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improve |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. This would limit the list to sectors really exposed and would eliminate the risk of a carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
As explained above, all energy intensive sectors as defined in the Energy Taxation Directive should be considered as exposed to the carbon leakage risk. As an alternative, trade and carbon intensity criteria should be used considering the following elements. First, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS. Second, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
a) Business |
GRUPPO MAURO SAVIOLA S.r.l. |
V.le Lombardia n° 29 46019 VIADANA (MANTOVA) ITALY +39-0375-7871 |
a) yes |
|
1) yes |
b) no |
By 2020 the large capital investments will have been made in the Wood-Based Panel sector. The Wood-Based Panel producers have already made large investments in reducing their direct emissions, resulting in a decline of fossil fuel-based CO2 emissions of around 80%. Further potential to reduce emissions cost-effectively is limited and the EU-ETS will not incentivise this. As the ability to make further significant emission savings will be extremely limited, the EU-ETS will increasingly act as a tax without realistic opportunities for mitigation. |
b) no |
Profit margins of the EU’s Wood-Based Panels producers are eroding since several years, and especially since the introduction of the EU RES policy. The Wood-Based Panel sector is squeezed between increasing costs of production and inability to pass these rising costs to customers. On the one hand, other industries are heavily incentivised to use any woody biomass in order to reduce their ETS allowance requirements, leading to increasing cost and decreasing availability of wood materials. On the other hand, the bargaining power of the Wood-Based Panel sector is limited. Consolidation of companies downstream, in the furniture and DIY sectors, has resulted in large conglomerates that have the power to bargain for low prices. Upstream in the value chain, the chemical companies (resins/adhesives) are also in the position to dictate prices. Consequently, the profit margins of the Wood-Based Panel industry are low and the ability to make further significant emission savings will be ext. lim. |
a) yes |
|
c) quite inadequate |
The eligibility criteria should be improved to reflect ‘economic markets’ in the selection of sectors benefitting from free allocation. For the time being, eligibility criteria do not reflect the wide variation of power generation at Member States’ level. |
b) it largely keeps the incentive |
|
b) quite proportionate |
|
b) a higher share than in 2013-20 |
|
e) I don’t know |
|
a) yes |
|
d) I don’t know |
|
a) yes |
There is a need for at least some EU policies coherency and strong incentives for re-industrialisation in the EU. |
b) more carbon leakage categories should be defined |
More carbon leakage categories should be defined to reflect the great diversity of sectors, their respective energy-intensity, main source of energy, the efforts they have already made in this area, their bargaining power, etc. |
c) the share of 'carbon costs' in the GVA should be maintained, but 'carbon costs' should be taken into account to the extent that they can't be recuperated in product prices |
The Wood-Based Panel sector is squeezed between increasing costs of production and inability to pass these rising costs to customers. These facts shall be taken into account in the calculation. |
b) other thresholds should be defined. Please specify below |
Capacity to pass increasing carbon cost vs. decrease in output |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
It is important to keep some discretion to consider situations which cannot be properly reflected into criteria calculation. |
a) five years |
|
d) I don’t know |
|
b) no |
State of the art in energy efficiency might in some sectors result in poorer environmental emission abatement. There is a risk of unintended consequences. |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
|
e) I don’t know |
|
a) no, the present approach should be maintained, i.e. that Member States can provide such compensation based on state aid guidelines |
|
Less important |
Least important |
Important |
I don't know |
|
e) I don't know |
|
|
a) Business |
Gruppo Ripa Bianca Srl (clay brick producer) |
Martinini Francesco Via Santarcangiolese, 1830 - 47822 Santarcagelo di Romagna (RN) Italy tel +39.0541.626132 fax +39.0541.625533 fmartinini@grupporipabianca.it |
a) yes |
|
1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials . The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improvement. |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies. |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. This would limit the list to sectors really exposed and would eliminate the risk of a carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
All energy intensive sectors as defined in the Energy Taxation Directive should be considered as exposed to the carbon leakage risk. As an alternative, trade and carbon intensity criteria should be used considering the following elements. GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS. Second, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥10%) should be introduced. |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also valuated. |
a) Business |
Gruppo Sereni Srl |
Ing. Filippo Martinelli, Sede amministrativa: via S.P. 343 Asolana, 25 - 26041 Casalmaggiore (Cremona) - Cell. 366/5840313 - Fax. 0375/40120 - qsa@grupposereni.it |
a) yes |
|
1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improveme |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. This would limit the list to sectors really exposed and would eliminate the risk of a carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
As explained above, all energy intensive sectors as defined in the Energy Taxation Directive should be considered as exposed to the carbon leakage risk. As an alternative, trade and carbon intensity criteria should be used considering the following elements. First, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS. Second, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensit |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
a) Business |
GUARDIAN OROSHÁZA KORLÁTOLT FELELŐSSÉGŰ TÁRSASÁG (Guardian Orosháza Ltd - Guardian inGlass, Advanced Interior Glass) |
5900 Orosháza, Csorvási út 31. HUNGARY Tel: 0036 30 944 4313 imak@Guardian.com |
a) yes |
|
1) yes |
b) no |
saját ágazatunkban /üvegipar/ versenyképesen nem |
a) yes |
a drágább energia természetesen a hatékonyságra ösztönöz, de a versenyképességnek az energiahatékonyság csak az egyik eleme; ha ez túl sokba kerül, akkor hátrányt jelent |
a) yes |
|
b) quite adequate |
az eszköz használatának mennyiségi és időbeli korlátai vannak, a lényeg a mérték, amint azt a 13. pontban is jelezzük, továbbá itt is számítanak a 7. pont indoklásában szereplő gazdaságossági megfontolások |
a) it absolutely keeps the incentive |
mivel a térítésmentes kiosztás egyre csökkenő arányban fedezi a szükségletet a késztetés attól függ, hogy a kvóta megvásárlása, vagy a csökkentést elősegítő innováció a gazdaságosabb |
b) quite proportionate |
az adminisztrációs teher nagyobb része nem a térítésmentes kiosztás szabályainak alkalmazásából adódik, hanem maga a rendszer indokolatlanul túladminisztrált |
b) a higher share than in 2013-20 |
|
e) I don’t know |
a 2 %-ot sem tudjuk, mi alapján határozták meg |
a) yes |
ha az előző pont igen, akkor ez még inkább |
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
|
b) no |
a kompenzáció mértéke a lényeg, hogy az megakadályozza a szénszvárgást |
a) the present two groups should remain |
|
a) the present criteria should remain |
|
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
d) in line with the duration of ETS Phase 4 |
|
c) the approach should be less stringent (please specify) |
legalább a leghatékonyabb 20 % átlaga legyen a benchmark; nem tudni, hogy a jelenlegit kik és hogyan érték el, de a Guardian gyárak a közelében sincsenek |
a) yes (please specify how often) |
10 évente |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
|
a) no, there should be no deviations |
|
d) yes, in the form of financial compensation at EU-level |
|
Important |
Most important |
Less important |
Least important |
|
e) I don't know |
az aukciós keret mint forrás érthető, de a térítésmentes kiosztás már nem igazán |
Az EU ETS az üvegházhatású gázok - unión belül - mintegy harmadát produkáló vállatokra tesz egyre növekvő anyagi, és nem csekély adminisztrációs terheket. Ezek világméretű hatása elenyésző mindaddig, amíg a többi területen nem történik változás. |
a) Business |
Hanson Building Products Ltd (UK) |
Neil Kilner Energy / Carbon Advisor Hanson UK Howley Park Dewsbury West Yorks WF12 7JJ Tel: +44 (0) 1132 203517 Fax: +44 (0) 1132 203599 Mob: +44 (0) 7798 653929 neil.kilner@hanson.biz www.hanson.com |
a) yes |
|
1) yes |
a) yes |
Much action has been taken and remaining abatement opportunities are incremental or require significant investment in new processes, technologies and equipment. Absolute emissions have reduced because many businesses have decreased or ceased production. Further reduction will become difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraint |
b) no |
Recycling of revenues towards a low carbon economy would be helpful. Increasing costs will only jeopardise the competitiveness of EU industry. Ceramic production is energy-intensive. |
a) yes |
Without transitional measures it is the EU industry that pays the price of an ambitious EU policy; a situation that will only contribute to carbon leakage. Transitional measures are necessary to minimise the risk of carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States and where it has been used (such as here in the UK) the scheme remains complicated. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support renewables in Member States. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies. |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs > 3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. A global system would eliminate the risk of carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
As explained above, all energy intensive sectors as defined in the Energy Taxation Directive must be considered as exposed to the carbon leakage risk Nevertheless, if trade and carbon intensity criteria are to be used, they need to be adapted: Firstly, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). Average, labour costs can be up to 70% for some ceramic sectors. Therefore, using GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with GOS Secondly, the current criteria entail either: i) to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or ii) a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) introduced. |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have: i) a trade intensity ≥ 30% or a carbon intensity ≥ 30%, or ii) a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. The application of this correction factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have limited impact since no major breakthrough technologies have been implemented following the initial benchmarking exercise. Furthermore, benchmark revision would entail a major administrative burden, especially for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
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a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
a) Business |
HASIT Šumavské vápenice a omítkárny, s.r.o. Velké Hydčice 91 341 01 Horažďovice ČR |
jaroslav.stulik@hasit.cz |
a) yes |
1) yes |
b) no |
Around 70% of the total CO2 emissions generated in lime production are "process emissions": they come from our raw material, limestone. These process emissions cannot be avoided without changing the quality of the final lime product which is however essential to serve specific applications. Currently, the most energy efficient kiln is near the thermodynamic minimum required for the chemical reaction needed for producing lime. The heat of the reaction for typical quicklime quality is 3.03 GJ/tonne, and the average fuel use 4.25. The energy consumption of the best available lime kiln (a Parallel Flow Regenerative Kiln, PFRK) is between 3.2 and 4.2 GJ/tonne. This type of kiln is already the most widely spread kiln technology today. However, one should keep in mind that horizontal rotary kilns (less energy efficient) provide a certain quality of lime and permit to optimize the extracted limestone due to their ability to treat the different sizes of stones. |
b) no |
The EU ETS will only remain the best solution for reducing CO2 emissions as long as the GHG reduction target is set at a level which is both technically and economically feasible. The current economic crisis and the further shrinking of the demand for lime products makes that there is at the moment a lot of “idle” production capacity in the EU. These installations are completely amortized which makes production in these installations cheaper than in a new one. A higher carbon price would not be a solution, as it would only draw money away from producers without enabling them to make an investment. When assessing the potential further ETS amendment in a sector, it is necessary to take account of the lifespan and replacement rate of kilns. Most of the time, investments costs always assume an investment in a new capacity (replacing the old capacity before its end of life). However, for the lime sector, kilns receive big maintenance periodically. |
a) yes |
Carbon Leakage will remain a big concern after 2020 in the absence of an international agreement putting forward a similar CO2 burden. EuLA believes that all energy intensive industries should be protected against carbon leakage, and that any increased level of ambition of Europe towards 2030 should lead to increased and not decreased protection against carbon leakage. Furthermore, the EU ETS is NOT addressing the following concerns: - The GHG reduction deficit (shortage of free allowances even for the installations with the best GHG performance. - Energy costs represent on average 40% of the lime industry’s manufacturing costs. Having access to energy at a reasonable cost is an essential condition for operating in the EU and for maintaining lime's competitiveness. - Further adequate incentives for low carbon investments is needed, with auctioning revenues being targeted for low carbon investment toward the industry |
b) quite adequate |
The current carbon leakage mitigation measures do not take into account of: The importance of CO2 embodied in imports A unilateral reduction of CO2 emissions in Europe will not help fighting against climate change if a subsequent rise of imports from third countries is created. Carbon Trust, amongst others, demonstrated that the reduction in production-related CO2 is largely compensated by CO2 embodied in imports. The cumulative burden of the EU framework Several other EU legislations have an impact on the EU's industry competitiveness (renewables, energy efficiency). The Commission should ensure an integrated approach with no overlap. Energy costs Energy costs represent on average 40% of the lime industry’s manufacturing costs. Like for any energy intensive industry, having access to energy at a reasonable cost is an essential condition for operating in the EU and for maintaining its competitiveness. |
b) it largely keeps the incentive |
It is important to remind that the Commission has calculated product specific benchmarks based on the average GHG emissions of the 10% best performers. A comparison of these benchmark values with the minimum values that are technically feasible shows that the remaining potential in some sectors, like lime, is actually quite low. The current best available and most energy-efficient kilns (the Parallel Flow Regenerative Kiln, PFRK) is close to the thermodynamic minimum required for the chemical reaction needed for producing lime. In other words, no further breakthrough technologies in energy efficiency are expected. The drive towards the most energy efficient solutions can easily be explained by the fact that energy costs represent on average around 40% of the lime sector’s production costs. Outside the deployment of a commercially and technically feasible Carbon Capture and Storage solution, there is little margin for further CO2 abatement in the lime sector. |
c) quite exaggerated |
Lime is the most impacted sector by the EU ETS. The production of 1 tonne of lime generates 1 to 1.6 tonne of CO2. This means that the EU ETS has a strong impact on the sector, up to 35% of impact of the CO2 costs on Gross Value Added (Hourcade et al, 2008). Therefore, the full impact of carbon costs would have serious consequences in terms of carbon leakage for the lime industry. While the lime industry advocates in favor of less red tape and less administrative burden, it recognizes the importance of the free allocation for maintaining a competitive industry in the EU. |
d) there should be no limit to overall free allocation to industry |
There is still a need today for an international climate agreement that would bring a level playing field to EU manufacturing companies. In the absence of such agreement, and considering that several countries in the EU neighborhood are not following the EU’s climate leadership, there should be no limit to the overall free allocations to the industry. Furthermore, EuLA believes that all energy intensive industries that are truly at risk of carbon leakage should be protected against carbon leakage, and that any increased level of ambition of Europe towards 2030 should lead to increased and not decreased protection against carbon leakage. The most GHG Efficient installations should receive 100% of their needs for free. The industry cap should be adjusted so that the CSCF and linear reduction factor do not reduce the free allocations. |
a) a substantially higher share than in Phase 3 |
The current state of efforts regarding the development of CCS (including the NER 300 program) will not reach the ambition to develop, by 2020, a commercially and technically available solution for the capture and storage of carbon. EuLA believes that further R&D is necessary for CCS, but that it should be funded via a mobilization of different sources including auctioning revenues, not through the new entrants' reserve. The New Entrant Reserve should be reserved to new entrants and the expected growth of the EU industry. In 2012 TNO calculated for EuLA the costs of capturing CO2 at different kinds of lime kilns. For the state-of-the-art solvent (MEA) costs to capture CO2 were €94 per ton of avoided CO2. The cost to capture CO2 would more than double the production costs of around €60/ton lime. Currently, lime plants are typically located right next to the deposit, not clustered in large industrial agglomerations. Transport costs can add significantly to the capture costs. |
a) yes |
The auctioning revenues should be used to encourage low carbon investments. As a general principle, revenues should go back to industry to enable investments in low carbon solutions. Part of the revenues could for example be used to provide cheaper loans for low carbon investments in installations falling under the EU ETS. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The auctioning revenues should be used to encourage low carbon investments. As a general principle, revenues should go back to industry to enable investments in low carbon solutions. Part of the revenues could for example be used to provide cheaper loans for low carbon investments in installations falling under the EU ETS. |
a) yes |
EuLA strongly favors a level playing field within the EU and outside Europe. This is why EuLA believes that the EU should maintain its efforts to achieve an internationally accepted and legally-binding agreement proportionate to the burden in the EU. In the absence of such agreement, the EU should safeguard the competitiveness of the EU industry with any appropriate measure. EuLA has serious doubts that the current legal framework will ensure a level playing field beyond 2020. |
a) the present two groups should remain |
EuLA believes that no further complexity and calculations should be added to an already complex scheme. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
1. Share of carbon costs in the GVA should be maintained 2. Trade intensity should take especially into account the trade with EU's neighborhood In an internal survey realized by the lime sector (NERA " Energy and transport cost comparison of the EU lime industry to 10 non-EU regions"), it has been established that the threat for lime producers mainly come from the EU neighbor countries such as Russia, Maghreb and Middle east. 3. Energy / climate requirements in Free Trade Agreements should be taken into account “Energy and climate” clauses should be part of any Free Trade Agreement, especially if the trading partner in question has not assumed any carbon reduction commitments. 4. Fuel mix price should be taken into account Finally, EuLA recommends that the EU defines an affordable and available “fuel mix” for 2030, assesses its accessibility and compares its costs with the costs of the fuel mix used by the main EU competitors. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
It is important to point out that the revision of NACE code list (v2) implied that the assessment of the carbon leakage criteria for the lime sector is now done at a new disaggregation level, which includes not only lime but also plasters and aggregates. EuLA believe that this assessment should be done at the appropriate level of disaggregation, since that the industrial activities that are included in the NACE v2 code for lime do not share the same fundamentals (in terms of energy intensity and carbon intensity for instance). |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
EuLA believes that it is important to maintain a certain level of discretion in the system for justified cases. This concerns both the qualitative criteria and the possibility to conduct the assessment at the appropriate level of disaggregation (Prodcom 8). |
b) longer (please specify) |
The time validity of the list of sectors exposed to carbon leakage should take into account the investment cycles of the industry. It is also necessary to take account of the lifespan and replacement rate of kilns. Most of the time, investments costs always assume an investment in a new capacity (replacing the old capacity before its end of life). However, for the lime sector, kilns receive big maintenance periodically. It is therefore important to ensure that the investments made now will not become "stranded assets" in the future due to an unexpected change in the carbon leakage list. Furthermore, any trade intensity assessment for the carbon leakage list should take into account the impact of trade with EU neighbouring countries. |
a) the present approach of average of the 10% most efficient installations should remain |
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b) no |
The benchmark exercise created an important workload on both the industry and the administration, and also triggered some issues regarding sensitive information. EuLA believes that any update should only been undertaken when sufficient evidence exist of technological progress. It is important to underline that the technological state of the art is not representative of what can be achieved in practice. Lime characteristics are so vast that multiple uses can be done from the same material. It is also highly dependent of the stone quality from the quarry. Any update in the benchmarks should only take into account innovations that have been proved to be commercially viable and that have been implemented on site. These benchmarks should further take into account each sectors characteristics into account, such as the existence of several end-products, the thermal energy efficiency of the sector, and its process CO2 emissions. |
c) other (please specify) |
In the case of the current ex-ante system, the reference year should be adapted, and the baseline should be a longer period without offering a choice between different periods, and not known in advance. However EuLA believes that free allocation should reflect economic reality per installation based on the most recent years and should not be frozen by historic production. In this regards, EuLA suggest to the European Commission to start working on the development of a dynamic system that could replace the current system, under the condition that no correction factor (CSCF) should be applied in addition to a dynamic system. Also, such system should take into account the administrative burden, the robustness of the control of the declared production, and the confidentiality of commercially sensitive information. |
a) no, there should be no deviations |
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d) yes, in the form of financial compensation at EU-level |
EuLA defends a Full off-setting of CO2 costs pass through in electricity prices with a harmonised approach in all EU Member States. |
Less important |
Least important |
Important |
Most important |
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a) from the Member States' auction budgets |
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a) Business |
HeidelbergCement AG |
Rob van der Meer HeidelbergCement AG 185 Chaussee de la Hulpe B-1170 Brussels, Belgium telephone +32 475652950 email rob.vandermeer@heidelbergcement.com |
a) yes |
|
1) yes |
a) yes |
The cement industry is fully committed to reducing GHG emissions in line with overall EU policy objectives. This has been demonstrated by investments over the past 20 years which have driven down CO2 emissions from clinker production and by our roadmap to go much further in the coming decades. To achieve this, industry needs to innovate and invest. This requires a return on investment above the cost of capital and a policy framework that promotes the competitiveness of the sector and allows for a secure access to raw materials and affordable energy prices. The cement industry in Europe needs a stable legal framework with predictable CO2 prices in order to justify and allocate scarce investment funds to realize CO2 emission reduction ambitions. 2030 targets have to take into account each sector specific roadmap. Differentiated levels of efforts are needed for different sectors (manufacturing industry, power, building, and transport) based on the ability to pass the cost on to the end us |
b) no |
Measures to decrease energy consumption and improve resources efficiency will de facto reduce CO2 emissions. Some industries like cement have very high energy costs as a proportion of GVA or profit which means that energy efficiency is an integral part of manufacturing. The EU ETS emphasis is GHG efficiency and in this regard it does put pressure on businesses to become more GHG efficient. In doing so EU ETS places CO2 costs on power generators and these costs are passed on to electricity consumers. There are limitations to which added costs act as a driver for efficiency before imports become more attractive. Furthermore, the cement and lime industry are unique due to the fact that the majority of GHG emissions are not caused by energy use from fuel combustion but come from the raw materials themselves. Around 60% of total CO2 emissions from clinker production are released directly from limestone. On the other hand, energy efficiency and CO2 reduction represents conflicting goals when |
a) yes |
The EU has aspirations of leading on CC policy but globally unequal carbon pricing has the ability to shift trade patterns. In order to direct investments to growth and jobs in Europe, the cement industry needs a global level playing field, including imports and exports: climate change is a global problem that needs a global solution. EU policy can only incentivise companies to aggressively work on further emissions reduction if there is predictability in and equality in carbon prices and if it is part of an overall industrial policy ensuring companies to be competitive in the international arena. This also applies to energy costs. For cement, energy costs are especially important representing 30 % of operational costs with European costs being substantially higher than in the US, Russia and plants in North Africa. Transitional measures are needed to bridge the gap between the EU and other countries. Free allocation is the most effective transitional mechanism. |
b) quite adequate |
As long as emissions do not have the same cost in different countries, a level playing field can be achieved most effectively by equalising measures such as free allocation. The limited evidence of leakage and empirical studies demonstrates (see the report by Vivid Economics last June), in part, that free allocation is working. However, it should not be assumed that free allocation is insulating operators from all of the ETS costs as it does not mean ‘full free allocation’ because of the CSRF and as some operators will face higher costs than others depending on the allocation base year activity. Furthermore, the indirect costs of ETS have not been selected for compensation for cement in the Commission guidelines creating a distortion of competition with competitors. So, not only does the cement industry face the full indirect costs of ETS but competing construction sectors are able to be compensated for their additional costs related to indirect CO2. |
a) it absolutely keeps the incentive |
With free allocation based on benchmark, the incentive to invest is provided by the benchmark. The magnitude of the residual incentive is a function of carbon costs as a proportion of GVA. Cement has one of the highest CO2 costs/GVA of any industrial sector so the residual effort is greater than in most sectors. In its search for a legal framework that fosters a competitive environment, CEMBUREAU has considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The EU cement industry has a relatively flat benchmark curve indicating that there is a narrow gap between the best and the worst performers; this limited level of abatement potential makes the task of emissions reduction more difficult in the cement sector compared to many other sectors. |
b) quite proportionate |
Overall, the administrative burden is quite proportionate but the system is extremely disproportionate for small/trivial combustion sources. In many cases these minor sources were not part of the benchmarking exercise and should not be included in reporting |
d) there should be no limit to overall free allocation to industry |
There should be free allocation if there isn’t an international agreement which places all competing manufacturers on an equal footing. Until certain conditions can be met with regard to the veracity of the schemes within other countries then transitional arrangements need to be maintained. Free allocation is the most effective transitional arrangement. The share of allowances dedicated to free allocation should be sufficient to avoid carbon leakage. To uphold this principle that carbon leakage should be minimized, the cross sectoral correction factor should be replaced by an adjustment to the auctioned amount to maintain the cap trajectory. That does not mean “a free ride for industry” but it would mean that sufficient allowances are provided for the most efficient producers because at present the CSCF has the ability to reduce free allocation beyond what is technically possible. |
e) I don’t know |
There are too many uncertainties on what the post 2020 allowances budget will be for the cement industry to be able to decide what share of the budget should be dedicated to such innovation support. The EU ETS does not encourage investment in new technology. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) yes |
To date, the NER 300 has been ineffective at stimulating novel CO2 reduction projects in the cement industry. The power generation sector which is passing on investment costs has benefitted most from the NER 300. The cement sector is not experiencing the same level of investment de-risking. The cement industry needs - an investment enhancing climate should encourage investments over long term (30 y) cycles in a capital intensive industry. Legal stability and CO2 price predictability are key to achieve this goal - Safeguards against price fluctuations in market based policy instruments; which objectives, if kept, should be clearly defined and not be prone to abuse for speculation purposes - an innovation policy which provides clear incentives for breakthrough technologies in a cost-effective way. Policy makers should consider hypothecation (earmarking) of revenues from allowance auctions and direct innovation support to those sectors facing the greatest abatement challenges. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Given the high costs associated with breakthrough technologies, funding from auctioning revenues should account for both capital and operational cost of projects. There should in addition be a ring fenced fund for the manufacturing industry. |
a) yes |
In its search for a legal framework that fosters a competitive environment, CEMBUREAU has considered an improved ETS with a performance based free allocation for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions cost impacts. In order to protect “carbon leakage” sectors’ competitiveness, the system could foresee either an adjustment to the overall cap to the auction amount or a sectoral cap with the inclusion of importers. However, a carbon pricing mechanism which is market-based and prone to wide fluctuations militates against effective investment. CEMBUREAU is ready to explore mechanisms which deliver price stabilization and global carbon price convergence. Some of the initial reflection is further elaborated in the annex to this paper and CEMBUREAU is ready to engage in a thorough reflection of a climate policy and energy policy that is fully integrated in a single industrial growth policy. |
a) the present two groups should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. One should consider a special treatment for process emissions e.g. full free allocation as those emissions are not linked to energy efficiency and are irreducible by their very nature. |
a) the present criteria should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. Nevertheless, as a static indicator trade intensity is of limited validity/conclusiveness. It is based solely on historic data and does not reflect future developments, i.e. resulting from changing cost patterns, at all |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria e.g. a complete loss of 30% of GVA is normally economically not acceptable for any industry or sector. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
EU trade and economic data is not always exact and its comparability with the EUITL CO2 data not always appropriate so there will always be a need to hear special cases. |
d) in line with the duration of ETS Phase 4 |
It is essential for the predictability of the system to introduce as little changes as possible in the course of a trading period; hence the validity of the list of sector exposed should be in line with the duration of the ETS phase 4. |
c) the approach should be less stringent (please specify) |
The benchmark would be calculated in a statistically solid way and be updated periodically to ensure predictability. It should be set at an ambitious but reasonable level and should not be distorted by statistical outliers. This can be achieved by defining percentile (e.g. 10%-percentile) or e.g. the average of a range including the 5% to 15% top performers of specific direct emissions (excluding the extreme outliers between 0% and 5%). Only this way, the benchmarking methodology will achieve sufficient statistical robustness for international application in ETS system. |
a) yes (please specify how often) |
Benchmark should be updated between two trading periods depending on what has been achieved but not during one trading period. One should consider a special treatment for process emissions e.g. full free allocation as those emissions are not linked to energy efficiency and are irreducible by their very nature. |
c) other (please specify) |
In its search for a legal framework that fosters a competitive environment, cement industry has considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The historic activity level (HAL) should be more closely aligned to recent production to avoid surplus allocation e.g. the average of the preceding 3 years. In this context, we the recently released EcoFys study (Dynamic allocation for the EU Emissions Trading System, Enabling sustainable growth, 20 June 2014) and its allowances allocation reserve as an interesting step forward. However, a more recent HAL has its potential downsides for installations that have extended shutdowns or breakdowns, provision will be necessary to deal with exceptional HAL circumstances. |
a) no, there should be no deviations |
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c) yes, in the form of additional free allocation |
We believe that EU Compensation should be granted for indirect emission impact where carbon leakage vulnerability is a combination of direct plus indirect emission cost. There is no need for two state aid guidelines and the compensation for indirect costs could be internalized in the ETD by providing free allocation for indirect CO2. |
Less important |
Important |
Most important |
Least important |
We regret the focus on carbon capture and storage and believes that carbn capture and re-use should be equally considered. We believe that funding should be technology neutral. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) from the Member States' auction budgets |
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a) Business |
HeidelbergCement Deutschland |
Dr. Ekkehard Franke, Manager für Umweltschutz und Sekundärstoffe Deutschland Berliner Str. 6, HeidelbergCement AG Tel. +49 6221-48113450 ekkehard.franke@heidelbergcement.com |
a) yes |
|
1) yes |
a) yes |
The cement industry is fully committed to reducing GHG emissions in line with overall EU policy objectives. This has been demonstrated by investments over the past 20 years which have driven down CO2 emissions from clinker production and by our roadmap to go much further in the coming decades. To achieve this, industry needs to innovate and invest. This requires a return on investment above the cost of capital and a policy framework that promotes the competitiveness of the sector and allows for a secure access to raw materials and affordable energy prices. The cement industry in Europe needs a stable legal framework with predictable CO2 prices in order to justify and allocate scarce investment funds to realize CO2 emission reduction ambitions. 2030 targets have to take into account each sector specific roadmap. Differentiated levels of efforts are needed for different sectors(manufacturing industry, power, building, and transport)based on the ability to pass the cost on to the end user |
b) no |
Measures to decrease energy consumption and improve resources efficiency will de facto reduce CO2emissions.Some industries like cement have very high energy costs as a proportion of GVA or profit which means that energy efficiency is an integral part of manufacturing.EU ETS emphasis is GHG efficiency and in this regard it does put pressure on businesses to become more GHG efficient.In doing so EU ETS places CO2costs on power generators and these costs are passed on to electricity consumers.There are limitations to which added costs act as a driver for efficiency before imports become more attractive.Furthermore,the cement and lime industry are unique due to the fact that the majority of GHG emissions are not caused by energy use from fuel combustion but come from the raw materials themselves.Around 60% of total CO2emissions from clinker prod. are released directly from limestone.On the other hand,energy efficiency and CO2reduction represents conflicting goals when looking e.g. at CCS. |
a) yes |
The EU has aspirations of leading on CC policy but globally unequal carbon pricing has the ability to shift trade patterns. In order to direct investments to growth and jobs in Europe, the cement industry needs a global level playing field, including imports and exports: climate change is a global problem that needs a global solution. EU policy can only incentivise companies to aggressively work on further emissions reduction if there is predictability in and equality in carbon prices and if it is part of an overall industrial policy ensuring companies to be competitive in the international arena. This also applies to energy costs. For cement, energy costs are especially important representing 30 % of operational costs with European costs being substantially higher than in the US, Russia and plants in North Africa. Transitional measures are needed to bridge the gap between the EU and other countries. Free allocation is the most effective transitional mechanism. |
b) quite adequate |
As long as emissions do not have the same cost in different countries, a level playing field can be achieved most effectively by equalising measures such as free allocation. The limited evidence of leakage and empirical studies demonstrates (see the report by Vivid Economics last June), in part, that free allocation is working. However, it should not be assumed that free allocation is insulating operators from all of the ETS costs as it does not mean ‘full free allocation’ because of the CSRF and as some operators will face higher costs than others depending on the allocation base year activity. Furthermore, the indirect costs of ETS have not been selected for compensation for cement in the Commission guidelines creating a distortion of competition with competitors. So, not only does the cement industry face the full indirect costs of ETS but competing construction sectors are able to be compensated for their additional costs related to indirect CO2. |
a) it absolutely keeps the incentive |
With free allocation based on benchmark, the incentive to invest is provided by the benchmark. The magnitude of the residual incentive is a function of carbon costs as a proportion of GVA. Cement has one of the highest CO2 costs/GVA of any industrial sector so the residual effort is greater than in most sectors. In its search for a legal framework that fosters a competitive environment, We have considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The EU cement industry has a relatively flat benchmark curve indicating that there is a narrow gap between the best and the worst performers; this limited level of abatement potential makes the task of emissions reduction more difficult in the cement sector compared to many other sectors. |
b) quite proportionate |
Overall, the administrative burden is quite proportionate but the system is extremely disproportionate for small/trivial combustion sources. In many cases these minor sources were not part of the benchmarking exercise and should not be included in reporting. |
d) there should be no limit to overall free allocation to industry |
There should be free allocation if there isn’t an international agreement which places all competing manufacturers on an equal footing. Until certain conditions can be met with regard to the veracity of the schemes within other countries then transitional arrangements need to be maintained. Free allocation is the most effective transitional arrangement. The share of allowances dedicated to free allocation should be sufficient to avoid carbon leakage. To uphold this principle that carbon leakage should be minimized, the cross sectoral correction factor should be replaced by an adjustment to the auctioned amount to maintain the cap trajectory. That does not mean “a free ride for industry” but it would mean that sufficient allowances are provided for the most efficient producers because at present the CSCF has the ability to reduce free allocation beyond what is technically possible. |
e) I don’t know |
There are too many uncertainties on what the post 2020 allowances budget will be for the cement industry to be able to decide what share of the budget should be dedicated to such innovation support. The EU ETS does not encourage investment in new technology. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) yes |
To date, the NER 300 has been ineffective at stimulating novel CO2 reduction projects in the cement industry. The power generation sector which is passing on investment costs has benefitted most from the NER 300. The cement sector is not experiencing the same level of investment de-risking. The cement industry needs - an investment enhancing climate should encourage investments over long term (30 y) cycles in a capital intensive industry. Legal stability and CO2 price predictability are key to achieve this goal - Safeguards against price fluctuations in market based policy instruments; which objectives, if kept, should be clearly defined and not be prone to abuse for speculation purposes - an innovation policy which provides clear incentives for breakthrough technologies in a cost-effective way. Policy makers should consider hypothecation (earmarking) of revenues from allowance auctions and direct innovation support to those sectors facing the greatest abatement challenges. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Given the high costs associated with breakthrough technologies, funding from auctioning revenues should account for both capital and operational cost of projects. There should in addition be a ring fenced fund for the manufacturing industry. |
a) yes |
In its search for a legal framework that fosters a competitive environment, we have considered an improved ETS with a performance based free allocation for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions cost impacts. In order to protect “carbon leakage” sectors’ competitiveness, the system could foresee either an adjustment to the overall cap to the auction amount or a sectoral cap with the inclusion of importers. However, a carbon pricing mechanism which is market-based and prone to wide fluctuations militates against effective investment. We are ready to explore mechanisms which deliver price stabilization and global carbon price convergence. Some of the initial reflection is further elaborated in the annex to this paper and we are ready to engage in a thorough reflection of a climate policy and energy policy that is fully integrated in a single industrial growth policy. |
a) the present two groups should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. One should consider a special treatment for process emissions e.g. full free allocation as those emissions are not linked to energy efficiency and are irreducible by their very nature. |
a) the present criteria should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. Nevertheless, as a static indicator trade intensity is of limited validity/conclusiveness. It is based solely on historic data and does not reflect future developments, i.e. resulting from changing cost patterns, at all. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria e.g. a complete loss of 30% of GVA is normally economically not acceptable for any industry or sector. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
EU trade and economic data is not always exact and its comparability with the EUITL CO2 data not always appropriate so there will always be a need to hear special cases. |
d) in line with the duration of ETS Phase 4 |
It is essential for the predictability of the system to introduce as little changes as possible in the course of a trading period; hence the validity of the list of sector exposed should be in line with the duration of the ETS phase 4. |
c) the approach should be less stringent (please specify) |
The benchmark would be calculated in a statistically solid way and be updated periodically to ensure predictability. It should be set at an ambitious but reasonable level and should not be distorted by statistical outliers. This can be achieved by defining percentile (e.g. 10%-percentile) or e.g. the average of a range including the 5% to 15% top performers of specific direct emissions (excluding the extreme outliers between 0% and 5%). Only this way, the benchmarking methodology will achieve sufficient statistical robustness for international application in ETS system. |
a) yes (please specify how often) |
Benchmark should be updated between two trading periods depending on what has been achieved but not during one trading period. One should consider a special treatment for process emissions e.g. full free allocation as those emissions are not linked to energy efficiency and are irreducible by their very nature. |
c) other (please specify) |
In its search for a legal framework that fosters a competitive environment, we have considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The historic activity level (HAL) should be more closely aligned to recent production to avoid surplus allocation e.g. the average of the preceding 3 years. In this context, we consider the recently released EcoFys study (Dynamic allocation for the EU Emissions Trading System, Enabling sustainable growth, 20 June 2014) and its allowances allocation reserve as an interesting step forward. However, a more recent HAL has its potential downsides for installations that have extended shutdowns or breakdowns, provision will be necessary to deal with exceptional HAL circumstances. |
a) no, there should be no deviations |
A more recent HAL e.g. preceding 3 years average, has its potential downsides for installations that have extended shutdowns or breakdowns, provision will be necessary to deal with exceptional HAL circumstances. |
c) yes, in the form of additional free allocation |
We believe that EU Compensation should be granted for indirect emission impact where carbon leakage vulnerability is a combination of direct plus indirect emission cost. There is no need for two state aid guidelines and the compensation for indirect costs could be internalized in the ETD by providing free allocation for indirect CO2. |
Less important |
Important |
Most important |
I don't know |
We regret the focus on carbon capture and storage and believes that carbn capture and re-use should be equally considered. We believe that funding should be technology neutral. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) from the Member States' auction budgets |
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We believes that the debate on the MSR should not be carried out in isolation from the broader ETS structural reform. |
a) Business |
HeidelbergCement Norway AS |
Per Brevik Director Alt. fuels HeidelbergCement Northern Europe P.O. Box 143 N-0216 Oslo, NORWAY Phone: +47 90970017 E-mail: per.brevik@heidelbergcement.com |
a) yes |
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1) yes |
a) yes |
The industry takes the challenge seriously, and works every day to reduce the footprint from the activity |
b) no |
Since we have much compettiton from outside Europe, it contributes to an unleveled "playing field" |
a) yes |
See comment on Q2 above |
b) quite adequate |
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b) it largely keeps the incentive |
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c) quite exaggerated |
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c) a constant share as in 2013-20 |
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b) the same share as in Phase 3 |
Such projects are important, and the first steps will need large financial support |
b) no |
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a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
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c) I don’t know |
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b) more carbon leakage categories should be defined |
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b) only the share of 'carbon costs' in the GVA should be maintained |
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a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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b) no, all criteria should be based on simple metrics and linked to clearly defined thresholds |
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d) in line with the duration of ETS Phase 4 |
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a) the present approach of average of the 10% most efficient installations should remain |
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b) no |
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b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
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a) no, there should be no deviations |
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c) yes, in the form of additional free allocation |
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Important |
Less important |
Most important |
Least important |
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a) from the Member States' auction budgets |
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a) Business |
HINTON, PERRY & DAVENHILL LTD |
DREADNOUGHT WORKS DREADNOUGHT ROAD PENSNETT BRIERLEY HILL DY5 4TH 01384 77405 kevin.preston@dreadnought-tiles.co.uk |
a) yes |
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1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. In some cases, a CO2 target and an energy efficiency target can contradict each other, e.g. pore forming agents used in the clay block industry can contribute to a lower fuel consumption but can raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improvements |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS are forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States and where it has been used (such as here in the UK) the scheme remains complicated. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support renewables in Member States. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies. |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs > 3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. A global system would eliminate the risk of carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
As explained above, all energy intensive sectors as defined in the Energy Taxation Directive must be considered as exposed to the carbon leakage risk Nevertheless, if trade and carbon intensity criteria are to be used, they need to be adapted: Firstly, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). Average, labour costs can be up to 70% for some ceramic sectors. Therefore, using GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with GOS Secondly, the current criteria entail either: i) to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or ii) a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) introduced |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have: i) a trade intensity ≥ 30% or a carbon intensity ≥ 30%, or ii) a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. The application of this correction factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have limited impact since no major breakthrough technologies have been implemented following the initial benchmarking exercise. Furthermore, benchmark revision would entail a major administrative burden, especially for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
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a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
a) Business |
Holcim (Slovensko) a.s. |
Holcim (Slovensko) Rohoznik Slovakia radoslav.jonas@holcim.com +421902488202 |
a) yes |
|
1) yes |
a) yes |
Yes but under condition that all player on the market will be treated the same way. We are witness that in case of cement the border countries of EU import cement from non EU countries based just on price comparison which in case of EU cement includes costs of ETS. |
b) no |
Answer relates to cement industry. In today situation the EU ETS is in most cases just an administrative burden. In case the EUA prices are higher, the motivation to save CO2/energy is higher. So the price for electricity is main driver for energy efficiency today. |
a) yes |
Definitely yes, especially in cases where costs of transport of the product represent important part of the product price. |
a) very adequate |
the same reasoning as in Q3 |
e) I don’t know |
Wrong question in today situation. I think the EUA price on the market is the main incentive, not free allocation. Either company will earn or will decrease costs by reducing emissions under condition of relevant EUA price. |
b) quite proportionate |
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a) a lower share than in 2013-20 |
Does not matter which exact way we will select but we need to secure the same conditions on the market for all. In order to support changes the share should be decreasing but the the equal conditions must be secured. |
a) a substantially higher share than in Phase 3 |
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a) yes |
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b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
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a) yes |
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b) more carbon leakage categories should be defined |
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a) the present criteria should remain |
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c) I don’t know |
Should be differenciated according to the industries. |
c) I don’t know |
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c) shorter (please specify) |
Longer or shorter. It should be connected with the development of the criteria. If criteria changes and exceed certain limits, and this change lasts at least 3 years consecutively, the status of industry should be changed. This status can last more that 5 years. |
c) the approach should be less stringent (please specify) |
average of 20% need to consider different conditions and technologies in production companies. |
a) yes (please specify how often) |
every 5-10 years, depending on the industry |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
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d) both b) and c) |
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b) no, and there is no need for financial compensation by Member States, either |
The system shall be revised |
Less important |
Important |
Most important |
Least important |
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e) I don't know |
It is more or less the same. The most important is the equal position on the market for all at the end |
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a) Business |
Holcim Group services LTD |
Rue Vilain XIIII, 53-55 1000 Bruxelles |
a) yes |
|
1) yes |
a) yes |
Holcim is fully committed to reducing GHG emissions, globally, including Europe. Holcim reduced its carbon emissions by 24.3% vs. 1990, in line with EU policy objectives. Going forward, the specificity of industrial sectors must be taken into account. In the cement sector, a large proportion of GHG emissions are linked to process (as opposed to energy). This means that the sector, and individual companies such as Holcim, will continue to rely on the emergence of breakthrough technologies if it is to meet longer terms objectives (2050). Secondly, in order to maintain industrial production in Europe, it is fundamental to maintain a level playing field: intra-EU across all different sectors (what falls under the scope of ETS for one sector, must apply to all industrial sector) and extra-EU with non-EU importers that are not subject to carbon constraints. Thirdly, an appropriate reform of the ETS could remove barriers to restructuring and thus improve the competitiveness of industry. |
b) no |
In energy-intensive industries, energy efficiency is an unconditional competitiveness factor that is not (solely) driven by the EU ETS (the objective of which is to reduce CO2 emissions in the most cost- effective way), even if there is a link between energy-intensity and GHG emissions. In the cement sector, including Holcim, a large proportion of GHG emissions come from process and raw materials as opposed to energy use. Having said that, the EU ETS can become a competitveness factor, if the instrument is reformed in a way so that it can continuously meet 4 pre-conditions: i. efficiency (= being market based, liquid, secure and incentivising), ii. effectiveness (= being predictable), iii. fairness (= giving a level playing field, intra and extra-EU) and iv. consistency (= 1 ton CO2 is 1 ton CO2) and is either recalibrated to be linked to actual emissions or reshaped so as to include non-EU importers. |
a) yes |
The EU has aspirations of leading on CC policy but globally unequal carbon pricing has the ability to shift trade patterns. In order to direct investments to growth and jobs in Europe, the cement industry needs a global level playing field, including imports and exports: climate change is a global problem that needs a global solution. EU policy can only incentivise companies to aggressively work on further emissions reduction if there is predictability and equality in carbon prices and if it is part of an overall industrial policy ensuring companies to be competitive in the international arena. |
b) quite adequate |
Free allocation can be an adequate system IF it is built upon the correct parameters. In our perspective, some of the parameters of the existing system have made it inefficient and ineffective. Those mainly are i. the fixed CO2 allowance supply and ii. free allocation on the basis of historic production allocations (vs. actual emissions - no historical reference, no production threshold). Secondly, free allocation is a short-term answers to the competitiveness issues (one that will increase and not decrease). This is to say that not only the ETS sustainably cannot function on its own, but the post-2020 regime will need to integrate importers in the EU ETS. Two possibilities to include importers: i. Full auctioning for EU producers and importers alike (recycling part of auction revenues to carbon leakage exposed industries for innovation projects) or ii. alternatively, include importers in a system with free allocation. |
c) it largely compromises the incentive |
In absolute terms, free allocations can reduce the incentive vis-à-vis a system of full auctioning / full carbon costs for all actors. However, such a system, without comptitiveness protection for energy-intensive industries prone to carbon/investment leakage and subject to high competition from non-EU importers, can not be envisaged today if we are to keep industrial activity in Europe. Under these circumstances, we either move to a system that include importers or reform the free allocation system so that is continuously meets the 4 pre-conditions mentioned under question 2 (efficiency, effectiveness, faireness and consistancy) and is adequtemy recalibrated (e.g. based on actual emissions). Otherwise, it can negatively impact a targeted industrial sector (indirect impacts of production and trade) and compromise the incentive to reduce emissions. Incentives will increase as we move towards a global carbon price signal and move away from a patchwork of systems and regulation |
b) quite proportionate |
Overall, the administrative burden is quite proportionate. The main burden is with the verification and reporting process, not the allocation process; But the system is extremely disproportionate for small/trivial combustion sources. In many cases these minor sources were not part of the benchmarking exercise and should not be included in reporting. |
f) I don’t know |
This very much depends on many factors, including the outcome of international negotiations. Free allocations is a transitional system that enables to respond to immediate competitiveness concerns. But it is not a long-term solution and other/additional options need to be considered and looked at in detail. This include the integration of importers in the free allocation system, or an alternative full auctioning systems which also integrates importers. |
e) I don’t know |
There are at this stage to many uncertainties as to what a post-2020 allowances budgets will look like. Whatever system prevail (NER300 type or earmarking of auctioning revenues), substantial financing must be dedicated to industrial applications and the emergence of breakthrough technologies (NER300, through criteria and thresholds, de facto excluded industrial applications of CCS, incl. in the cement sector). This needs to be addressed. Such programmes should also focus more on the partnership angle. What is needed is more than merely projects. Europe needs to build stronger partnerships with Industry to accelerate the development and emergence of needed breakthrough technologies. Such partnerships must not merely focus on financing tools, but also embrace a risk- sharing philosophy with a view to build EU leadership in industrial applications that have a global potential. |
a) yes |
Whatever system prevail (NER300 type or earmarking of auctioning revenues), substantial financing must be dedicated to industrial applications and the emergence of breakthrough technologies (NER000, through criteria and thresholds, de facto excluded industrial applications of CCS, incl. in the cement sector). This needs to be addressed. Such programmes should also focus more on the partnership angle. What is needed is more than merely projects. Europe needs to build stronger partnerships with Industry to accelerate the development and emergence of needed breakthrough technologies. Such partnerships must not merely focus on financing tools, but also embrace a risk-sharing philosophy with a view to build EU leadership in industrial applications that have a global potential. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Such schemes ought to include capital and operational costs for emerging and breakthrough technologies. |
a) yes |
Free allocation is a short-term transitional system, the efficiency and effectiveness of which will decrease progressively. The inclusion of importers (whether in a free allocation system or a full auctioning system) is one of the other measures that can be considered. |
a) the present two groups should remain |
|
c) the share of 'carbon costs' in the GVA should be maintained, but 'carbon costs' should be taken into account to the extent that they can't be recuperated in product prices |
In addition, the assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures and should be carried out, as far as possible, on a forward looking basis (incl. forward looking CO2 price). |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
d) in line with the duration of ETS Phase 4 |
|
a) the present approach of average of the 10% most efficient installations should remain |
It should nonetheless address the issue of statistical outliers so as to have a robust, ambitious, yet achievable benchmark. As a general principle, appropriateness of the chosen benchmark should be assessed to give the right economic incentive to produce the best environmental outcome. |
a) yes (please specify how often) |
The appropriateness of a given benchmark must be ensured all along the trading period. Periodic assessments of the benchmark (e.g. halfway through a trading period) might therefore be desirable. |
c) other (please specify) |
Production data used to calculate allocations in phase 4 must be correlated to (close to) actual production and thus actual emissions. This implies evolving towards a more dynamic allocation system (e.g. average of n-1, n-2 and n-3). |
a) no, there should be no deviations |
|
a) no, the present approach should be maintained, i.e. that Member States can provide such compensation based on state aid guidelines |
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Important |
Least important |
Most important |
I don't know |
|
d) other |
Low-carbon innovation support must also be funded by auction revenues, earmarked for industrial breakthroughs. |
|
a) Business |
HUNGRANA Kft. (HUNGRANA Bioeconomy Company) |
2432 Szabadegyháza, Ipartelep, Hungary www.hungrana.hu Tel.: +36 (25) 578 159 Fax: +36 (25) 578 114 Email: totha@hungrana.hu |
a) yes |
|
1) yes |
b) no |
Álláspontunk szerint a CO2 kvóta kiosztás szigorú szabályai már így is jelentős beruházásokat generáltak az egyes iparágakban a kibocsátások csökkentése érdekében. A kötelezettek a megújuló energiaforrások mind szélesebb körű felhasználása révén igyekeztek hozzájárulni a CO2 kibocsátás csökkentéséhez, azonban vannak energiaigényes iparágak, ahol a kibocsátások csökkentése adott szinten túl már nem tud CO2 kibocsátás csökkentést maga után vonni, mert a termelékenység rovására megy, a piaci szereplők elvándorlását vonja maga után. |
a) yes |
Az EU ETS generálta beruházások hosszú távon mindenképpen az EU érdekét fogják szolgálni, bár egyelőre a szigorú szabályozási környezet miatt csak a termelés drágulását, ennek okán az európai piac versenyhátrányát eredményezték. Mindazonáltal ezek a fejlesztések, a környezetbarát modern technológia alkalmazása révén az európai gazdaság nagy előnye lehet a jövőben. |
a) yes |
Ilyen pl. az ingyenes kiosztás, amelynek mindenképpen szükséges fent maradnia, mivel ingyenes kvóta nélkül nem lehetséges a piacra való termelés fenntartása. Az európai termékek már így is kifejezetten drága kategóriába tartoznak, így fontos, hogy amennyire csak lehet megvédjük piacainkat. |
a) very adequate |
|
a) it absolutely keeps the incentive |
Mivel az ingyenes kiosztás nem fedezi a kibocsátásokat teljes mértékben, ezért a beruházások megvalósítását kellőképpen ösztönzi. |
c) quite exaggerated |
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c) a constant share as in 2013-20 |
|
b) the same share as in Phase 3 |
|
a) yes |
|
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
|
b) no |
A kibocsátással megegyező mértékű kiosztás, valamint a fejlesztések támogatása elegendő lenne. |
a) the present two groups should remain |
|
a) the present criteria should remain |
|
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
a) five years |
|
a) the present approach of average of the 10% most efficient installations should remain |
|
a) yes (please specify how often) |
Iparági szereplők adatszolgáltatása alapján háromévente. |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
|
d) both b) and c) |
|
c) yes, in the form of additional free allocation |
|
Least important |
Most important |
Important |
Less important |
|
a) from the Member States' auction budgets |
|
|
a) Business |
Hydro Norsk ASA is a global aluminium company with production, sales and trading activities throughout the value chain, from bauxite, alumina and energy generation to the production of primary aluminium and rolled products as well as recycling. Based in Norway, the company is active in more than 50 countries worldwide but has a strong European presence. About two-thirds of our 13,000 employees work in Europe. Aluminium production falls under the scope of the EU ETS since 2013.
Hydro is listed in the Transparency Register under the number 45060553191-59. |
Norsk Hydro ASA Drammensveien 260 N-0283 Oslo, Norway 17 rue Archimede B-1000 Brussels, Belgium +32.2.286.48.80 jan.peter.jebsen@hydro.com |
a) yes |
|
1) yes |
b) no |
Introduction of emission trading has incentivised industry to reduce emissions per unit of output in existing production facilities as far as possible through operational improvement alone, and further improvements in emission efficiency will require investments, either in upgrading of existing capacity or in new plants.This is crucial since emission trading limits the ability to invest by reducing the operational margins, in particular for electro-intensive industries. These industries are mostly price takers in global markets, and the cost increase is not reflected in higher product prices. Electricity cost is a main localisation factor, and investments in Europe are unlikely since electricity cost is higher here due to cost linked to climate policy:
1. Extra cost due to climate policy is insufficiently compensated and will reduce the margins of this industry. Shrinking margins reduces the ability to invest in energy efficiency and will thus finally lead to closures of capacity.
2. The increased electricity cost corresponding to increased output due to investments is not fully compensated due to unclear regulation of capacity creep and new entrants.
3. Support for renewable generation and increased grid and balancing cost for intermittent generation is charged on all end users of electricity, including industry and electro-intensive industries are not fully exempted or compensated.
Compensation of cost increases are to a large extent deemed to constitute State Aid. State Aid is exposed to budgetary constraints and annual decisions in Member States. Furthermore, support is required to be reassessed and gradually reduced over time. Investments will therefore not be made if they depend on annual State Aid for a long period. EUA price risk is translated into electricity price risk. This risk is mainly political and cannot be hedged; it weakens the forward market in electricity, and prevents long-term hedging of electricity supply. |
b) no |
Energy intensive industry has an innate incentive to become more energy efficient due to high energy cost, independently of the extra cost related to ETS. In these industries, however, the EU ETS may reduce the ability to become more energy efficient. Improvements will require investments, either in upgrading of existing capacity or in new plants. Extra cost due to climate policy is however insufficiently compensated and will reduce the margins of the industry.
Shrinking margins lead to reduced energy efficiency investments. Investment in more energy efficient technology in energy intensive industry requires that:
1. The industry is guaranteed full compensation for the extra costs related to European climate policy until a level playing field is restored through a comprehensive global climate agreement. (Investment will of course not be made in Europe unless European prices are competitive.)
2. New capacity created through the project also gets full compensation. Reductions in output from energy intensive industries may at an aggregate level falsely be interpreted as improvements in energy efficiency. Such effects do not correspond to an improved competitive position. |
a) yes |
In most energy intensive industries, product prices are set in global markets. Until a significantly larger share of competitors is influenced by similar increases in energy cost, there is a need for such measures. Otherwise such industries will disappear from Europe. Such measures are transitional in the sense that they may be phased out when an international agreement is in place, provided that it creates a global level playing field for relevant industries. |
b) quite adequate |
Full compensation for direct and indirect costs, linked to actual output and realistic benchmarks, would be a quite adequate measure to address the risk of carbon leakage. A fixed number of allowances may adequately compensate increased cost independently of the market value of those allowances. |
a) it absolutely keeps the incentive |
Full compensation for direct and indirect costs is absolutely necessary for the competitive position of Europe as a localisation of energy intensive industries. Compensation should be linked to actual output in order to provide an incentive for growth and to allow production flexibility through business cycles. Realistic benchmarks are necessary for full compensation to new capacity and for the preservation of the undistorted environmental incentive. Free allocation based on historical values neither supports growth nor preserves the environmental incentive. Insufficient compensation reduces the operational margins and will ultimately reduce the incentive to keep the production equipment in good operational condition and to invest in new and more efficient technology. Investing in European capacity with new technology requires that the project financials match those of similar investments elsewhere. Allocation of allowances will not reduce the environmental incentive for the recipient. On the contrary, full compensation for direct and indirect effects of ETS through allocation or otherwise is a precondition for investment in new capacity in Europe. |
b) quite proportionate |
The administrative burden is not insignificant, but proportionate in the sense that no better solutions to solve the carbon leakage issue have been proposed. Border adjustments will most probably require a higher administrative effort. |
d) there should be no limit to overall free allocation to industry |
Carbon leakage undermines the environmental efficiency of EU ETS as well as EU’s industrial growth. Certain industries have to be protected for unfair international competition until fair conditions are restored by an international climate agreement. Without a comprehensive international agreement giving the global competitors of European industry a similar cost element related to emissions and electricity consumption, the cost of carbon leakage mitigation will be more or less stable, whereas the number of allowances to cover this cost will gradually diminish. This is a cost that is directly linked to emission trading and should be covered by the ETS system itself before any money is taken out of the system. If in the future, there is an inadequate number of allowances available to cover the need for carbon leakage mitigation, compensation could be provided as a sum of money proportionate to a given number of allowances from another source of finance. |
d) there should be no such innovation support post-2020 |
Income from the sale of emission allowances should primarily be used to the mitigation of undesirable effects of emission trading. Innovation support should mainly come out of MS general budgets and not from auction income. When EUA prices are low, electricity prices are low, and the need for support in CCS projects is high. Conversely, with high EUA prices, there might be a very small need for support. Furthermore, volatility in electricity markets adds to the risk and financing cost of CCS projects. Income from the sale of a given share of the allowances budget is thus not an appropriate source of financing of support to CCS projects. |
b) no |
Income from the sale of emission allowances should primarily be used to the mitigation of undesirable effects of emission trading. Innovation support should mainly come out of MS general budgets and not from auction income. |
c) other types of funding (please specify) |
Income from the sale of emission allowances should primarily be used to the mitigation of undesirable effects of emission trading. Innovation support should mainly come out of Member States’ general budgets and not from auction income. |
a) yes |
The use of free allowances will also have to be extended to cover indirect effects through increased electricity prices. With significantly higher EUA prices, the present solution for indirect costs based on State Aid will:
- be insufficient for long term survival of these industries in Europe,
- not create the predictability needed for investments, and, as well,
- create significant disturbances in the internal market for energy intensive products.
Effective carbon leakage prevention will also require exemption from extra costs related to other elements of climate policy like support to development of renewable electricity generation and extra grid costs related to transmission and balancing of electricity from renewable sources. |
b) more carbon leakage categories should be defined |
Electro-intensive industries are particularly exposed to carbon leakage and need full compensation of extra cost until a significant share of competitors is influenced by similar cost increases. EUA costs are passed on into electricity prices through the marginal cost of the marginal sources of electricity, and for these industries, electricity related cost make up a high share of total cost. Most electro-intensive products have a high value compared to their weight, and may be moved between markets at a cost that is small compared to their value. They are thus globally priced with only a minimal price differentiation between markets. Other industries may need compensation, but not necessarily to the same degree. Other trading systems, like the Australian one, have more than one category of industries receiving different degrees of compensation. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
A single carbon leakage list (with several categories) should be established. The list should be based on the combined effect of direct cost (emission allowances) and indirect costs (increases in electricity costs due to climate policy).
The following set of criteria should be established:
1. The exposure to global competition is deemed through an analysis of the correlation of a global commodity price and the European price. A high correlation indicates that the opportunity of cost pass-through is low and that the exposure to competition is high.
2. The exposure to EUA cost is measured by calculating the sum of emission cost and increased electricity cost related to a fixed EUA price divided by the gross value added (GVA) for the relevant sector. Using a standardised price as a basis for both this calculation and the corresponding thresholds will stabilise the list. 3. The unit is in the most exposed category of the carbon leakage list if both criteria are met being simultaneously at a high threshold. If one or both of the criteria only meets a lower threshold, the unit will be in the less exposed category of the list.
The intensity of trade with third countries is a weak proxy to competitive exposure, and should
not be used in this context. |
b) other thresholds should be defined. Please specify below |
The levels of the thresholds should be based proper analysis of the proposed new set of categories and criteria (see response to Q12 and Q13). |
b) no, all criteria should be based on simple metrics and linked to clearly defined thresholds |
|
d) in line with the duration of ETS Phase 4 |
Predictability is the key to incentive efficiency. There is reason to believe that the set of criteria described above will establish robust and stable lists. |
a) the present approach of average of the 10% most efficient installations should remain |
|
a) yes (please specify how often) |
Benchmarks and carbon leakage lists should be revised simultaneously (i.e. for each ETS trading period). |
c) other (please specify) |
The main advice to be found in the literature is to use output based allocation linked to realistic benchmarks. For each industry, the baseline will then be set by the realistic benchmark. Indirect emission should also be set by realistic benchmarks and actual output.. The compensation will be linked to a sum of two benchmarks, one derived from emissions and one derived from electricity consumption. (See also the response to Q21) Compensation linked to production output through benchmarks restores and strengthens the incentives for investment in energy and environmentally efficient technology. The long-term and short-term efficiency incentives for energy efficiency derived from high electricity prices are preserved, as well. Other instruments commonly used to protect those incentives, like reducing the level of aid by a certain percentage, would not work as intended. On the contrary, such reduction would weaken the long-term environmental incentive by reducing the likelihood of investment in new technology. In option a), emission data will be outdated and incomplete, creating possibilities for windfall profit and distorted operational incentives. Furthermore, the baseline periods for indirect emission will not be the same as for direct emission. Repeated grandfathering based on updated historical data (option b)) is also advised against in the literature on emission trading. Any suspicion that updated emission data will be used as a baseline for later allocation will strongly distort incentives. Depending on the situation for various industries, this may lead to the maintenance of high emissions as a basis for later allocation. A main weakness of the present solution is the complete lack of flexibility to fit optimal operations. This problem will only be solved through output based allocation: 1. The main strategy for industrial cost efficiency is full utilisation of installed capacity and continuous capacity creep, i. e. gradually increasing capacity of existing plants through improved operational procedures, debottlenecking investments, technological improvements, etc. 2. These industries experience strong variations in product prices. To survive through the business cycles, these industries, and in particular those with a precarious cost position and/or high variable cost, will have to remain flexible, reducing output when prices are low. |
a) no, there should be no deviations |
There should be no deviations linked to the short-term financial conditions of industries. There might however be a need to find special solutions for industries where it is impossible to establish sectorial benchmarks. |
c) yes, in the form of additional free allocation |
Compensation inside the EU ETS should be extended to cover indirect effects through increased electricity prices. With significantly higher EUA prices, the present solution for indirect costs based on State Aid will be insufficient for long term survival of these industries in Europe and, as well, create significant disturbances in the internal market. The cost of any compensation measures will be proportionate to the EUA price, thus corresponding to the value of free allowances. Compensation could be provided as free allowances or as a sum of money proportionate to a given number of allowances from another source of finance. |
Important |
Least important |
Most important |
Less important |
|
d) other |
Income from the sale of emission allowances should primarily be used to the mitigation of undesirable effects of emission trading. Innovation support should mainly come out of MS general budgets and not from auction income. |
|
a) Business |
Ibstock Brick Ltd |
Dr David Hills Sustainability Manager, Halifax House, Falcon Court, Stockton on Tees, TS18 3TU Mobile: +447778141605 Email: d.hills@ibstock.co.uk |
a) yes |
|
1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. In some cases, a CO2 target and an energy efficiency target can contradict each other, e.g. pore forming agents used in the clay block industry can contribute to a lower fuel consumption but can raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improvements |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS are forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States and where it has been used (such as here in the UK) the scheme remains complicated. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support renewables in Member States. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies. |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs > 3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. A global system would eliminate the risk of carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
As explained above, all energy intensive sectors as defined in the Energy Taxation Directive must be considered as exposed to the carbon leakage risk Nevertheless, if trade and carbon intensity criteria are to be used, they need to be adapted: Firstly, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). Average, labour costs can be up to 70% for some ceramic sectors. Therefore, using GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with GOS Secondly, the current criteria entail either: i) to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or ii) a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) introduced |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have: i) a trade intensity ≥ 30% or a carbon intensity ≥ 30%, or ii) a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. The application of this correction factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have limited impact since no major breakthrough technologies have been implemented following the initial benchmarking exercise. Furthermore, benchmark revision would entail a major administrative burden, especially for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Less important |
Least important |
Most important |
Important |
One important issue for decarbonisation in ceramics is to develop zero carbon or low carbon gaseous fuels for combustion processes in furnaces and dryers. The capital requirement is very substantial to take this to a scale worthy of review for industrial development as the feasibility of producing such fuels is already established to a reasonable degree at low level pilot scale or higher level for electricity generation yet some significant technical issues remain with tars included in the gas stream at 3-5 MW level. It is the application of this to industrial kilns, furnaces and dryers as a replacement for natural gas that is a pre-cursor to achievement of the 2050 CO2 reduction targets. |
a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
a) Business |
Imerys Minerals Ltd |
Nathan Guest Imerys Minerals Par Moor Centre Par Moor Road Cornwall UK PL24 2SQ |
a) yes |
1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. In some cases, a CO2 target and an energy efficiency target can contradict each other, e.g. pore forming agents used in the clay block industry can contribute to a lower fuel consumption but can raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improvements |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS are forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States and where it has been used (such as here in the UK) the scheme remains complicated. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support renewables in Member States. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies. |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs > 3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. A global system would eliminate the risk of carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
As explained above, all energy intensive sectors as defined in the Energy Taxation Directive must be considered as exposed to the carbon leakage risk Nevertheless, if trade and carbon intensity criteria are to be used, they need to be adapted: Firstly, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). Average, labour costs can be up to 70% for some ceramic sectors. Therefore, using GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with GOS Secondly, the current criteria entail either: i) to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or ii) a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) introduced |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have: i) a trade intensity ≥ 30% or a carbon intensity ≥ 30%, or ii) a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. The application of this correction factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have limited impact since no major breakthrough technologies have been implemented following the initial benchmarking exercise. Furthermore, benchmark revision would entail a major administrative burden, especially for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
|
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
|
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
a) Business |
IMERYS TC - French Clay Tiles producer |
Christian Ravaud - Industrial Director - Imerys TC - 1, rue des Vergers - Bat 3 BP 22 - 69579 LIMONEST cedex - Tel: +33 (0) 472 170 854 - christian.ravaud@imerys.com |
a) yes |
|
1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improve |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. This would limit the list to sectors really exposed and would eliminate the risk of a carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
All energy intensive sectors as defined in the Energy Taxation Directive should be considered as exposed to the carbon leakage risk. As an alternative, trade and carbon intensity criteria should be used considering the following elements. First, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS. Second, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be i |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
c) yes, in the form of additional free allocation |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
a) Business |
INDUSTRIE CERAMICHE PIEMME S.P.A. |
VIA DEL CROCIALE, 42/44 41042 - FIORANO (MO) - ITALY TEL. +39 0536 849111 EMAIL: f.accardi@ceramichepiemme.it |
a) yes |
|
1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improvement |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies. |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. This would limit the list to sectors really exposed and would eliminate the risk of a carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
All energy intensive sectors as defined in the Energy Taxation Directive should be considered as exposed to the carbon leakage risk. As an alternative, trade and carbon intensity criteria should be used considering the following elements.First, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS.Second, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity≥30%, or a trade intensity≥10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced. |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
a) Business |
INEOS Chemicals Grangemouth Limited |
Contact: Colin Pritchard, Energy Business Manager PO Box 21, Bo'ness Road, Grangemouth, Stirlingshire, FK3 9XH 01324 476603 colin.pritchard@ineos.com |
a) yes |
|
1) yes |
a) yes |
Figures from the CEFIC Roadmap show that between 1990 and 2010 the European chemical industry was able to achieve an absolute greenhouse gas emission reduction of 50% as estimated previously and attract investments. Although the industry has invested heavily in cutting-edge technology only marginal reduction is possible, mainly through incremental energy efficiency improvements. While the chemicals sector remains committed to making further improvements, there are diminishing returns and not much low-hanging fruit. The EU industry's ability to further curb carbon emissions depends on a cost level playing field as well as on adequate protection for energy-intensive sectors. |
b) no |
Improving energy efficiency is a business imperative in a globally competitive market for industry sectors where energy costs constitute a significant part of production costs. As it stands, the EU ETS is not a cost-effective mechanism to reduce carbon emissions, as it adds further policy costs (actual and expected), hampering economic growth, undermining competitiveness, and reducing the willingness to invest in the EU. |
a) yes |
INEOS note that special measures to support EU industry and avoid carbon as well as investment leakage are needed. However, these measures must not be transitional. Transitional measures are unlikely to provide adequate support to energy-intensive industries, and they will not be able to fill the competiveness gap between the EU and other countries such as the US, China, and the Middle East. The EU industry needs stable measures for the whole period until a global level playing field is achieved. |
b) quite adequate |
Free allocation and indirect compensation are essential. INEOS recommend that the Commission should switch from ex-ante allocation (historical production) to ex-post allocation (actual production), which is more likely to encourage investment to avoid carbon leakage. Enhanced free allocation would be an adequate instrument to address the risk of carbon leakage. Good performers must be rewarded while bad performers must directly feel positive consequences of improvement measures. To that aim, free allocation post-2020 must be based on a dynamic system, which has the following main components: (1) realistic benchmark levels including direct and indirect emissions (2) the actual production level (3) no correction factors. (4) an allocation supply reserve. With such reforms, enhanced free allocation can minimise carbon leakage also at higher CO2-prices. EU climate policy should be reviewed if diplomacy fails to agree on a global climate change deal that imposes fair burdens on each country |
a) it absolutely keeps the incentive |
The concept of free allocation and innovation to reduce emissions are independent from each other. The EU industry cannot survive without free allocation. |
b) quite proportionate |
|
d) there should be no limit to overall free allocation to industry |
In absence of a substantial global agreement, asymmetrical climate policies will impose unfair burdens on EU industry. INEOS strongly recommend that the EU Commission should reconsider its proposal to phase out free allocation completely by 2027, as this will hamper industrial growth. Free allocation must continue until countries agree on a substantial global climate deal. |
e) I don’t know |
The Commission should prioritise protection for industries at risk of carbon leakage to allow EU companies to remain competitive. |
a) yes |
It is crucial to strengthen industrial R&D, as technologies to meet the 2050 reduction targets are not yet available. Policy makers should avoid raising the costs of decarbonisation policies to increase the revenue needed to address those costs. All ETS auctioning revenues should be used in a more cost-effective way to facilitate the transition towards a low-carbon economy without undermining competitiveness. The ETS Directive states that half of auctioning revenues should be spent on decarbonisation measures. This has not been the case so far: a missed opportunity to pursue an active industry policy (i.e. through a large breakthrough technology programme for innovation in energy intensive industry). |
c) other types of funding (please specify) |
See answer Q8 and Q9 |
a) yes |
INEOS recommend the following measures: Reforming the EU ETS providing more effective carbon leakage measures (see Q4); providing adequate compensation for the full carbon emissions costs in electricity prices; taking into account all relevant costs induced by the climate policy package (such as RES-support). Politicians must also commit to review the EU climate change policy including the absolute industry target if a global level playing field is not achieved by 2020. INEOS point out that the Commission should encourage and incentivise non-ETS sectors to deliver competitive, lower carbon solutions to their customers. It is important to recognise that the burden share of emissions needs to be rebalanced between energy intensive sectors and other sectors such as transport and households. |
a) the present two groups should remain |
INEOS note that the current system is appropriate and recommend that only sectors at serious risk of carbon leakage should be included on the list. It is important that energy-intensive industries are fully protected and shielded against rising energy and raw materials costs. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
Present criteria should remain. However, INEOS note that the quantitative assessment of potential carbon leakage is not always able to measure the full impact of carbon costs. It is key to include complementary qualitative assessments to add both a forward looking perspective as well as a value chain aspect. |
c) I don’t know |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
INEOS note that for sectors characterised by a complex, integrated manufacturing systems and by diverse, interdependent value chains, quantitative criteria may not be sufficient to properly assess the real risk of carbon leakage. For these sectors, it is key to identify a set of qualitative assessment criteria to be used in addition to quantitative criteria. This can be due to abatement potential, market characteristics, or profit margins. |
d) in line with the duration of ETS Phase 4 |
It is crucial that industrial sectors at risk of carbon leakage are given the certainty of a stable and forward-looking list, which should be valid for the duration of the EU ETS Phase IV. Further changes at the end of the five-year period would further discourage investment. |
c) the approach should be less stringent (please specify) |
Allocation is currently based on the stringent average of the top 10% performers, meaning that only about 5 out of 100 installations receive 100 % free allocation. These stringent benchmarks are significantly reduced through the cross-sectoral correction factor and the linear reduction factor. This adds costs even to the most efficient producers and discourages efficient investments and growth. This approach is not sustainable and does not protect against carbon leakage. INEOS propose that the approach should be rather less stringent and encourage the use of realistic benchmarks. Realistic benchmark levels should reflect the penetration of a given efficiency technology within EU industrial sectors and be comparable to benchmarks in other schemes globally. Realistic benchmarks should provide long-term certainty and predictability. |
b) no |
See response Q17. |
c) other (please specify) |
Current 'frozen' ex-ante allocation based on historical production data discourages growth and perversely rewards relocation outside Europe. This system should be replaced by a dynamic allocation system based on actual production output. An 'ex-post' allocation system would protect investment combining economic growth with ambitious climate change target. |
e) I don’t know |
|
c) yes, in the form of additional free allocation |
Carbon costs represent a significant part of the marginal capacity to meet electricity demand, directly in the fuel mix or indirectly through imported electricity. Therefore, compensation for indirect costs is a key part of the overall carbon leakage protection that industry needs, and Member States should be free to provide up to 100% compensation to protect the most vulnerable industries to ensure they remain globally competitive. INEOS suggest that industry should not rely on an unpredictable and voluntary financial system based on Member States compensation, which should be replaced by a system that provides indirect allocation at European level without unrealistic reduction factors |
Less important |
Important |
Most important |
Least important |
|
d) other |
Innovation should be supported by existing stable funds such as Horizon 2020. However, Member States’ auction budgets should be used transparently. |
The competitiveness of the EU’s chemical sector is seriously undermined by current energy and feedstock price differences between Europe and other regions of the world. In the US shale gas has been a game changer for the petrochemical industry providing cheaper energy, cheaper feedstock, and secure domestic energy supply. The EU should avoid unilateral EU policy-driven cost increases that weaken the competitive position of domestic producers and speed up relocation and divestment. INEOS is one of the largest chemicals companies in the world, with 36 sites across Europe. We operate in Belgium, France, Germany, Italy, Norway, the Netherlands, Spain, Sweden, and the UK. Worldwide we operate 51 manufacturing sites in 11 countries, with facilities in the US and China. We employ around 15,000 people and our sales in 2013 were $43 billion. |
a) Business |
INEOS ChlorVinyls Ltd. |
Roger Mottram – Group Environmental and Regulatory Affairs Manager INEOS ChlorVinyls Ltd. Runcorn Site HQ South Parade P O Box 9 Runcorn Cheshire WA7 4JE roger.mottram@ineos.com 00 44 1928 512592 |
a) yes |
|
1) yes |
a) yes |
Figures from the CEFIC Roadmap show that between 1990 and 2010 the European chemical industry was able to achieve an absolute greenhouse gas emission reduction of 50% as estimated previously and attract investments. Although the industry has invested heavily in cutting-edge technology only marginal reduction is possible, mainly through incremental energy efficiency improvements. While the chemicals sector remains committed to making further improvements, there are diminishing returns and not much low-hanging fruit. The EU industry's ability to further curb carbon emissions depends on a cost level playing field as well as on adequate protection for energy-intensive sectors. |
b) no |
Improving energy efficiency is a business imperative in a globally competitive market for industry sectors where energy costs constitute a significant part of production costs. As it stands, the EU ETS is not a cost-effective mechanism to reduce carbon emissions, as it adds further policy costs (actual and expected), hampering economic growth, undermining competitiveness, and reducing the willingness to invest in the EU. |
a) yes |
INEOS ChlorVinyls notes that special measures to support EU industry and avoid carbon as well as investment leakage are needed. However, these measures must not be transitional. Transitional measures are unlikely to provide adequate support to energy-intensive industries, and they will not be able to fill the competiveness gap between the EU and other countries such as the US, China, and the Middle East. The EU industry needs stable measures for the whole period until a global level playing field is achieved. |
b) quite adequate |
Free allocation and indirect compensation are essential. INEOS recommend that the Commission should switch from ex-ante allocation (historical production) to ex-post allocation (actual production), which is more likely to encourage investment to avoid carbon leakage. Enhanced free allocation would be an adequate instrument to address the risk of carbon leakage. Good performers must be rewarded while bad performers must directly feel positive consequences of improvement measures. To that aim, free allocation post-2020 must be based on a dynamic system, which has the following main components: (1) realistic benchmark levels including direct and indirect emissions (2) the actual production level (3) no correction factors. (4) an allocation supply reserve. With such reforms, enhanced free allocation can minimise carbon leakage also at higher CO2-prices. In the medium and long-term, the EU climate policy should be reviewed if diplomacy fails to agree on a global climate change deal. |
a) it absolutely keeps the incentive |
The concept of free allocation and innovation to reduce emissions are independent from each other. The EU industry cannot survive without free allocation. |
b) quite proportionate |
|
d) there should be no limit to overall free allocation to industry |
In absence of a substantial global agreement, asymmetrical climate policies will impose unfair burdens on EU industry. INEOS strongly recommend that the EU Commission should reconsider its proposal to phase out free allocation completely by 2027, as this will hamper industrial growth. Free allocation must continue until countries agree on a substantial global climate deal. |
e) I don’t know |
The Commissions should prioritise protection for industries at risk of carbon leakage to allow EU companies to remain competitive. |
a) yes |
It is crucial to strengthen industrial R&D, as technologies to meet the 2050 reduction targets are not yet available. Policy makers should avoid raising the costs of decarbonisation policies to increase the revenue needed to address those costs. All ETS auctioning revenues should be used in a more cost-effective way to facilitate the transition towards a low-carbon economy without undermining competitiveness. The ETS Directive states that half of auctioning revenues should be spent on decarbonisation measures. This has not been the case so far: a missed opportunity to pursue an active industry policy (i.e. through a large breakthrough technology programme for innovation in energy intensive industry). |
c) other types of funding (please specify) |
See answer Q8 and Q9 |
a) yes |
INEOS ChlorVinyls recommend the following measures: Reforming the EU ETS providing more effective carbon leakage measures (see Q4); providing adequate compensation for the full carbon emissions costs in electricity prices; taking into account all relevant costs induced by the climate policy package (such as RES-support). Politicians must also commit to review the EU climate change policy including the absolute industry target if a global level playing field is not achieved by 2020. INEOS point out that the Commission should encourage and incentivise non-ETS sectors to deliver competitive, lower carbon solutions to their customers. It is important to recognise that the burden share of emissions needs to be rebalanced between energy intensive sectors and other sectors such as transport and households. |
a) the present two groups should remain |
INEOS ChloVinyls note that the current system is appropriate and recommend that only sectors at serious risk of carbon leakage should be included on the list. It is important that energy-intensive industries are fully protected and shielded against rising energy and raw materials costs. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
Present criteria should remain. However, INEOS ChlorVinyls note that the quantitative assessment of potential carbon leakage is not always able to measure the full impact of carbon costs. It is key to include complementary qualitative assessments to add both a forward looking perspective as well as a value chain aspect. |
c) I don’t know |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
INEOS ChlorVinyls note that for sectors characterised by a complex, integrated manufacturing systems and by diverse, interdependent value chains, quantitative criteria may not be sufficient to properly assess the real risk of carbon leakage. For these sectors, it is key to identify a set of qualitative assessment criteria to be used in addition to quantitative criteria. This can be due to abatement potential, market characteristics, or profit margins. |
d) in line with the duration of ETS Phase 4 |
It is crucial that industrial sectors at risk of carbon leakage are given the certainty of a stable and forward-looking list, which should be valid for the duration of the EU ETS Phase IV. Further changes at the end of the five-year period would further discourage investment. |
c) the approach should be less stringent (please specify) |
Allocation is currently based on the stringent average of the top 10% performers, meaning that only about 5 out of 100 installations receive 100 % free allocation. These stringent benchmarks are significantly reduced through the cross-sectoral correction factor and the linear reduction factor. This adds costs even to the most efficient producers and discourages efficient investments and growth. This approach is not sustainable and does not protect against carbon leakage. INEOS ChlorVinyls propose that the approach should be rather less stringent and encourage the use of realistic benchmarks. Realistic benchmark levels should reflect the penetration of a given efficiency technology within EU industrial sectors and be comparable to benchmarks in other schemes globally. Realistic benchmarks should provide long-term certainty and predictability. |
b) no |
See response Q17. |
c) other (please specify) |
Current 'frozen' ex-ante allocation based on historical production data discourages growth and perversely rewards relocation outside Europe. This system should be replaced by a dynamic allocation system based on actual production output. An 'ex-post' allocation system would protect investment combining economic growth with ambitious climate change target. |
e) I don’t know |
|
c) yes, in the form of additional free allocation |
Carbon costs represent a significant part of the marginal capacity to meet electricity demand, directly in the fuel mix or indirectly through imported electricity. Therefore, compensation for indirect costs is a key part of the overall carbon leakage protection that industry needs, and Member States should be free to provide up to 100% compensation to protect the most vulnerable industries to ensure they remain globally competitive. INEOS ChlorVinyls suggest that industry should not rely on an unpredictable and voluntary financial system based on Member States compensation, which should be replaced by a system that provides indirect allocation at European level without unrealistic reduction factors. |
Less important |
Important |
Most important |
Least important |
|
d) other |
Innovation should be supported by existing stable funds such as Horizon 2020. However, Member States’ auction budgets should be used transparently. |
The competitiveness of the EU’s chemical sector is seriously undermined by current energy and feedstock price differences between Europe and other regions. In the US shale gas has been a game changer for the chemical industry providing cheaper energy, cheaper feedstock, and secure domestic energy supply. The EU should avoid unilateral policy-driven cost increases that weaken the competitive position of domestic producers. INEOS ChlorVinyls is a major chlor-alkali producer in Europe and the largest PVC producer. As an energy-intensive manufacturer, electricity accounts for up to 70% of our production costs. Along with other chlor-alkali producers, we have made a commitment to eliminate the less energy efficient mercury technology by 2020 and therefore face significant investment decisions. It is crucial that we have adequate protection against unilateral EU ETS policy costs (both for direct- and indirect costs). |
a) Business |
INEOS Group AG |
Richard Longden INEOS Group AG Avenue des Utins 3. 1180 Rolle Switzerland e-mail : richard.longden@ineos.com tel: +41 216 277 063 |
a) yes |
|
1) yes |
a) yes |
Figures from the CEFIC Roadmap show that between 1990 and 2010 the European chemical industry was able to achieve an absolute greenhouse gas emission reduction of 50% as estimated previously and attract investments. Although the industry has invested heavily in cutting-edge technology only marginal reduction is possible, mainly through incremental energy efficiency improvements. While the chemicals sector remains committed to making further improvements, there are diminishing returns and not much low-hanging fruit. The EU industry's ability to further curb carbon emissions depends on a cost level playing field as well as on adequate protection for energy-intensive sectors. |
b) no |
Improving energy efficiency is a business imperative in a globally competitive market for industry sectors where energy costs constitute a significant part of production costs. As it stands, the EU ETS is not a cost-effective mechanism to reduce carbon emissions, as it adds further policy costs (actual and expected), hampering economic growth, undermining competitiveness, and reducing the willingness to invest in the EU. |
a) yes |
INEOS note that special measures to support EU industry and avoid carbon as well as investment leakage are needed. However, these measures must not be transitional. Transitional measures are unlikely to provide adequate support to energy-intensive industries, and they will not be able to fill the competiveness gap between the EU and other countries such as the US, China, and the Middle East. The EU industry needs stable measures for the whole period until a global level playing field is achieved. |
b) quite adequate |
Free allocation & indirect compensation are essential. We recommend the Commission switch from ex-ante allocation (historical production) to ex-post allocation (actual production), which is more likely to encourage investment to avoid carbon leakage. Enhanced free allocation would be an adequate instrument to address the risk of carbon leakage. Good performers must be rewarded while bad performers must directly feel positive consequences of improvement measures. To that aim, free allocation post-2020 must be based on a dynamic system, with the following components: 1 realistic benchmark levels including direct and indirect emissions 2 the actual production level 3 no correction factors. 4 an allocation supply reserve. With such reforms, enhanced free allocation can minimise carbon leakage also at higher CO2-prices. In the medium/long-term, EU climate policy should be reviewed if diplomacy fails to agree on a global climate change deal that imposes fair burdens on each country. |
a) it absolutely keeps the incentive |
The concept of free allocation and innovation to reduce emissions are independent from each other. The EU industry cannot survive without free allocation. |
b) quite proportionate |
|
d) there should be no limit to overall free allocation to industry |
In absence of a substantial global agreement, asymmetrical climate policies will impose unfair burdens on EU industry. INEOS strongly recommend that the EU Commission should reconsider its proposal to phase out free allocation completely by 2027, as this will hamper industrial growth. Free allocation must continue until countries agree on a substantial global climate deal. |
e) I don’t know |
The Commissions should prioritise protection for industries at risk of carbon leakage to allow EU companies to remain competitive. |
a) yes |
It is crucial to strengthen industrial R&D, as technologies to meet the 2050 reduction targets are not yet available. Policy makers should avoid raising the costs of decarbonisation policies to increase the revenue needed to address those costs. All ETS auctioning revenues should be used in a more cost-effective way to facilitate the transition towards a low-carbon economy without undermining competitiveness. The ETS Directive states that half of auctioning revenues should be spent on decarbonisation measures. This has not been the case so far: a missed opportunity to pursue an active industry policy (i.e. through a large breakthrough technology programme for innovation in energy intensive industry). |
c) other types of funding (please specify) |
See answer Q8 and Q9 |
a) yes |
INEOS recommend the following measures: Reforming the EU ETS providing more effective carbon leakage measures (see Q4); providing adequate compensation for the full carbon emissions costs in electricity prices; taking into account all relevant costs induced by the climate policy package (such as RES-support). Politicians must also commit to review the EU climate change policy including the absolute industry target if a global level playing field is not achieved by 2020. INEOS point out that the Commission should encourage and incentivise non-ETS sectors to deliver competitive, lower carbon solutions to their customers. It is important to recognise that the burden share of emissions needs to be rebalanced between energy intensive sectors and other sectors such as transport and households. |
a) the present two groups should remain |
INEOS note that the current system is appropriate and recommend that only sectors at serious risk of carbon leakage should be included on the list. It is important that energy-intensive industries are fully protected and shielded against rising energy and raw materials costs. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
Present criteria should remain. However, INEOS note that the quantitative assessment of potential carbon leakage is not always able to measure the full impact of carbon costs. It is key to include complementary qualitative assessments to add both a forward looking perspective as well as a value chain aspect. |
c) I don’t know |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
INEOS note that for sectors characterised by a complex, integrated manufacturing systems and by diverse, interdependent value chains, quantitative criteria may not be sufficient to properly assess the real risk of carbon leakage. For these sectors, it is key to identify a set of qualitative assessment criteria to be used in addition to quantitative criteria. This can be due to abatement potential, market characteristics, or profit margins. |
d) in line with the duration of ETS Phase 4 |
It is crucial that industrial sectors at risk of carbon leakage are given the certainty of a stable and forward-looking list, which should be valid for the duration of the EU ETS Phase IV. Further changes at the end of the five-year period would further discourage investment. |
c) the approach should be less stringent (please specify) |
Allocation is currently based on the stringent average of the top 10% performers, meaning that only about 5 out of 100 installations receive 100 % free allocation. These stringent benchmarks are significantly reduced through the cross-sectoral correction factor and the linear reduction factor. This adds costs even to the most efficient producers and discourages efficient investments and growth. This approach is not sustainable and does not protect against carbon leakage. INEOS propose that the approach should be rather less stringent and encourage the use of realistic benchmarks. Realistic benchmark levels should reflect the penetration of a given efficiency technology within EU industrial sectors and be comparable to benchmarks in other schemes globally. Realistic benchmarks should provide long-term certainty and predictability. |
b) no |
See Q17 = Allocation is currently based on the stringent average of the top 10% performers, meaning that only about 5 out of 100 installations receive 100 % free allocation. These stringent benchmarks are significantly reduced through the cross- sectoral correction factor and the linear reduction factor. This adds costs even to the most efficient producers and discourages efficient investments and growth. This approach is not sustainable and does not protect against carbon leakage. INEOS propose that the approach should be rather less stringent and encourage the use of realistic benchmarks. Realistic benchmark levels should reflect the penetration of a given efficiency technology within EU industrial sectors and be comparable to benchmarks in other schemes globally. Realistic benchmarks should provide long-term certainty and predictability. |
c) other (please specify) |
Current 'frozen' ex-ante allocation based on historical production data discourages growth and perversely rewards relocation outside Europe. This system should be replaced by a dynamic allocation system based on actual production output. An 'ex- post' allocation system would protect investment combining economic growth with ambitious climate change target. |
e) I don’t know |
|
c) yes, in the form of additional free allocation |
Carbon costs represent a significant part of the marginal capacity to meet electricity demand, directly in the fuel mix or indirectly through imported electricity. Therefore, compensation for indirect costs is a key part of the overall carbon leakage protection that industry needs, and Member States should be free to provide up to 100% compensation to protect the most vulnerable industries to ensure they remain globally competitive. INEOS suggest that industry should not rely on an unpredictable and voluntary financial system based on Member States compensation, which should be replaced by a system that provides indirect allocation at European level without unrealistic reduction factors. |
Less important |
Important |
Most important |
I don't know |
|
d) other |
Innovation should be supported by existing stable funds such as Horizon 2020. However, Member States’ auction budgets should be used transparently. |
The competitiveness of the EU’s chemical sector is seriously undermined by current energy and feedstock price differences between Europe and other regions of the world. In the US shale gas has been a game changer for the petrochemical industry providing cheaper energy, cheaper feedstock, and secure domestic energy supply. The EU should avoid unilateral EU policy-driven cost increases that weaken the competitive position of domestic producers and speed up relocation and divestment. INEOS is one of the largest chemicals companies in the world, with 36 sites across Europe. We operate in Belgium, France, Germany, Italy, Norway, the Netherlands, Spain, Sweden, and the UK. Worldwide we operate 51 manufacturing sites in 11 countries, with facilities in the US and China. We employ around 15,000 people and our sales in 2013 were $47 billion. |
a) Business |
INEOS Olefins ad Polymers Europe |
Jacques Breulet Rue de Ransbeek, 310 B 1120 Bruxelles jacques.breulet@ineos.com +32 475554743 |
a) yes |
|
1) yes |
a) yes |
Figures from the CEFIC Roadmap show that between 1990 and 2010 the European chemical industry was able to achieve an absolute greenhouse gas emission reduction of 50% as estimated previously and attract investments. Although the industry has invested heavily in cutting-edge technology only marginal reduction is possible, mainly through incremental energy efficiency improvements. While the chemicals sector remains committed to making further improvements, there are diminishing returns and not much low-hanging fruit. The EU industry's ability to further curb carbon emissions depends on a cost level playing field as well as on adequate protection for energy-intensive sectors |
b) no |
Improving energy efficiency is a business imperative in a globally competitive market for industry sectors where energy costs constitute a significant part of production costs. As it stands, the EU ETS is not a cost-effective mechanism to reduce carbon emissions, as it adds further policy costs (actual and expected), hampering economic growth, undermining competitiveness, and reducing the willingness to invest in the EU. |
a) yes |
INEOS note that special measures to support EU industry and avoid carbon as well as investment leakage are needed. However, these measures must not be transitional. Transitional measures are unlikely to provide adequate support to energy-intensive industries, and they will not be able to fill the competiveness gap between the EU and other countries such as the US, China, and the Middle East. The EU industry needs stable measures for the whole period until a global level playing field is achieved |
b) quite adequate |
Free allocation and indirect compensation are essential. INEOS recommend that the Commission should switch from ex-ante allocation (historical production) to ex-post allocation (actual production), which is more likely to encourage investment to avoid carbon leakage. Enhanced free allocation would be an adequate instrument to address the risk of carbon leakage. Good performers must be rewarded while bad performers must directly feel positive consequences of improvement measures. To that aim, free allocation post-2020 must be based on a dynamic system, which has the following main components: (1) realistic benchmark levels including direct and indirect emissions (2) the actual production level (3) no correction factors. (4) an allocation supply reserve. With such reforms, enhanced free allocation can minimise carbon leakage also at higher CO2-prices. In the medium and long-term, the EU climate policy should be reviewed if diplomacy fails to agree on a global climate change deal that imp |
a) it absolutely keeps the incentive |
The concept of free allocation and innovation to reduce emissions are independent from each other. The EU industry cannot survive without free allocation. |
b) quite proportionate |
|
d) there should be no limit to overall free allocation to industry |
In absence of a substantial global agreement, asymmetrical climate policies will impose unfair burdens on EU industry. INEOS strongly recommend that the EU Commission should reconsider its proposal to phase out free allocation completely by 2027, as this will hamper industrial growth. Free allocation must continue until countries agree on a substantial global climate deal. |
e) I don’t know |
The Commissions should prioritise protection for industries at risk of carbon leakage to allow EU companies to remain competitive. |
a) yes |
It is crucial to strengthen industrial R&D, as technologies to meet the 2050 reduction targets are not yet available. Policy makers should avoid raising the costs of decarbonisation policies to increase the revenue needed to address those costs. All ETS auctioning revenues should be used in a more cost-effective way to facilitate the transition towards a low-carbon economy without undermining competitiveness. The ETS Directive states that half of auctioning revenues should be spent on decarbonisation measures. This has not been the case so far: a missed opportunity to pursue an active industry policy (i.e. through a large breakthrough technology programme for innovation in energy intensive industry). |
c) other types of funding (please specify) |
See answer Q8 and Q9 |
a) yes |
INEOS recommend the following measures: Reforming the EU ETS providing more effective carbon leakage measures (see Q4); providing adequate compensation for the full carbon emissions costs in electricity prices; taking into account all relevant costs induced by the climate policy package (such as RES-support). Politicians must also commit to review the EU climate change policy including the absolute industry target if a global level playing field is not achieved by 2020. INEOS point out that the Commission should encourage and incentivise non-ETS sectors to deliver competitive, lower carbon solutions to their customers. It is important to recognise that the burden share of emissions needs to be rebalanced between energy intensive sectors and other sectors such as transport and households. |
a) the present two groups should remain |
INEOS note that the current system is appropriate and recommend that only sectors at serious risk of carbon leakage should be included on the list. It is important that energy-intensive industries are fully protected and shielded against rising energy and raw materials costs. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
Present criteria should remain. However, INEOS note that the quantitative assessment of potential carbon leakage is not always able to measure the full impact of carbon costs. It is key to include complementary qualitative assessments to add both a forward looking perspective as well as a value chain aspect. |
c) I don’t know |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
INEOS note that for sectors characterised by a complex, integrated manufacturing systems and by diverse, interdependent value chains, quantitative criteria may not be sufficient to properly assess the real risk of carbon leakage. For these sectors, it is key to identify a set of qualitative assessment criteria to be used in addition to quantitative criteria. This can be due to abatement potential, market characteristics, or profit margins. |
d) in line with the duration of ETS Phase 4 |
It is crucial that industrial sectors at risk of carbon leakage are given the certainty of a stable and forward-looking list, which should be valid for the duration of the EU ETS Phase IV. Further changes at the end of the five-year period would further discourage investment. |
c) the approach should be less stringent (please specify) |
Allocation is currently based on the stringent average of the top 10% performers, meaning that only about 5 out of 100 installations receive 100 % free allocation. These stringent benchmarks are significantly reduced through the cross-sectoral correction factor and the linear reduction factor (both 1.74% points per year). This adds costs even to the most efficient producers and discourages efficient investments and growth. This approach is not sustainable and does not protect against carbon leakage. INEOS propose that the approach should be rather less stringent and encourage the use of realistic benchmarks. Realistic benchmark levels should reflect the penetration of a given efficiency technology within EU industrial sectors and be comparable to benchmarks in other schemes globally. Realistic benchmarks should provide long-term certainty and predictability. |
b) no |
See response Q17. |
c) other (please specify) |
Current 'frozen' ex-ante allocation based on historical production data discourages growth and perversely rewards relocation outside Europe. This system should be replaced by a dynamic allocation system based on actual production output. An 'ex-post' allocation system would protect investment combining economic growth with more ambitious climate change and energy efficiency targets. |
e) I don’t know |
|
c) yes, in the form of additional free allocation |
Carbon costs represent a significant part of the marginal capacity to meet electricity demand, directly in the fuel mix or indirectly through imported electricity. Therefore, compensation for indirect costs is a key part of the overall carbon leakage protection that industry needs, and Member States should be free to provide up to 100% compensation to protect the most vulnerable industries to ensure they remain globally competitive. INEOS suggest that industry should not rely on an unpredictable and voluntary financial system based on Member States compensation, which should be replaced by a system that provides indirect allocation at European level without unrealistic reduction factors. |
Less important |
Important |
Most important |
Least important |
|
d) other |
Innovation should be supported by existing stable funds such as Horizon 2020. However, Member States’ auction budgets should be used transparently and there should be no competition between carbon leakage protection and innovation support. Both are crucial for the successful implementation of the climate and energy policy. |
The competitiveness of the EU’s chemical sector is seriously undermined by current energy and feedstock price differences between Europe and other regions of the world. In the US shale gas has been a game changer for the petrochemical industry providing cheaper energy, cheaper feedstock, and secure domestic energy supply. The EU should avoid unilateral EU policy-driven cost increases that weaken the competitive position of domestic producers and speed up relocation and divestment. INEOS is one of the largest chemicals companies in the world, with 36 sites across Europe. We operate in Belgium, France, Germany, Italy, Norway, the Netherlands, Spain, Sweden, and the UK. Worldwide we operate 51 manufacturing sites in 11 countries, with facilities in the US and China. We employ around 15,000 people and our sales in 2013 were $43 billion. |
a) Business |
IrRADIARE, Science for Evolution |
Warsaw: ul. Ogrodowa 31/35, 00-893 Warsaw Brussels: Factory Forty, Rue des Anciens Étangs 40, B 1190 Brussels Lisbon: Rua Marcos Portugal, 8-A, 1495-091 Algés Braga: Rua dos Bombeiros, 257, 4730-752 Vila Verde Headquarters: Rua de Goa, 16, 2º, 2795-089 Linda-a-Velha Main Postal adress: P.O. Box 20, 2796-901 Linda-a-velha Phone: +351.210.937.907; Internet: www.irradiare.com; info@irradiare.com |
c) not relevant |
IrRADIARE operates as service provider for both ETS and non ETS costumers |
1) yes |
a) yes |
|
a) yes |
|
b) no |
|
b) quite adequate |
Free allocation may be extended under a constant or reducing overall emissions balance |
c) it largely compromises the incentive |
|
c) quite exaggerated |
|
a) a lower share than in 2013-20 |
|
c) a lower share than in Phase 3 |
|
a) yes |
|
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
|
a) yes |
Room for open innovation and competitiveness should be wider in order to sustain continues innovation chains from research to large-scale implementation. |
b) more carbon leakage categories should be defined |
|
a) the present criteria should remain |
|
c) I don’t know |
|
b) no, all criteria should be based on simple metrics and linked to clearly defined thresholds |
|
a) five years |
|
a) the present approach of average of the 10% most efficient installations should remain |
|
a) yes (please specify how often) |
five years |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
|
a) no, there should be no deviations |
meaning, in general no major deviations. |
d) yes, in the form of financial compensation at EU-level |
|
Important |
Most important |
Less important |
Least important |
|
c) from both |
|
|
a) Business |
Johnson Tiles, a division of Norcros Group (Holdings) Limited |
Mark Thompson Harewood Street, Tunstall, Stoke-on-Trent, Staffordshire, UK +44 1782 524196 mthompson@johnson-tiles.com |
a) yes |
|
1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources. The ceramic tile sector is competing against imported products which are increasingly from outside the EU. These countries have low legislative burdens on manufacturers and lower labour costs. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. In some cases, a CO2 target and an energy efficiency target can contradict each other. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise competitiveness. Johnson Tiles, prior to being in EU ETS, had already adopted the most energy-efficient fast single firing process with state-of-the-art plant and therefore further reductions in gas consumption are very limited. Therefore any increase of the existing EU ETS targets with purely become an additional cost to the business, driving up manufacturing costs and making it more uncompetitive. |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS are forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support renewables in Member States. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies. |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs > 3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. A global system would eliminate the risk of carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
As explained above, all energy intensive sectors as defined in the Energy Taxation Directive must be considered as exposed to the carbon leakage risk Nevertheless, if trade and carbon intensity criteria are to be used, they need to be adapted: Firstly, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). Average, labour costs can be up to 70% for some ceramic sectors. Therefore, using GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with GOS Secondly, the current criteria entail either: i) to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or ii) a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) introduced. |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have: i) a trade intensity ≥ 30% or a carbon intensity ≥ 30%, or ii) a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. The application of this correction factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have limited impact since no major breakthrough technologies have been implemented following the initial benchmarking exercise. Furthermore, benchmark revision would entail a major administrative burden, especially for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
a) Business |
K+S AG |
Dr. Steffen Niebergall
Bertha-von-Suttner-Str.7 341313 Kassel
tel. +49 561 9301 1065 steffen.niebergall@k-plus-s.com |
a) yes |
1) yes |
b) no |
b) no |
a) yes |
b) quite adequate |
b) it largely keeps the incentive |
d) absolutely exaggerated |
b) a higher share than in 2013-20 |
d) there should be no such innovation support post-2020 |
a) yes |
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
a) yes |
a) the present two groups should remain |
a) the present criteria should remain |
This depends also from the boundary conditions which taken into account. (CO2 price etc.) |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
c) I don’t know |
a) five years |
a) the present approach of average of the 10% most efficient installations should remain |
b) no |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
a) no, there should be no deviations |
a) no, the present approach should be maintained, i.e. that Member States can provide such compensation based on state aid guidelines |
Less important |
Less important |
Important |
Important |
e) I don't know |
a) Business |
KEM ONE (France Producteur de chlore / soude et PVC) |
etienne.chardiny@kemone.com Adresse : le Quadrille, 19 rue Jacqueline Auriol , LYON 69 008 |
a) yes |
|
1) yes |
b) no |
The industry we represent is already reducing its GHG emissions wherever it makes sense technologically and financially. There are thermodynamic limits and some technological breakthrough needed for beyond 2020 that have not yet been invented. Moreover these potential breakthroughs ought also to be commercially viable to be implemented. |
b) no |
The ETS system is the most efficient system for driving the GHG emissions of the industry. However ETS adds costs to the European industry only which contributes to decrease its competitiveness towards third countries. The drivers to become more energy efficient are not the same as the drivers for becoming more carbon efficient (e.g. switching from natural gas to biomass will make industry less energy efficient but more carbon efficient). |
a) yes |
These measures must not be transitional but stable for the period until a level playing field of climate policy costs will be achieved |
b) quite adequate |
Free allocation is one of the necessary tools to address carbon leakage and it should encompass all effects of carbon costs like indirect emissions and low carbon price effects |
a) it absolutely keeps the incentive |
the free allocations are based on ambitious benchmarks (10% best) which maintain the incentive to innovate in emissions reductions |
a) absolutely proportionate |
Currently benchmarks are set and are not difficult to apply. However establishing benchmarks was a complex exercise therefore doing the whole exercise once again should be avoided by all means. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage its share should be sufficient to avoid carbon leakage. An efficient producer in the EU must not have any competitiveness disadvantage compared to his competitors in third countries. |
d) there should be no such innovation support post-2020 |
Such support system is not adequate to finance noncompetitive technologies as well as research programs. ETS is an instrument that must curb emissions at the lowest cost for participants. Dedicated funds, independent from the price of carbon, already exist for research and innovation projects in Europe. |
b) no |
ETS is not the right instrument for financing, through a specific support scheme, expensive or uncompetitive technologies. All ETS revenues from auctioning should simply be recycled back towards the industry for supporting the transition to a low carbon economy. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This 50% share should first be secured for industry through a compulsory mechanism and possibly become a 100% share. |
a) yes |
additional measures must include free allocation for indirect emissions, free allocations based on actual production (dynamic allocations) rather than historical ones, no cross-sectoral correction factor for sectors exposed to carbon leakage, use of offsets (international credits). |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
the whole value chain is concerned by carbon leakage therefore the absence of any list would simplify the process since today almost 95% of the sectors are anyway included in the list. Moreover it would reinforce the legislative predictability which is an important factor for securing investments in Europe. |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
Any manufacturing company subject to ETS must be protected against carbon leakage |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
For the sake of simplicity, administrative burden and full understanding by all, we should not change the parameters unless they would become obsolete by having all sectors listed as carbon leakage sectors. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
for some sectors heavily exposed to international competition the quantitative criteria might not be sufficient to reveal their particular situation. It then requires a qualitative assessment to justify the cases. |
b) longer (please specify) |
longer and at least for the duration of phase 4 since we need the longest legislative predictability possible and preferably in line with the average industrial investment cycle (several decades). |
c) the approach should be less stringent (please specify) |
there should be no system (Cross sectoral correction factor, linear reduction factor) that implicitly circumvent the level of the benchmarks by reducing the allocation below this level leading to unrealistic values. |
b) no |
legislative predictability is very important to keep industry investing in Europe. Moreover early movers would be discouraged to invest since it would contribute to decrease their benchmark and it would make them loose their payback on the investment. |
c) other (please specify) |
Frozen ex-ante allocation does prevent growth of the industry. A dynamic system with a rolling basis should be the system of choice to accompany the economic situation. |
a) no, there should be no deviations |
Harmonized rules must be kept in order to avoid any competition distortion cases. |
c) yes, in the form of additional free allocation |
free allocations for indirect emissions will avoid the current situation of diverging national approaches leading to competition distortion. |
Less important |
Important |
Most important |
Least important |
the most difficult stage is usually to finance a successful large scale pilot |
a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This 50% share should first be secured for industry through a compulsory mechanism and possibly become a 100% share. ETS is not a scheme designed to finance Member States budget deficit. |
Growth and competitiveness of the EU industry is of paramount importance for investments and jobs in the EU and should be at the top of criteria when assessing any change to the ETS. |
a) Business |
KGHM Polska Miedź S.A. is a global producer of copper and silver with output amounts to 565 thousand tons of copper and about 1200 tons of silver annually. Our offer includes gold, lead and rhenium. We have technologically advanced operations. Copper ore mining in Poland is concentrated in three mines: "Lubin", "Rudna" and "Polkowice-Sieroszowice", ore processing in the Ore Processing Facilities and we produce our final products at smelters in Głogów and Legnica and the rolling mill "Cedynia". |
Mr. Wacław Gąsior, Metallurgical Technology Chief Engineer, Environmental Policy Department, KGHM Polska Miedź S.A., ul. M.Skłodowskiej-Curie 48, 59-301 Lubin, Poland Phone +48 76 747 82 78; E-mail w.gasior@kghm.pl |
a) yes |
|
1) yes |
b) no |
Unless: 1. Friendly environment is created for: - investment - global competitions - innovation - new technology implementation 2. Specific measures are taken within EU ETS: - coherent, direct and indirect financial compensation for CL prevention - actual production is taken as the base for allocation of allowances and financial compensation - “process emission” is exempted from EU ETS |
b) no |
Energy intensive industry such as Copper Industry has an incentive to become more energy efficient due to high energy cost, independently of the extra cost related to ETS. In these industries, however, the EU ETS may reduce the ability to become more energy efficient. The reason is that additional improvements will require investments, either in upgrading of existing capacity or in new plants. Extra cost due to climate policy, if insufficiently compensated, will reduce the margins of the European industry then reduce energy efficiency investments. |
a) yes |
Until competitors outside the EU are influenced by similar system (and cost increases due to direct CO2 emission and energy cost) there is a need for such a measures. In most non-ferrous metals (eg copper ) industries product prices are set in global markets and there is no possibility to pass costs on the customers. Otherwise such industries will disappear from Europe. |
a) very adequate |
Coherent compensation system for direct and indirect emission, based on actual production and realistic benchmarks, would be a very adequate measure to address the risk of carbon leakage. |
a) it absolutely keeps the incentive |
Full compensation for direct and indirect costs is absolutely necessary for the competitive position of Europe as a localisation of energy intensive industries. Compensation should be linked to actual output in order to provide an incentive for growth and to allow production flexibility through business cycles. Realistic benchmarks are necessary for full compensation to new capacity and for the preservation of the undistorted environmental incentive. Allocation of free allowances will not reduce the environmental incentive for the recipient. On the contrary, full compensation for direct and indirect effects of ETS through allocation or otherwise is a precondition for investment in new capacity in Europe. |
b) quite proportionate |
The administrative burden is not insignificant, but proportionate in the sense that no better solutions to solve the carbon leakage issue have been proposed. |
d) there should be no limit to overall free allocation to industry |
Carbon leakage undermines the environmental efficiency of EU ETS as well as EU’s industrial growth. Certain industries have to be protected for unfair international competition until fair conditions are restored by an international climate agreement. Without a comprehensive international agreement giving the global competitors of European industry a similar cost element related to emissions and electricity consumption, the cost of carbon leakage mitigation will be more or less stable, whereas the number of allowances to cover this cost will gradually diminish. This is a cost that is directly linked to emission trading and should be covered by the ETS system itself before any money is taken out of the system. If in the future, there is an inadequate number of allowances available to cover the need for carbon leakage mitigation, compensation could be provided as a sum of money proportionate to a given number of allowances from another source of finance. |
b) the same share as in Phase 3 |
Financing of CCS should not be a priority for the allowance budget. It is illogical to reserve a given share of the budget for this purpose: When the EUA prices are low the need for support is high and vice versa. Furthermore, the lack of stability in the EUA market creates a high project risk and high financing cost. This adds the project cost and the need for support. |
a) yes |
ETS should be focused on emission trading and mitigating the effects of such trading. Financing further programs should be limited to cost-effective and economically efficient projects able to reduce GHG emission. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
ETS should be focused on emission trading and mitigating the effects of such trading. Auction income should be diverted to innovation support only for cost-effective and economically efficient projects. |
a) yes |
The use of free allowances will also have to be extended to cover indirect effects through increased electricity prices. With significantly higher EUA prices, the present solution for indirect costs based on State Aid will: - be insufficient for long term survival of these industries in Europe, - not create the predictability needed for investments, and, as well, - create significant disturbances in the internal market for energy intensive products. Effective carbon leakage prevention will also require exemption from extra costs related to other elements of climate policy like support to development of renewable electricity generation and extra grid costs related to transmission and balancing of electricity from renewable sources. |
b) more carbon leakage categories should be defined |
Electro-intensive industries, like copper, are particularly exposed to carbon leakage and need full compensation of extra cost until a significant share of competitors is influenced by similar cost increases. EUA costs are passed on into electricity prices, and for these industries, electricity related cost make up a high share of total cost. Most electro-intensive products have a high value compared to their weight, and may be moved between markets at a cost that is small compared to their value. They are thus globally priced with only a minimal price differentiation between markets. Other industries may need compensation, but not necessarily to the same degree. Other trading systems, like the Australian one, have more than one category of industries receiving different degrees of compensation. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
A single carbon leakage list (with several categories) should be established. The list should be based on the combined effect of direct cost (emission allowances) and indirect costs (increases in electricity costs due to climate policy). The following set of criteria should be established: 1. The exposure to global competition. 2. The exposure to EUA cost 3. The unit is in the most exposed category of the carbon leakage list if both criteria are met being simultaneously at a high threshold. If one or both of the criteria only meets a lower threshold, the unit will be in the less exposed category of the list. |
b) other thresholds should be defined. Please specify below |
The levels of the thresholds should be based proper analysis of the proposed new set of categories and criteria (see response to Q12 and Q13). |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Justified cases could be: inability to pass through the CO2 costs to its global customers (i.e. price-taker industrial sector), economic activity of major importance for EU society (eg recycling as a contribution to the "circular society") |
d) in line with the duration of ETS Phase 4 |
Predictability is the key to incentive efficiency. There is reason to believe that the set of criteria described above will establish robust and stable lists. |
a) the present approach of average of the 10% most efficient installations should remain |
In cases in which determining of benchmark is not possible (small number of installations, specific resources etc.) fall back option should be maintained. |
a) yes (please specify how often) |
To preserve legal certainty, benchmarks should be valid during an entire EU ETS phase. |
c) other (please specify) |
The best solution is to use output based allocation linked to realistic benchmarks. For each industry, the baseline will then be set by the realistic benchmark. Indirect emission should also be set by realistic benchmarks and actual output. The compensation will be linked to a sum of two benchmarks, one derived from emissions and one derived from electricity consumption. |
a) no, there should be no deviations |
There should be no deviations linked to the short-term financial conditions of industries. There might however be a need to apply special solutions for industries where it is impossible to establish sectorial benchmarks (current fall back option). |
c) yes, in the form of additional free allocation |
Compensation inside the EU ETS should be extended to cover indirect effects through increased electricity prices. With significantly higher EUA prices, the present solution for indirect costs based on State Aid will be insufficient for long term survival of these industries in Europe and, as well, create significant disturbances in the internal market. The cost of any compensation measures will be proportionate to the EUA price, thus corresponding to the value of free allowances. Compensation could be provided as free allowances or as a sum of money proportionate to a given number of allowances from another source of finance. |
Important |
Least important |
Most important |
Less important |
|
a) from the Member States' auction budgets |
ETS should be mainly focused on emission trading and mitigating the undesirable effects of such trading. Innovation support should come out of MS auction income and be earmarked for investments in cost-efficient, low carbon technologies. |
|
a) Business |
LA FARGA GROUP, European group of industries that produces copper products. Based in Spain next to Barcelona in Les Masies de Voltregà (www.lafarga.es) |
LA FARGA GROUP Crta. C17Z Km 73,5 08508.- Les Masies de Voltregà Barcelona Spain xavier rovira@lafarga.es 34938594286 |
a) yes |
1) yes |
b) no |
1. Extra cost due to climate policy is sufficiently compensated. Currently, a key carbon leakage prevention mechanism, compensation for ETS indirect costs, exists only on paper as only few member states established meaningful compensation schemes. 2. We have a stable, predictable and investment friendly legislative environment in Europe. 3. Conditions are put in place to ensure that EU copper industry can remain globally competitive so that it can continue to invest in innovation along its entire value chain. 4. Sector specific reduction potentials and technology availability are properly and realistically assessed, (when designing new policies). |
b) no |
Energy intensive industry such as the Copper Industry for example has an innate incentive to become more energy efficient due to high energy cost, independently of the extra cost related to ETS. In these industries, however, the EU ETS may reduce the ability to become more energy efficient. The reason is that additional improvements will require investments, either in upgrading of existing capacity or in new plants. Extra cost due to climate policy, if insufficiently compensated, will reduce the margins of the European industry. Shrinking margins lead intrinsically to reduced energy efficiency investments. |
a) yes |
In most energy intensive industries, product prices are set in global markets. This is particularly true for copper which price is fixed globally at LME London Metal Exchange. Until a significantly larger share of global competitors is influenced by similar increases in energy cost, there is a need for such measures. Otherwise such industries will disappear from Europe. |
a) very adequate |
Compensation for direct and indirect costs, linked to actual output and realistic benchmarks, would be a very adequate measure to address the risk of carbon leakage (predictability and effectiveness is ensured in the long term for both, direct and indirect costs). |
a) it absolutely keeps the incentive |
Full compensation for direct and indirect costs is absolutely necessary for the competitive position of Europe as a localisation of energy intensive industries. Compensation should be linked to actual output in order to provide an incentive for growth and to allow production flexibility through business cycles. Realistic bench¬marks are necessary for full compensation to new capacity and for the preservation of the undistorted environmental incentive. Expressed differently, allocation of free allowances will not reduce the environmental incentive for the recipient. On the contrary, full compensation for direct and indirect effects of ETS through allocation or otherwise is a precondition for investment in new capacity in Europe. |
b) quite proportionate |
The administrative burden is not insignificant, but proportionate in the sense that no better solutions to solve the carbon leakage issue have been pro¬posed. |
e) there should be no free allocation post-2020 |
Carbon leakage undermines the environmental efficiency of EU ETS as well as EU’s industrial growth. Certain industries have to be protected for unfair international competition until fair conditions are restored by an international climate agreement. Without a comprehensive international agreement giving the global competitors of European industry a similar cost element related to emissions and electricity consumption, the cost of carbon leakage mitigation will be more or less stable, whereas the number of allowances to cover this cost will gradually diminish. This is a cost that is directly linked to emission trading and should be covered by the ETS system itself before any money is taken out of the system. If in the future, there is an inadequate number of allowances available to cover the need for carbon leakage mitigation, compensation could be provided as a sum of money proportionate to a given number of allowances from another source of finance. |
c) a lower share than in Phase 3 |
Financing of CCS should not be a priority for the allowance budget. It is illogical to reserve a given share of the budget for this purpose: When the EUA prices are low the need for support is high and vice versa. Furthermore, the lack of stability in the EUA market creates a high project risk and high financing cost. This adds the project cost and the need for support. |
b) no |
ETS should be focused on emission trading and mitigating the effects of such trading. Financing is tight, and there is no room for further programs. |
c) other types of funding (please specify) |
ETS should be focused on emission trading and mitigating the effects of such trading. Auction income should not be diverted to general innovation support. |
a) yes |
The use of free allowances will also have to be extended to cover indirect effects through increased electricity prices. With significantly higher EUA prices, the pre¬sent solution for indirect costs based on State Aid will: - be insufficient for long term survival of these industries in Europe, - not create the predictability needed for investments, and, as well, - create significant disturbances in the internal market for energy intensive products. Effective carbon leakage prevention will also require exemption from extra costs related to other elements of climate policy like support to development of renew¬able electricity generation and extra grid costs related to transmission and balancing of electricity from renewable sources. |
b) more carbon leakage categories should be defined |
Electro-intensive industries are particularly exposed to carbon leakage and need full compensation of extra cost until a significant share of competitors is influenced by similar cost increases. EUA costs are passed on into electricity prices through the marginal cost of the marginal sources of electricity, and for these industries, electricity related cost make up a high share of total cost. Most electro-intensive products have a high value compared to their weight, and may be moved between markets at a cost that is small compared to their value. They are thus globally priced with only a minimal price differentiation between markets. Other industries may need compensation, but not necessarily to the same degree. Other trading systems, like the Australian one, have more than one category of industries receiving different degrees of compensation. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
A single carbon leakage list (with several categories) should be established. The list should be based on the combined effect of direct cost (emission allowances) and indirect costs (increases in electricity costs due to climate policy). The following set of criteria should be established: 1. The exposure to global competition. 2. The exposure to EUA cost 3. The unit is in the most exposed category of the carbon leakage list if both criteria are met being simultaneously at a high threshold. If one or both of the criteria only meets a lower threshold, the unit will be in the less exposed category of the list. The intensity of trade with third countries is a weak proxy to competitive exposure, and should not be used in this context. |
b) other thresholds should be defined. Please specify below |
The levels of the thresholds should be based proper analysis of the proposed new set of categories and criteria (see response to Q12 and Q13). |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Justified cases could be: inability to pass through the CO2 costs to its global customers (i.e. price-taker industrial sector), economic activity of major importance for EU society (for ints. recycling as a contribution to the "circular society") |
d) in line with the duration of ETS Phase 4 |
Predictability is the key to incentive efficiency. There is reason to believe that the set of criteria described above will establish robust and stable lists. |
a) the present approach of average of the 10% most efficient installations should remain |
Alternative options should remain in case a benchmark cannot be defined (as for instance in case of small number of installations, specific resources, etc) |
a) yes (please specify how often) |
every 10 years |
c) other (please specify) |
The main advice to be found in the literature is to use output based allocation linked to realistic benchmarks. For each industry, the baseline will then be set by the realistic benchmark. Indirect emission should also be set by realistic bench¬marks and actual output. The compensation will be linked to a sum of two bench¬marks, one derived from emissions and one derived from electricity consumption. |
a) no, there should be no deviations |
There should be no deviations linked to the short-term financial conditions of industries. There might however be a need to find special solutions for industries where it is impossible to establish sectoral benchmarks. |
c) yes, in the form of additional free allocation |
Compensation inside the EU ETS should be extended to cover indirect effects through increased electricity prices. With significantly higher EUA prices, the pre¬sent solution for indirect costs based on State Aid will be insufficient for long term survival of these industries in Europe and, as well, create significant disturbances in the internal market. The cost of any compensation measures will be proportionate to the EUA price, thus corresponding to the value of free allowances. Compensation could be provided as free allowances or as a sum of money proportionate to a given number of allowances from another source of finance. |
Less important |
Least important |
Most important |
Important |
|
d) other |
ETS should be focused on emission trading and mitigating the undesirable effects of such trading. Innovation support should mainly come out of MS general budgets and not from auction income. |
|
a) Business |
LA PLATERA, S.A. |
Ctra. Castellón, s/n L'Alcora (Castellón) Spain 964 360153 mgayet@laplatera.es |
a) yes |
|
1) yes |
b) no |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improvement |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
a) the present two groups should remain |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value) which are subject to international competition should be considered as exposed to the risk of carbon leakage, until an international agreement is established. It is important to limit the list to sectors that really compete globally, and thus it is vital to maintain an assessment based on trade intensity with third countries. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
The present criteria should be used, considering the following element. GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
a) Business |
Laakirchen Papier AG |
Schillerstrasse 5 A-4663 Laakirchen Phone: +43 7613 8800 - 349 Mail: helmut.aichhorn@heinzelpaper.com |
a) yes |
|
1) yes |
a) yes |
Energy intensive industrie reduced their energy consumption (=emissions from fossil fuel) year by year in the past as energy - costs are main costs. If you are one of the BAT - user it is hard to reduce in the same way further in future without new technologies. And you need more energy too, if you want to grow in production. Maybe there are possibillities in smaller inustrie - sectors, houeseholds and traffic. But until now they all are expected from ETS-System. |
a) yes |
No energy-intensive company want to lose mony by wasting energy. But soemetimes it isn't economic changing to a little bit more efficient devices. And one has to finance first in the core business than in another field. |
b) no |
|
a) very adequate |
Only for big energy cunsuming sectors (Steel, paper, brick, ceramic, cement - industrie,....)! |
a) it absolutely keeps the incentive |
It keeps the mony in the industrie for investigations into more efficient production (to reach BAT-level) and doesn't flow to the goevernment for buing aditional CO2 certificates (they use the money tu support other competitors or finance with the money completely other things). |
c) quite exaggerated |
High burden and very expensive - same datas have to be checked by different auditors. Whatfor is ISO 50.001, own company-energy manager, different external quality certificates, confirmations and reports to the government authorities - always the same datas? Maybe it is a good busines for auditors, but it costs a lot for energy intensive industries. 3 years period for confirmation should be enough!!! |
d) there should be no limit to overall free allocation to industry |
If company is among BAT-leaders they should get all certificates they need - also for increasing their production (xxx certificats / unit). |
d) there should be no such innovation support post-2020 |
|
b) no |
|
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
|
b) no |
|
a) the present two groups should remain |
|
a) the present criteria should remain |
|
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
b) longer (please specify) |
10 years - e.i. industry need more security for their high investments; if sector changes after 5 years (f.e. to fall out of the cl-sector) there is a high risk for stranded investments. |
a) the present approach of average of the 10% most efficient installations should remain |
BUT: free certificas also depend from the aerea a company is locatet. North of europe has cheap el. form hydro-power ana cheap biomass; they don't need so high free quantities than rest of europe (higher el.and heat from fossile fuel - natural gas, coal, etc.) . It is impossible to compete her with the low CO2-possibillities of nordic competitors. |
a) yes (please specify how often) |
10 years period |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
If production increases, one need more energy (=higher emissions in case of fossil fuel) |
c) yes, there should be deviations with lower allowances for installations enjoying very favourable circumstances |
depending from main fossil energy - availabel in the area of the installation |
d) yes, in the form of financial compensation at EU-level |
|
Least important |
Important |
Less important |
Most important |
|
a) from the Member States' auction budgets |
|
|
a) Business |
LAFARGE is a top ranking player in cement, aggregates and concrete industries, with annual sales of euros 15,2 billion, operating in 62 countries and employing 64 000 people. |
Anne VAUCHEZ European Public Affairs Manager 61 rue des Belles Feuilles 75 782 Paris cedex 16 |
a) yes |
|
1) yes |
a) yes |
Cement industry is fully committed to reducing GHG emissions in line with overall EU policy objectives. This has been demonstrated by investments over the past 20 years which have driven down CO2 emissions from clinker production and by our roadmap to go much further in the coming decades. To achieve this, industry needs to innovate and invest. This requires a return on investment above the cost of capital and a policy framework that promotes the competitiveness of the sector and allows for a secure access to raw materials and affordable energy prices. Cement industry in Europe needs a stable legal framework with predictable CO2 prices in order to justify and allocate scarce investment funds to realize CO2 emission reduction ambitions. 2030 targets have to take into account each sector specific roadmap. Differentiated levels of efforts are needed for different sectors (manufacturing industry, power, building, and transport) based on the ability to pass cost on to the end user. |
b) no |
Measures to decrease energy consumption and improve resources efficiency will de facto reduce CO2 emissions. Industries like cement have very high energy costs as a proportion of GVA or profit which means that energy efficiency is an integral part of manufacturing. The EU ETS emphasis is GHG efficiency and in this regard it does put pressure on businesses to become more GHG efficient. In doing so EU ETS places CO2 costs on power generators and these costs are passed on to electricity consumers. There are limitations to which added costs act as a driver for efficiency before imports become more attractive. Furthermore, the cement and lime industry are unique due to the fact that the majority of GHG emissions are not caused by energy use from fuel combustion but come from the raw materials themselves. Around 60% of total CO2 emissions from clinker production are released directly from limestone. On the other hand, energy efficiency and CO2 reduction represents conflicting goals w |
a) yes |
The EU has aspirations of leading on Climate Change policy but globally unequal carbon pricing has the ability to shift trade patterns. In order to direct investments to growth and jobs in Europe, the cement industry needs a global level playing field, including imports and exports: climate change is a global problem that needs a global solution. EU policy can only incentivise companies to aggressively work on further emissions reduction if there is predictability in and equality in carbon prices and if it is part of an overall industrial policy ensuring companies to be competitive in the international arena. This also applies to energy costs. For cement, energy costs are especially important representing 30 % of operational costs with European costs being substantially higher than in the US, Russia and plants in North Africa. Transitional measures are needed to bridge the gap between the EU and other countries. Free allocation is the most effective transitional mechanism. |
b) quite adequate |
As long as emissions do not have the same cost in different countries, a level playing field can be achieved most effectively by equalising measures such as free allocation. The limited evidence of leakage and empirical studies demonstrates (see the report by Vivid Economics last June), in part, that free allocation is working. However, it should not be assumed that free allocation is insulating operators from all of the ETS costs as it does not mean ‘full free allocation’ because of the CSRF and as some operators will face higher costs than others depending on the allocation base year activity. Furthermore, the indirect costs of ETS have not been selected for compensation for cement in the Commission guidelines creating a distortion of competition with competitors. So, not only does the cement industry face the full indirect costs of ETS but competing construction sectors are able to be compensated for their additional costs related to indirect CO2. |
a) it absolutely keeps the incentive |
With free allocation based on benchmark, the incentive to invest is provided by the benchmark. The magnitude of the residual incentive is a function of carbon costs as a proportion of GVA. Cement has one of the highest CO2 costs/GVA of any industrial sector so the residual effort is greater than in most sectors. In its search for a legal framework that fosters a competitive environment, CEMBUREAU has considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The EU cement industry has a relatively flat benchmark curve indicating that there is a narrow gap between the best and the worst performers; this limited level of abatement potential makes the task of emissions reduction more difficult in the cement sector compared to many other sectors. |
b) quite proportionate |
Overall, the administrative burden is quite proportionate but the system is extremely disproportionate for small/trivial combustion sources. In many cases these minor sources were not part of the benchmarking exercise and should not be included in reporting. |
d) there should be no limit to overall free allocation to industry |
There should be free allocation if there isn’t an international agreement which places all competing manufacturers on an equal footing. Until certain conditions can be met with regard to the veracity of the schemes within other countries then transitional arrangements need to be maintained. Free allocation is the most effective transitional arrangement. The share of allowances dedicated to free allocation should be sufficient to avoid carbon leakage. To uphold this principle that carbon leakage should be minimized, the cross sectoral correction factor should be replaced by an adjustment to the auctioned amount to maintain the cap trajectory. That does not mean “a free ride for industry” but it would mean that sufficient allowances are provided for the most efficient producers because at present the CSCF has the ability to reduce free allocation beyond what is technically possible. |
e) I don’t know |
There are too many uncertainties on what the post 2020 allowances budget will be for the cement industry to be able to decide what share of the budget should be dedicated to such innovation support. The EU ETS does not encourage investment in new technology. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) yes |
To date, the NER 300 has been ineffective at stimulating novel CO2 reduction projects in the cement industry. The power generation sector which is passing on investment costs has benefitted most from the NER 300. The cement sector is not experiencing the same level of investment de-risking. The cement industry needs : - an investment enhancing climate should encourage investments over long term (30 y) cycles in a capital intensive industry. Legal stability and CO2 price predictability are key to achieve this goal - Safeguards against price fluctuations in market based policy instruments; which objectives, if kept, should be clearly defined and not be prone to abuse for speculation purposes - an innovation policy which provides clear incentives for breakthrough technologies in a cost-effective way. Policy makers should consider hypothecation (earmarking) of revenues from allowance auctions and direct innovation support to those sectors facing the greatest abatement challenges. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Given the high costs associated with breakthrough technologies, funding from auctioning revenues should account for both capital and operational cost of projects. There should in addition be a ring fenced fund for the manufacturing industry. |
a) yes |
In its search for a legal framework that fosters a competitive environment, CEMBUREAU has considered an improved ETS with a performance based free allocation for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions cost impacts. In order to protect “carbon leakage” sectors’ competitiveness, the system could foresee either an adjustment to the overall cap to the auction amount or a sectoral cap with the inclusion of importers. However, a carbon pricing mechanism which is market-based and prone to wide fluctuations militates against effective investment. CEMBUREAU is ready to explore mechanisms which deliver price stabilization and global carbon price convergence. Some of the initial reflection is further elaborated in the annex to this paper and CEMBUREAU is ready to engage in a thorough reflection of a climate policy and energy policy that is fully integrated in a single industrial growth poli |
a) the present two groups should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. One should consider a special treatment for process emissions e.g. full free allocation as those emissions are not linked to energy efficiency and are irreducible by their very nature. |
a) the present criteria should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. Nevertheless, as a static indicator trade intensity is of limited validity/conclusiveness. It is based solely on historic data and does not reflect future developments, i.e. resulting from changing cost patterns, at all. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria e.g. a complete loss of 30% of GVA is normally economically not acceptable for any industry or sector. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
EU trade and economic data is not always exact and its comparability with the EUITL CO2 data not always appropriate so there will always be a need to hear special cases. |
d) in line with the duration of ETS Phase 4 |
It is essential for the predictability of the system to introduce as little changes as possible in the course of a trading period; hence the validity of the list of sector exposed should be in line with the duration of the ETS phase 4. |
c) the approach should be less stringent (please specify) |
The benchmark would be calculated in a statistically solid way and be updated periodically to ensure predictability. It should be set at an ambitious but reasonable level and should not be distorted by statistical outliers. This can be achieved by defining percentile (e.g. 10%-percentile) or e.g. the average of a range including the 5% to 15% top performers of specific direct emissions (excluding the extreme outliers between 0% and 5%). Only this way, the benchmarking methodology will achieve sufficient statistical robustness for international application in ETS system. |
a) yes (please specify how often) |
Benchmark should be updated between two trading periods depending on what has been achieved but not during one trading period. One should consider a special treatment for process emissions e.g. full free allocation as those emissions are not linked to energy efficiency and are irreducible by their very nature. |
c) other (please specify) |
In its search for a legal framework that fosters a competitive environment, we considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The historic activity level (HAL) should be more closely aligned to recent production to avoid surplus allocation e.g. the average of the preceding 3 years. In this context, LAFARGE considers the recently released EcoFys study (Dynamic allocation for the EU Emissions Trading System, Enabling sustainable growth, 20 June 2014) and its allowances allocation reserve as an interesting step forward. However, a more recent HAL has its potential downsides for installations that have extended shutdowns or breakdowns, provision will be necessary to deal with exceptional HAL circumstances. |
a) no, there should be no deviations |
A more recent HAL e.g. preceding 3 years average, has its potential downsides for installations that have extended shutdowns or breakdowns, provision will be necessary to deal with exceptional HAL circumstances. |
c) yes, in the form of additional free allocation |
LAFARGE believes that EU Compensation should be granted for indirect emission impact where carbon leakage vulnerability is a combination of direct plus indirect emission cost. There is no need for two state aid guidelines and the compensation for indirect costs could be internalized in the ETD by providing free allocation for indirect CO2. |
Less important |
Important |
Most important |
Least important |
LAFARGE regrets the focus on carbon capture and storage and believes that carbn capture and re-use should be equally considered. CEMBUREAU believes that funding should be technology neutral. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) from the Member States' auction budgets |
|
In addition, we believe that the debate on the MSR should not be carried out in isolation from the broader ETS structural reform. See CEMBUREAU position papers on its website - Post 2020 Climate and Energy Legislation - The cement industry's reflections on a post-2020 climate policy & POST 2020 CLIMATE AND ENERGY LEGISLATION PROPOSAL BY THE EUROPEAN CEMENT INDUSTRY |
a) Business |
Lafarge Tarmac |
Dr Martyn Kenny Portland House, Bickenhill Lane, Solihull, West Midlands B37 7BQ 00447785 530453 martyn.kenny@ lafargetarmac.com, |
a) yes |
|
1) yes |
a) yes |
Lafarge Tarmac continues its commitment to reduce GHGs, with a 54% reduction since 1990. We support a policy environment that delivers carbon reduction at lowest cost, while maintaining the competitiveness of indigenous manufacturing as technologies are developed to transition to a low carbon economy. We support the MPA Cement greenhouse gas strategy (2013) showing how the sector could reduce GHGs by 81% by 2050. This needs secure access to raw materials, affordable energy, a stable policy framework and predictable CO2 price, to justify scarce investment funds. Cement & lime have a high proportion of process emissions (60-70% direct emissions) and need 2030 targets to take account of technological potential. Differentiated effort is required by different sectors based on ability to pass cost to end users. For some sectors it is only possible to further reduce GHGs without de-industrialization if competitiveness is protected from countries that do not have the same carbon price. |
b) no |
Energy intensive industries, like cement & lime, have energy costs >40% of GVA. Efficiency is a Board level priority and integral to business management to remain competitive. The ETS emphasis is on GHGs which puts pressure on businesses to be more GHG efficient. ETS places CO2 costs on power generators that are passed on to consumers. There are limits to which added costs act as a driver for efficiency before imports become more attractive. Furthermore, cement & lime industries are unique in that the majority of GHGs come from the raw materials themselves (process emissions) not combustion. While Lafarge Tarmac continues to push the technological barriers on energy efficiency and CO2 reduction, the largest proportion of CO2 comes from process emissions but there are as yet no economically viable options. Energy efficiency and CO2 efficiency are related but but not all GHG reduction measures are energy efficient. |
a) yes |
The EU to lead on Climate Change policy but globally unequal carbon pricing can shift trade patterns, competitively inhibit domestic producers and introduce irreversible structural change in material supply chains. Emissions reduction should not be met by exporting local production as this undermines GHG efficiency, damages the economy, exposes the EU to supply risks and makes global emissions reduction more difficult. EU policy can only incentivise companies to aggressively work on further GHG reduction if there is predictability and equality in carbon prices and if it is part of an overall industrial policy ensuring companies remain internationally competitive. This also applies to energy costs with the EU being much higher than the US, Russia and North Africa. Until there is a global solution, transitional measures are needed to bridge the gap between the EU and countries without an equivalent carbon price signal. Free allocation is the most effective transition mechanism. |
b) quite adequate |
While emissions do not have the same cost in different countries, a level playing field can be achieved most effectively by equalising measures such as free allocation. The limited evidence of leakage, supported by empirical studies (e.g. Vivid Economics, June 2014) demonstrate, in part, that free allocation is working. However, free allocation in Phase III (and as it stands Phase IV) has been fatally undermined by the Cross Sectoral Correction Factor, which sets vulnerable operators on a pathway of reduced free allocation, that undermines the protection measure and quickly exposes the most vulnerable sectors to leakage. Free allocation does not protect against the considerable indirect costs of ETS. Although a compensation scheme is available in some member states for a few sectors, it is currently distorting competition in the construction market as some sectors receive compensation for indirect CO2 while the cement & lime faces the full indirect costs of ETS. |
a) it absolutely keeps the incentive |
Energy costs are such a high proportion of operating costs of cement & lime that investment in cost effective reduction technologies is a pre-requisite for staying in business. Within ETS, free allocation maintains the incentive to invest by virtue of the top 10% benchmark used to determine free allocation. The magnitude of the ETS driver is a function of carbon costs as a proportion of GVA plus the commercial incentive to operate better than the benchmark and sell EUA overachievement. Cement production has one of the highest CO2 costs/GVA so the residual effort is greater. ETS could be improved by using a performance based free allocation system more closely aligned to recent production and compensating for the cost of indirect emissions. The EU cement industry has a relatively flat benchmark curve as there is a narrow gap between the best and the worst performers; ; this limited level of abatement potential shows the sector approaches technological limits. |
b) quite proportionate |
Overall, the administrative burden is quite proportionate but the system is extremely disproportionate for small/trivial combustion sources and operators that are small emitters. Many minor sources that were not part of the benchmarking exercise and should not be included in reporting have been brought under ETS, including negligible combustion sources like Bunsen burners and cookers. This undermines the credibility of the system as a disproportionate amount of management time and resource goes into monitoring and reporting these trivial emission sources. Small emitters, like asphalt plants, can have installed thermal capacities above the 20MW threshold but CO2 emissions are just a few thousand tonnes per year. The ETS could be greatly simplified by removing trivial sources and small emitters from the scheme, leaving them to be managed by national measures instead. |
d) there should be no limit to overall free allocation to industry |
Until there is an international agreement that places all competing manufacturers on an equal footing, it is vital that protection against carbon leakage is given to those sectors truly vulnerable to carbon leakage. Such sectors should be allocated allowances to cover 100% of a benchmark set to maintain the driver to reduce emissions but not beyond what is technically feasible and without penalizing operators against markets without equal carbon pricing. Once a global climate deal is made, free allocation should remain in place as a transitional arrangement until certain conditions are met with regard to the coverage and veracity of the schemes in other countries. The share of allowances dedicated to free allocation must be sufficient to avoid carbon leakage. To ensure that carbon leakage is minimized, the Cross Sectoral Correction Factor (CSCF) should be replaced by an adjustment to the auctioned amount to maintain the cap trajectory. |
e) I don’t know |
There are too many uncertainties about the rules and the post 2020 allowance budget for the cement & lime to decide what share of the budget should be dedicated to innovation. Support for innovation is important and should not be technology specific or focused on power generators alone. To achieve the transition, low carbon industrial technologies are needed. For sectors like lime & cement where similar technologies are used across the globe joint innovation programmes should form part of, would be more effective and better placed as part of the international agreement. The current rules on accessing the NER discourage investment in new technology because there will always be uncertainty in the post-commissioning plant performance. Furthermore, frequent changes to the EU ETS policy, such as backloading interventions and reviews of carbon leakage status do not provide policy clarity or the investment confidence that is needed for large scale capital intensive industries. |
a) yes |
To date, the NER 300 has been ineffective at stimulating novel CO2 reduction projects in the cement industry. The power generation sector, which is passing on investment costs to consumers, has benefitted most from the NER 300. The cement sector is not experiencing the same level of investment de-risking. The cement industry is capital intensive and requires legal stability and CO2 price predictability in order to encourage the long term investment (around 30 years) required to innovate. An innovation policy is required which provides clear incentives for breakthrough technologies in a cost-effective way. This will need to include safeguards against price fluctuations in market based policy instruments. Furthermore, policy makers should consider hypothecation (earmarking) of revenues from allowance auctions and direct innovation support to those sectors facing the greatest abatement challenges, particularly those sectors with a high proportion of process emissions. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Given the high costs associated with breakthrough technologies, funding from auctioning revenues should account for both capital and operational cost of projects. The hypothecation of auction revenues to innovative low carbon technologies should be made a priority for EU ETS to meet its full potential in reducing greenhouse gas emissions. This hypothecation should include a ring fenced fund for the manufacturing industry to ensure that technologies such as carbon capture and storage are deployed as soon as possible in sectors with high process emissions. For sectors like lime and cement where similar technologies are used across the globe joint innovation programmes should form part of, would be more effective and better placed as part of the international agreement. |
a) yes |
ETS could be improved by using a performance based free allocation for direct emissions that is more closely aligned to recent production. In addition compensation should be granted to protect vulnerable sectors against the cost impact of indirect emissions. The protection offered by free allocation is currently undermined by the Cross Sectoral Correction Factor (CSCF). This must be addressed post-2020 or it will inevitably fatally undermine EU manufacturing in sectors vulnerable to carbon leakage. Instead of a CSCF there should be n adjustment to the auction allowances rather than the number of free allowances allocated. The Commission proposal for a market-based carbon pricing mechanism is prone to wide fluctuations that could further deter effective EU investment. |
a) the present two groups should remain |
The current system is simple, predictable and understood and should remain largely unchanged post-2020. However, more emphasis should be put on the cost intensity criterion as this is the most important of the current two criteria. Trade intensity is largely a function of production cost differential and is therefore less important in determining carbon leakage risk. Furthermore, it is a historic metric which does not reflect the potential trade intensity for sectors with high carbon intensity. Such sectors are highly sensitive to carbon price which can act as a tipping point for future trade intensity. The carbon leakage assessment should be based on a forward looking CO2 price, as currently, and be carried out at the product level used for benchmarking to ensure consistency. Once sectors have been determined as vulnerable to carbon leakage there may be some potential to provide differentiated protection depending on the level of exposure. |
a) the present criteria should remain |
The system has to remain simple and predictable. Operators need confidence in their forward position to secure investment in the EU. Cost intensity is the most important assessment criterion and must be maintained as a standalone threshold measure and not be replaced or removed from the assessment. The assessment should be based on a forward looking CO2 price and carried out at the relevant product level i.e. in line with ETS implementing measures. Cost assessment should continue to include indirect costs. The marginal power plants should be used to calculate the indirect carbon cost. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
A complete loss of 30% of GVA is normally economically not acceptable for any industry or sector and the threshold should be lowered. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. Cost assessment should continue to include indirect costs. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price to match the long term nature of investment decisions. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
EU trade and economic data is not always exact and its comparability with the EUITL CO2 data is not always appropriate so there will always be a need to consider cases based on qualitative information. |
d) in line with the duration of ETS Phase 4 |
The investment cycles for large energy and capital intensive businesses are considerably longer than 5 years, the payback period for a cement plant is typically 30-40 years. Without carbon leakage protection the EU cement and lime manufacture will not be economically viable. The regular 5 year threat of losing carbon leakage status under the current rules is a significant barrier to investment in the EU. It is essential for the predictability of the system and for investment confidence to introduce as little change as possible in the course of a trading period, hence the validity of the list of exposed sectors should be in line with the duration of phase 4 of ETS. |
c) the approach should be less stringent (please specify) |
The benchmark should be calculated in a statistically sound way and be updated periodically, but no more than once per trading period, to ensure predictability. It should be set at an ambitious but reasonable level and should not be distorted by statistical outliers. This can be achieved by defining percentile or e.g. the average of a range excluding outliers. This will ensure that the benchmarking methodology will achieve sufficient statistical robustness for international application in ETS system. |
a) yes (please specify how often) |
The benchmark should be updated after every two trading periods/phases. This will give enough time for technology changes to have an effect and will be less burden than having to undertake a benchmarking exercise between every phase. |
c) other (please specify) |
ETS could be improved through the use of a performance based free allocation system for direct emissions that is more closely aligned to recent production and inclusion of a scheme to compensate for the cost impact of indirect emissions. The historic activity level (HAL) should be more closely aligned to recent production to avoid surplus allocation e.g. the average of the preceding 3 years. In this context, the recently released EcoFys study (Dynamic allocation for the EU Emissions Trading System, Enabling sustainable growth, 20 June 2014) and its allowances allocation reserve provides a good starting point for further discussion. However, a more recent HAL has its potential downsides for installations that have extended shutdowns or breakdowns and provision will be necessary to deal with such exceptional HAL circumstances. |
a) no, there should be no deviations |
Harmonised rules should remain. The use of a more recent HAL e.g. preceding 3 years average, could be introduced to a harmonized scheme to ensure an ongoing appropriate level of free allocation to protect vulnerable sectors. Such a proposal would need to accommodate the disadvantages for installations that have extended shutdowns or breakdowns. If such a change was made to ETS, provisions could be introduced to deal with exceptional HAL circumstances. |
c) yes, in the form of additional free allocation |
EU Compensation should be granted for indirect emission impact where carbon leakage vulnerability is a combination of direct plus indirect emission cost. The current system whereby there are two guidelines for state aid in the EU, one specifically related to EU ETS and another for environmental and energy state aid, is unnecessary. The compensation for indirect costs could be internalized in the ETD by providing free allocation for indirect CO2. |
Less important |
Important |
Most important |
I don't know |
Carbon capture and re-use should receive a similar level of consideration as carbon capture and storage. Funding should be technology neutral to ensure that the highest emissions reductions can be achieved in the most appropriate way for each particular industry. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions and reviews of carbon leakage status do not provide policy clarity that is needed for large scale industrial investment. |
a) from the Member States' auction budgets |
|
In order to design a workable post-2020 ETS, it is vital that the scheme is approached as a whole and not in the current piecemeal way where each individual element is being reviewed separately. The debate on the MSR should not be carried out in isolation from the broader ETS structural reform and discussions on carbon leakage protection. |
a) Business |
Lhoist Bukowa Sp. z o.o. |
ul. Osiedlowa10, Bukowa, 29-105 Krasocin, Tel +48 41 38 89 105, bronislaw.cieslik@lhoist.com |
a) yes |
|
1) yes |
b) no |
The reply concerns lime production sector only: the emission reduction potential is practically depleted, due to the fact that about 70% of total emission is a process emission coming from the calcination of calcium carbonate (a raw material for lime production) and this part of emission is not possible to avoid. Only ~30% of emission comes from fuel. Deeply modernised lime kilns and recent technology have reached the highest possible energy efficiency. Localisation of burning installation close to the geological deposits of limestone limits application of fuel mix. Any further reductions of emission must result by the production decrease. |
b) no |
In the world wide economy and trading of goods the ETS has really a negative impact on many important issues, like: • decreases the competitiveness of the European industry; • have a negative impact on economic growth of the EU countries. • slows down the development of emerging economy countries, • in the scope of global CO2 emission - import of goods from the outside of ETS generates a higher global CO2 emission if they have been produced in EU. |
a) yes |
We consider, that the most concerned industries (as lime industry, cement, fertilisers etc.) that are affected by the ETS negative impact should be given as much free emission allowances as they need, to guaranty the production on the market demand level. Energy intensive industries should also be extra compensated (at least partly) for the increase of energy price resulted by ETS. It can be realized by the tax reduction or by granting (subventions). |
b) quite adequate |
The allocation of free allowances for industrial sectors covered by the ETS, is considered to be absolutely necessary in order to: • keep the production on the market demand level • keep the European competitiveness • enable the owners of installations making decisions concerning modernisation of installation and new construction (based on low or emission-free technologies, if possible) The benchmark supported method of granting allowances we consider quite sufficient to force emission reduction by ETS covered industries. |
a) it absolutely keeps the incentive |
Benchmark based rules of free allowances strongly forces the rational and complex actions oriented to implementation of the innovative and best available technologies. Nonetheless it should be noted that: o lime installations are expensive with payback period of ~30 years o the modernisation is enforced not only because of the CO2 reduction but mainly by reduction of burning energy consumption cost for ~40% of total production cost o all kilns erected in last 25 years use the advanced technologies of energy recuperation, resulting with high energy efficiency and minimising of CO2 emission o lime kilns have to be located close to the deposits of the raw material, and as a result, in many cases, far from the gas network. Benchmark based on the natural gas only, penalises the fuel mix composed of other accessible fuels o some customers need for their obsolescent technologies the lime with “higher emission” level - we have to respect their needs. |
c) quite exaggerated |
Lime production is strongly affected by the ETS restrictions: ~70% of CO2 emission are process emissions that are absolutely not possible to avoid as they are resulting from thermal decomposition of calcium carbonate into calcium oxide and CO2: CaCO3 => CaO + CO2 Implementation of the current rules of granting free allowances made their quota close to the level of process emission. Any further reductions of emission must result in production decrease. This is the reason why, in our opinion, it is necessary to exclude the process emission from the ETS. The benchmarks should include the fuel mix – now they are based only on natural gas as a less emissive fuel . The benchmark allocation system based on the current conditions will be a huge burden for the lime industry, by limiting the production and paralysing any development of the lime sector. |
d) there should be no limit to overall free allocation to industry |
The amount of free CO2 allowances granted to the industry after 2020, must absolutely ensure and remain the competitiveness of the European industry, provide conditions for economic growth, and development of infrastructure for all EU countries. The scope of EU climate politics has to be adequate and proportional with pro-climatic activity of all other countries being the biggest CO2 emitters. |
e) I don’t know |
we do not fell competent to take a position concerning the development of CCS, nor to allocate funds for this purpose. However, we share the widespread concern that: • CCS implementation will drastically decrease efficiency of conventional energy production systems, which will result in significant energy price increase • CCS could be installed only for the several biggest CO2 emitters - the biggest thermal power plants, but never for the industry. • the progress and fast development of renewable energy, could affect the CCS installations that will not be efficient (capital-intensive with very long pay-back, and expensive during exploitation). We consider it reasonable to support the development of renewable energy. We suggest to not engage NER for supporting the CCS. |
a) yes |
We consider incentive supporting of low emission and low carbon technologies as the best way to decrease the negative climate changes. Financial support could be ensured by country governments with revenues of allowances auctioning. It is necessary to protect by the EU regulation the minimal % ratio of auctioning revenues to be dedicated for this goal. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
|
a) yes |
We consider fully reasoned the need to exclude process emission from the ETS for those industries where process emissions appear i.e.: lime, cement, chemistry - fertilisers, glass, steel. Process emissions are defined as those emissions that are not deriving from fuel and are not possible to avoid regardless technology and investments. The process emissions are predictable, easy to monitor and report. For lime industry process emissions coming from calcination of raw material account about 70% of total emission. |
a) the present two groups should remain |
We consider the current system of Carbon Leakage risk classification as fully adequate. The only reservation is the mode of classification of sectors accordingly to the NACE 4 Eurostat classification, as it would be better, more adequate and representative to go one step deeper i.e. PRODCOM 6. Currently lime production is deeply threatened by Carbon Leakage risk as it is classified with plaster sector which is indifferent to Carbon Leakage. |
a) the present criteria should remain |
As mentioned in question 12 – the current rules may remain with reservation of Eurostat classification the sectors dimmed on Carbon Leakage risk. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
See comments to questions 12 and 13 |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
We consider indispensable to maintain a certain level of discretion within the system in appropriate cases. |
d) in line with the duration of ETS Phase 4 |
It is absolutely essential that the rules concerning Carbon Leakage risk exposure as well as all other substantial ETS regulations remain unchanged for at least 10 years, in order to ensure clear and stable conditions of running business and enable making rational investment decisions. |
c) the approach should be less stringent (please specify) |
We consider reasonable: • to exclude process emission from ETS (see comments to question 1,6,11,24) • to base the “fuel part” of benchmark on the fuel mix and not only on the natural gas. Lime burning installations has been located close to the stone deposit, very often far from the gas network. |
a) yes (please specify how often) |
Revision and eventual update of product benchmarks could take place simultaneously with the revision and update of BAT/BREF, i.e. each 10 years . It is to note that the benchmark has to be achievable and reflect realistic production conditions. |
c) other (please specify) |
It seems that the proposal of “Dynamic allocation of free allowances” presented by ECOFYS, if introduced: • will enable to correlate the allocations with the substantive needs of allowances for each installation; • at the same time will push through reduction of emission; • will restrict the speculation with allowances by the third person not directly implemented to ETS. |
a) no, there should be no deviations |
We suggest to exclude process emission from ETS as it is the part of CO2 emission that is impossible to avoid (see comments to questions 1,6,11,17,24) |
d) yes, in the form of financial compensation at EU-level |
We support common initiative of all European energy intensive industries to be financially compensated (at least partly) due to the increase of the energy costs caused by ETS restrictions. Such compensation would be paid from auctioning revenues |
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a) from the Member States' auction budgets |
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Production of lime is the most, from the entire manufacturing industry, threatened by the ETS restrictions due to the fact that production of 1 tonne of lime generates ~0,95 t up to 1,6 t of CO2. Additionally, about 70% of CO2 emission is absolutely not possible to avoid as it comes not from fuel but from calcination of carbonates. This part of the emission is called process emission. Lime is an irreplaceable product widely used in environment protection (flue gas treatment in conventional energy production, water and sludge treatment), in construction, civil engineering, steel industry, metallurgy, chemistry, paper, glass, in agriculture for optimizing the pH of soils and in cattle farming. We suggest to consider the exclusion of process emission from ETS. We also strongly suggest to base the “fuel part of benchmark” on fuel mix, as otherwise the market competition conditions might be threatened. |
a) Business |
Lime plant, Vapenka Certovy schody a.s. |
Libor Prokopec, Tman 200, CZ-26721 Tman, Czech Republic |
a) yes |
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1) yes |
b) no |
Around 70% of the total CO2 emissions generated in lime production are "process emissions": they come from our raw material, limestone. These process emissions cannot be avoided without changing the quality of the final lime product which is however essential to serve specific applications. Currently, the most energy efficient kiln is near the thermodynamic minimum required for the chemical reaction needed for producing lime. The heat of the reaction for typical quicklime quality is 3.03 GJ/tonne, and the average fuel use 4.25. The energy consumption of the best available lime kiln (a Parallel Flow Regenerative Kiln, PFRK) is between 3.2 and 4.2 GJ/tonne. This type of kiln is already the most widely spread kiln technology today. However, one should keep in mind that horizontal rotary kilns (less energy efficient) provide a certain quality of lime and permit to optimize the extracted limestone due to their ability to treat the different sizes of stones. |
b) no |
The EU ETS will only remain the best solution for reducing CO2 emissions as long as the GHG reduction target is set at a level which is both technically and economically feasible. The current economic crisis and the further shrinking of the demand for lime products makes that there is at the moment a lot of “idle” production capacity in the EU. These installations are completely amortized which makes production in these installations cheaper than in a new one. A higher carbon price would not be a solution, as it would only draw money away from producers without enabling them to make an investment. When assessing the potential further ETS amendment in a sector, it is necessary to take account of the lifespan and replacement rate of kilns. Most of the time, investments costs always assume an investment in a new capacity (replacing the old capacity before its end of life). However, for the lime sector, kilns receive big maintenance periodically. |
a) yes |
Carbon Leakage will remain a big concern after 2020 in the absence of an international agreement putting forward a similar CO2 burden. We believe that all energy intensive industries should be protected against carbon leakage, and that any increased level of ambition of Europe towards 2030 should lead to increased and not decreased protection against carbon leakage. Furthermore, the EU ETS is NOT addressing the following concerns: - The GHG reduction deficit (shortage of free allowances even for the installations with the best GHG performance. - Energy costs represent on average 40% of the lime industry’s manufacturing costs. Having access to energy at a reasonable cost is an essential condition for operating in the EU and for maintaining lime's competitiveness. - Further adequate incentives for low carbon investments is needed, with auctioning revenues being targeted for low carbon investment toward the industry |
c) quite inadequate |
The current carbon leakage mitigation measures do not take into account of: The importance of CO2 embodied in imports A unilateral reduction of CO2 emissions in Europe will not help fighting against climate change if a subsequent rise of imports from third countries is created. Carbon Trust, amongst others, demonstrated that the reduction in production-related CO2 is largely compensated by CO2 embodied in imports. The cumulative burden of the EU framework Several other EU legislations have an impact on the EU's industry competitiveness (renewables, energy efficiency). The Commission should ensure an integrated approach with no overlap. Energy costs Energy costs represent on average 40% of the lime industry’s manufacturing costs. Like for any energy intensive industry, having access to energy at a reasonable cost is an essential condition for operating in the EU and for maintaining its competitiveness. |
b) it largely keeps the incentive |
It is important to remind that the Commission has calculated product specific benchmarks based on the average GHG emissions of the 10% best performers. A comparison of these benchmark values with the minimum values that are technically feasible shows that the remaining potential in some sectors, like lime, is actually quite low. The current best available and most energy-efficient kilns (the Parallel Flow Regenerative Kiln, PFRK) is close to the thermodynamic minimum required for the chemical reaction needed for producing lime. In other words, no further breakthrough technologies in energy efficiency are expected. The drive towards the most energy efficient solutions can easily be explained by the fact that energy costs represent on average around 40% of the lime sector’s production costs. Outside the deployment of a commercially and technically feasible Carbon Capture and Storage solution, there is little margin for further CO2 abatement in the lime sector. |
c) quite exaggerated |
Lime is the most impacted sector by the EU ETS. The production of 1 tonne of lime generates 1 to 1.6 tonne of CO2. This means that the EU ETS has a strong impact on the sector, up to 35% of impact of the CO2 costs on Gross Value Added (Hourcade et al, 2008). Therefore, the full impact of carbon costs would have serious consequences in terms of carbon leakage for the lime industry. While the lime industry advocates in favor of less red tape and less administrative burden, it recognizes the importance of the free allocation for maintaining a competitive industry in the EU. |
d) there should be no limit to overall free allocation to industry |
There is still a need today for an international climate agreement that would bring a level playing field to EU manufacturing companies. In the absence of such agreement, and considering that several countries in the EU neighborhood are not following the EU’s climate leadership, there should be no limit to the overall free allocations to the industry. Furthermore, we believe that all energy intensive industries should be protected against carbon leakage, and that any increased level of ambition of Europe towards 2030 should lead to increased and not decreased protection against carbon leakage. The most GHG Efficient installations should receive 100% of their needs for free. The industry cap should be adjusted so that the CSCF and linear reduction factor do not reduce the free allocations. |
c) a lower share than in Phase 3 |
It seems that the current state of efforts regarding the development of CCS (including the NER 300 program) will not reach the ambition to develop, by 2020, a commercially and technically available solution for the capture and storage of carbon. In 2012 TNO calculated for EuLA the costs of capturing CO2 at different kinds of lime kilns. For the state-of-the-art solvent (MEA) costs to capture CO2 were €94 per ton of avoided CO2. The cost to capture CO2 would more than double the production costs of around €60/ton lime. Currently, lime plants are typically located right next to the deposit, not clustered in large industrial agglomerations. Transport costs from the capture to the storage can add significantly to the capture costs. This is why we believe that further R&D is necessary, but that it should be funded via a mobilization of different sources including auctioning revenues but not the new entrants' reserve. |
a) yes |
The auctioning revenues should be used to encourage low carbon investments. As a general principle, revenues should go back to industry to enable investments in low carbon solutions. Part of the revenues could for example be used to provide cheaper loans for low carbon investments in installations falling under the EU ETS. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The auctioning revenues should be used to encourage low carbon investments. As a general principle, revenues should go back to industry to enable investments in low carbon solutions. Part of the revenues could for example be used to provide cheaper loans for low carbon investments in installations falling under the EU ETS. |
a) yes |
We strongly favor a level playing field within the EU and outside Europe. This is why we believe that the EU should maintain its efforts to achieve an internationally accepted and legally-binding agreement proportionate to the burden in the EU. In the absence of such agreement, the EU should safeguard the competitiveness of the EU industry with any appropriate measure. We have serious doubts that the current legal framework will ensure a level playing field beyond 2020. |
a) the present two groups should remain |
We believe that no further complexity and calculations should be added to an already complex scheme. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
1. Share of carbon costs in the GVA should be maintained 2. Trade intensity should take especially into account the trade with EU's neighborhood In an internal survey realized by the lime sector (NERA " Energy and transport cost comparison of the EU lime industry to 10 non-EU regions"), it has been established that the threat for lime producers mainly come from the EU neighbor countries such as Russia, Maghreb and Middle east. 3. Energy / climate requirements in Free Trade Agreements should be taken into account “Energy and climate” clauses should be part of any Free Trade Agreement, especially if the trading partner in question has not assumed any carbon reduction commitments. 4. Fuel mix price should be taken into account Finally, we recommend that the EU defines an affordable and available “fuel mix” for 2030, assesses its accessibility and compares its costs with the costs of the fuel mix used by the main EU competitors. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
It is important to point out that the revision of NACE code list (v2) implied that the assessment of the carbon leakage criteria for the lime sector is now done at a new disaggregation level, which includes not only lime but also plasters and aggregates. We believe that this assessment should be done at the appropriate level of disaggregation, since that the industrial activities that are included in the NACE v2 code for lime do not share the same fundamentals (in terms of energy intensity and carbon intensity for instance). |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
We believe that it is important to maintain a certain level of discretion in the system for justified cases. This concerns both the qualitative criteria and the possibility to conduct the assessment at the appropriate level of disaggregation (Prodcom 8). |
b) longer (please specify) |
The time validity of the list of sectors exposed to carbon leakage should take into account the investment cycles of the industry. It is also necessary to take account of the lifespan and replacement rate of kilns. Most of the time, investments costs always assume an investment in a new capacity (replacing the old capacity before its end of life). However, for the lime sector, kilns receive big maintenance periodically. It is therefore important to ensure that the investments made now will not become "stranded assets" in the future due to an unexpected change in the carbon leakage list. Furthermore, any trade intensity assessment for the carbon leakage list should take into account the impact of trade with EU neighbouring countries. |
a) the present approach of average of the 10% most efficient installations should remain |
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a) yes (please specify how often) |
The most GHG efficient producers have to be defined with ambitious, fact-based and realistic benchmarks to be periodically reviewed per commitment period so as to reflect technological progress and uptake of new proven technologies in the EU. It is however important to understand that the technological state of the art is not representative of what can be achieved in practice. Lime characteristics are so vast that multiple uses can be done from the same material. It is also highly dependent of the stone quality from the quarry. The benchmarks should only take into account innovations that have been proved to be commercially viable and that can be implemented on site. |
c) other (please specify) |
In the case of the current ex-ante system, the reference year should be adapted, and the baseline should be a longer period without offering a choice between different periods, and not known in advance. However we believe that free allocation should reflect economic reality per installation based on the most recent years and should not be frozen by historic production. In this regards, we suggest to the European Commission to start working on the development of a dynamic system that could replace the current system, under the condition that no correction factor (CSCF) should be applied in addition to a dynamic system. Also, such system should take into account the administrative burden, the robustness of the control of the declared production, and the confidentiality of commercially sensitive information. |
a) no, there should be no deviations |
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d) yes, in the form of financial compensation at EU-level |
We defend a Full off-setting of CO2 costs pass through in electricity prices with a harmonised approach in all EU Member States. |
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a) from the Member States' auction budgets |
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a) Business |
Luossavaara-Kiirunavaara AB (LKAB), producing 90% of the iron ore in EU (NACE 0710) |
Göran Bäckblom, +33 777 230694. goran.backblom@lkab.com |
a) yes |
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1) yes |
c) I don’t know |
From a general standpoint, the many of the low-hanging fruits in terms of energy efficiency have already been achieved. Energy-saving measures is a continuous work for companies. As a result, for subsectors of the mining industries exposed to carbon leakage, it would be difficult if not impossible to further reduce GHG emissions without lowering production in the EU unless new technologies/energy sources requiring major investments are implemented. LKAB plans to increase production while decreasing carbon emission per ton of product by investments in energy efficiency and by using gas instead of coal and oil for supplying energy to our six pelletizing plants. For other sectors (steel), there are theoretical limits what can be achieved with respect to reductions. In view of EU policies including re-industrialization, an issue is rather how to grow industry, than to reduce or keep reduce or keep production at present level. Hence the policies shall encourage industry to invest in EU. |
c) I don’t know |
In our sector it is not clear that a more climate efficient production is more energy efficient, for instance the use of natural gas may increase the amount of energy used for pelletisation of iron ore while decreasing the emissions of greenhouse gases. The EU ETS provides short term, but not long-term price signals. For LKAB the targets are more important than the ETS price signals. The targets foster a culture so LKAB proactively studies options to reduce emissions. What is most important in this aspect is investments in new technology. These investments are long-term and cannot be based on uncertain ETS price signals. The power industry can pass-on the ETS costs to the consumer, while many sectors in the ETS compete on the global arena without any possibility to compensate for the ETS costs. It does not make sense to group industry that can forward ETS costs to the EU customers with industry sector that cannot forward to any customer within or outside the EU. |
a) yes |
Yes definitely. Use measures to minimize unfair distortion of global markets, while on the other hand ensure that EU ETS sectors make best efforts to increase energy efficiency and reduce GHG emissions. The revenues generated from the ETS should be earmarked for investments in improved technology. “Improved technology” is however often about implementing BAT than to develop completely new technology. |
a) very adequate |
Very adequate; however the sequencing EU ETS trading periods and Carbon Leakage Lists review should be harmonized as current legislation unnecessarily adds to uncertainty. And free allocation should be free and not to be reduced as in current terms and conditions, where full compensation never is achieved, even for the “best performers”. |
b) it largely keeps the incentive |
Sectors that cannot pass-on costs to the consumers are inherently interested to make investments to reduce emissions. However, emission reductions often has more to do with implementation of current BAT processes than to innovate completely new technology. Free allocation should reward good performers and ensure a level playing field for sectors at risk of carbon leakage. |
c) quite exaggerated |
LKAB has the most climate and energy efficient iron ore pelletising plants in the world, but could not receive a benchmark as the number of facilities in EU was too small (seven pelletizing plants) to set a benchmark. The ETS uncertainties for a small sector (NACE 0710) from a small member state (Sweden) necessitate extraordinary measures to ensure fairness in the process. The administrative cost for our company alone is in the range of €1 million annually including third party verification of data. |
d) there should be no limit to overall free allocation to industry |
The answer is pending the global negotiations on GHG reductions and the EU measures shall not impede the competitiveness of EU industry. Allocation should be free for industry that is at risk for carbon leakage. Even when best performers grow production. |
a) a substantially higher share than in Phase 3 |
It is noteworthy that CCS has a prominent place in the Energy Roadmap 2050 document , but is quite absent as a concept in the Energy and Climate 2030 package. The allocations by quotas to countries in the EU should be re-visited, since a member state may have more than three excellent projects that would benefit the whole of the EU. Post-2020 allowances that support innovations should not impact on the amount of free allocations. |
a) yes |
EU ETS support schemes – earmark revenues by ETS by investments in improved technology. Investments should be required to be done in Europe. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS revenues should be kept in dedicated funds that companies may use for their investments in improved technology. |
a) yes |
The EU ETS system must have long-term stable regulatory framework and rules harmonized within the EU to keep the appetite for investments in the EU. |
a) the present two groups should remain |
Make a distinction whether a sector can pass on costs to consumers or not. |
c) the share of 'carbon costs' in the GVA should be maintained, but 'carbon costs' should be taken into account to the extent that they can't be recuperated in product prices |
E.g. the power industry and other sectors that can pass-on costs to consumers should be treated separately. Metal mining industry cannot transfer the cost to customers since we are competing in a global market and are price takers. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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d) in line with the duration of ETS Phase 4 |
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a) the present approach of average of the 10% most efficient installations should remain |
LKAB is among the best 10% performers in the world, but due to internal Commission rules (minimum 10 installations) no benchmark for iron ore pellets were decided. The fallback option is less favourable than the benchmarks. Best performers shall not be penalized in the post-2020 ETS system and best performers that grow production should rather be rewarded than penalized. Benchmarks should be global since the climate change is a global issue. |
b) no |
That will add to uncertainty that decreases the appetite for investments in the EU. Investments are long-term in the mining sector |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
The results vary a lot in between years due to financial crises etc. Production levels in 2016-2018 and planned production increases should be the BASIS for post 2020 (Phase 4) allocation. Flexibility is important and allowances should increase when production increases, as industry growth contributes to re-industrialisation, jobs etc. |
a) no, there should be no deviations |
Small important sectors would be impeded by non-harmonized rules. Favouring one installation on the expense of another should not be done. That would distort the competition. |
d) yes, in the form of financial compensation at EU-level |
The present state-aid system can easily distort the internal markets as some countries certainly will compensate for indirect ETS costs and other members states will certainly NOT compensate. Would be interesting to make an impact assessment on the assumption that additional free allocation would be an option. |
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The most important is implementation and when deemed necessary large-scale pilots are interesting, (but very expensive). Most of the actions are already covered in Horizon 2020, where selection is made on the basis of excellence. |
a) from the Member States' auction budgets |
There is no reasoning behind the fact the member states get such a large part of the revenues from the EU ETS. For this money to be spent on emission reduction, it is better to earmark those at EU level. |
Industrial competitiveness concerns should be systematically mainstreamed across all EU policy areas and be part of impact assessments in view of getting a stronger industrial base for our economy. LKAB currently has the world’s most energy- and carbon-efficient pelletizing plant . Our targets are that the specific energy consumption (kWh per ton of finished products) will be reduced from 160 in 2011 to 130 by 2020. Carbon dioxide emission per ton of finished products will be reduced from 27 kg in 2011 to 17 kg by 2020. |
a) Business |
MAGNESITAS DE RUBIÁN, S.A. |
Adress: LU-546, km.35 VILA DE MOUROS (O INCIO) LUGO (SPAIN) 27341 Person of contact: - Eduardo Jimenez Aguirre: General Manager - Jesús Rodríguez Arias: Production Manager Telephone: 0034982424211 email: ejimenez@mgr.es; jesus.rodriguez@mgr.es |
a) yes |
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1) yes |
b) no |
There is no one size fits all answer. On the contrary, a sectorial approach should prevail. While some sectors/subsectors might still have some margins to further reduce GHG, others don't because of physical constraints. This is the case for industrial activities whose emissions cannot be prevented or reduced without reducing the production simply because they are process emissions arising from the chemical transformation of the raw materials needed to produce the end-product. A good example is magnesia production where most ofthe emissions arise from decarbonatation. Magnesia continues to be produced in Europe and has a high economic importance which justified the inclusion of magnesite in the new list of critical raw materials. In addition, EU's 2020 objective should be to increase industrial production (and not simply to avoid its reduction) in order to "reach as much as 20% share of GDP for manufacturing by 2020", as called upon in the COM "For a European Industrial Renaissanc |
b) no |
The EU ETS was not initially designed to foster energy-efficiency, though the latter can be one of the tools enabling to reduce GHG which is EU ETS' primary objective. For example, in the mining industry, one way to reduce GHG emissions is to switch, when technically feasible, energy sources - for example from coal & gas to gas only. Though this will lower GHG emissions, this may not result in energy efficiency gains as the use of natural gas or of any other energy source might require a similar or a higher amount of energy for the process at stake. Secondly, when it comes to energy efficiency, other instruments, in particular financial incentives or the use of BAT, are more effective to achieve that goal. Last but not least, regardless of any EU scheme, companies have an intrinsic interest in being energy efficient as (i) energy accounts for a substantial share of their costs and (ii) energy prices are comparatively higher today in Europe. |
a) yes |
Competitive disadvantages EU industries are facing are real & take the form of comparatively higher production costs (including energy), highly-regulated and ever-evolving EU/national regulatory framework and sometimes untackled unfair trade practices. Thus support measures for EU ETS industries are a must to avoid carbon leakage (CL) as long as a similar scheme ensuring a level playing is not implemented at global level. Dropping them would amount to abandon EU’s 2020 reindustrialisation objective. New types of support measures need to be implemented. A 1st one might be to earmark EU ETS generated revenues for investments in more efficient technologies and make them available to all industrial sectors. A 2nd type of measures must be designed for sectors, such as magnesia production, facing process emissions which cannot be reduced. Exempting them from the EU ETS while focusing on the implementation of BATs under the IED would be much more effective to foster sustainable production |
a) very adequate |
Free allocation has proved to be an efficient policy instrument to ensure, in the framework of climate policy, a level playing field at international level and mitigate the risk of carbon leakage. So far, there is no better mechanism than free allocation to address the CL risk. It is therefore essential (i) to preserve free allocation without reducing its scope as in the current foreseen terms and conditions as long as international competitors are not facing a similar cost burden and (ii) guarantee a stable CL mechanism over long periods of time so as to respect legal certainty. |
a) it absolutely keeps the incentive |
The use of benchmarks of emissions performance based on which allowances are allocated for free absolutely preserves the incentive to innovate. Sectors, such as the mining industry, that cannot pass on costs to consumers are inherently interested in making investments to reduce emissions. Expenses saved thanks to free allocation enable companies active in the mining sector to invest more in innovation, otherwise spent to buy allowances. |
c) quite exaggerated |
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d) there should be no limit to overall free allocation to industry |
There should be no limit to overall free allocation to industry that is at risk of CL as long as a global agreement imposing similar obligations on Europe's industrial competitors is not reached and implemented at international level. Such a measure ('no limit to overall free allocation") is needed to preserve EU's industry competitiveness. In that respect, it is important to stress that climate change is a global matter which requires coordinated efforts at global level. Of global GHG emissions, the EU represents less than 10% and its share is decreasing. Europe must rethink its strategy for attracting the other global major economies into a comparable binding scheme and draw the consequences at European level in order to ensure that, as long as such a scheme is not in place, the relevant measures are taken to guarantee a level playing field between European producers and their international competitors. |
b) the same share as in Phase 3 |
CCS can become a key technology enabling to reduce GHG emissions. It can gain from technologies and expertise developed by the mining industry. However, CCS is not so far mature enough to be in the short term a 'silver bullet' process. Therefore, Magnesitas de Rubián S.A. believes that, though adequate support for CCS should continue to be available, it is equally if not more important to ensure that funding opportunities are also made available to companies across the value chain for other type of technologies able to reduce GHG emissions "in a cost-effective and economically efficient manner", which is one of the key objective of EU ETS. Post-2020 allowances that support innovations should not impact on the amount of free allocations. |
a) yes |
The scope of NER 300 is rather limited and does not directly benefit to all industrial sectors covered by EU ETS. This must be corrected. Revenues generated by EU ETS must be earmarked for investments made in Europe in new cost-efficient & low-carbon technologies. They should be made available for example, via a dedicated fund, to all stakeholders across the value chain covered by the EU ETS. However, in parallel of new funding opportunities for low-carbon technologies, the EU must implement an ambitious industrial policy to remedy structural deficiencies and boost investments in industrial activities. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
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a) yes |
Various measures are needed: 1/ EU ETS must ensure a stable legal framework as industry needs predictability to invest. Proposalscontradicting that objective must be ruled out. 2/ Free allocation for sectors at risk of CL should continue as long as a scheme similar to the EU ETS is not implemented at global level. 3/ The EC shall not set aside beforehand any option to bring EU trade partners to commit to an international climate agreement or to draw the consequences of a potential refusal to commit to it. 4/ Compensation measures must be flexible enough to enable industrial growth. In practice, free certificates must be granted when installations, fulfilling the relevant conditions, increase their production. 5/ A better solution is needed to tackle indirect carbon costs. State aids’ measures are insufficient as discrepancies between MS exist. It is of utmost importance to improve: -the coordination between EU&National policies impacting indirect costs. -their financial compensation |
b) more carbon leakage categories should be defined |
The distinction between sectors which are not deemed to be at risk of CL and sectors that are not makes sense. However, a sub-distinction deserves to be defined within the former for sectors, such as the mining industry, that are price-takers and cannot pass on indirect costs to consumers because they compete at global level. Beside free allocation, those sectors need to obtain full compensation for indirect CO2 costs. From a more general standpoint, it is likely also that more categories might require CL status in the future as long as non-EU competitors do not have to comply with a similar cost burden. |
a) the present criteria should remain |
It is important to keep both the share of carbon costs in the GVA as well as the trade intensity as relevant criteria. With respect to the carbon cost/GVA criterion, proposal c) (the share of 'carbon costs' in the GVA should be maintained, but carbon costs should be taken into account to the extent that they can't be recuperated in product prices) should be further explored at the condition that both the trade intensity and qualitative assessment (see Q.15) are kept. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The qualitative assessment must be kept as it enables to include sectors at significant risk of CL which would otherwise fail to qualify under the sole quantitative criteria for various reasons such as the fact that NACE codes – primarily used for statistical purposes – do not accurately reflect the cost structure of the industry. |
d) in line with the duration of ETS Phase 4 |
This would improve legal certainty and consistency. |
a) the present approach of average of the 10% most efficient installations should remain |
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b) no |
No, because that will add further legal uncertainty. This negative reply is all the more true for sectors covered by directive based on which Best Available Techniques (BAT) are set, such as the Mining Waste Directive or the Industrial Emissions Directive. Those are the right instruments under which BAT and emerging techniques should be discussed and agreed. To preserve legal certainty, benchmarks should be valid during an entire EU ETS phase. |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
As a matter of principle, data used to determine allocations for a given period must be up to date. This therefore tends to support taking the period 2016-2018 as a basis to determine phase 4 allocations. However, it is equally important to bear in mind that historic levels, even very recent, tell little about future prospects. Therefore, the method to be used for phase 4 allocations should provide for sufficient flexibility so as to allow, if production increases during this period, to grant consequently more allowances, so as to avoid in practice placing a ceiling on investment in new industrial activities. |
b) yes, there should be deviations with higher allowances for installations facing specific hardships |
Deviations should remain exceptional but not be ruled out prima facie. Deviations can indeed be necessary where specific hardships faced by installations are partly the consequence of the EU ETS related costs. In addition, Magnesitas de Rubián S.A. believes that: - simplified EU ETS must be considered for SMEs; - fit-for-purpose solutions, in particular their exemption from the EU ETS, must be found for sectors, such as magnesia production, facing process emissions which cannot be reduced. Focusing on the implementation of BAT via the IED process would be a much more effective driver to further foster sustainable production of activities with process emissions. |
d) yes, in the form of financial compensation at EU-level |
Compensation solely based on state aids creates distortion as compensation measures vary from one Member States to another. As a result, similar indirect costs are compensated differently across Europe. Such discrimination must be tackled. Measures, independent from MS financial capacity, need to be taken to fully compensate CO2 price in energy prices. We therefore tend to support the principle of compensation at EU level, either in the form of financial compensation (d) or in the form of additional free allocation (d). An impact assessment might help determining the most adequate options to compensate indirect costs at EU level. |
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a) from the Member States' auction budgets |
Revenues from Member States auctioning must be earmarked at EU level for investments made in Europe in new cost-efficient & low-carbon technologies. They should be made available to all stakeholders across the value chain covered by the EU ETS. |
We welcome the early opportunity offered to stakeholders to comment on options for the post 2020 CL framework. Magnesitas de Rubián S.A would like to stress the need for the EU to opt for an integrated (and not only sectorial) approach to prevent CL as this risk is amplified by many other parameters: - energy prices much higher in Europe than the ones of our main competitors; - the lack of a predictable legal framework in the EU as many, sometimes overlapping, regulatory instruments applicable to industrial activities are under a constant revision process; - The need to remedy the qualitatively weak competitiveness proofing made in impact assessments and to effectively implement in the future recommendations the statement recalled in the recent Council Conclusions according to which: "Industrial competitiveness concerns should be systematically mainstreamed across all EU policy areas and be part of impact assessments in view of getting a stronger industrial base for our economy." |
a) Business |
Magnesitas Navarras S.A. |
Avda Roncesvalles S/N 31630 Zubiri. +34 948 421 626 / +34 948 421 617 p.perezdeasis@magnesitasnavarras.es |
a) yes |
|
1) yes |
b) no |
There is very little scope for reducing emissions from the industry. Since 2005 the industry has begun to make financial efforts for the reduction. In fact energy efficiency, at the current price of energy, it is a key objective for the control of industrial costs. Obviously if the technological development will achieve lower power consumption or to alternative energy sources, it is clear that European industry will be in favour; but this technological development should be lead and finance from Central and National Governments. Another part of the emissions are from process, and therefore cannot be reduced, unless production will be reduced. This option is against to the policy of reaching 20% of GDP in 2020, by industrial activity. The geological storage of CO2 would be a key element for compliance with emissions targets, but it is necessary to accelerate the development of technologies, in order to have viable costs. |
b) no |
As already mentioned, the main objective to achieve greater energy efficiency in industry is the reduction of costs. In many industries, the energy cost is the greatest influence to the manufacturing cost of the product. The ETS in terms of cost, it is not a decision element for energy efficiency investments. |
a) yes |
Energy costs in Europe are high compared to other countries. Also in Europe, there are other important costs, to comply with a extensive environmental and worker safety framework, which is not exist in emerging countries. These two issues have an important influence for the competitiveness of European industry. Besides these costs, the ETS adds the extra cost for purchasing of allowances, (in the case of the most efficient industrial activity, its costs for purchasing are 17,57% of its total emissions, due to intersectoral reduction factor). Therefore it can be concluded, that if no one remedy, the relocation of the industry outside Europe, is guaranteed. The list of carbon leakage sectors has to remain as it is, and it is necessary to remove the intersectoral factor for the sectors in the carbon leakage list. |
a) very adequate |
Free allocation has proved to be an efficient policy instrument to ensure, in the framework of climate policy, a level playing field at international level and mitigate the risk of carbon leakage. So far, there is no better mechanism than free allocation to address the CL risk. It is therefore essential (i) to preserve free allocation without reducing its scope as in the current foreseen terms and conditions as long as international competitors are not facing a similar cost burden and (ii) guarantee a stable CL mechanism over long periods of time so as to respect legal certainty. |
a) it absolutely keeps the incentive |
As already mentioned above, reducing emissions by improving energy efficiency, reduces industrial costs and improves profit and loss account of companies. This positive balance for European industry enables more investments in improving industrial facilities, and therefore increases their international competitiveness, instead of spending money on buying CO2 allowances. |
c) quite exaggerated |
The administrative burden ensuing from the implementation of the EU represents a significant red-tape for companies. As usual, it is much more difficult for SMEs to handle this burden due to more limited resources as well as for small industrial sub-sectors. |
d) there should be no limit to overall free allocation to industry |
There should be no limit to overall free allocation to industry" that is at risk of CL as long as a global agreement imposing similar obligations on Europe's industrial competitors is not reached and implemented at international level. Such a measure ('no limit to overall free allocation") is needed to preserve EU's industry competitiveness. In that respect, it is important to stress that climate change is a global matter which requires coordinated efforts at global level. Of global GHG emissions, the EU represents less than 10% and its share is decreasing. |
e) I don’t know |
CCS can become a key technology enabling to reduce GHG emissions. Magnesitas Navarras presented a project last year, in NER 300 call. It was a global project for CCS, in terms to be economically feasible. It was the only industrial project, but it was rejected because under the conditions of the call, our activity It was not included only the cement sector. We are going to present the project in the topic LCE 15 under Horizon 2020. The key points are: Use of the captured CO2, for industrial application and use of the captured CO2, for enhanced gas recovery for internal utilization (rotary kiln actually use petcoke). In the balance, there is a reduction of the CO2 emissions, and the CO2 produced is used for industrial application and the rest is storage in the gas reservoir. |
a) yes |
It is essential to have specific support for research and industrial development would otherwise not be possible to have technology to reduce CO2 emissions. Technological development in lower power consumption or toward alternative CO2 low emissions energy sources (in a total lifecycle: since the raw material exploitation until the disposal of equipments). he energy storage is another key point for the sustainable future. The other alternative is to stop with the existing economy of well-being. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
|
a) yes |
It is necessary to offset the indirect costs, and that compensation has to be the same in all EU Member States, in order to avoid competitive disadvantage inside EU |
a) the present two groups should remain |
|
a) the present criteria should remain |
|
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
e) I don’t know |
The revision should be flexible, in order to adapt the list at the macro economic circumstances and global agreements. |
c) the approach should be less stringent (please specify) |
It would be appropriate to remedy to inconsistencies of the current system. Benchmarks only consider the total CO2 emission for product ton, but don’t have account other environmental effects (cross media effects) or the characteristic of the raw materials. Other especial case is for small sectors, no benchmark is enough representative and the fall-back option is less favourable. |
a) yes (please specify how often) |
It has to revised when there are evidences of technological improvements and/or there are the possibility of develop benchmarks with the industry outside of Europe. |
c) other (please specify) |
2013-2020 |
e) I don’t know |
|
d) yes, in the form of financial compensation at EU-level |
|
I don't know |
Important |
Most important |
Less important |
|
e) I don't know |
It is necessary to get funding for all possible vias |
The European industry needs clear and durable rules about ETS, in order to plan the strategy for production and investments in Europe. |
a) Business |
MANUFACTURA INDUSTRIAL AZULEJERA, S.L. |
CAMI LA TRAVESSA, 17 12540 VILA-REAL (CASTELLON), SPAIN TLF: 964506300 MAIL: laboratorio@mainzu.com |
a) yes |
1) yes |
b) no |
We have answered this question thinking about our sector. |
a) yes |
|
a) yes |
|
a) very adequate |
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b) it largely keeps the incentive |
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d) absolutely exaggerated |
|
b) a higher share than in 2013-20 |
|
a) a substantially higher share than in Phase 3 |
|
a) yes |
|
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
|
a) yes |
|
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
|
c) the share of 'carbon costs' in the GVA should be maintained, but 'carbon costs' should be taken into account to the extent that they can't be recuperated in product prices |
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c) I don’t know |
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c) I don’t know |
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d) in line with the duration of ETS Phase 4 |
|
c) the approach should be less stringent (please specify) |
|
a) yes (please specify how often) |
in line with the duration of ETS Phase 4 |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
|
e) I don’t know |
|
c) yes, in the form of additional free allocation |
|
Least important |
Less important |
Important |
Most important |
|
a) from the Member States' auction budgets |
|
|
a) Business |
MARAZZI GROUP S.R.L. |
Via Regina Pacis 39 - 41049 Sassuolo (MO) - Italy Telephone: +39 0536 860111 email: Stefano.Malagoli@marazzigroup.com |
a) yes |
|
1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improvement |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. This would limit the list to sectors really exposed and would eliminate the risk of a carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
As explained above, all energy intensive sectors as defined in the Energy Taxation Directive should be considered as exposed to the carbon leakage risk. As an alternative, trade and carbon intensity criteria should be used considering the following elements.First, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS. Second, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria should be introduced |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
a) Business |
MDI S.A. Miroslaw Maruiewicz Finance Director Mid-size company managing construction projects of wind farms and bio-gas power plants |
AL. Wyscigowa 6 02-681 Warszawa Poland Tel: +48 609709839 Email: mm@molisa.pl |
b) no |
|
1) yes |
a) yes |
|
a) yes |
|
a) yes |
|
b) quite adequate |
|
b) it largely keeps the incentive |
|
a) absolutely proportionate |
|
b) a higher share than in 2013-20 |
|
a) a substantially higher share than in Phase 3 |
|
a) yes |
|
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
|
a) yes |
|
a) the present two groups should remain |
|
a) the present criteria should remain |
|
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
b) longer (please specify) |
10 years rolling |
a) the present approach of average of the 10% most efficient installations should remain |
|
a) yes (please specify how often) |
3-5 years |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
|
b) yes, there should be deviations with higher allowances for installations facing specific hardships |
|
d) yes, in the form of financial compensation at EU-level |
|
Important |
Most important |
Least important |
Less important |
|
c) from both |
|
|
a) Business |
Metallo-Chimique N.V. is a multi-metal (non-ferrous metals) recycling and refining company, mainly Copper, Lead, Tin and Nickel. |
Tom Laureyssens, Energy manager, Metallo-Chimique N.V., Nieuwe Dreef 33 - 2340 Beerse - Belgium - Phone +32 (0) 14 609 677 - Email tom.laureyssens@metallo.com - www.metallo.com |
a) yes |
|
1) yes |
b) no |
1. Extra cost due to climate policy is sufficiently compensated. Currently, a key carbon leakage prevention mechanism, compensation for ETS indirect costs, exists only on paper as only few member states established meaningful compensation schemes. 2. We have a stable, predictable and investment friendly legislative environment in Europe. 3. Conditions are put in place to ensure that EU copper industry can remain globally competitive so that it can continue to invest in innovation along its entire value chain. 4. Sector specific reduction potentials and technology availability are properly and realistically assessed, (when designing new policies). |
b) no |
Energy intensive industry such as the Copper Industry for example has an innate incentive to become more energy efficient due to high energy cost, independently of the extra cost related to ETS. In these industries, however, the EU ETS may reduce the ability to become more energy efficient. The reason is that additional improvements will require investments, either in upgrading of existing capacity or in new plants. Extra cost due to climate policy, if insufficiently compensated, will reduce the margins of the European industry. Shrinking margins lead intrinsically to reduced energy efficiency investments. |
a) yes |
In most energy intensive industries, product prices are set in global markets. This is particularly true for copper which price is fixed globally at LME London Metal Exchange. Until a significantly larger share of global competitors is influenced by similar increases in energy cost, there is a need for such measures. Otherwise such industries will disappear from Europe. |
a) very adequate |
Compensation for direct and indirect costs, linked to actual output and realistic benchmarks, would be a very adequate measure to address the risk of carbon leakage (predictability and effectiveness is ensured in the long term for both, direct and indirect costs). |
a) it absolutely keeps the incentive |
Full compensation for direct and indirect costs is absolutely necessary for the competitive position of Europe as a localisation of energy intensive industries. Compensation should be linked to actual output in order to provide an incentive for growth and to allow production flexibility through business cycles. Realistic benchmarks are necessary for full compensation to new capacity and for the preservation of the undistorted environmental incentive. Expressed differently, allocation of free allowances will not reduce the environmental incentive for the recipient. On the contrary, full compensation for direct and indirect effects of ETS through allocation or otherwise is a precondition for investment in new capacity in Europe. |
b) quite proportionate |
The administrative burden is not insignificant, but proportionate in the sense that no better solutions to solve the carbon leakage issue have been proposed. |
d) there should be no limit to overall free allocation to industry |
Carbon leakage undermines the environmental efficiency of EU ETS as well as EU’s industrial growth. Certain industries have to be protected for unfair international competition until fair conditions are restored by an international climate agreement. Without a comprehensive international agreement giving the global competitors of European industry a similar cost element related to emissions and electricity consumption, the cost of carbon leakage mitigation will be more or less stable, whereas the number of allowances to cover this cost will gradually diminish. This is a cost that is directly linked to emission trading and should be covered by the ETS system itself before any money is taken out of the system. If in the future, there is an inadequate number of allowances available to cover the need for carbon leakage mitigation, compensation could be provided as a sum of money proportionate to a given number of allowances from another source of finance. |
c) a lower share than in Phase 3 |
Financing of CCS should not be a priority for the allowance budget. It is illogical to reserve a given share of the budget for this purpose: When the EUA prices are low the need for support is high and vice versa. Furthermore, the lack of stability in the EUA market creates a high project risk and high financing cost. This adds the project cost and the need for support. |
b) no |
ETS should be focused on emission trading and mitigating the effects of such trading. Financing is tight, and there is no room for further programs. |
c) other types of funding (please specify) |
ETS should be focused on emission trading and mitigating the effects of such trading. Auction income should not be diverted to general innovation support. |
a) yes |
The use of free allowances will also have to be extended to cover indirect effects through increased electricity prices. With significantly higher EUA prices, the present solution for indirect costs based on State Aid will: -- be insufficient for long term survival of these industries in Europe, -- not create the predictability needed for investments, and, as well, -- create significant disturbances in the internal market for energy intensive products. Effective carbon leakage prevention will also require exemption from extra costs related to other elements of climate policy like support to development of renewable electricity generation and extra grid costs related to transmission and balancing of electricity from renewable sources. |
a) the present two groups should remain |
Electro-intensive industries are particularly exposed to carbon leakage and need full compensation of extra cost until a significant share of competitors is influenced by similar cost increases. EUA costs are passed on into electricity prices through the marginal cost of the marginal sources of electricity, and for these industries, electricity related cost make up a high share of total cost. Most electro-intensive products have a high value compared to their weight, and may be moved between markets at a cost that is small compared to their value. They are thus globally priced with only a minimal price differentiation between markets. Other industries may need compensation, but not necessarily to the same degree. Other trading systems, like the Australian one, have more than one category of industries receiving different degrees of compensation. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
A single carbon leakage list (with several categories) should be established. The list should be based on the combined effect of direct cost (emission allowances) and indirect costs (increases in electricity costs due to climate policy). The following set of criteria should be established: 1. The exposure to global competition 2. The exposure to EUA cost 3. The unit is in the most exposed category of the carbon leakage list if both criteria are met being simultaneously at a high threshold. If one or both of the criteria only meets a lower threshold, the unit will be in the less exposed category of the list. The intensity of trade with third countries is a weak proxy to competitive exposure, and should not be used in this context. |
b) other thresholds should be defined. Please specify below |
The levels of the thresholds should be based proper analysis of the proposed new set of categories and criteria (see response to Q12 and Q13). |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Justified cases could be: inability to pass through the CO2 costs to its global customers (i.e. price-taker industrial sector), economic activity of major importance for EU society (eg recycling as a contribution to the "circular society") |
d) in line with the duration of ETS Phase 4 |
Predictability is the key to incentive efficiency. There is reason to believe that the set of criteria described above will establish robust and stable lists. |
a) the present approach of average of the 10% most efficient installations should remain |
Alternative options should remain in case a benchmark cannot be defined (as for eg in cas of small number of installations, specific resources, etc.). |
a) yes (please specify how often) |
|
c) other (please specify) |
The main advice to be found in the literature is to use output based allocation linked to realistic benchmarks. For each industry, the baseline will then be set by the realistic benchmark. Indirect emission should also be set by realistic benchmarks and actual output. The compensation will be linked to a sum of two benchmarks, one derived from emissions and one derived from electricity consumption. |
a) no, there should be no deviations |
There should be no deviations linked to the short-term financial conditions of industries. There might however be a need to find special solutions for industries where it is impossible to establish sectorial benchmarks. |
c) yes, in the form of additional free allocation |
Compensation inside the EU ETS should be extended to cover indirect effects through increased electricity prices. With significantly higher EUA prices, the present solution for indirect costs based on State Aid will be insufficient for long term survival of these industries in Europe and, as well, create significant disturbances in the internal market. The cost of any compensation measures will be proportionate to the EUA price, thus corresponding to the value of free allowances. Compensation could be provided as free allowances or as a sum of money proportionate to a given number of allowances from another source of finance. |
Important |
Least important |
Most important |
Less important |
|
d) other |
ETS should be focused on emission trading and mitigating the undesirable effects of such trading. Innovation support should mainly come out of MS general budgets and not from auction income. |
|
a) Business |
Metsä Group |
Metsä Group P.O. Box 10 FI-02020 Metsä, Finland tel. + 358104601 ilkka.latvala@metsagroup.com |
a) yes |
|
1) yes |
c) I don’t know |
The pulp, paper & board manufacturing industry, already invested significantly to reduce its GHG emissions. Major investments on actual available technologies have already been made across the sector. The potential for improvement with available technologies is very limited and it has to fit with market conditions for investment cycles. Forcing such investments makes little economic sense: they will only increase the competitive gap with international competitors. Technological breakthroughs are needed in order to further reduce GHG emission. This requires time and financial support (research and investment cycles). |
b) no |
Key is the long-term investment cycle. The high costs of energy and the related tax burden already act like an incentive for the pulp, paper and board manufacturing industry to reduce energy costs, thus reduce GHG emissions. Moreover, due to the energy price in Europe it is not a question of GHG reduction but a question of competitiveness. The EU ETS adds further costs that competitors outside the EU do not have. In addition, the continuous interventions to modify the regulatory framework create additional risks, thus costs, to industry. Overall, the EU ETS severely impairs our industry competitiveness. The short-term visibility provided by the EU ETS provides (rules set for single trading periods) does not give industry the long-term visibility needed to invest. |
a) yes |
Since the EU ETS was set up in 2005, the international economic context dramatically changed: the shale gas production in the USA offered a significant competitive edge to the American industry, the oil price increased dramatically, the debt crisis in Europe further increased the tax burden, the very low margins of the pulp, paper and board industry impaired its ability to invest, etc. The European countries suffer from a deficit of competitiveness on the international playing field. The EU ETS adds a substantial cost that is unmatched by industry in other parts of the world, thus negatively impacting on EU competitiveness. In a world of growing asymmetries in climate change policies, measures to support EU industry are a must. |
b) quite adequate |
The free allocation has been a shield for the competitiveness of the EU industry and helped maintain economic activity within EU borders. However, competitiveness is not secured over the short and medium term as the fast decrease of free allocation, the CSCF, the inadequate compensation for indirect costs, and the expected increase in carbon prices are a threat the EU industry faces in the future. Without a global agreement (that could lead to comparable burdens for competing industrial installations around the world), Europe will have to mitigate the impact of its policies for industries producing globally trading goods. Overall, mechanisms should be set up to help the EU industry improve its energy efficiency and reduce its GHG emissions. In addition, regarding the carbon leakage issue, the objective should be to attract more industrial activity while reducing the GHG emission and not only to avoid the decrease of industrial activity. |
b) it largely keeps the incentive |
There is no direct correlation between free allocation and the incentive to innovate to reduce GHG emissions. The GHG emissions still represents a significant energy-related cost for the pulp, paper and board industry which companies try to minimize through incremental innovation. Free allocation does not affect what just stated, as what matters is the opportunity cost. In addition, free allocation is used as collateral for raising finances to invest in GHG emission reductions. No free allocation would mean a lot less ability to access to capital to invest in CAPEX for GHG emissions reduction. As explained above, further incentive should come as funding investments and research aiming at innovative breakthroughs in low GHG emission production of energy-intensive goods. |
b) quite proportionate |
One of the main causes of administrative burden has been the continuous changes in ETS framework and implementing rules. This has caused uncertainty among industry. There is an urgent need for a more stable and consistent ETS policy. The initial burden is very high. Afterwards, it depends on Member States. Constant changes, almost every year, in MRV rules, without delivering any environmental benefits. Fines in place due to wrong entries disproportionately high, especially in view of constant changes in rules. |
b) a higher share than in 2013-20 |
There is only one overall EU allowance budget. If there is a risk of carbon leakage due to EU energy-climate policies, this has to be prevented with additional credits available in the system, including the ones covering indirect costs for increased electricity prices. In fact, carbon leakage would mean failure of the EU ETS to contain global GHG emission. Thus, the avoidance of carbon leakage should be an absolute priority. Given the current economic context, a higher share of allowances is needed to ensure growth in Europe and prevent businesses from moving abroad. Looking at current rules, the linear factor and correction factor makes that even being carbon leakage installations are allocated bellow benchmarks values. Moreover, there is a need to reconsider the need to provide free allocation to electricity produce in industrial CHP, as it is considered a BAT for energy efficiency in industry. |
b) the same share as in Phase 3 |
It is not so much a matter of budget allocated, but of policy uncertainty. |
a) yes |
EU ETS revenues from auctioning to be returned exclusively the industry in a way that supports the transition to a low GHG emission economy. This should include subsides for low GHG emission investments and funding of low GHG emission technology research. The EU ETS only will not be sufficient to improve energy efficiency and GHG emission reduction. The support of energy savings and GHG reduction investments will be a determinant factor of success of the EU ETS. Therefore, the development of new low-carbon technologies for industrial innovation should be as transversal as possible. |
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
Prevention of carbon leakage is a pre-requisite for innovation. As explained above, EU ETS auctioning revenues should be returned to the EU industry to support low GHG emission investments and research projects |
a) yes |
Energy intensive sectors, in particular the pulp, paper and board manufacturing sector suffer from a lack of competitiveness partly due to high energy cost, high level of taxation and high direct and indirect GHG emission reduction cost relative to their competitors outside the EU. A global agreement would be the most effective way to address the risk of carbon leakage. In the absence of that, EU-wide harmonised measures addressing indirect costs should include both the rising of electricity costs due to energy-climate related policies (ETS + Renewables) and rising of wood raw material costs. Specifically on the latter, the ETS and renewables targets provide an incentive to burn wood instead of fossil fuels. It has strongly increased demand of wood for energy use. Hence today even round wood suitable as raw material for forest industry is increasingly burnt across Europe. As result, there is growing pressure for higher price of pulp wood. |
a) the present two groups should remain |
There is no need for a revision of the carbon leakage list. The pulp, paper & board manufacturing industry needs stability in the regulatory framework. |
a) the present criteria should remain |
The current criteria should remain. HOWEVER the “carbon costs” criteria should be expanded to include the cost of rising wood raw material cost due to ETS (see answer to Question 11). Move to NACE 3 level in assessing integrated sectors, such as the pulp and paper. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
See comment above (question 13) |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
b) longer (please specify) |
Stability is crucial for investments in Europe. Fiscal and legislative instability triggers insecurity of return on investment and should therefore be avoided. The validity of the carbon leakage list should then be extended to reflect typical investment cycles (10 to 15 years) and should remain unchanged until global climate agreement (which would guarantee equal competition conditions). |
a) the present approach of average of the 10% most efficient installations should remain |
Fiscal and legislative stability is important for investment and decision-making. Therefore, we advise not to revise the benchmarks, thus to keep the currently existing specific benchmark values. Moreover, revising the current benchmarks would greatly reduce the benefits that industrial installations should receive for their last energy-saving and GHG reduction investments, resulting in a loss of confidence and thus a decrease in investments. It should reminded that the ETS in general, and the benchmarks in particular, should reward installations and sectors reducing GHG emissions. Revising benchmarks will only penalise the most virtuous sectors, rewarding the most carbon intensive. |
b) no |
Fiscal and legislative stability is important for investment and decision-making. Therefore, we advise not to revise the benchmark. Moreover, revising the benchmarks would greatly reduce the benefits that industrial installations should receive for their last energy-saving and GHG reduction investments, resulting in a loss of confidence and thus a decrease in investments. It should reminded that the ETS in general, and the benchmarks in particular, should reward installations and sectors reducing GHG emissions Revising benchmarks will only penalise the most virtuous sectors, rewarding the most carbon intensive. |
c) other (please specify) |
Three year average of relevant period could be OK, but there should be some flexibility in the reference years to take into consideration economic activities. Nevertheless, it should be kept the possibility to revise according to the state of the economy, crises, catastrophes etc. The allocation system should not constrain economic growth. |
a) no, there should be no deviations |
|
d) yes, in the form of financial compensation at EU-level |
Any system should be mandatory and harmonised for all the states. |
Least important |
Less important |
Important |
Most important |
Support for these stages is absolutely important and largely missing at EU level. However, it presupposes that all preceding R&D stages are adequately supported as well. |
c) from both |
Any support for innovation in industry should not come at the expenses of carbon leakage protection. Allowances for innovation will have to come on top of free allowances for industry. |
To mitigate climate change the EU should focus on promoting industrial production in Europe, which is good for the environment and climate. Beside the high environmental standards set worldwide by European industries, the average CO2-emissions caused by electricity production in Europe are also low in global comparison. Hence, the more industry produces in Europe, the lower the global CO2-emissions. |
a) Business |
MIHŐ Miskolci Hőszolgáltató Kft. (MIHŐ Miskolc Heat Provider Ltd) |
3534 Miskolc, Gagarin u. 52. HUNGARY Tel: (+36) 46/533-120 Fax: (+36) 46/533-121 miho@miho.hu www.miho.hu |
a) yes |
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1) yes |
a) yes |
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a) yes |
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a) yes |
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b) quite adequate |
|
b) it largely keeps the incentive |
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c) quite exaggerated |
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b) a higher share than in 2013-20 |
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a) a substantially higher share than in Phase 3 |
|
a) yes |
|
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
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a) yes |
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c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
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c) the share of 'carbon costs' in the GVA should be maintained, but 'carbon costs' should be taken into account to the extent that they can't be recuperated in product prices |
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a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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d) in line with the duration of ETS Phase 4 |
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c) the approach should be less stringent (please specify) |
A távhőszolgáltatás esetén nagyobb kvóta álljon rendelkezésre az időjárás szélsőségeinek kiküszöbölésére, mivel a rezsicsökkentés miatt a költésgek nem háríthatóak át a felhasználókra. |
a) yes (please specify how often) |
Kereskedési időszakonként |
c) other (please specify) |
A 3. kereskedési időszak 2 legnagyobb termelési adataival bíró évek legyenek a bázisidőszak alapjai (távhőszolgáltatás) |
b) yes, there should be deviations with higher allowances for installations facing specific hardships |
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c) yes, in the form of additional free allocation |
|
Most important |
Less important |
Least important |
Important |
|
a) from the Member States' auction budgets |
|
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a) Business |
MOL Csoport (MOL Group) |
H-1117 Budapest, Október huszonharmadika u. 18. HUNGARY Tel: +36 1 464 11 23 ilvari@mol.hu molgroup.hu |
a) yes |
|
1) yes |
c) I don’t know |
Nem tudunk megállapításokat tenni a teljes európai iparra vonatkozóan. Noha bizonyos iparágak bizonyára képesek tovább csökkenteni a kibocsátásukat, az energia-intenzív iparágak, és különösen a finomítás esetében az ETS szektoroknak javasolt cél (-43% 2030-ig 2005-höz képest) nem életszerű a kapacitások további csökkentése és az EU-n kívülre transzferálása nélkül. A finomítás esetében ez károsítaná a kontinens energiabiztonságát. Noha egyes finomítói létesítményekben további javulások lehetségesek, a teljes szektort tekintve nincsenek olyan alkalmazható technológiai megoldások amelyek 2030-ig elérhetővé tennék a javasolt ÜHG-csökkentési célt a teljes szektor számára. Megjegyzendő, hogy a legjobb európai finomítók már ma is a világ elitjéhez tartoznak. Felhívjuk továbbá a figyelmet az ún. ’finomítói paradoxon’ (refinery paradox) jelenségre: az egyre szigorúbb üzemanyag-minőségi előírások teljesítése olyan termelési technológiákat igényelnek, amik elkerülhetetlenül növelik az adott fino |
a) yes |
A CO2 kibocsátások pontos mérésén és árazásán keresztül az EU ETS ösztönzőt jelent ebben a tekintetben, de más tényezők sokkal erősebben érvényesülnek. A legfontosabbak ezek között a világviszonylatban magas európai energiaárak, amelyek jelentős részét képezik a termelési költségeinknek. A versenyképesség továbbá más tényezőktől, nem csak az energiafelhasználás hatékonyságától függ. Elutasítjuk azt az értelmezést, ami a versenyképességet az energiahatékonyságbeli javulásokkal azonosítja. A versenyképesség megőrzésének egyik kulcsa például a szénszivárgás elleni védelem megfelelő szinten tartása. |
a) yes |
Az EU klíma- és környezetvédelmi szabályozása világviszonylatban a legszigorúbb. Bármilyen olyan javaslat megvalósulása, ami ezt tovább erősíti, elsősorban nem további energiahatékonysághoz vezetne, hanem elűzné az energa-intenzív iparágakat az unióból. Ameddig az EU fő kereskedelmi partnerei (a MOL szempontjából Oroszország, Közel-Kelet, Ázsia bizonyos részei) nem vezetnek be az EU-ban érvényeshez mérhető CO2-szabályozást és –árazást, egy széleskörű és hosszú távú szénszivárgás elleni védelem része kell legyen bármilyen 2030-as klíma- és energiapolitikai rezsimnek. Ennek hiányában az ingyenes allokációs szintek a jelenlegi, referenciaértéknél 100%-os szintről már 2020-ban 30% alá csökkennének. Az EU-n belüli versenyt torzító tényezők szintén aggodalomra adnak okot. A belső piacot korábban torzította a nemzeti szintű allokáció; napjainban pedig a közvetett ETS-költségeket kompenzáló vagy megújuló energiaforrásokat támogató, igen egyenlőtlen nemzeti sémák rendszere. |
b) quite adequate |
Az ingyenes allokáció alapvetően betölti a szerepét. Egy hatékony nemzetközi klímavédelmi megállapodás hiányában a MOL az ingyenes allokáció (és a szénszivárgásnak kitett szektoroknak járó emelt ingyenes allokáció) fenntartását tartja a legjobb megoldásnak. A rendszer nem mentes azonban hibáktól. A Cross-Sectoral Correction Factor (CSCF, ágazatközi korrekciós tényező) hosszú távon igen jelentős hatással lesz az allokációs szintekre. Az EU ETS referenciaértékei (benchmarkok) is különböző szigorúsággal érvényesülnek az egyes iparágakban. A finomítás esetében a referenciaérték a leghatékonyabb 10%-nyi létesítmény átlagaként került meghatározásra. Ez a megoldás, a 2013-as ellenőrzött adatok elemzése alapján, a finomítás esetében lényegesebben alacsonyabb átlagos kiosztást eredményezett mint más szektorokban (a szektor összességében a kibocsátásához képest 21%-kal alul lett allokálva, míg más jelentős szektorok a kvótaigényük összességével egyenlő, sőt jóval azt jóval meghaladó kvótát kapt |
a) it absolutely keeps the incentive |
Tekintve, hogy a létesítmények nagyrésze nem teljesíti a referenciaértéket, a késztetés a kvótahiányuk csökkentésére (az innováción keresztül) teljes mértékben megmarad. Különösen igaz ez, mert a grandfathering rendszer rögzítette a létesítmények egymáshoz viszonyított versenyképességi különbségeit, így bármilyen technológiai javulás nem eredményezheti az allokációs szint növekedését, csak a kvótahiányt tudja csökkenteni. A finomítás esetében a fő ösztönző a magas energiaköltség. A finomítás esetében a referenciaérték a leghatékonyabb 10%-nyi létesítmény átlagaként került meghatározásra 2013-tól. Ez a megoldás, a 2013-as ellenőrzött adatok elemzése alapján, lényegesebben alacsonyabb átlagos kiosztást eredményezett a finomítói szektorban, mint más szektorokban. Emlékeztetünk arra, hogy a jelenlegi szabályok szerint az ingyenes allokációs szintek jelentősen csökkenni fognak a csökkenő kibocsátási sapkának és a CSCF-nek köszönhetően. Ez alapján 2030-ban még a leghatékonyabb létesítménye |
b) quite proportionate |
Az adminisztrációs teher jelentős volt 2008-2009-ben a referenciaérték kidolgozása idején, de azóta a rendszer működtetése beépült a mindennapi üzleti folyamatokba, és nem jelent túlzott terhet. |
c) a constant share as in 2013-20 |
A szénszivárgás elleni védelmet fenn kell tartani a III. kereskedési időszak szintjén (feltéve, hogy nemzetközi klímaegyezmény nem születik 2020 előtt). A kibocsátási sapka csökkenése, valamint a CSCF miatt az iparnak jutó ingyenes allokáció szintje már a referenciaértéknél is 60%-ra fog csökkenni 2030-ra. Ennek elkerülése érdekében az iparági kibocsátási sapkát indokolt lenne befagyasztani a 2020-as szinten. Csak egy ilyen megoldás őrizheti meg a szénszivárgásnak kitett szektorok versenyképességét. |
e) I don’t know |
Határozottan támogatjuk az ipari innováció (rész)finanszírozását mind uniós, mind tagállami szinten. A NER300 azonban nem bizonyult sikeres programnak, hiszen nem vezetett érdemleges CCS-projekthez, és jelentős források maradtak vissza az alapban. A III. kereskedési időszakban a tagállami aukciók a korábbinál sokkal jelentősebb bevételeket fognak jelenteni. Ezeket a bevételeket, általános szabályként, technológia-semleges módon vissza kell juttatni a gazdaságba, összpontosítva azokat a K+F szakaszra. Bármilyen más megoldás torzítaná az unió egységes belső piacát. |
a) yes |
Véleményünk szerint a NER300 által támogatott technológiák körét kell bővíteni ezzel a területtel is. Az egyéb uniós pénzügyi instrumentumok vonatkozó forrásai (H2020, FP7, SET) szintén növelhetőek lennének. |
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
Új mechanizmust nem tanácsos létrehozni, hiszen már számos létezik. A létező alapok forrásnövelése mellett a NER300 támogatási körét kell bővíteni. Minden esetben az alacsony kibocsátású ipari technológiák támogatása technológia-semleges kell legyen, s egyúttal időben és mértékben korlátozott. Minden energiaforrás szabad piaci és egyenlő versenyfeltételek melletti versenyeztetése a helyes cél. |
a) yes |
A MOL alapvetően támogatja a szénszivárgás elleni rezsim mai felépítését (azaz az iparnak járó ingyenes és a kitett szektoroknak járó emelt ingyenes allokációt). Ezt a rendszert kell fenntartani, kisebb javításokkal, 2020 után is (feltéve, hogy nemzetközi klímaegyezmény nem születik meg). A javítások tekintetében különösen a közvetett ETS-költségeket kompenzáló, igen egyenlőtlen nemzeti sémák rendszere ad okot aggodalomra. Az ilyen sémáknak uniós szinten egységesnek kéne lennie, és a finomítók esetében pedig az összes, a létesítményen belül felhasznált villamosenergia-felhasználásra is ingyenes kvótát kellene juttatnia. |
a) the present two groups should remain |
A MOL alapvetően támogatja a szénszivárgás elleni rezsim mai felépítését. Emlékeztetünk arra, hogy az ipari termelés ma csökkenő trendet mutat az EU-ban (a GDP-hez való hozzájárulása a 2012-es 15,4%-ről 15,1%-ra csökkent 2013-ra a Bizottság vonatkozó közleménye [Communication for a European industrial renaissance] szerint). A jelenlegi két szénszivárgási kategória a jelen formájában fenntartandó, amíg egy nemzetközi klímaegyezmény nem rendezi megnyugtatóan a szénszivárgás kockázatát – azaz ameddig az EU fő kereskedelmi partnerei (a MOL szempontjából Oroszország, Közel-Kelet, Ázsia bizonyos részei) nem vezetnek be az EU-ban érvényeshez mérhető CO2-szabályozást és –árazást. |
a) the present criteria should remain |
A MOL alapvetően támogatja a szénszivárgás elleni rezsim mai felépítését. A finomításnak, mint a két kritériumon együttesen kvalifikáló iparágnak, különösen fontos mind a többletköltséggel, mind a kereskedelmi kitettséggel kapcsolatos mutató. A finomító ipar üzleti modelljét mindkettő érinti: a finomítás két globálisan integrált árupiac (a kőolaj és a finomított olajtermékek/derivatívák piaca) közötti árrésekben működő iparág. Ahogy a finomított termékek importja nő, a többletköltségek fogyasztóra hárításának lehetősége csökken. Felhívjuk továbba a figyelmet az ún. ’finomítói paradoxon’ (refinery paradox) jelenségre: az egyre szigorúbb üzemanyag-minőségi előírások teljesítése olyan termelési technológiákat igényelnek, amik elkerülhetetlenül növelik az adott finomító CO2-kibocsátását. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
A MOL alapvetően támogatja a szénszivárgás elleni rezsim mai felépítését. Bármilyen lépés a küszöbértékek szigorítására azzal járna, hogy jelentős, esetenként stratégiai fontosságú szektorok kerülnének le a szénszivárgásnak kitett szektorok listájáról. Ez rontaná az uniós iparágak versenyképességét, a finomítás esetében pedig károsítaná a kontinens energiabiztonságát. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Bizonyos szektorok esetében, pl. a petrolkémia esetében a szénszivárgás kockázatát csak a kvantitatív kritériumokon túli, kvalitív piacelemzéssel lehet megbízhatóan felmérni. Ezért egy ilyen, másodlagos mérlegelési lehetőség fenntartása teljesen indokolt. Egy másik példa: ha a finomítás nem kvalifikált volna a két kritériumon együttesen, akkor az ún. ’finomítói paradoxon’ (refinery paradox) jelenséget (ahol az egyre szigorúbb üzemanyag-minőségi előírások teljesítése olyan termelési technológiákat igényelnek, amik elkerülhetetlenül növelik az adott finomító CO2-kibocsátását) egy ilyen másodlagos mérlegelés esetében figyelembe kellett volna venni. |
d) in line with the duration of ETS Phase 4 |
A két periódos harmonizálása logikus lenne. Ez egyszerűsítené a rendszert, növelné annak átláthatóságát és megbízhatóságát, ami előnyös lenne befektetői szempontból is. |
c) the approach should be less stringent (please specify) |
A MOL alapvetően támogatja a szénszivárgás elleni rezsim jelenlegi felépítését, és csak kisebb javításokat tart indokoltnak. Az egyik ilyen a referenciaértékek szintje. Ezek a referenciaértékek igen eltérő szigorúsággal érvényesülnek a különböző iparágakban. A finomítás esetében a referenciaérték a leghatékonyabb 10%-nyi létesítmény átlagaként került meghatározásra 2013-tól. Ez a megoldás, a 2013-as ellenőrzött adatok elemzése alapján, a finomítás esetében lényegesebben alacsonyabb átlagos kiosztást eredményezett mint más szektorokban (a szektor összességében a kibocsátásához képest 21%-kal alul lett allokálva, míg más jelentős szektorok a kvótaigényük összességével egyenlő, sőt jóval azt jóval meghaladó kvótát kaptak). Ezeket az különbségeket elemezeni és kijavítani szükséges. |
b) no |
Az energia-intenzív iparágakban általában, és a finomításban különösen, igen hosszú időtávja van minden technológiai fejlesztésnek. Az eszközök élettartama szintén igen hosszú, és egy finomítóban ezek konfigurációját nem könnyű megváltoztatni. A tipikus fejlesztési út egy-egy nagy váltás 30-40 évenként, és nem a néhány évenkénti, lépcsőzetes fejlesztés. Ezt az adottságot figyelembe kell venni a referenciaértékek bármilyen felülvizsgálata esetén. A jelenlegi szintek felülvizsgálata a finomítás és a petrolkémia esetében azonban nem indokolt, mert azok továbbra is maradéktalanul tükrözik a jelenlegi csúcstechnológiát. |
c) other (please specify) |
A közép-kelet európai ipar növekedési potenciálját egy komoly gazdasági fellendülés esetén nem lenne tanácsos korlátozni. Ezt a potenciált csak bizonyos mértékig biztosítja az a gazdasági válság előtti, 2005-2008-as aktivitási szint (historical activity level, HAL), amin az ingyenes allokáció ma alapul. Ez azonban egy komoly fellendülés esetén növekedési plafonná válhat a jövőben. Ezért az ingyenes allokációs szintet egy aktuálisabb gazdasági realitáshoz lenne tanácsos kötni. |
a) no, there should be no deviations |
Az eddigi tapasztalatok alapján a 2020 utáni rendszerben nem szabad tagállami hatáskörben hagyni az allokációval kapcsolatos döntéseket, mert ez a belső piac torzulását hozza magával. Az EU-n belüli versenyt torzító tényezők már ma is aggodalomra adnak okot. Korábban a nemzeti szintű allokáció torzította, napjainban pedig a közvetett ETS-költségeket kompenzáló vagy megújuló energiaforrásokat támogató, igen egyenlőtlen nemzeti sémák rendszere torzítja a belső piacot. |
c) yes, in the form of additional free allocation |
Igen, de bármilyen állami támogatási mechanizmus csak akkor alkalmazható nagyvállalatok esetében, ha uniós szintű és átlátható kritériumokat sikerül hozzá kidolgozni, amelyek az egész EU-ban automatikus alkalmazásra kerülnek minden energiaigényes iparágban. Komoly kockázatok rejlenek abban, hogy a támogatási rendszerek ma ugyan uniós útmutatók szerint, de nemzeti alapokon működnek (és bővülnek). Az ilyen, uniós szempontból indikatív rendszer kerülhetetlenül a belső energiapiac bizonyos torzulásához vezet. A jelenlegi megközelítés voltaképpen megkülönbözteti a tagállamokat attól függően, hogy a költségvetésük képes-e támogatni az ipart. |
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A III. kereskedési időszakban a tagállami aukciók igen jelentős bevételeket fognak jelenteni. Ezeket a bevételeket, általános szabályként, technológia-semlegesen és a K+F szakaszra összpontosítva vissza kell juttatni a gazdaságba. A sorozatgyártás esetében ilyen támogatás nem indokolt, sőt káros lenne. Bármilyen más megoldás torzítaná az unió egységes belső piacát. |
a) from the Member States' auction budgets |
A MOL támogatja, hogy az aukciós bevételek teljessége az alacsony kibocsátású technológiák támogatására legyen fordítva. Emlékeztetünk arra, hogy a jelenlegi szabályok szerint az ingyenes allokációs szintek jelentősen csökkenni fognak a csökkenő kibocsátási sapka és a CSCF következményeképpen. Ez alapján még a leghatékonyabb létesítmények is csak a kvótaszükségletük 60%-át kapnák meg 2030-ban. |
A szénszivárgás kockázatát felmérő vizsgálatok előretekintőek és nem a múltat vizsgálóak kell, hogy legyenek (ellentétben pl. az ECORYS által a DG Climának készített, Carbon leakage evidence project című tanulmánnyal). Álláspontunk szerint a historikus elemzések azért nem találták bizonyítékát a jelentős szénszivárgásnak, mert a jelenlegi rendszer alapvetően hatékonyan látta el a feladatát. Ha egy visszatekintő vizsgálat ilyen bizonyítékot találna, az azt jelentené, hogy az érintett iparágak versenyképessége már jelentősen sérült, és az utólagos, ezen diagnózis alapján nyújtott segítség sokszor már túl későn érkezne. A kérdőív formátumát nem tartjuk megfelelőnek a vélemény szabad kifejezésére, sőt egyes kérdések (pl. a 4.) esetében úgy véljük, hogy azok megfogalmazása sugallja az egyik választ. |
a) Business |
ÓAM Ózdi Acélművek Kft. (ÓAM ÓZD STEELWORKS LTD. The Max Aicher Group) |
H-3600 Ózd, Kovács-Hagyó Gyula út 7. HUNGARY Tel: +36-48-575-585 Fax: +36-48-575-591 www.oamkft.hu krisztina.vincze@oamkft.hu |
a) yes |
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1) yes |
b) no |
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a) yes |
Igen, ösztönzi, azonban sajnos vannak olyan iparágak, ahol az energiahatékonyságnak a rendelkezésre álló eszközökkel történő növelése mellett sem érhető el jelentős mértékű kibocsátás csökkenés. Például az acélipar. |
a) yes |
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a) very adequate |
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b) it largely keeps the incentive |
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b) quite proportionate |
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c) a constant share as in 2013-20 |
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b) the same share as in Phase 3 |
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a) yes |
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a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
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b) no |
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a) the present two groups should remain |
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a) the present criteria should remain |
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a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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a) five years |
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a) the present approach of average of the 10% most efficient installations should remain |
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a) yes (please specify how often) |
A referenciaértékek 5 évenkénti felülvizsgálata lenne a legoptimálisabb. |
c) other (please specify) |
Véleményem szerint a IV. kereskedési időszakban lehetőséget kellene biztosítani az egyes vállalatoknak, hogy a bázisidőszakot maguk választhassák meg az előző kereskedési időszakokban számukra kedvezőbb évek adatai alapján. Csupán azt kellene megszabni, hogy a bázisidőszaknak hány egymást követő évet kell lefednie. |
d) both b) and c) |
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a) no, the present approach should be maintained, i.e. that Member States can provide such compensation based on state aid guidelines |
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c) from both |
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A térítésmentes kiosztásra szükség van, legfőképp a szénszivárgásnak kitett ágazatok esetében. Ezen kívül mindenképp szükség van olyan támogatási formák kidolgozására is, amit bármely érintett ágazat igénybe vehet a széndioxid kibocsátásának csökkentése esetében, mint további ösztönző erőt. Tagállami szinten kell megvizsgálni továbbá, hogy az adott állam érintett iparágainak milyen lehetőségei vannak a kibocsátások csökkentésére és ezeket a lehetőségeket tudatosítani kell az egyes szereplőkben is. |
a) Business |
OCI Nitrogen bv Mijnweg 1 6167 AC Geleen; The Netherlands Contact person: JJH Nusselder, Manager Public Affairs OCI Nitrogen entrance in the het transparancy register is 939698210655-66. OCI Nitrogen is a Dutch based fertilizer producer and it a subsidairy of OCI NV. It is a member of Fertilizers Europe. |
Jan Jaap Nusselder OCI Nitrogen bv P.O Box 601 6160 MD Geleen The Netherlands e mail: jan-jaap.nusselder@ocinitrogen.com phone: +31 46 7020209 |
a) yes |
1) yes |
a) yes |
For the Eu industry in general it will be possible to reduce GHG emissions, but “low hanging fruits” have been harvested. Thus the reduction rate will be lower than before and it will require high investments. Carbon capture and storage can reduce GHG emissions, but it is far from commercial implementation. For the fertilizer industry GHG reductions by end of pipe, easy to implement, options such as N2O abatement have been or will be implemented in the coming years. GHG reduction via energy efficiency will not bring much without the investment in new plant with the newest technology. These new investment will NOT take place in Europe due to the poor competitive position (i.e. high energy costs). |
b) no |
ETS is a factor for decisions on energy efficiency improvement and GHG reduction. However, the unreliability in the execution of the European climate policy hinders the industry to factor in climate costs in their investment decisions. Positive decisions on investments in energy efficiency are taken on the merits of reduced energy costs. ETS does not contributes to increasing the competiveness of European industry because in the current ETS scheme never all climate costs are compensated. In fact ETS will increase the costs for all producers and therefore decrease the competitiveness. |
a) yes |
Special measures (100 % free allocations according to realistic bench marks without correction factors) must be provided to EU industries that are exposed to carbon leakage. This allocation should be based on actual production. This must exist as long as international agreements are not reached and the European industry is facing stricter regulations than others. |
a) very adequate |
Free allocation is the best tool available under ETS to avoid carbon leakage. Free allocation should be regulated in such a way that it shields is necessary for industries exposed to carbon leakage, especially so for energy intensive industries to higher climate costs since they face two disadvantages vs those of industries in other parts of the world where there are less : (1) stricter climate change regulations and (2) higher cost of energy. |
a) it absolutely keeps the incentive |
‘Free allocation’ will in principle only be 100% free for those meeting the benchmark emission rate (at the outset= 10% of the industry) (at ex-ante production level). For the large majority of ETS production sites with ‘free allocation’, the system will be a driver for innovation of more efficient technology and use of renewables since free allocation does only compensate a part of the climate costs. |
b) quite proportionate |
Allocation on actual production levels will not lead to an additional administrative burden since reporting on manufacturing output is already done anyway. |
b) a higher share than in 2013-20 |
Energy intensive industries should have an unlimited higher free allocation (based on actual production & realistic bench marks without correction factors) share to compensate for differences in climate policies of countries with less ambitious targets than EU. The Eu industry must not be unilaterally burdened with limits and constraints. The incentive to improve energy efficiency is given due to the benchmark based allocation. |
a) a substantially higher share than in Phase 3 |
Cost efficient, reliable and publically acceptable carbon capture and storage is essential for reaching the long term emission reduction targets |
a) yes |
It is highly surprising that such a support scheme has not yet been established, since the challenge of climate change is of major importance. However, these schemes should without a large administrative burden and being granted in the project phase and less as a support scheme to come to a favourable business case in a running operation. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
ETS revenues should be directed back to the industry (and power sector). |
a) yes |
In addition: - compensation of indirect carbon costs associated with the consumption of electricity - development of an energy pricing system which is competitive with the energy pricing in other parts of the world |
b) more carbon leakage categories should be defined |
Sectors that are severely exposed to the risk of carbon leakage, should be placed in a separate category and given preferential treatment. |
a) the present criteria should remain |
The present criteria include the use of a specific carbon price to calculate the share of carbon costs in their GVA. The carbon price should be kept at the current level otherwise it will be unclear if an industry will be compensated for the carbon costs in future. This uncertainty will negatively influence investment and maintenance decisions. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
No comments |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
No comments |
d) in line with the duration of ETS Phase 4 |
The validity should be long to come to a consistent and predictable policy for the industry. A review of the carbon leakage list together with the review of the ETS is a logical moment. |
c) the approach should be less stringent (please specify) |
The bench mark should anyhow be based on the weighted average. The combination of the 10% benchmark and the application of linear reduction factor results in unrealistic low free allocations. For the ammonia industry even the best performing plant will not receive enough free allocation to compensate for the feedstock related emission and they will face additional costs. These costs can only be avoided by reduction of the production (to max.49%) and import of the product from outside the EU. This is fully undesired for the company, the environment and the EU economy. |
b) no |
Benchmarks should describe the level of performance of the industry and not the state of the art (which for many industry sectors will never materialize in Europe given the fact that the state of the art technology can only be implemented in new plants). The competitive environment in Europe (energy costs, climate cost, changing climate legislation every 8-10 years) is prohibitive for multi-billion investments with long payback times. Revising benchmark would also punish the early adaptors of innovations and will stop them innovating again. |
c) other (please specify) |
Historical production data should not be used. Instead, production data for the year of concern should be the basis for issuing allowances. |
a) no, there should be no deviations |
There should be no deviations as long as (1) industries severely exposed to the risk of carbon leakage are placed in a special category with preferential treatment, (2) the benchmarks remain at the present levels, and (3) actual production data is used for calculating allowances. |
d) yes, in the form of financial compensation at EU-level |
A harmonised EU-wide compensation scheme avoids discrepancies between Member States and ensures equal competition between EU industries. The indirect cost are invoiced in Euro’s (as intergral part of the electricity invoice) and not in emission rights. Therefore should the compensation also be given in euro’s. |
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no comment |
a) from the Member States' auction budgets |
Support from the free allocation budget will reduce free allocation to the running business. |
It is proposed to differentiate between allocation of allowances to the industry (exposed to the risk of carbon leakage) and to the power sector (not exposed to the risk of carbon leakage). |
a) Business |
OMV Aktiengesellschaft |
OMV Aktiengesellschaft Vienna Office / Trabrennstrasse 6-8 / 1020 Vienna / +43 1 40440-0 Brussels Office / Avenue de Cortenbergh 52 / 1000 Brussels / +32 2 7337 107 / johannes.deimel@omv.com |
a) yes |
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1) yes |
a) yes |
OMV believes it is possible to further reduce GHG emissions - depending on R&D support, the linkage of GHG targets with industrial targets (eg 20% industrial share of GDP) and the adequacy of a revised carbon leakage list. However, achieving a potential -43% CO2 reduction target is technologically and economically unachievable for the oil&gas sector and the refining industry at the pace implied by the modified Linear Reduction Factor. In addition, the refining industry has already used many options to reduce its energy intensity cost effectively: Refineries in Western Europe are the least carbon intensive in the world. Unless it benefits from a strong carbon leakage protection, the oil&gas sector could only comply with the ETS obligation by purchasing allowances (sunk cost with no return on investment) which adds cost to an already high-cost area and diminishes the sectors ability to invest, which is detrimental for security of supply and reduces competitiveness in a global market. |
a) yes |
The EU ETS is likely one contributing factor but is not as important as the business needs to drive down operating costs or the loss of value from burning field gas rather than exporting it as sales gas. Also, the EU ETS is an additional cost to EU refineries but not to non-EU competitors which is why industry needs sufficient carbon leakage protection. The European oil&gas industry continually strives for energy efficiency improvements, both through application of internal energy and environmental management systems and through compliance with the IPPC (now IED) Directive requirement to use energy efficiently. Reporting and monitoring emissions reveals emissions at (sub-) installation level, and assists industrial installations in emissions reduction and improved efficiency. However, for the Refining sector, this is only at the margin, as the main driver for such improvements remains the high proportion of energy costs in total operating costs (60% according to Solomon). |
a) yes |
Until there are global harmonised climate change policies, support for EU industrial sectors exposed to carbon leakage must be continued as a core element of the EU’s post-2020 climate policy framework. Removing carbon leakage protection would result in a sudden decrease in free allocation: from allocation at 100% at the benchmark to 80% in 2013 declining to 30% in 2020 and zero by 2027 (EU ETS Article 10a 11).This would lead to significant loss of international competitiveness, threat for job security especially in the European refining industry and would jeopardize with Europe's security of supply. |
b) quite adequate |
As the protection of the energy intensive industries beyond 2020 is crucial, we support free allocation, and free allocation for exposed sectors to deal with carbon leakage. For the Refining sector, the EU ETS benchmark was set at the average of the top 10% performance level from 2013. The impact of such a tough benchmark introduced immediately will be significant. According to the 2013 final allocation data, the refining industry as a whole should receive less than 80% of its quota needs. Protection is eroding due to the decreasing industry cap and the CSCF (by 2030, most efficient installations would be left with 60% free allocation if a 2.2% LRF continues to be applied). To provide sufficient levels of protection, a long term structural reform of the ETS - with automatic mechanisms – would be welcomed. Free allowances should be given to offshore exploration installations for the onboard generation of electricity given the infeasibility of connecting to the grid. |
a) it absolutely keeps the incentive |
Without free allocations the industry would clearly lose significant competitive edge with potentially existence-threatening effects and as a consequence the ability to invest into innovation, new technology and emission reduction. The oil & gas industry is constantly elaborating possibilities to reduce energy costs and gas flaring and venting and therefore carbon emissions. The main incentive for reducing emissions in the oil&gas sector is the associated energy costs. Carbon cost does add to this, while free allocation is used to abate carbon leakage costs but still keeping the incentive. Moreover, the oil&gas sector is reducing energy costs and maximizing the amount of field gas that can be exported and sold. Installations are constantly elaborating possibilities to implement reduction measures and sell freed up allowances into the market in order to offset investment costs for energy efficiency improvements. |
b) quite proportionate |
The administrative burden was significant in 2008 and 2009 when the benchmarking system was developed. In the refining sector with large scale complex installations, implementation of the CWT and HVC benchmarking provisions is considered proportionate to the objectives. However, proposals for simplification would be welcomed. Also, given the likely use of the NER, it would be easier if it was allocated directly from auctioned allowances, and that allocation for the remainder of that phase is granted ex post to avoid the complexity of determining SCUF (Standard Capacity Utilization Factor). |
d) there should be no limit to overall free allocation to industry |
If the intention is to provide carbon leakage protection to industry then the number of allowances needs to fully cover direct and indirect emissions for best performing installations – hence no limit to overall free allocation. There is no centralised post 2020 allowance budget - control of proceeds from auctioning is delegated to Member States, with some redistribution via the solidarity and growth provisions. Until the issue of carbon leakage is addressed through an international climate change agreement, sufficient levels of protection to industry are needed. To provide an adequate protection for the European refining industry, a CSCF should not be employed to avoid reductions in the amount of free allocation. |
e) I don’t know |
OMV is in favour of greater innovation support by the EU and its Member States but we do not believe that the use of ETS revenues is the right mechanism. The NER 300 programme has been complex to administer, had a market impact of releasing allowances onto the market early, and has not delivered large scale CCS demonstration project. A large scale CCS project requires dedicated funding outside EU ETS. In Phase 3, auctioning is expected to generate substantial revenue to governments; these revenues, should be returned to the economy without creating distortions between energy sources and technologies. |
b) no |
The NER 300 programme is dependent on market pricing. New low carbon technologies require more financial stability, thus existing funds such as Horizon 2020, 7th Framework and SET programmes should be augmented, rather than creating new funding frameworks. |
c) other types of funding (please specify) |
Rather than establishing new bureaucracies, existing funds such as Horizon 2020, 7th Framework and SET programmes should, where required be augmented by EU and Member State funding. In addition, support for innovative low-carbon technologies should be technology neutral as well as time- and cost- limited - all energy sources should be integrated under normal market conditions, without subsidies (including system connection, balancing cost and exposure to price risk) as soon as possible. |
a) yes |
EU industry needs greater equity of non-EU with EU abatement measures. Until there are globalized and harmonized climate changes policies EU industry need carbon leakage protection to remain competitive, via free allocations. There are currently no EU ETS measures addressing carbon leakage post 2020. Thus, the ETS Directive needs to be reviewed to make sure that levels of free allocation after 2020 adequately reflect the industry’s carbon leakage exposure and to protect the energy intensive industry. The current indirect emissions compensation system is unsuitable. It should be reformed to allow free allocation for all electricity consumed in refineries. Furthermore, for carbon leakage sectors, compensation for CO2 costs with regards to consumption of electricity must be covered. In general, the strategic importance of manufacturing industries, such as Refining, and the cumulative impact of EU legislation on these industries must be carefully looked at. |
a) the present two groups should remain |
The current two groups should remain. |
a) the present criteria should remain |
For Refining as a mixed sector both trade and GVA exposure are very important. Carbon costs should cover both direct and indirect carbon costs. The upstream sector qualifies under the trade intensity metric and would want to see this option maintained as is. The thresholds calculation for GVA and Trade Intensity is specifically problematical for the Refining sector. Around 1000 plants under NACE code 19.20 are shown in the database (EUROSTAT), but less than 100 Refineries in the EU are covered by the EU ETS. Objective analysis of GVA requires data for the Refining sector below NACE-4 level. It needs to be underlined, that carbon leakage is also about future investments. Hence, the GVA criteria carbon price must reflect future projected EUA prices and not current prices, as it is common refining industry practice in evaluating major projects. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
If the criteria are tightened thus reducing the number of sectors/sub-sectors on the list, some key strategic sectors for the EU’s economy risk being excluded from carbon leakage protection, with potential negative spill-over effects on other industries (eg for the oil Refining industry and the petro-chemical industry, which are strongly inter-connected). Specifically for the Refining sector, the thresholds calculation for GVA and Trade Intensity is problematic. The EUROSTAT database shows some 1000 plants under NACE code 19.20, but less than 100 Refineries in the EU covered by the EU ETS. Objective analysis of GVA requires data for the Refining sector below NACE-4 level. Carbon leakage is also about future investment decisions. Therefore the GVA criteria carbon price must reflect future projected EUA prices and not current prices. This is common refining industry practice in evaluating major projects. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
OMV supports the use of qualitative assessments but these should be kept as simple as possible. For the Refining sector, this kind of assessment would need to account for increases in GHG emissions resulting from other EU or national measures imposed upon the industry (e.g. product specifications, policy-induced demand changes etc). |
d) in line with the duration of ETS Phase 4 |
Mid-year review is detrimental to investment certainty, given the significant difference in the levels of free allocation according to the carbon leakage status (allocation at 100% at the benchmark vs 80% in 2013 declining to 30% in 2020 and zero by 2027). Long term visibility is essential for investment decisions in the oil&gas sector. We do, however, recognize that any decision would need to be revisited in the light of a global agreement. |
c) the approach should be less stringent (please specify) |
A benchmark based on the sector average and/or excluding sector outlying installations would take account of typical carbon leakage exposure rather than average of top 10% which may be atypical in character, depending on sector. This is particularly important as EU benchmarks do not rate performance of installations outside the EU thus potentially penalising EU installations that are more efficient than their non EU competitors. Potential effects on EU strategic industrial sectors including those integral to the supply chains of other sectors must be considered. The current benchmark has turned out to be penalising for the refining sector, in absolute terms and in comparison with other sectors. In combination with the CSCF the carbon leakage protection is currently not adequate. A remediation well before 2020 is required. |
b) no |
OMV supports a review of benchmarks in terms of updating criteria with more recent data and their adequacy for free allocation distribution to prevent carbon leakage. However, the objective should not be to reflect the technological state of the art, as this is subject to interpretation. It is also challenging and extremely costly to change existing refinery configurations to integrate state of the art technologies due to physical and other operational constraints. Investments into such technologies have to pay their way. |
c) other (please specify) |
Free allocation should reflect economic reality per installation based on the most recent years. More recent verified data should be used to reflect recent activity: free allocation should reflect economic reality per installation based on the most recent years. In the case of refineries, a regular turn-around period is required for regulatory inspection, maintenance and capital projects. If this is not taken into account, refining installations will be penalised in terms of future allocation. Alternative approaches such as extending baseline periods or some form of dynamic allocation should be considered. |
a) no, there should be no deviations |
General harmonised allocation rules should continue to apply for all carbon leakage installations in the same manner. |
c) yes, in the form of additional free allocation |
Carbon leakage protection should also secure full compensation for EU ETS cost pass-through in electricity prices for all sectors exposed to carbon leakage in harmonised fashion in addition to free allocation for direct emissions. The current indirect compensation system is unsuitable. It should be reformed to allow free allocation for all electricity consumed in refineries (e.g. net power used). If a sector is deemed at risk of direct carbon leakage, then free allocation should automatically be given for indirect carbon emissions to all installations in that sector. |
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I don't know |
To strengthen the EU's innovation support in all four phases would clearly be a positive signal. However, primary emphasis needs to be put on phase 2 and 3, as EU’s innovation support needs to cushion the high risks at the - due to high time pressure and heavy financial burdens - most critical stages. Already existing innovation support schemes, e.g. Horizon 2020 should be used accordingly, whereas further support for mature technologies should be reassessed (solar PV, onshore wind, biomass, coal and nuclear). |
e) I don't know |
OMV is in favour of greater innovation support by the EU and its Member States but we do not believe that the use of ETS revenues is the right mechanism. Innovation should be supported by existing funds such as Horizon 2020, 7th Framework and SET programmes. If the Member States wish to support such endeavours in addition to the numerous processes already available then they can do so from their auction revenues or from general taxation according to societal priorities. |
Competitiveness and carbon leakage risk must be kept under constant review. Assessments should not look for evidence that leakage has occurred and competitiveness already damaged, but rather assess the level of risk in future in a forward looking manner. The allocation system must not penalise economic recovery or growth. Regarding the format of the questionnaire, we believe that some of the questions are not neutral and push the respondents to make a certain response. The answer cannot always be as simple as yes or no. Many of the answers are provided as yes or no, with additional conditions – which are required as part to the answer. This does not necessarily mean that the respondent “does not know” and has no valuable input to bring. The report of the consultation should look separately at the responses from the stakeholder organisations which represent a wider share of civil society and responses from individuals. |
a) Business |
Outokumpu Oyj |
Tuomas Haikka Director - Sustainability and Environment Outokumpu Oyj Corporate Management Riihitontuntie 7 A, 02200 Espoo, Finland email: tuomas.haikka@outokumpu.com tel: +358(0)94214241 mobile: +358(0)407494218 |
a) yes |
|
1) yes |
b) no |
Outokumpu has the lowest emissions in its industry (Stainless Steel and Ferrochrome production). Emissions are allready extremely low. The fact that in our steel making processes emissions are minimal, further reductions would be very expensive. The reduction of emissions towards 2020 may be achieved through ongoing efficiency improvements and investments in known technology with current production levels. Outokumpu has allready closed one low emissions, but electricity intensive melting shop and decision to close second has been made. Price of electricity, energy and un-foreseeable regulation has naturally affected these decisions. Newly proposed 2030 targets are very stright and to our analysis will lead to reduced competitiveness, reduced investments, employment and carbon leakage. These current targets incentivise only reduced production and / or closures. |
b) no |
The EU-ETS leaves companies competing on global markets to deal with artificially increased (to pay windfall) energy costs and only option for survival is reduction of production to meet EU emission targets. This decreases the competiveness of stainless steel industry in EU. The steel industry is energy intensive and constantly works to reduce energy use. Production processess that are operating on benchmark level, being most energy and carbon efficient in the world are losing competitiveness on the world market due to ETS. If adding the insecurity of electricity supply within Europe in the future, the conditions for development and investment in the stainless industry in Europe are very unfavorable. The competitive advance in energy efficiency we used have has been lost due to ETS, and this development continues with unilateral 2030 targets. |
a) yes |
Carbon leakage is the most significant negative impact from unilateral EU ETS. Especially for energy intensive industry competing on global markets are in very disadvantaged position. European businesses have consistently called for a stable and predictable legislative framework that effectively combines EU climate ambition and EU industrial competitiveness, indispensable for investments. Addressing carbon leakage is crucial for survival of European stainless steel industry and one cornerstone for needed future growth of our businesses. For sectors at risk of carbon and or investment leakage, full compensation of ETS costs is needed to allow the most efficient European companies to be globally competitive without being penalized by indirect ETS costs. |
b) quite adequate |
Full compensation of indirect and direct costs is only way to stop carbon leakage. It needs to be taken care of in one way or another, one possibility is through allocation to both indirect and direct costs. Carbon leakage is reality in stainless industry, not a fictive construction. Capital intensive industry seldom "move" but lack of investment and in the end closure of industry in Europe is a threat to the global greenhouse gas reduction scheme as well, leading to increased GHG footprint of global and also European consumption. Free allocation creates space for companies within Europe to make necessary investments and changes. In Finland and Sweden the electricity cost increase due to EU-ETS is not compensated, which affects the energy intensive industry´s competiveness in any case. |
b) it largely keeps the incentive |
Outokumpu is extremely aware of the necessity to decrease the greenhouse gas emissions. Our products are fully recyclable and offer possibility to create climate friendlier and more energy efficient solutions for our customers and the society as a whole. The free allocation is though needed to create time to develop new techniques for lowered emissions and in the meantime do the right investments in order to stay competitive over time. Outokumpu has set long term targets for direct emissions which exceed the targets of EU. On the other hand current measures do not protect us from the indirect cost increases that our global competititors are not facing. |
d) absolutely exaggerated |
The process of getting free allocation and reporting CO2 emissions is extremely laborious. The changes which are implemented regularly, not enough information available in time and short time spans to act, add additional burden. One excaple is our big scandinavian installation that has been forced to change monitoring and reporting plans and documents every year since 2005. |
d) there should be no limit to overall free allocation to industry |
The methodology for free allocation needs to give possibilities for increased production, which is also covered by free allowances in relation to efficiency. Competitiveness on the global markets is crucial for European industry. Without industry the welfare of the EU union will decrease and create a downward spiral, leaving little room for investments and development. Growth is therefore essential for continuing competitiveness. |
c) a lower share than in Phase 3 |
Finding and testing technological solutions to decrease greenhouse gas emissions is of vital importance for the society. Making funds available for this as a part of the ETS system makes sense. Share of allowances needed for this is never the less lower, taken the higher prices are foreseeable. |
a) yes |
Availability of such fund would create one possibility to industries under carbon leakage risk to find new innovations and find a way out of current investment dead end. Just as renewable energy is a part of the solution of reducing greenhouse gas emissions, the development of industry is. Supporting industry development in terms of funds for research, innovation and pilot testing is a good way of making it easier to make informed and successful investments. Since industrial investments, such as in the steel industry, are very long-lived it is important to dare to make large investments in Europe. |
c) other types of funding (please specify) |
The most efficient way to support these innovations should be decided in collaboration with industries. Creating innovation programmes in a structured way around industrial sectors would create a necessary missing element in the climate package. All ETS auctioning revenues should be used more cost-effectively and efficiently to assist the decarbonisation of European industry without impairing its international competitiveness. The ETS directive states that half of auctioning revenues should be spent on decarbonisation measures. This has not been the case so far, a missed opportunity to pursue an active industry policy. The other half should be used to prevent carbon leakage. |
a) yes |
As stated before compensation of indirect carbon costs is the most important element for stainless steel industry. It is important for all countries to compensate for the increased energy cost due to the ETS system, which is a source of decreased competitiveness. The compensation for indirect costs should be handled in a harmonized manner within EU. |
a) the present two groups should remain |
It is important to have a reasonably simple and transparent system. |
a) the present criteria should remain |
The major focus at all times must be to keep or increase the competiveness of the European industry. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
There is always possibility that some unique (single process etc.) or otherwise extraordinary process within certain sector needs a possibility to argue a case built on qualitative criteria. |
d) in line with the duration of ETS Phase 4 |
|
a) the present approach of average of the 10% most efficient installations should remain |
The present approach of the 10% best performing installations should remain but reflect accurately the real economical and technical feasibility, at least for sectors at risk of carbon leakage without the application of any deduction. |
b) no |
In case the benchmarks are to be revised it should not happen too often and this revision should be based on real robust benchmarking excercise. Not on artifcial top down decision for example in form of estimated percentage value. |
c) other (please specify) |
It is necessary for the ETS system and the industry to be allocated emission allowances based on actual production and not historic. This would allow for both economic growth and recession, without negatively influencing the ETS-system. |
a) no, there should be no deviations |
Favoring possibility would create distort the competition within EU. |
c) yes, in the form of additional free allocation |
Compensation should be main priority. Both options c and d are suitable, together or separately, main issue is compensation for the indirect costs lcurrently causing carbon leakage. Compensation for increased electricity costs is an example of how different countries can influence the competitiveness of their industry. In a harmonized system also compensations should be fully harmonized at EU-level. |
Important |
Least important |
Most important |
Less important |
Large scale pilots are the hardest to find financing for and for such an important area as this it makes sense to make some funds available. |
d) other |
Auctioning revenues may be used for funding low-carbon innovation support at EU level. Transformation towards low carbon society is big change and funding this transformation is larger issue that just dividing ETS related resources into various packages and distributing them. |
The steel industry is energy intensive. Outokumpu is a large electricity user and energy is significant cost element. Energy is permanent item on Outokumpu's strategic reviews: in recent years climate change has also been integrated into our long-term strategy. We recognize the need for energy efficiency and we also aim to minimize the Group's effect on climate change. We have chosen to be the industry leader in this area. We have already minimized our impact. Outokumpu has reduced direct CO2 emissions by 25% and product carbon footprint is over 50% lower per ton of stainless steel and reduced. Outokumpu's current long term target (since 2010) is a further 20% reduction in the Group's specific carbon emissions profile in stainless steel production by 2020. Climate change is global challenge, we need global solution. ETS is favouring more emitting producers abroad and through carbon leakage increses global emissions. |
a) Business |
Ovako Group |
Ovako Group Headquarters Ovako AB Box 1721 SE-111 87 Stockholm, Sweden WWW.ovako.com |
a) yes |
|
1) yes |
a) yes |
In steel industry, reduction of emissions towards 2020 may be achieved through increased efficiency by investments in known technology with current production levels. To maintain capacity in production equipment, it is essential to be able to vary production levels according to the economic situation. This is difficult with the current layout of EU ETS, resulting in increased cost on marginal products due to the cap on free allowances. This may lead to decreased investments, a slow dismantling of production capacity, and thus reduces production, which will be taken up by producers outside Europe. The incentive for increased production must be improved. In a longer perspective break through techniques are needed to significantly reduce emissions. |
b) no |
The EU-ETS is an extremely laborious system which was intended to be a market system, but is changed by EU and governmental authorities, leaving companies with high energy costs and plans for reduction of production to meet EU emission targets. This decreases the competiveness of the Swedish steel industry and the steel industry in Europe as a whole. The steel industry is energy intensive and constantly works to be more energy efficient. Energy efficiency is not always the same as CO2 efficiency. Investments also have to result in total positive return to increase the competitiveness. ETS increases the costs for industry and thereby reduces the financial possibilities for investments in energy efficiency. |
a) yes |
By pushing tough legislation in Europe, companies with world-wide sales become less competitive, if other countries do not follow fast enough to create a level playing field on the market. Therefore it is important to provide measures making it possible to keep competitiveness until a global agreement, with relevant commitments, is achieved. |
a) very adequate |
Carbon leakage is not a fictive construction, it is reality. Companies seldom "move" but lack of investment and in the end closure of industry in Europe, is a threat to the global greenhouse gas reduction scheme, if less efficient industry in countries outside Europe wins the race. Free allocation creates space for companies within Europe to make necessary investments and changes. Sectors at risk of carbon leakage should be provided with 100% free allocation, based on realistic benchmarks and without any correction factor. In Sweden the electricity cost increase due to EU-ETS not being compensated, which affects the energy intensive industry´s competiveness. Such compensations should be handled in a harmonized manner at EU level. |
a) it absolutely keeps the incentive |
The steel industry is extremely aware of the necessity to decrease the greenhouse gas emissions. The free allocation is, however, needed to create time to develop new techniques for lower emissions and doing the right investments, in order to stay competitive over time. The steel industry in Sweden has high ambitions for emission reductions in a longer perspective, including development of specialized products for globally improved climate efficiency. Increased cost due to lower free allocation does not incentivize such a development. |
d) absolutely exaggerated |
The process of getting free allocation and reporting CO2 emissions is extremely laborious. The changes which are implemented regularly, not enough information available in time and short time spans to act, add additional burden and uncertainty for strategic decisions. |
d) there should be no limit to overall free allocation to industry |
We prefer that the post-2020 free allowances are based on CO2 intensity for the carbon leakage industries and not an absolute cap. The methodology for free allocation needs to give possibilities for increased production, which is also covered by free allowances in relation to efficiency. Staying competitive on the world market is crucial for European industry. Without industry the welfare of the EU union will decrease and create a downward spiral, leaving little room for investments and development. Growth is therefore essential for continuing competitiveness. |
a) a substantially higher share than in Phase 3 |
Finding and testing technological solutions to decrease greenhouse gas emissions is of vital importance for the society. Making funds available for this as a part of the ETS system makes sense. The problem is that the support is linked to the allowances, which have an unknown value. The support has to be changed to a certain amount of money and may be financed in another way. A demonstration plant for CCS is a huge investment, which has to be almost completely subsidized by authorities, not requiring pay back if it fails. |
a) yes |
Just as renewable energy is a part of the solution of reducing greenhouse gas emissions, the development of industry is. Supporting industry development in terms of funds for research, innovation and pilot testing is a good way of making it easier to make informed and successful investments. Since industrial investments, such as in the steel industry, are very long-lived, it is important to dare to make large investments in Europe. |
c) other types of funding (please specify) |
|
a) yes |
It is important for all countries to compensate for the increased energy cost due to the ETS system, which also is a source of decreased competitiveness. The compensation for indirect costs should be handled in a harmonized manner within EU. |
a) the present two groups should remain |
It is important to have a reasonably simple and transparent system. |
a) the present criteria should remain |
The major focus at all times must be to keep or increase the competiveness of the European industry. When a cost cannot be transferred to a customer, competitiveness is lost. This includes products with international competition, even if trade intensity currently might be low. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
There will always be companies with production that does not fit into the bulk of the relevant sector. For these companies there should be a possibility to argue a case built on qualitative criteria. |
d) in line with the duration of ETS Phase 4 |
It makes sense to have an alignment between the ETS phase duration and criteria for carbon leakage to maintain reasonably stable conditions for industry. |
a) the present approach of average of the 10% most efficient installations should remain |
In the present approach, product groups include a variety of products; hence the benchmark is not technically achievable for all producers, especially for high quality products. More specialized benchmark groups might, however, make the system more complicated. Therefore the approach should not be more stringent. The benchmark for hot metal is today not set according to the 10% approach, and is thus not achievable for any producer and should be corrected. The benchmark for heat is clear, but the implementation of allocation rules for using heat differ between countries e.g. in Sweden early adopters using heat to increase their energy efficiency get less allocation than companies in other countries who don’t. |
a) yes (please specify how often) |
Not to get stuck in old technology, the benchmarks have to be revised on a regular basis. However, to do this more often than the trading periods makes no sense, as investments in our sector are long-term and often very expensive. Ten years is a minimum span between revisions of the benchmark. The revision should be based on actual industry performance within EU. |
c) other (please specify) |
It is necessary for the ETS system, and the industry, to allocate emission allowances based on actual production and not historic. This would allow for both economic growth and recession, without negatively influencing the ETS-system. |
a) no, there should be no deviations |
Favoring one installation on the expense of another should not be done. That would distort the competition. |
d) yes, in the form of financial compensation at EU-level |
Compensation for increased electricity costs is an example of how different countries can influence the competitiveness of their industry by making different decisions. In a harmonized system also compensations should be fully harmonized at EU-level. Since the auctioning revenues are different in different countries, it is better to make a financial compensation at EU-level. |
Important |
Least important |
Most important |
Less important |
Large scale pilots are the hardest to find financing for, and for such an important area it makes sense to make some funds available. |
a) from the Member States' auction budgets |
Auctioning revenues may be used for funding low-carbon innovation support at EU level, instead of being used for various purposes on national level. |
The steel industry in Sweden has set up a vision for 2050, where we make the following commitments: Our research and innovation revolutionize technology for tomorrow´s society. Our steel constantly challenges the frontiers of engineering. Our working environment fosters new solutions for communities through global collaboration. Our creativity constantly challenges the limits of contemporary thinking. Our production uses resources so efficiently that only products of value to the community leave our plants. Our ambition constantly challenges the limits of the possible. We work very hard to reduce greenhouse gas emissions, but cannot do it on our own. We need to work together in the society to set up conditions for reducing emissions without losing competitiveness. On the contrary we need to increase competitiveness, to be able to continue to develop sustainable solutions for the whole world. This requires research and legislation which does not distort competitiveness on the market. |
a) Business |
Plzenska Energetika, a.s. |
Name: Pavlína Valešová Adress: Tylova 1/57 316 00 Plzeň Czech Republic Email: pvalesova@pe.cz |
a) yes |
|
1) yes |
b) no |
|
b) no |
|
a) yes |
|
a) very adequate |
|
a) it absolutely keeps the incentive |
|
b) quite proportionate |
|
e) there should be no free allocation post-2020 |
|
c) a lower share than in Phase 3 |
|
a) yes |
|
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
|
b) no |
|
b) more carbon leakage categories should be defined |
|
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
|
b) other thresholds should be defined. Please specify below |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
d) in line with the duration of ETS Phase 4 |
|
c) the approach should be less stringent (please specify) |
|
b) no |
|
a) no, the same baseline period chosen for allocation in Phase 3 should be maintained also for post 2020 (Phase 4) allocation |
|
b) yes, there should be deviations with higher allowances for installations facing specific hardships |
|
d) yes, in the form of financial compensation at EU-level |
|
Less important |
Important |
Least important |
I don't know |
|
a) from the Member States' auction budgets |
|
|
a) Business |
Polish Confederation Lewiatan |
Zbyszka Cybulskiego 3 00-727 Warszawa tel. +48 22 55 99 924 astaniewska@konfederacjalewiatan.pl |
c) not relevant |
Polish Confederation Lewiatan is a nation-wide employers organisation. We associate sectoral and regional associations of private employers and 25 individual members. Among our members we have representatives of energy sector, chemical sector, cement sector, rafinery sector. |
1) yes |
b) no |
European industry already operates in a very challenging conditions. They have to face with high energy prices, high costs of work, security of supply challenges, fragmentation of the internal market and not coherent EU policies. We already observe that difference in energy prices with direct global competitors significantly impacts the competitiveness of many manufacturing sectors. As a consequence many development plans for industry have been frozen. It is also worth to underline that industry has an excellent track record in environmental protection and energy efficiency and in some sectors further improvements might be on the edge of technological limits. |
b) no |
EU ETS stimulates industry to reduce GHG emissions, also by improving energy efficiency. However industry operating in, above mentioned, challenging conditions should not be burdened post 2020 by any additional regulatory measures of energy efficiency. A reformed EU ETS post-2020 should become the only instrument to drive energy efficiency investment in industry. |
a) yes |
Addressing carbon leakage is crucial for the further growth of the industry in EU. Full compensation of the direct carbon costs, through free allocation based on benchmarks must allow the most efficient companies to be globally competitive. |
b) quite adequate |
We appeal to exempt process related emissions from EU ETS system or grant free allowances for such process CO2 emissions as they are unavoidable. |
b) it largely keeps the incentive |
Free allocation system meets both, need for competitiveness (free allowances) and incentives for CO2 reduction (benchmark). However, the EU ETS has been primarily designed as a tool to reduce emissions in the most cost-effective way and should not be considered as the only innovation driver. Policy-makers should refrain from raising the costs of decarbonisation policies in order to increase revenues that would otherwise be needed to addressing those costs. A more targeted use of all financial instruments at EU level and a more industry-focused low carbon technology R&D programme are essential to drive innovation. |
b) quite proportionate |
|
d) there should be no limit to overall free allocation to industry |
Real/recent production levels – combined with economically and technically feasible benchmarks – should be considered as an option for the allocation of free allowances in order to provide better protection against carbon leakage and avoid problems deriving from over or under allocation. Therefore, a “dynamic allocation model” based on realistic benchmarks and actual production should be further explored. |
b) the same share as in Phase 3 |
We recognize innovation development and support as an important element of economic growth in Europe. However, we perceive the need to improve current tools to drive innovation. First of all, all EU ETS revenues should be used more efficiently to decrease emissions in EU. In our opinion improvement might be done on both national and European level: - Many European countries have missed the opportunity to spent half of the auction revenues to decrease carbon intensity of their economies. - European Commission should create innovation programmes in a structured way around energy and industrial sectors. These programmes should be partly supported by EU ETS as well by other public funds to provide predictability required for R&D&I investments in low carbon economy. |
a) yes |
We support idea to create breakthrough technology programme for innovation in industry, which might be partly funded by EU ETS. |
c) other types of funding (please specify) |
It should be fund on the EU level - Improved successor to the NER300 with extended scope and with financial support from EU ETS and other public sources. At the same time, we expect that on the national level auction revenues will be managed in a more effective way stimulating investments in low emission economy. |
a) yes |
It is important to address indirect carbon costs. In the current system energy intensive sectors might receive compensations for indirect effects if the Member State decide to grant such a support. As long as the compensation is voluntary for Member States it generates significant differences for industry across Europe. It is therefore necessary to set mandatory EU compensation measures to achieve full offsetting of indirect costs in all Member States. |
b) more carbon leakage categories should be defined |
The current definition of carbon leakage is insufficient to address industry’s competitiveness exposed to international competition after 2020. We already observe that some industrial sectors in Poland have frozen new investments or projects that increases a production capacity, despite all medium and long-term forecasts indicate increase demand for their products. That is why EC should reconsider what is meant by displacement due to asymmetrical climate policies and encompass the broader notion of investment leakage. In our opinion, free allowances for process related emissions which are unavoidable, is an important option to protect industry after 2020. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
- Potential for further reductions. - The impact of overlapping climate measures (subsidies to renewable energy and energy efficiency) - Different geographical scope. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The possibility for a qualitative assessment, for justified cases when quantitative assessment haven’t arbitrated the case, should be maintained. |
e) I don’t know |
ETS system requires genuine reform which will make the system more efficient post 2020. This reform should also include improvements of carbon leakage support. The validity of the CL list should be determined as a result of this comprehensive actions. |
a) the present approach of average of the 10% most efficient installations should remain |
|
a) yes (please specify how often) |
Industry have to be strongly involved in the revision of benchmarks to reflect the technological state of the art. |
c) other (please specify) |
Real/recent production levels – combined with economically and technically feasible benchmarks – should be considered as an option for the allocation of free allowances in order to provide better protection against carbon leakage and avoid problems deriving from over or under allocation. Therefore, a “dynamic allocation model” based on realistic benchmarks and actual production should be further explored |
d) both b) and c) |
Flexibility of the system to react to specific situations is needed. |
c) yes, in the form of additional free allocation |
We support harmonization of the compensation scheme for indirect costs on the EU level. However, the form of this compensation shouldn't be decided now. |
Important |
Less important |
Most important |
Least important |
|
d) other |
Low-carbon innovation support to be effective needs a better targeted use of all financial instruments at EU level. EU ETS is a tool to reduce emissions in the most cost-effective way and should not be considered as the only innovation driver. Partly EU ETS funds should be used to mobilize innovation in EU, however, it will be vital to identify and open up other sources of public funds to support transformation towards low emission economy. |
NO |
a) Business |
PORCELANICOS HDC S.A. |
CTRA CV-160, KM 16,8 12192 VILLAFAMES TF 0034964329940 HDC@PORCELANICOSHDC.ES |
a) yes |
|
1) yes |
b) no |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constrain |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to alower fuel consumption but could raise the CO2 output.The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improvem |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage.However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective.Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross- sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
a) the present two groups should remain |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value) which are subject to international competition should be considered as exposed to the risk of carbon leakage, until aninternational agreement is established. It is important to limit the list to sectors that really compete globally, and thus it is vital to maintain an assessment based on trade intensity with third countries. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
The present criteria should be used, considering the following element. GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists ofboth labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimatedif it is compared with the GOS. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended(at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarksare set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yetsince the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier toindustrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored.This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concernsassociated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order toavoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
a) Business |
PORCELANOSA S.A. |
Porcelanosa S.A. Ctra N.340, Km 56.2 12540 Vila-real (Castellón) Spain +34964507100 jcid@porcelanosa.com |
a) yes |
|
1) yes |
b) no |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improve |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
a) the present two groups should remain |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value) which are subject to international competition should be considered as exposed to the risk of carbon leakage, until an international agreement is established. It is important to limit the list to sectors that really compete globally, and thus it is vital to maintain an assessment based on trade intensity with third countries. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
The present criteria should be used, considering the following element. GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
a) Business |
Prazska teplarenska a.s. |
Prazska teplarenska a.s. Partyzanska 7/1 170 00 Praha 7 Ing. Ladislav Moravec (CEO) +420266752100 LMoravec@ptas.cz |
a) yes |
|
1) yes |
b) no |
|
b) no |
|
a) yes |
|
a) very adequate |
Instrument (free allocation) should be also in the future (after 2020) focused on sectors not deemed to be exposed to risk of carbon leakage but still facing competition disadvantages on respective markets such as district heating. |
a) it absolutely keeps the incentive |
|
b) quite proportionate |
|
d) there should be no limit to overall free allocation to industry |
|
c) a lower share than in Phase 3 |
|
a) yes |
|
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
|
b) no |
|
b) more carbon leakage categories should be defined |
There is urgent need for new category which should cover internal carbon leakage such as heat production sector where installations within EU ETS and outside EU ETS compete. GHGs emission limits imposed just to one segment of the heat market leads to unfair competitiveness distortions. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
Current criteria could be maintained for current two categories of sectors. For new category there should be only criterium incurred carbon costs compared to competitors on same market – e.g. carbon costs for district heating installations included in EU ETS compared to heat installations outside the scope of EU ETS, excessive carbon costs for EU ETS installations should be compensated by free allocation. |
b) other thresholds should be defined. Please specify below |
Current criteria could be maintained for current two categories of sectors. For new category there should be no minimum (threshold) for inclusion to “endangered sectors” category. Until alternative approach for covering GHGs emissions for sectors outside EU ETS will emerge (e.g. “Carbon tax” etc.), EU ETS installations with proven excessive carbon costs (in comparison with competitor on the same market) should be compensated by free allocation. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
d) in line with the duration of ETS Phase 4 |
|
c) the approach should be less stringent (please specify) |
Approach should be less stringent in terms of increasing the percentage from 10% to at least 20% of best performing installations in the EU for a given product to cover higher variability among installations thanks to development since 2008 – increasing share of RES, energy efficiency measures, more variety in technological solutions etc. |
b) no |
|
a) no, the same baseline period chosen for allocation in Phase 3 should be maintained also for post 2020 (Phase 4) allocation |
Phase 4 allocation should be derived from same historical production data (2005-2008 or 2009-2010 period) in order to keep continuity in legislative tools in respective Directive. Historical production levels already determined allocation also for Phase 4 in certain sectors (such as district heating). |
b) yes, there should be deviations with higher allowances for installations facing specific hardships |
|
d) yes, in the form of financial compensation at EU-level |
|
Important |
Most important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
|
ETS should be complemented by carbon tax for non-ETS installations in order to provide for level playing field on internal EU market between large and small installations. Current setting where carbon price is paid only by large installations disadvantages district heating, CHP and other low carbon technologies. |
a) Business |
Rába Energiaszolgáltató Kft. (Rába Energy Provider Ltd) MESZ Mosonmagyaróvár Kft. (MESZ Mosonmagyaróvár Ltd) |
Martin u. 1. 9027 Győr HUNGARY Tel: 0036-96624915 Fax: 0036-96624743 E-mail: energia@raba.hu |
a) yes |
|
1) yes |
b) no |
|
a) yes |
|
a) yes |
|
b) quite adequate |
|
b) it largely keeps the incentive |
|
c) quite exaggerated |
|
f) I don’t know |
|
a) a substantially higher share than in Phase 3 |
|
a) yes |
|
d) I don’t know |
|
b) no |
|
a) the present two groups should remain |
|
g) I don’t know |
|
c) I don’t know |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
c) shorter (please specify) |
3 év a rugalmas változás követés miatt |
c) the approach should be less stringent (please specify) |
teljes iparág átlag feletti és alatti |
a) yes (please specify how often) |
3 év |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
|
a) no, there should be no deviations |
|
e) I don’t know |
|
Important |
Most important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
|
|
a) Business |
Rába Járműipari Holding Nyrt. (Rába Járműipari Holding Ltd) |
9027 Győr, Martin út 1. HUNGARY Tel: + 36 96 624 739 Mobil: + 36 30 444 9509 E-mail: gergo.markus@raba.hu |
a) yes |
|
1) yes |
b) no |
|
c) I don’t know |
|
a) yes |
|
b) quite adequate |
|
b) it largely keeps the incentive |
|
c) quite exaggerated |
|
c) a constant share as in 2013-20 |
|
b) the same share as in Phase 3 |
|
a) yes |
|
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
|
a) yes |
|
a) the present two groups should remain |
|
a) the present criteria should remain |
|
c) I don’t know |
|
b) no, all criteria should be based on simple metrics and linked to clearly defined thresholds |
|
d) in line with the duration of ETS Phase 4 |
|
a) the present approach of average of the 10% most efficient installations should remain |
|
b) no |
|
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
|
d) both b) and c) |
|
c) yes, in the form of additional free allocation |
|
Less important |
Most important |
Least important |
Important |
|
b) from free allocation |
|
|
a) Business |
REALONDA S.A. |
REALONDA S.A. AVD. MEDITERRANEO 50 12200 ONDA (CASTELLÓN) ESPAÑA |
a) yes |
|
1) yes |
b) no |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to alower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improvem |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage.However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective.Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
a) the present two groups should remain |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value) which are subject to international competition should be considered as exposed to the risk of carbon leakage, until aninternational agreement is established. It is important to limit the list to sectors that really compete globally, and thus it is vital to maintain an assessment based on trade intensity with third countries. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
The present criteria should be used, considering the following element. GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists ofboth labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimatedif it is compared with the GOS. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended(at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarksare set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yetsince the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier toindustrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored.This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concernsassociated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order toavoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
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a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
a) Business |
REPSOL, S.A. |
REPSOL (Corporate Headquarters). Méndez Álvaro, 44. 28045, Madrid (Spain). Telephone: (34) 91 75 38 100 / (34) 91 75 38 000 |
a) yes |
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1) yes |
a) yes |
Some industries may be able to reduce emissions through further energy efficiency improvements. However, the Refining industry has already used most of the options to improve its energy efficiency cost-effectively: The GHG intensity of Western European refineries is already world leading, as measured by the Solomon Carbon Emissions Index (CEITM). The proposed 43% emissions reduction objective is very ambitious and technologically and economically unachievable for the refining industry itself at the pace implied by the Linear Reduction Factor. |
a) yes |
Reporting and monitoring emissions does quantify emissions at installation level. The carbon price does incentivise industrial installations to reduce emissions and improve efficiency. However, for the Refining sector this is only a marginal factor, as the main driver for such improvements remains the high proportion of energy costs in total operating costs (63% on average for EU-28 refineries, according to Solomon). EU refineries in Western Europe are collectively the least carbon intensive in the world, driven not by legislation but by measuring the economic cost of energy use. However, the EU ETS is an additional cost to EU industry and not to its non-EU competitors, which is potentially very damaging for competitiveness. This is why industry needs sufficient carbon leakage protection. |
a) yes |
Until there are equivalent carbon pricing policies in competing sectors, support for EU industrial sectors exposed to carbon leakage must continue as a core element of the EU’s post-2020 climate policy framework. Removing carbon leakage protection would result in a sudden decrease in free allocation: from allocation at 100% at the benchmark to 80% in 2013 declining to 30% in 2020 and zero by 2027 (EU ETS Article 10a 11). For Refining, competing regions include Russia, Middle East, USA, and parts of Asia and so support measures should remain until these key refining competitors adopt carbon pricing. Delocalisation of petroleum products production outside the EU is also likely to have negative effects of global GHG emissions. According to a recent study from Vivid Economics, commissioned by the UK Department of Energy & Climate Change, EU Refining is on average less emissions-intensive than non-EU firms. Carbon leakage therefore exceeds output leakage and is about 135%. |
b) quite adequate |
In the absence of an international climate agreement, Repsol prefers both free allocation and enhanced free allocation for exposed sectors to deal with carbon leakage. For the Refining sector, the EU ETS benchmark was set from 2013 at the average of the top 10% performance level. According to 2013 final allocation data, the refining industry has received less than 80% of its quota as free allocation and is a sector receiving less than its actual emissions. This situation is highly detrimental to the refining industry’s competitiveness and requires corrective actions. However, under the current system protection will be further eroded due the decreasing industry cap and the CSCF (by 2030, even the most efficient installations would be left with only 60% free allocation if a 2.2% Linear Reduction Factor continues to be applied). The EU ETS needs to be reformed to provide sufficient protection to industry until carbon leakage is addressed through an international climate change agreement |
a) it absolutely keeps the incentive |
The main incentive for reducing emission in Refining is reducing energy costs. Carbon cost does add to this incentive. The incentive for any installation with the capacity for cost effective emissions reduction is the carbon price: either avoiding buying allowance or being able to sell their surplus allowances whether these are received free or not. Therefore, free allocation is used to protect industry from carbon leakage while keeping the incentive intact. |
b) quite proportionate |
In the refining sector with large scale complex installations, implementation of the CWT benchmarking provisions was a major undertaking and involved considerable work by the sector, national governments and the Commission. Given the importance of the competitive threat, the work to create an accurate and fair system is considered proportionate to the objectives. However, if the system could be simplified, we would be willing to work with Commission to achieve this. |
d) there should be no limit to overall free allocation to industry |
Until the issue of carbon leakage is addressed through an international climate change agreement, sufficient levels of protection to industry are needed. To provide an adequate protection for the European refining industry, a CSCF should not be employed to avoid reductions in the amount of free allocation .If the intention is to provide carbon leakage protection to industry then the number of allowances need to fully cover direct and indirect emissions for best performing installations – hence no limit to overall free allocation. There is no centralised post 2020 allowance budget - control of proceeds from auctioning is delegated to Member States, with some redistribution via the solidarity and growth provisions. |
e) I don’t know |
Repsol is strongly in favour of greater innovation support by the EU and its member states but we do not believe that the use of ETS revenues is the right mechanism. The NER 300 programme has been complex to administer, had a market impact of releasing allowances onto the market early, and has not delivered large scale CCS demonstration project. A large scale CCS demonstration project requires dedicated funding outside EU ETS. In Phase 3, auctioning is expected to generate substantial revenue to governments; these revenues, should be returned to the economy without creating distortions between energy sources and technologies. |
b) no |
The NER 300 programme is dependent on market pricing. There should be more innovation support and new low carbon technologies require more financial stability, thus existing funds such as Horizon 2020, 7th Framework and SET programmes should be augmented, rather than creating new funding frameworks. |
c) other types of funding (please specify) |
Support for innovative low-carbon technologies should be technology neutral as well as time- and cost- limited - all energy sources should be integrated under normal market conditions, without subsidies (including system connection, balancing cost and exposure to price risk) as soon as possible. Rather than establishing new bureaucracies, existing funds such as Horizon 2020, 7th Framework and SET programmes should, where required, be augmented by EU and Member State funding. |
a) yes |
EU industry needs first and foremost greater equity of non-EU with EU abatement measures. Until there are equivalent carbon pricing policies in competing sectors, EU industry need carbon leakage protection to remain competitive, via free allocations. There are currently no EU ETS measures addressing carbon leakage post 2020. Thus, the ETS Directive needs to be reviewed to make sure that levels of free allocation after 2020 adequately reflect the industry’s carbon leakage exposure. The current indirect emissions compensation system is unsuitable. It should be reformed to allow free allocation for all electricity consumed in refineries. In general, the strategic importance of manufacturing industries, such as Refining, needs to sufficiently reflected across all EU policies; the cumulative impact of EU legislation on these industries including the EU ETS, must be carefully looked at. |
a) the present two groups should remain |
Industrial capacity in EU has declined (According to the Commission communication for a European industrial renaissance, the share of manufacturing in GDP has fallen from 15.4% to 15.1% in 2013) and exposure to international competition remains a key concern for many energy intensive industries, including Refining. Creating uncertainty about how the risk of carbon leakage in industrial sectors such as Refining will be mitigated is not the right way to promote recovery. The current two groups should remain until progress is achieved in the international arena to re level the competitive playing field by introducing similar carbon pricing in other regions that compete with EU Refining. |
a) the present criteria should remain |
For Refining as a mixed sector both trade and GVA exposure and thresholds are very important. Refining is a “margin business”, acting between two international, open commodity markets: crude oil market and refined products market. EU Refining is also open to traded imports so that pass through of EU carbon costs is limited by non- or less-regulated trading partners. This becomes more difficult as imports rise. For the carbon leakage assessment, it is therefore important to keep looking at the effect of carbon costs on Gross Value Added rather than production costs and to take sectors’ trade intensity into account. Carbon costs should cover both direct and indirect carbon costs due to their cumulative impact on Refining’s competitiveness. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
If the criteria are tightened thus reducing the number of sectors/sub-sectors on the list, some key strategic sectors for the EU’s economy risk being excluded from carbon leakage protection, with potential negative spill-over effects on other industries (e.g. for the oil Refining industry and the petro-chemical industry, which are strongly inter-connected). Carbon leakage is also about future investment decisions. Therefore the GVA criteria carbon price must reflect future projected EUA prices and not current prices. This is common refining industry practice in evaluating major projects. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Repsol supports the use of qualitative assessments but these should be kept as simple as possible. Legislative requirements on the quality of fuels (e.g. marine fuels specifications) and the conversion of heavy residues into lighter products result in the increase of refineries’ energy intensity and GHG emissions. If the Refining sector, undergoes a qualitative assessment this so-called “Refining paradox” would need to be taken into account. |
d) in line with the duration of ETS Phase 4 |
Mid-period review is detrimental to investment certainty, given the significant difference in the levels of free allocation according to the carbon leakage status and the rest (allocation at 100% at the benchmark vs. 80% in 2013 declining to 30% in 2020 and zero by 2027). Long term visibility is essential for investment decisions in the refining industry. |
c) the approach should be less stringent (please specify) |
A benchmark excluding sector outlying installations would take account of typical carbon leakage exposure rather than average of top 10%, which may be atypical in character, depending on the sector. This is particularly important as EU benchmarks do not rate performance of installations outside the EU, thus potentially penalising EU installations that are more efficient than their non EU competitors. Potential effects on EU strategic industrial sectors including those integral to the supply chains of other sectors must be considered. The current benchmark has turned out to be penalising for the refining sector, both in absolute terms and in comparison with other sectors. In combination with the CSCF, carbon leakage protection currently covers less than 80% of emissions to the refining sector which is subject to carbon leakage. |
b) no |
In order to provide free allocation in an effective way, the benchmarks should accurately reflect the performance of ETS installations. However, Repsol does not support a revision of the benchmarks based on the technological state of the art, as the latter is subject to interpretation (e.g. do we look at progress worldwide where verified data is lacking, or only the situation in the EU?). Integrating state of the art technologies implies a change in the refineries configuration, which is challenging and extremely costly due to physical and other operational constraints. Investments into such technologies have to pay their way. |
c) other (please specify) |
Free allocation should reflect economic reality per installation based on the most recent years. More recent verified data should be used: free allocation should reflect installations’ economic activity, based on the most recent years. In the case of refineries, a regular turn-around period is required for regulatory inspection, maintenance and capital projects. If this is not taken into account, refining installations will be penalised in terms of future allocation. Alternative approaches such as extending baseline periods or some form of dynamic allocation should be considered. |
a) no, there should be no deviations |
General harmonised allocation rules should continue to apply for all carbon leakage installations in the same manner. |
c) yes, in the form of additional free allocation |
Carbon leakage protection should also include free allocations for EU ETS cost pass-through in electricity prices for all sectors exposed to carbon leakage in a harmonised fashion, in addition to free allocation for direct emissions. The absence of an EU harmonised indirect compensation system, leaving decisions to Member States restricts compensation to a few sectors as many of them do not grant such compensation, thereby creating single market distortions. It should be reformed to allow free allocation for all electricity consumed in refineries (e.g. net power used). If a sector is deemed at risk of direct carbon leakage, then free allocation should automatically be given for indirect carbon emissions to all installations in that sector. |
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I don't know |
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d) other |
Repsol is strongly in favour of greater innovation support by the EU and its member states, which may bring more significant and cost-effective results than current renewables mandates. but we do not believe that the use of ETS revenues is the right mechanism. Innovation should be supported by existing funds such as Horizon 2020, 7th Framework and SET programmes. |
Competitiveness and carbon leakage risk must be kept under constant review. Assessments should not look for evidence that leakage has occurred and competitiveness already damaged, but rather assess the level of risk in future. The allocation system must not penalise economic recovery or growth. Regarding the format of the questionnaire, we believe that some of the questions are not neutral and push the respondents to make a certain response. The answer cannot always be as simple as yes or no. Many of the answers are provided as yes or no, with additional conditions – which are required as part to the answer. This does not necessarily mean that the respondent “does not know” and has no valuable input to bring. |
a) Business |
RHI AG A world leader in Refractories |
RHI AG Wienerbergstraße 9 A-1100 Wien Telefon: +43 (0) 50 213-0 Vermittlung: +43 (0) 50 213-6200 Fax: +43 (0) 50 213-6213 rhi@rhi-ag.com franz.maier@rhi-ag.com RHI Transparency Register 138083013988-72 |
a) yes |
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1) yes |
b) no |
RHI, a world leader in refractories , belongs to the energy intensive industry. At RHI, two third of all emissions arise from raw materials. These emissions cannot be reduced . CCS technologies are not allowed in some Members States. This means: 1) RHI, because of very high process emissions has to purchase an increasingly number of certificates, resulting in a loss of international competitiveness. 2) Less certificates mean reducing production with all negative consequences (loss of knowledge, loss of jobs, loss of R&D, loss of innovation and increase in CO2 emissions worldwide) RHI rejects a ‘one-size fits all’ approach and call the Commission to: 1) Exempt small emitters (up to 50.000t CO2 emissions/year) from the ETS 2) Exempt carbonate related emissions from the ETS 3) Grant (sub)sectors with CL status 100% free allocation. In theory and public perception, CL-sectors do get 100% free allocation. In reality it´s significantly less, cause of the reduction factor. |
b) no |
There are no verifiable/proven investments because of the ETS. Industry and more so the Energy Intensive Industry (EII) has a very strong self-interest in being energy efficient and innovative. RHI employs a group-wide energy management system (EnMS) designed to systematically save energy. In some EII industries the energy related costs are 30-50% and the potential is exhausted. In medium-long term, the EU ETS will jeopardise EU industry’s competitiveness due to: § Unilateral costs because of a stringent cap, very limited free allocation (if any), high carbon prices and high indirect costs in electricity prices and § In the absence of an international agreement that is consistently implemented and that puts a comparable burden on competitors based in third countries |
a) yes |
RHI calls for a strongly reduced number of emitters that are under the scope of the ETS (see Question 1): exempt small emitters (up to 50.000t CO2 emissions/year) from the ETS. 2/3 of all RHI emissions are raw-material related emissions (process emissions). As they cannot be reduced they must be exempt from the ETS. Grant sectors/subsectors with CL status 100% free allocation. Not only on paper, but in reality. No deduction through reduction/ correction factor etc. . |
a) very adequate |
Free allocation is a prerequisite to keep industry and therefore jobs, R&D etc. in Europe. But it is absolutely essential that free allocation is 100% free and not reduced by correction/reductions factors etc. . In Europe we already have major disadvantages in production cost if we compare e.g. energy prices (20% cost increase for RHI product sintered magnesia (1 ton) when produced in the EU compared to the US). It is absolutely essential that we do not add up disadvantageous factors (e.g. cost for CO2 certificates, high energy prices, etc.). Industrial production in Europe is essential, as we have seen in the recent economic crisis. |
a) it absolutely keeps the incentive |
Free allocation allows industry to invest money in innovation, which otherwise would have been spent for allowances. On top the current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations have to purchase allowances. |
d) absolutely exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. Also the national equivalent - opt-out for small installations - has been exercised by very few Member States and where it has been used (e.g. UK) the scheme retains much complexity. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, Carbon Leakage sub-/sectors should receive 100% free allocation and the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. Raw material related emissions should be exempt from the ETS as well as small emitters. |
d) there should be no such innovation support post-2020 |
RHI thinks that committing proceeds from auctioning allowances to innovation support is highly desirable. However, allowances should not be set aside from the new entrants reserve. So we do not support the continuation via NER300. NER is also limited in the scope of technologies supported and does little to help industry decarbonise. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies. |
a) yes |
Committing proceeds in the direction of innovation and deployment of a wide range of new low-carbon technologies under one financial support scheme is highly desirable (see answer 8). EU ETS can be a tool for the development of a wide range of low-carbon technologies provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS directive explicitly suggests that 50% of the proceeds from the auctioning of allowances should be used to reduce emissions and to fund research and development for reducing emissions and adaption to develop renewable energies. This clear commitment from all Member States should be implemented fully and without delay. RHI generally thinks that a start-up financing of low carbon technologies is desirable. A very negative example, however, of how financial support should not be done is the German Renewable Energies Act (EEG). Prices have jumped to unknown heights and massive influx from solar and wind power plants that produce without regard for actual need. On top, a restriction to solar and wind energy, as low carbon technologies is too restrictive. |
a) yes |
Beyond free allocation and innovation support, RHI supports a harmonized EU-wide financial compensation of indirect costs resulting from emission price in energy prices: Necessary measures: - a stable and predictable legal framework - 100% allocation of allowances in case of CL - a flexible allocation method, which allows industrial growth - exemption of raw material related emissions from the ETS - financial compensation of indirect cost arising from electrical energy |
d) there is no need for a carbon leakage list, all industrial installations should be treated as not exposed |
RHI would like to encourage the Commission to envisage a comprehensive and courageous simplification, which would significantly reduce red tape, bureaucracy and would be clear and simple. It would also reflect the fact that 75% of emissions come from the energy sector and that 85% of all installations are responsible for 10% of overall emissions: All non-electricity generating installations in Annex I of the ETS Directive and at least the energy-intensive sectors as defined in the Energy Taxation Directive, should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. This would eliminate the risk of a carbon leakage exposure factor for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
As explained in the reply to question 12, all energy intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value) should be considered as exposed to the carbon leakage risk. Furthermore, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA includes both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent around 50% of the GVA for the manufacturing industry. Therefore, the real impact of ETS-related costs can be better appreciated if it is compared with the GOS. Finally, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, a third set of criteria should be a trade intensity ≥ 5% combined with a carbon intensity ≥ 10%. |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, a third set of criteria should be a trade intensity ≥ 5% combined with a carbon intensity ≥ 10%. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. |
d) in line with the duration of ETS Phase 4 |
RHI faces long-term investment cycles. A production plant typically has a lifetime of over 40 years. As a result, RHI needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) for the entire duration of phase 4. |
a) the present approach of average of the 10% most efficient installations should remain |
The benchmark of the 10% best performing installations is used only to calculate the preliminary free allocation, while the final free allocation is affected also by the cross sectoral reduction factor. RHI rejects the application of the factor as the carbon leakage status wrongly suggests a 100% free allocation where reality shows that allocation is significantly less. |
b) no |
We can assume that benchmark leaders in Europe are also leading worldwide. Therefore we don’t consider it useful to revise benchmarks right now. |
c) other (please specify) |
The method to be used for phase 4 allocations should provide for sufficient flexibility and must reflect economic reality. A dynamic system should be implemented , which allows industrial growth. |
b) yes, there should be deviations with higher allowances for installations facing specific hardships |
We ask the Commission to take into account possible growth of the industrial production of an installation. We also ask the Commission to take into account extended production in the sense of backward integration. Although RHI continuously strives for improvement in environmental standards and energy efficiency etc., RHI emissions have augmented because of ‘backward integration’ (in our case: own production of magnesia) in Europe. However, if RHI would ‘outsource’ the raw materials production to third countries, this would mean an increase of 20% CO2 emissions per ton material produced due to less strict environmental standards in those countries. Backward integration – although it increases CO2 emissions in Europe - therefore makes sense from the point of view of entrepreneurial thinking, business practice, job creation, R&D and also from an environmental point of view. |
d) yes, in the form of financial compensation at EU-level |
The current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
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a) from the Member States' auction budgets |
The ETS directive explicitly suggests that 50% of the proceeds from the auctioning of allowances should be used to reduce emissions and to fund research and development for reducing emissions and adaption to develop renewable energies. This clear commitment from all Member States should be implemented fully and without delay. |
As set out in various questions experience from the last years shows the necessity that 1) Small emitters (up to 50.000t CO2 emissions/year) should be exempted from the ETS. 2) Raw-material related emissions (process emissions) should be exempted from the ETS. 3) Sectors/subsectors with CL status should be entitled to 100% free allocation. 4) There should be reference to the actual production which allows a company/installation to grow and increase production without being punished. 5) This also applies to a more integrated approach whereby a company acts as integrated producer. The fact that this increases CO2-emissions in Europe is not an indicator for unmindful and environmentally harmful production standards. Shifting production to third countries means in most cases that emissions worldwide go up. 6) There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. |
a) Business |
Royal DSM |
Royal DSM Ir. Michiel Cornelissen Het Overloon 1 6411 TE Heerlen The Netherlands EU Register ID: 73926352722-07 Email: Michiel.Cornelissen@DSM.com Phone: +31 6 1010 2875 |
a) yes |
|
1) yes |
a) yes |
EU industry is highly innovative and one of the most sustainable in the world. However, the ability of EU industry to further reduce GHG emissions without reducing production highly depends on a political environment/framework that promotes local investments into sustainability innovation in order to keep production and create jobs, herewith securing Europe’s competitiveness. The high costs resulting from the proposed EU targets for 2030, combined with the uncertainty regarding the future carbon leakage provisions, create obstacles and will limit investments. That’s why the EU reduction targets are only acceptable with parallel provisions which allow fulfilling the EU target for a growing industry share. The industry needs a stable and predictable cost level playing field. It needs a clear political commitment, that EU climate policy - including targets - will be reviewed if by 2020 no global level playing field is achieved. |
b) no |
Two elements: EE & competitiveness. Emission trading on a global scale is an effective and efficient market based instrument providing climate protection at lowest costs by introducing a carbon factor in decision making on investment and efficiency improvements. However, as long as there is no global system, robust carbon leakage protection is needed to protect competitiveness. This purpose would be served best by a dynamic ETS system (for details see Q4). On the other hand, additional costs due to the EU ETS – actual and expected - harm competitiveness and the willingness to invest in the EU, reducing in that way the progress in energy efficiency that could have been reached in a prosperous investment climate. Furthermore, the unilateral and absolute cap on emissions is limiting industrial growth potentials. Despite these influences, EU industry is already very carbon efficient and ETS targets have been achieved through a number of measures taken for the installations involved. |
a) yes |
Yes, the EU needs to provide special (transitional) measures to support EU industry covered by the EU ETS in order to sustain competitiveness of European companies. The ambitious EU climate policy means extra costs for European companies, cost that competitors outside Europe not face, hence the system is undermining the competitiveness of European companies. Any measures must be predictable and stable. The proposed approach for such measures is a dynamic free allocation system (see Q4) |
b) quite adequate |
Enhanced free allocation would be an adequate instrument to address the risk of carbon leakage. Good performers must be rewarded; underperformers must feel positive pressure upon implementing improvement measures. To that aim, free allocation post-2020 must be based on a dynamic system, which has the following main components: (1) realistic benchmark levels including direct and indirect emissions (2) the actual production level (3) no correction factors. (4) an allocation supply reserve. With such reforms, enhanced free allocation can minimise carbon leakage also at higher CO2-prices. Furthermore, we need a clear political commitment for a review of the EU climate policy if the EU remains isolated with its ambitious climate policy and the associated high burden after 2020. In the medium- to long-term, an isolated ambitious climate policy with an absolute cap and effective protection against carbon leakage are incompatible. |
a) it absolutely keeps the incentive |
Free allocation based on benchmarks keeps EU industry competitive, while preserving the incentives to innovate for reducing emissions. Such incentives, however, are distorted in the current design of free allocation based on historical instead of actual production data. The downside of free allocation is the lack of visibility of the carbon costs in the product price. |
b) quite proportionate |
Administrative burden currently is high, but acceptable. It could be significantly reduced via a dynamic system (see Q 4). In the current system, most red tape is created by its complexity; e.g. allocation rules for changes between historical and current production data or the establishing of benchmarks (establishing new benchmarks should be avoided). |
d) there should be no limit to overall free allocation to industry |
The share of allowances dedicated to free allocation should be sufficient to avoid carbon leakage. That means sufficient free allowances for efficient producers (produce at realistic benchmark levels); safeguarding low costs for efficient production. |
e) I don’t know |
Research and development is crucial for EU de-carbonisation towards 2050 (picking thereby the most promising approached in terms of cost-efficiency). Support/funding should not depend on the auctioning income which varies with the carbon price. |
a) yes |
Yes, support scheme for (R&D in) technologies are crucial to meet the 2050 reduction targets, simply because new technologies are not yet invented or available. The ETS directive states that half of auctioning revenues should be spent on decarbonisation measures. This has not been the case so far and thus is a missed opportunity to boost innovation in energy intensive industry. In any case it is important to note that such support should not limit the free allocation volumes and carbon leakage provisions. |
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
Auction revenues should be earmarked and ring-fenced for innovation purposes rather than going into national budgets. The funding support from the NER300 program should be allocated to the most cost efficient technology developments. The question is, if CCS fits in this frame or whether other options such as CCU, electricity storage and others would be more cost efficient. On the other hand, auction revenues should go back to industry, ensuring that enough means are available for investments in production capacity and innovation. Therefore, innovation support should not counteract carbon leakage protection measures. Innovation centres are closely linked with production and therefore we both need measures to keep production cluster in Europe and to promote research and development. |
a) yes |
The following measures are needed: • More consistent and aligned energy and climate policies on both EU and MS levels including bringing EU energy prices in line with global prices and the commitment of EU politicians and policymakers to review policies in case no global level playing field can be achieved. • A reform of the EU ETS providing more effective carbon leakage measures (see Q4). • An adequate compensation of the full CO2 costs in electricity prices. • Taking account of all relevant costs induced by the climate policy package (such as RES-support). • The effort sharing between ETS and non-ETS sectors should be in line with the findings of the impact assessment for the Energy Efficiency Directive: the remaining economic potential is much larger in other sectors (building, power, transport) than in industry. |
a) the present two groups should remain |
The list was established after thoroughly investigating statistical data. The two groups should remain, since there is still a big need for protection, especially when considering increasing globalization, increasing European energy prices and the shrinking cap (which will lead to an increase of the carbon price and the danger of carbon leakage). To avoid value chain effects the level of protection rather needs to be increased. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
The following criteria should be added: • a comprehensive carbon/climate cost comparison: the ETS costs in Europe should be compared with those in other regions (including an analysis of the allocation rules for direct and indirect emissions) • a clear definition of “a decisive share of global production” (with the same carbon costs) • The full power price effects of climate change policies must be taken into account for the risk evaluation. • the impact of value chain effects: Sub-sectors that are not directly impacted but are inherently linked with exposed sectors are not necessarily on the list. It is therefore important that qualitative assessments are done where relevant to add the necessary value chain aspect (including upstream costs, impact of carbon leakage position of upstream sectors on downstream sectors i.e. the respective end products, (im)possibility of cost pass-through). • a forward looking carbon price |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
For further detail we refer to our answer to Q 15. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Yes, qualitative criteria are needed in addition to quantitative criteria e.g. as the latter are solely based on historic data which not always reflect the current situation for (competing) products at the world market. The following parameters are proposed for a forward looking qualitative assessment: • All costs related to climate change policy along the value chain should be taken into account, in particular upstream costs. • The value chain analysis should also consider the implication for downstream sectors if an upstream sector is deleted from the carbon leakage list. • The inability to pass through locally imposed costs to sectors whose product prices are determined internationally (“price takers”) should be taken into account. |
d) in line with the duration of ETS Phase 4 |
The carbon leakage status is a fundamental parameter for investment decisions of companies. Any change here has sharp consequences: the sector can get 100% free allocation in one year and 0% the next year. To avoid negative consequences for decisions to invest in maintaining or expanding manufacturing capacity in Europe, uncertainty about the carbon leakage status should be avoided. Therefore, we need a rather long stable validity of the CL status of the involved players. Once per trading period could be an acceptable compromise, however, much shorter than support and planning horizons realized for investors into RES according to the most MSs’ RES-E support schemes. |
c) the approach should be less stringent (please specify) |
Currently allocation is based on the stringent average of the top 10% performers, meaning that only about 5 out of 100 installations would receive 100 % free allocation. All others incur costs. Furthermore, these stringent allocations are significantly reduced through the cross-sectoral correction factor and the linear reduction factor (both 1.74% points per year). This adds costs even for the most efficient producers and thereby discourages efficient investments and growth. This approach is not sustainable and does not protect against carbon leakage. Therefore, we believe that the approach should be rather less stringent and proposes the use of realistic benchmarks. Realistic benchmark levels should reflect the penetration of a given efficiency technology within EU industry sector and be comparable to benchmarks in other schemes globally. Realistic Benchmarks should provide long-term certainty and predictability. |
b) no |
An update of the benchmark should reflect the technical development. To ensure that the benchmark level is technically and economically achievable, benchmarks must be defined bottom-up, starting from real performance levels. The benchmark level should not reflect the technological state of the art. In addition, an update of the benchmark must also reflect the carbon leakage risk, i.e. it must be ensured that the carbon leakage protection is not compromised. An update of the benchmark levels should only take place between trading periods and not within a trading period. This is important to limit the impact on the effectiveness of the EU ETS: if efficiency improvements lead to a more stringent benchmark, this could provide an incentive to delay investments if a company has several plants which would then have to bear the more stringent benchmark. Furthermore, an update of the benchmark could undermine the planning of investment decisions. |
c) other (please specify) |
The production data used to calculate allocations should be based on the most actual data to best reflect the need for free allocation. This way significant faults and undesired developments of the current system, (e.g. over- and under-allocation to the most efficient producers, incentives to reduce EU production and sell the freed allowances) would also be avoided. Basing allocation to industry on actual production, furthermore, puts carbon efficiency improvements into the focus, because any improvements then bring a direct and logic financial benefit. |
b) yes, there should be deviations with higher allowances for installations facing specific hardships |
Harmonized treatment should be the principle rule. However, the complexity and diversity of installations’ cases is immense and there should be an option to deviate in exceptional cases. |
c) yes, in the form of additional free allocation |
Direct and indirect emission cost/compensation must be treated equally over the MS. A solid and predictable alternative for the current diverse, unstable and incomplete system of indirect compensation at MS level could be: indirect allocation on European level. This indirect allocation should not include unrealistic reduction factors. |
Less important |
Important |
Most important |
Least important |
The development of new technologies follows a pre-defined path (from development to deployment and commercialisation) where different types and levels of support are needed in the different stages. It is important to adequately define the appropriateness of each type of aid. Support is principally necessary at each stage in order to overcome the market barriers and failures specific to each stage. We see a particular lack of support for large scale pilots in industries and would wish to have the EU more active here. |
d) other |
Free allocation has to protect against carbon leakage adequately. Therefore, the free allocation should not be used for innovation support. There should be no competition between carbon leakage protection and innovation support. The revenues from auctioning should be reinvested for low carbon technology support, as foreseen in the ETS Directive. |
The multiple choice response options in many cases do not provide an option that exactly meets our answer. We strongly advise not to make a simple statistical analysis of the multiple choice answers to understand the consultation properly. Any decisions should allow for industrial growth and the climate change policy of the future should fit with the EU’s industrial renaissance strategy. As Europe’s impact on climate is becoming relatively small, a global climate agreement is key for effective climate protection. The results of COP 21 / commitment of the major world regions to climate change policies are a precondition that EU climate policies will have a future in the manner we see it today. Whether avoidance of carbon leakage is really feasible depends on a number of breakthrough technologies. The EU can help such developments with focused support of innovation/R&D. Giving industry-funds for these purposes is a no regret strategy. |
a) Business |
Royal Dutch Shell plc is incorporated in England and Wales, has its headquarters in The Hague and is listed on the London, Amsterdam and New York stock exchanges. Shell companies have operations in more than 110 countries with businesses including oil and gas exploration and production; production and marketing of Liquefied Natural Gas (LNG) and Gas to Liquids (GtL); manufacturing, marketing and shipping of oil products and chemicals, and renewable energy projects. |
Shell Companies Transparency Register Identification Number: 05032108616-26 Ivan Martin Head EU Liaison Office Shell Companies Belgian Shell N.V. Rond Point Schuman 11 1040 Brussels Tel: + 32 2 256 75 06 |
a) yes |
|
1) yes |
a) yes |
Yes, industry is able to reduce greenhouse gas emissions through energy efficiency improvements. However, the vast majority of economic energy efficiency improvement projects have already been achieved by industry. The larger scale changes in emissions proposed beyond 2020 require new technologies to be demonstrated and costs reduced in order to enable a step-change in emission reductions to meet future climate change goals. This requires a supportive policy framework, including amongst other tools an update of the EU innovation fund, the NER-300, for the demonstration of emerging low carbon technologies and its extension beyond 2015. |
a) yes |
Yes, industry that is energy efficient will have lower operating costs and can therefore be more competitive. However, energy prices are the main factor in driving energy efficiency under the current market fundamentals. The EU ETS has an important role to play in ensuring that participants pay attention to their greenhouse gas emissions through mandatory monitoring, reporting and verification as well as surrendering allowances equivalent to greenhouse gas emissions in each compliance year driving further attention on energy efficiency. However, the EU ETS needs to be strengthened so that it can deliver a robust carbon price that can effectively incentivise energy efficiency in the power and industrial sectors. |
a) yes |
Yes, until there is a global agreement on climate change and comparable action with key trading partners then the EU ETS should provide safeguards to industry exposed to the risk of carbon leakage. |
b) quite adequate |
We believe that the current free allocation mechanism is quite adequate because it supports the competitiveness of industries at risk of carbon leakage. The level of free allocation is based on the average of the 10 per cent most CO2 efficient European assets. This provides companies with an incentive to perform to this level thereby promoting energy efficiency. However, the application of the Cross Sectoral Correction Factor (CSCF) which reduces the level of free allowances received to levels below the benchmark hinders the effectiveness of this mechanism. The level of free allocation is reduced and companies are exposed to carbon costs. We believe there is a requirement to review how the CSCF is applied and its impact on the effectiveness of the current mechanism to protect industry against the risk of carbon leakage. |
a) it absolutely keeps the incentive |
Free allocation is designed to keep the incentive on installations to reduce emissions. Installations already operating at or above the most CO2 efficient European assets have the incentive to further reduce emissions and sell allowances into the market to raise revenue. Installations that are not as efficient as the benchmarked level have the incentive to meet this level of CO2 performance and reduce costs through purchasing fewer allowances. |
b) quite proportionate |
There is administration effort to deliver free allowances via the benchmarking provisions but these are quite proportionate. |
d) there should be no limit to overall free allocation to industry |
The post-2020 allowances budget for carbon leakage and competitiveness purposes should be proportionate to compensate industries at risk of carbon leakage. At this moment in time, it is difficult to determine the share of the post-2020 allowances budget. It could be predicted that it will be higher than in 2013-2020 because the cap on emissions declines and therefore the share of the budget would be higher. It could also be argued that it will be lower as there is more comparable action globally and fewer sectors at risk. This will need to be assessed closely over the next few years. |
a) a substantially higher share than in Phase 3 |
Shell fully supports the current NER300 programme and requirement for innovation and low carbon demonstration support post-2015. The current NER 300 ran for 5 years so we expect that a new programme would run for a longer period and therefore represent a higher share of the allowances budget in Phase 4 than in Phase 3. However, at this moment in time, it is difficult to determine the share of the allowances budget. This should be informed by the portfolio of innovative and emerging low carbon technologies that will need support to move from R&D to commercial deployment, in order to contribute to the EU’s climate and energy goals. We would welcome the opportunity to discuss design options / improvements with EU policy makers (based on learnings from the current programme) that will help to ensure effective and balanced support for a wide range of emerging low carbon technologies such as demonstration projects for CCS and innovative renewable including advanced biofuels. |
a) yes |
Shell fully supports a policy framework that enables emerging technologies to progress along the technology pathway. However, EU ETS revenues should not be used for the deployment of commercially viable low carbon technologies which could undermine the operation of the EU ETS whereby the carbon price alone should deliver emission reductions and not revenues from the ETS. Revenues from the EU ETS should be used to help demonstrate emerging low carbon technologies in the industrial, power and transport sectors, and we support an innovation and demonstration fund which enables the demonstration of CCS and renewables in Europe. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Shell supports the existence of an innovation support programme beyond 2015, which combines available instruments at EU and Member States level in an optimal way. Such a programme should incorporate the learnings from the current NER300 programme to ensure greater effectiveness. For example, future innovation support could be funded by the revenues received from the auctioning of allowances under the EU ETS as well as other sources of funding such as any successor to Horizon 2020. We welcome the opportunity to discuss design options with policy makers in more detail. |
a) yes |
There is fragmentation of compensation for indirect costs and this would benefit from harmonisation throughout Europe so similar rules are applied and industry is treated consistently. |
a) the present two groups should remain |
We believe it is essential to ensure that those industries at risk of carbon leakage receive adequate compensation and those not a risk receive a lower level and eventually no support in 2027. For this reason we believe that there should be at least two categories for sectors in terms of exposure to the risk of carbon leakage and we support both options (a) and (b). It would be worthwhile to explore a mechanism that might have more than two groups, for example, the California systems has three groups described as low, medium and high leakage risk. |
a) the present criteria should remain |
Currently, we support the present criteria and we are reviewing the options available and believe that it is important to understand which sectors are emissions intensive and/or have high carbon costs. Furthermore, trade intensity/exposure is a valid criterion to assess the risk of carbon leakage. Australia and California both use emissions intensity (no carbon costs required) and trade exposure. We believe that a number of methodologies should be explored so that the full impact can be understood. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
At this moment in time, we are reviewing the options and support the current criteria and welcome analysis using alternative methodologies to ensure that industry at risk of carbon leakage receives adequate compensation. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Yes there is a role for qualitative criteria for borderline cases to ensure sustainable supply chains in Europe. |
d) in line with the duration of ETS Phase 4 |
We believe that the carbon leakage list should be valid for the whole trading phase as this measure protects for both investment leakage and production leakage and so a longer term certainty is welcomed. |
a) the present approach of average of the 10% most efficient installations should remain |
It is important that the benchmark is set to the most energy efficient assets in Europe to give incentive to the majority of installations to become more energy efficient. We support the average of the top 10% most efficient installations. |
b) no |
We support a review of benchmarks in terms of updating criteria with more recent data and their adequacy for free allocation distribution to prevent carbon leakage. However the objective should not be to reflect the technological state of the art, as this is subject to interpretation. We believe that the benchmark should be representative of the 10 per cent most efficient EU assets to ensure that assets have the incentive to perform to this level. |
c) other (please specify) |
We support the current approach and also welcome the opportunity to investigate a methodology which brings into consideration free allocations based on actual production levels, sometimes referred to as dynamic or ex-post allocation. This would avoid any unintended consequences from under or over allocation of allowances based on historic activity levels. However, it needs to be designed to be simple and enable an effective carbon market. |
a) no, there should be no deviations |
For simplicity, we do not support this approach which would add an extra level of complexity to the system. |
d) yes, in the form of financial compensation at EU-level |
There is fragmentation of compensation for indirect costs and this would benefit from harmonisation throughout Europe so that Member States apply similar rules and industry is treated consistently. Due to the decreasing cap we suggest that financial compensation at EU-level could be provided. Free allowances should be reserved for direct emission costs. |
Least important |
Less important |
Important |
Most important |
We have suggested a ranking for each stage of the innovation process; however, we believe that it is important to support technologies along the whole pathway to commercial viability via a well designed and coherent policy framework. Furthermore, we believe that demonstration of emerging energy technologies, such as CCS, is vital to enable Europe to meet future climate change goals. For example, in a first wave of CCS demonstration projects a wide range of support mechanisms will be required e.g. upfront capital grants, contracts-for-difference (CfD), and accessing systems like the NER300. In a second wave, as CCS technology de-risks and financing options improve, capital grants may be discontinued but time-limited operating subsidies such as CfD should be maintained. Finally, strengthening the EU ETS now is important to ensure that the business case for CCS exists in 2030 when it will be commercially viable. |
d) other |
Funding is required from a variety of sources and all routes should be explored. Member State support is essential to enable emerging technologies to become competitive, subject to state aid approval. We believe that the EU ETS has a role to play in raising revenues from the holding or sale of allowances and would argue that this should come from the auctioning volumes so that industry at risk of carbon leakage receives the level of support that is required. Other routes to funding for low carbon innovation support are equally important and we see that all are required to enable progress to be made towards Europe’s low carbon economy. |
We believe that the EU ETS should be the leading policy instrument of Europe’s climate and energy policy. Shell supports strengthening the system by means of cancelling allowances, a supply side mechanism (the Market Stability Reserve), review of the linear reduction factor; and an NER-type funding mechanism for the demonstration of low carbon technologies beyond 2015. Strengthening of the EU ETS in the absence of a global climate agreement requires the protection of industries exposed to carbon leakage through appropriate safeguards. Additionally, we support a coherent policy framework which takes into consideration and minimises any counter-balancing effects due to the overlap of policies from the headline targets for 2030. |
a) Business |
RWE AG Opernplatz 1 45128 Essen Germany Transparency Register identification number: 77608353460-77 |
Matthias Dürr +32 (0)2 777 05 40 matthias.duerr@rwe.com Jens Wiggershaus +49 (0)201 12 15593 jens.wiggershaus@rwe.com |
a) yes |
|
1) yes |
a) yes |
EU industry has substantially reduced emissions in the past. This has not been realized by re-locating production sites to non EU countries. Instead, enterprises have developed and implemented new low carbon production processes and products. Progress in this movement to a greener industry varies significantly between different EU Member States, industry sectors and companies. To a certain extent, this reflects the differing reduction potentials. On the other hand, extensive unexploited potentials have not been addressed so far. Furthermore, innovation and technological development were and are a key factor for industries in Europe to maintain competitiveness in global competition. And most of the companies that have been forged ahead with their GHG reduction efforts will further innovate in the future being able to reduce their emissions further. In addition the premise underpinning emissions trading is that different sectors and countries will have different rates of decarbonisation |
a) yes |
By putting a price tag on carbon emissions, as the EU ETS does, electricity becomes more expensive. To compensate for the increased costs of energy as production factor, it is economically reasonable for companies to reduce emissions and to reduce energy consumption. If prices for energy resources rise in the future, a low energy-intensity of European industry could turn out to be a competitive advantage. |
a) yes |
As long as no international agreement on climate protection has been achieved, companies in the EU face higher production costs than competitors in countries which have not implemented measures to reduce GHG emissions. In order to avoid the closure or re-location of companies or production sites due to missing profitability, industry sectors covered by the EU ETS should be compensated for the induced higher costs. This compensation should be limited to companies exposed to international competition and demonstrably unable to pass through these additional direct or indirect costs to their customers. To avoid carbon leakage not only across but also (and especially) inside of one sector compensations or any form of support should be fairly allocated and comparably granted. |
b) quite adequate |
Free allocation is one option to compensate companies for higher costs induced by the EU ETS. An assessment of this option depends on how free allocation is designed in detail. In particular what is meant by ‘enhanced free allocation’? |
b) it largely keeps the incentive |
That depends on the specific design of the free allocation. If it is based on historic emissions data, the market-driven stimulus to reduce emissions is identical for companies with and without free allocation. In case of a changed design, e.g. an ex-post allocation based on real emissions, the stimulus may be cushioned. |
b) quite proportionate |
|
f) I don’t know |
The share should not be higher than in 2013-20. In the target setting process for EU 2030 targets, effort sharing between different sectors will be discussed as well. The outcome along with the impact of any international climate change agreement should be considered when deciding on the budget dedicated to carbon leakage. In any case, sufficient share of allowances must be available by primary auctions for the majority of companies relying on auctions for compliance. |
d) there should be no such innovation support post-2020 |
R&D support for new technologies and new industrial processes, e.g. renewables and low carbon, is meaningful and necessary to help them reaching maturity and becoming cost-competitive. But support should be independent from the EU ETS and not be handed out in the form of free allocation, but in the form of financial means. |
b) no |
As stated above, support of new technologies and innovation in industrial processes is meaningful; but not within the framework of the EU ETS. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Support schemes for low carbon technologies should be financed by Member States’ auction or public budget. |
b) no |
Even in times of high CO2-prices in the EU ETS (2006, 2008) no significant amount of carbon leakage could be detected. This can be seen as an indication that the measures implemented to prevent carbon leakage have proven their reliability. As a compensation for (any) costs induced by EU ETS today is covered by free allocation and support for innovation to reduce emissions in the future is granted, no additional measures to prevent carbon leakage are necessary. Potentially, adjustments to the existing measures could be considered (see as well answers to questions 8 and 9). |
b) more carbon leakage categories should be defined |
The risk of carbon leakage can be assessed for specific companies as a clear yes or no for the foreseeable future. Others belong to a transitional area. The same is true, if the risk is assessed for sectors or sub-sectors, as done by EU commission when the carbon leakage list is set-up. Dealing with the transitional area could therefore be meaningful to avoid excluding sectors that are threatened by carbon leakage to a certain extent and to avoid over compensation to listed sectors with only minor risk of carbon leakage. The definition of a third category and its specific allocation rules may be one solution to take care of these partly affected sectors. |
a) the present criteria should remain |
Stakeholders are familiar with the current criteria which have also a positive track record. Maintaining of these criteria seems to be the obvious choice. In order to increase consistency and coordination of European climate and energy policy these criteria may be reviewed and slightly adjusted. Other criteria and sector lists do as well try to relieve sectors and companies from prohibitive burdens of European policies. A better alignment of the existing set of different criteria would be appropriate. One example is the recently published Guidelines on environmental and energy aid. These Guidelines contain a list of sectors eligible to receive “Aid in the form of reductions in funding support for electricity from renewable sources”. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
In general, the existing criteria have been successful in preventing carbon leakage. An adjustment could be considered, if an alignment of different criteria for relieve of sectors and/or companies from prohibitive burdens of European policies will be carried out (see as well answer to question 13). |
b) no, all criteria should be based on simple metrics and linked to clearly defined thresholds |
Companies need a stable framework for their investment decisions. One element of the needed stability is the knowledge, if a company’s sector belongs to a carbon leakage list in the future. If belonging to this list is dependent on qualitative criteria, companies will not be able to assess if they could receive a free allocation or similar reliefs for their investment projects. To increase predictability of EU commission’s about the carbon leakage list, an assessment on the risks of carbon leakage should be based mainly on quantitative criteria. To deal with sectors that stand on the brink it would be more suitable to define a third category in terms of exposure to the risk of carbon leakage (see as well answer to question 12). |
d) in line with the duration of ETS Phase 4 |
The question which sectors are exposed to the risk of carbon leakage and to which extent relieve (e.g. free allocation) should be granted to these sectors depends on the configuration of the ETS and the corresponding burdens. Therefore it makes sense to coordinate reviews of the ETS / decisions on the ETS‘ phases with the set-up of the respective carbon leakage list. A longer period of validity would also increase the certainty on the European framework relevant for companies’ investment decisions. |
a) the present approach of average of the 10% most efficient installations should remain |
The technological state-of-the-art should be taken into account for the decision on the extent of free allocation for individual companies. This could be done by using benchmarks. To examine the efficacy, a review of the benchmark approach may be recommendable. |
a) yes (please specify how often) |
To ensure a stable framework for investment decisions, it should be made transparent to all stakeholders when revisions take place. A schedule should be provided at the same time as other parameters of an ETS phase are defined. As a complete ETS phase of eight or more years may be considered as too long for a benchmark to remain unchanged, a revision of benchmarks could e.g. be scheduled after the first half of an ETS phase. |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
A definition of more timely base years is reasonable to incorporate changes in the production levels. It could also be considered to set the amount of free allowances year-by-year dependent on a rolling basis of base years for historical production provided this does not increase the overall level of free allocation. |
a) no, there should be no deviations |
Any special arrangements for specific installations are difficult to align with the general requirement of the carbon leakage criteria to be transparent, comprehensible and easy to predict. To address the problem of companies being more energy-/trade-intensive than their sector, it could be an option to shift from sector to a company level when assessing the risk of carbon leakage. |
a) no, the present approach should be maintained, i.e. that Member States can provide such compensation based on state aid guidelines |
The prices for energy in general and especially for electricity transport signals to customers. Consumption patterns and changes of these patterns are based on these signals, e.g. energy efficiency improvements are incentivized by genuine electricity prices. It is not meaningful to curb these signals in general. Of course, price increases could result in prohibitively high burdens for customers. Therefore it could be necessary and appropriate to grant some relieve for these customers. But energy costs for customers consist of lots of components which are not remarkably high considered individually. Additionally, these components differ significantly in their nature and extent from Member State to Member State. This taken into account, a harmonized compensation scheme may turn out to be unsuitable to consider all conceivable cases making national schemes the better choice. But it could make sense to provide Member States with guidance for the design of these schemes. |
Important |
Most important |
Less important |
Least important |
R&D support for new technologies and innovation in industrial processes, e.g. renewables and low carbon, is meaningful and necessary to help them reaching maturity and becoming cost-competitive. But market entry of a technology and final investment decisions for single projects should be driven mainly by market incentives. |
d) other |
The reduction of carbon emissions is in the interest of the whole society, which will profit from new developments and innovations in the field of low carbon technologies. Consequently, innovation support should be financed from the Member States’ auction or public budget. |
As long as no international agreement on climate change has been reached and competitors from different countries face disparate burdens from measures taken to reduce GHG emissions, it should be considered to relieve companies from these burdens e.g. by allocating free allowances. When this relieve is granted, over- as well as under-allocation has to be avoided. This can be guaranteed by an examination of real exposure to the risk of carbon leakage. Criteria could be e.g. being in international competition and being unable to pass additional carbon costs to the customer. But free allocation (or comparable measures) does not provide a solution in the long run, if other major emitting countries do not implement instruments to reduce GHG gases. Therefore, EU Member States should form an aligned position for the COP in Paris 2015 soon. Only a strong EU could be able to pave the way to an international agreement on climate protection. |
a) Business |
SABIC UK Petrochemicals Ltd |
S J Bryan SABIC UK Petrochemicals Ltd Wilton Centre Redcar Cleveland TS10 4RF UK tel: +44 1642 834180 email: steve.j.bryan@sabic-europe.com |
a) yes |
|
1) yes |
a) yes |
The European chemical industry comprises 29,000 companies, employs 1.2M people, contributes €500Bn to the EU economy and €42Bn to its balance of trade. The Industry has invested heavily in energy efficiency. Over 1990-2010, EU chemicals production grew 70% while energy consumption fell 20% and CO2 emissions fell 50%. CEFIC’s Chemical Industry Roadmap (2013) shows how the chemical industry can deliver further GHG reductions in Europe. With investment, innovation could reduce its GHG emissions by 15-25% from 2010 levels by 2030, building on the 49% reductions already achieved since 1990. The cost of energy is, and will remain, a key factor in determining the competitiveness of our sector: and high costs of carbon and of energy in the EU undermine that competitiveness. Preserving its international competitiveness is key to unlocking the investment that will deliver new and innovative solutions to the environmental challenges Europe and the World face. |
b) no |
The EUETS is a cap-and-trade system designed to apply an absolute and declining level of CO2 emissions on European energy-intensive manufacturers and power generators. It is not an instrument specifically designed or suited to encouraging energy efficiency. In competitive international markets with mobility of capital new capital-intensive capacity investments will primarily be directed towards areas capable of sustaining growth in unit output. Even where investments are capable of exploiting technological improvements in energy efficiency, the growth in unit output achievable within the confines of a declining absolute emissions cap is directly undermined by the rate of decline in that absolute cap. The reality is therefore that, in the absence of a fully embracing international climate agreement, the EUETS as it moves forward will prove a major disincentive for new investment in Europe and the attendant efficiency improvement that comes with it. |
a) yes |
The chemical industry operates in a global market place, with the prices of many of its product set on a competitive global basis. Many areas of the industry are, and will remain, energy intensive, and there are thermodynamic and economic limits to the energy efficiency of any process. Europe as a whole currently accounts for ~11% of global GHG emissions and that figure is set to decline to ~5% by 2030. Trends in the chemical sector will be broadly similar. It is self-evident from the foregoing that an innovating and investing European chemical industry will not be sustained if unilateral climate action and its accompanying costs are allowed to distort its competitiveness in Europe compared to other areas of the globe. Effective climate action requires global measures and equitable application. In the meantime, no climate benefit will be served by driving industry away from Europe, and transitional measures are therefore needed to address this threat. |
b) quite adequate |
Within the confines of a cap-and-trade scheme, free allocation is the right basic approach to the issue of carbon leakage. There are however serious design flaws in the current EUETS. Specifically, carbon leakage exposed companies still face too high a residual financial cost burden after free allocation due to the stringency of the allocation benchmarks and the further impact of the cross sectoral correction factor. In some instances, the latter will reduce allocation by 2030 to below the limit of what is thermodynamically possible. Additionally, levels of indirect (electricity) emission compensation in member states even where it is available can frequently be little more than 50% of actual impact for even mid-efficiency installations. The resultant scale of residual costs facing exposed industries which cannot be passed on in product prices represents a loss of funds which might otherwise be directed to innovation and investment and thus is positively hindering GHG abatement. |
a) it absolutely keeps the incentive |
So long as there is an external market value for CO2 the level of free allocation will not detract from the incentive to innovate as the opportunity value of reducing emissions will always be realizable, whether in lower residual purchases of allowances or the sale of increasing surplus. Indeed, and as is argued above, for sectors exposed to the threat of carbon leakage there is likely to be a positive correlation between increasing free allocation and the ability to innovate and invest. |
c) quite exaggerated |
We support the basic principle of benchmarking as the basis for determining free allocation. The design flaw of the current EUETS attached to the too stringent level of benchmarks has already been referred to. An additional fundamental flaw is the use of an ex ante production reference rather than ex post actual output linked to an overall scheme allocation cap, which is the approach SABIC and others have long advocated. This latter approach would have avoided much of the so-called ‘surplus’ build-up of allowances in Phase-2 of the scheme, would in principle remove the need for a Market Stability Reserve Mechanism under Phase-4 and would also remove the largest amount of the very considerable administrative burden associated with the capacity increase/reduction and partial cessation mechanisms under Phase-3. This latter issue is a very significant and costly burden to participants throughout the scheme. |
d) there should be no limit to overall free allocation to industry |
In parallel with its 2030 climate and energy framework the Commission has set out the need for a European industrial renaissance, with the aspiration of industry making and sustaining a 20% contribution to GDP by 2020 and beyond. Energy intensive and carbon leakage exposed sectors will be required to make their contribution if this growth objective is to be delivered. Within the overall confines of the EUETS cap it will remain necessary to support carbon leakage-exposed industries with on-going free allocation of allowances in order to sustain competitiveness in the absence of an effective and comprehensive global climate agreement. We would therefore not support further artificial constraints on free allocation in such circumstances. |
b) the same share as in Phase 3 |
As we anticipate that CO2 prices will be markedly higher in Phase-4 than has been the case in Phase-3 to date we would consider that retaining the same level of % allowances for CCS support will provide more than sufficient financial resource for the purpose. |
a) yes |
We would give qualified support to a proposal of this sort funded through the re-cycling of revenues from the auctioning of allowances. We would be concerned however to see that there is free and effective competition introduced as to the choice of technologies and applications. To this end, we could envision a scheme whereby industry is invited to bid for specific funding in support of specified abatement or efficiency targets. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
See response to Question 9. |
a) yes |
We believe it is necessary that the Commission address the current divergence and disparity in mechanisms for the compensation of indirect (electricity) CO2 costs faced by carbon leakage exposed sectors. Even where such schemes exist, compensation is only partial and will be subject to declining limits through the period up to 2020. We believe both the scale and degressive nature of the compensation is inadequate to address the scale of threat posed by this issue and would advocate the need for fundamental reform in this area. See also our answer to Question 4. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
The current tests for carbon leakage are largely arbitrary in the qualification thresholds set by the Directive. The more fundamental criticism however is that they are backward-looking, being based upon assessments of historic GVA impact and trade intensity. Neither of these tests is adequate for predicting and assessing the more fundamental threat of carbon leakage in the longer-term, which is that of new and re-investment being directed out of Europe in favour of other areas with less stringent emissions regulation. In advance of the implementation of a global climate agreement which is the only safeguard against structural leakage of this sort all European manufacturing industry should be treated on an equivalent basis with 100% free allocation against realistic median-performance benchmarks. |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
See the response to Question 13. We do not support the differentiation of industry sectors between exposed and non-exposed categories. |
b) other thresholds should be defined. Please specify below |
See the response to Question 13. We do not support the differentiation of industry sectors between exposed and non-exposed categories. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
See the response to Question 13. We do not support the differentiation of industry sectors between exposed and non-exposed categories. In the event that the Commission intends to maintain a distinction between exposed and non-exposed sectors, we consider the preservation of a discretionary qualitative set of criteria to be an important element in the design of any mechanism for assessing carbon leakage exposure. In particular, it wouldl allow the Commission to accommodate instances where qualification or otherwise may be marginal and/or where relevant industry data for the main metrics may me missing or of questionably reliability. We would also strongly advocate a capacity to examine industry at lower levels of aggregation that 4-digit NACE coding, as there are instances of sectors where areas of the GVA and trade intensity of some activities are diluted and masked by the less intensive activities of the wider group. |
b) longer (please specify) |
See the response to Question 13. We do not support the differentiation of industry sectors between exposed and non-exposed categories. In the event that the Commission intends to maintain a distinction between exposed and non-exposed sectors, we would advocate the following. The purpose of designating carbon leakage exposed sectors is to allow protection from damaging unilateral climate costs until such time as that need is obviated by the establishment and implementation of a global climate agreement regime of adequate stringency, equivalence and scope. The operational and investment certainty this provides will only be effective in forestalling carbon leakage if it is guaranteed on that basis. It is therefore not appropriate to link the duration of exposed status to a pre-determined time limit. Depending on the progress with the implementation of a global agreement, it may thereafter be appropriate and necessary to review the status of industry sectors on a case by case basis, |
c) the approach should be less stringent (please specify) |
Please see also our responses to Questions 4,5 & 6. For many energy intensive chemical processes the replacement value of major assets can be €0.5Bn and above. Planned asset lives are typically 30+ years. In combination with the cross sectoral correction factor, free allocation on the basis of the current benchmarks will move well beyond practical, and in some cases thermodynamic, limits by 2030. If effective protection from carbon leakage is to be provided, levels of free allocation will have to be set more directly aligned with installed performance, while still incentivising improvement. For these reasons we would favour reference benchmarks being set at around median industry performance, with allocation then linked to ex post production within the confines of an overall cap. |
b) no |
Please see our response to the previous question. Setting benchmarks on a performance basis well beyond that of most or all installed capacity will simply increase costs for all carbon leakage exposed operators that they are unable to pass on in product prices. It will therefore serve to undermine the effectiveness of that protection. The effectiveness of the EUETS as a mechanism to deliver a prescribed GHG reduction at minimum cost is provided by the overall cap and the external carbon price signal: it does not rely on further penalising of energy intensive manufacturing to deliver the desired outcome. |
c) other (please specify) |
Please see our response to question 6. We believe an ex post production reference in combination with an overall sectoral cap will lead to major improvement in the effectiveness of the EUETS mechanism, will ease significantly the administrative burden and will also address concerns as to the inter-temporal efficiency of the mechanism as a long-term instrument. |
a) no, there should be no deviations |
With the proviso of moving to an ex post production reference as set out in this response we would otherwise not support deviations from a general set of harmonised allocation rules. Such a move would threaten the introduction of distortions in competitiveness and competition, particularly if they were applied on an intra-sector basis or in response to local (economic) considerations. |
c) yes, in the form of additional free allocation |
We would favour free allocation above national financial schemes. |
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a) from the Member States' auction budgets |
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a) Business |
SAVOIA ITALIA SPA Via Ghiarola Nuova,77 41042 FIORANO MODENESE (MO) ITALY |
SIGHICELLI ANTONIO Via Ghiarola Nuova,77 41042 FIORANO MODENESE (MO) ITALY +390536838411 Tel ambiente.sicurezza@savoiaitalia.com |
a) yes |
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1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improvement |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010 |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. This would limit the list to sectors really exposed and would eliminate the risk of a carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
As explained above, all energy intensive sectors as defined in the Energy Taxation Directive should be considered as exposed to the carbon leakage risk. As an alternative, trade and carbon intensity criteria should be used considering the following elements. First, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS. Second, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
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a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
a) Business |
SECIL- Companhia Geral de Cal e Cimento,S.A. |
José Bravo Ferreira Apartado 71, 2901-864 SETÚBAL Portugal +351 932 566 445 bravo.ferreira@secil.pt |
a) yes |
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1) yes |
a) yes |
Over the last 20 years, in order to reduce GHG emissions in line with overall EU policy objectives, cement industry made investments that have driven down CO2 emissions from clinker production. Additionally, prepared a roadmap to go much further in the coming decades, what obliges to further investment and innovation and requires a return on investment above the cost of capital and a stable legal framework, with predictable CO2 pricing, that promotes the competitiveness of the sector and allows for a secure access to raw materials and affordable energy prices. 2030 targets have to take into account each sector specific roadmap |
b) no |
Cement industry is CO2, energy and material intensive. Focusing on energy efficiency, the power costs will be higher, which can imply lack of competitiveness of intensive energy industries vs importing. Although measures to decrease energy consumption and improve resources efficiency may be applied to reduce CO2 emissions, cement and lime industry are unique due to the fact that around 60% of total CO2 emissions from clinker production are released directly from limestone. These emissions come from raw materials themselves, not caused by energy use from fuel combustion. On the other hand, energy efficiency and CO2 reduction represents conflicting goals when looking e.g. at CCS. |
a) yes |
The cement industry needs a global level playing field, including for exports and imports, in order to direct investments to growth and jobs in Europe. To incentivize companies on further reduction of their emissions, predictability in carbon pricing is crucial as part of an overall industrial policy, as well as an adequate free allocations scheme, ensuring companies, namely those performing better than their sector Benchmark, to be competitive in the international arena (export market). This also applies to energy costs, representing 30% of operational costs (substantially higher than in the US, Russia and plants in North Africa). Beyond this, the maintenance of jobs (direct and indirect) will be at risk, particularly in sectors which have a local structure, that are using European raw materials and that have an important role in terms of local or regional employment and development (high level of regional or national added value). |
b) quite adequate |
As long as emissions do not have the same cost in different countries, a level playing field can be achieved most effectively by equalization measures such as free allocation. The limited evidence of leakage demonstrates that free allocation is working. However, it should not be assumed that free allocation is insulating operators from all of the ETS costs. Free allocation does not mean ‘full free allocation’ and some operators will face higher costs than others depending on the allocation base year activity. Furthermore, in the case of the cement sector, the indirect costs of ETS have not been selected for compensation in the Commission guidelines. Not only the cement industry is electrical energy intensive, is at risk of carbon leakage and is facing the full indirect costs of ETS as other directly competing construction materials sectors are on the contrary able to be compensated. |
a) it absolutely keeps the incentive |
Being free allocation based on benchmark, the incentive to invest is provided by the benchmark. Additionally, cement has one of the highest CO2 costs/GVA of any industrial sector so the residual effort is greater than in most sectors. Looking for a legal framework that fosters a competitive environment, cement industry has considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The EU cement industry has a relatively flat benchmark curve indicating that as a result of early actions and past investments in energy efficiency there is now a narrow gap between the best and the worst performers; this limited level of abatement potential makes the task of emissions reduction more difficult in the cement sector compared to many other sectors. |
b) quite proportionate |
Overall, the administrative burden is quite proportionate but the system is extremely disproportionate for small/trivial combustion sources. In many cases these minor sources were not part of the benchmarking exercise and should not be included in reporting. |
d) there should be no limit to overall free allocation to industry |
There should be free allocation if there isn’t an international agreement which places all competing manufacturers on an equal footing. Until certain conditions (namely rules in terms of verification and monitoring) can be met with regard to the veracity of the schemes within other countries then transitional arrangements need to be maintained. If a global agreement, between the great majority of Kyoto countries, including the largest emitters, is achieved, and only in this very case, there should be no free allocation to industry since the carbon leakage risk will then be eliminated. The share of allowances dedicated to free allocation has to be determined in function of the number of industrial sectors subject to carbon leakage risk and should be sufficient to avoid carbon leakage. That does not mean “a free ride for industry” but sufficient allowances for efficient producers. CSCF should be replaced by an adjustment to the auctioned amount to maintain the cap trajectory. |
e) I don’t know |
There are too many uncertainties on what the post 2020 allowances budget will be for the cement industry to be able to decide what share of the budget should be dedicated to such innovation support. The EU ETS does not encourage investment in new technology due to a continuous change of the rules of the game. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) yes |
To date, the NER 300 hasn’t been useful for cement sector. The power generation sector which is passing through investment costs has benefitted the most from the NER 300. The cement sector is not experiencing the same level of investment de-risking. The cement industry needs: an investment enhancing policy climate should encourage investments over long term (30 years) cycles in a capital intensive industry. Legal stability and CO2 price predictability are key to achieve this goal / Safeguards against price fluctuations in market based policy instruments; the objective of these instruments, if kept, should be clearly defined and not be prone to abuse for speculation purposes / An innovation policy which provides clear incentives for breakthrough technologies for CO2 reduction in a cost-effective way. Policy makers should consider hypothecation (earmarking) of revenues from allowance auctions and direct innovation support to those sectors facing the greatest abatement challenges. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Given the high costs associated with breakthrough technologies, funding from auctioning revenues should account for both capital and operational cost of projects. There should in addition be a ring fenced fund for the manufacturing industry. |
a) yes |
Cement industries considers the need of the following additional measures: An improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production, with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts / An adjustment to the overall cap to the auction amount or a sectoral cap with the inclusion of importers, in order to protect “carbon leakage” sectors’ competitiveness / However, a carbon pricing mechanism which is market-based and prone to wide fluctuations has a negative impact on effective investment / Cement industry is ready to explore mechanisms which deliver price stabilization and is ready to engage in a thorough reflection of a climate policy and energy policy that is fully integrated in a single industrial growth policy. |
a) the present two groups should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion (GVA) is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. |
a) the present criteria should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential. Therefore, the cost intensity criterion (GVA) is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. Nevertheless, as a static indicator trade intensity is of limited validity/conclusiveness. It is based solely on historic data and does not reflect future developments, i.e. resulting from changing cost patterns, at all. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion (GVA) is the most important of the current two criteria e.g. a complete loss of 30% of GVA is normally economically not acceptable for any industry or sector. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
EU trade and economic data is not always exact and its comparability with the EUITL CO2 data isn’t always appropriate so there will always be a need to hear special cases. These cases, even not on the scope of quantitative criteria, must be considered. |
d) in line with the duration of ETS Phase 4 |
It is essential for the predictability of the system to introduce as less changes as possible in the course of one ETS phase, which means that the list of sectors exposed to the risk of carbon leakage should be fully in line with the duration of ETS Phase 4. |
c) the approach should be less stringent (please specify) |
The benchmark would be calculated in a statistically solid way and be updated periodically to ensure predictability. It should be set at an ambitious but reasonable level and should not be distorted by statistical outliers. This can be achieved by defining percentile (e.g. 10%-percentile) or e.g. the average of a range including the 5% to 15% top performers of specific direct emissions (excluding the extreme outliers between 0% and 5%). Only this way, the benchmarking methodology will achieve sufficient statistical robustness for international application in ETS system. |
a) yes (please specify how often) |
Benchmark should be updated between two trading periods depending on each sector reduction potential, not during one trading period. One should also consider a special treatment for process emissions e.g. full free allocation as those emissions are not linked to energy efficiency and are irreducible by their very nature. Only when the technology CCS will be available, probably after 2030, the cement industry will be able to tackle this issue of process emissions. |
c) other (please specify) |
Allocation should be more dynamic. The sector has considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. Historic activity level (HAL) should be closely aligned to recent production to avoid surplus allocation e.g. the average of the preceding 3 years. The sector considers EcoFys study (Dynamic allocation for the EU Emissions Trading System, Enabling sustainable growth, 20 June 2014) and its allowances allocation reserve as an interesting step forward, in order to compensate CSCF elimination. Notwithstanding this, we should be cautious in approaching situations of cement market growth. If this situation is not duly tackled an installation might be forced to buy allowances to support this market growth during a certain year until it gets the compensation for its production increase the year after. |
a) no, there should be no deviations |
A more recent HAL e.g. preceding 3 years average has its potential downsides for installations that have extended shutdowns or breakdowns, provision will be necessary to deal with exceptional HAL circumstances. |
c) yes, in the form of additional free allocation |
Cement industry believes that EU Compensation should be granted for indirect emission impact where carbon leakage vulnerability is a combination of direct plus indirect emission cost. The compensation for indirect costs should be internalized in the ETD by providing free allocation for indirect CO2, in order to harmonize the procedure of compensation in Europe. |
Less important |
Important |
Most important |
Least important |
Cement industry regrets the focus on carbon capture and storage and believes that carbon capture and re-use should be considered in an equal footing. We believe that funding should be technology neutral. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) from the Member States' auction budgets |
|
As Cembureau members, we support the prepared position papers: “Post 2020 Climate and Energy Legislation - The cement industry's reflections on a post-2020 climate policy” and “Post 2020 Climate and Energy Legislation Proposal by the European Cement Industry”. In addition, cement industry believes that the debate on the MSR should not be carried out in isolation from the broader ETS structural reform. |
a) Business |
SIA CEMEX in Latvia |
Dr. Uwe Lubjuhn, Rupnicas iela 10, Broceni, LV-3851, Latvia Phone: +371 67033501 Mobile: +371 22846370 Email: uwe.lubjuhn@cemex.com |
a) yes |
|
1) yes |
a) yes |
The cement industry is fully committed to reducing GHG emissions in line with overall EU policy objectives. This has been demonstrated by investments over the past 20 years which have driven down CO2 emissions from clinker production and by our roadmap to go much further in the coming decades. To achieve this, industry needs to innovate and invest. This requires a return on investment above the cost of capital and a policy framework that promotes the competitiveness of the sector and allows for a secure access to raw materials and affordable energy prices. The cement industry in Europe needs a stable legal framework with predictable CO2 prices in order to justify and allocate scarce investment funds to realize CO2 emission reduction ambitions. 2030 targets have to take into account each sector specific roadmap. Differentiated levels of efforts are needed for different sectors (manufacturing industry, power, building, and transport) based on the ability to recover costs from customers. |
a) yes |
The EU ETS emphasis is GHG efficiency and in this regard it does put pressure on businesses to become more GHG efficient. In doing so EU ETS forces companies to implement improved technologies. This may help the industry to be competitive in the long term but in the short- and mid-term it must be taken into consideration that too aggressive goals will need too high investments wich may jeopardize competitiveness looking at non-EU cement imports. |
a) yes |
The EU has aspirations to be leading in CO2 emission reduction but globally unequal carbon pricing has the ability to shift trade patterns. In order to direct investments to growth and jobs in Europe, the cement industry needs a global level playing field, including imports and exports: climate change is a global problem that needs a global solution. EU policy can only incentivise companies to aggressively work on further emissions reduction if there is predictability in and equality in carbon prices and if it is part of an overall industrial policy ensuring companies to be competitive in the international arena. This also applies to energy costs. For cement, energy costs are especially important representing 30 % of operational costs with European costs being substantially higher than in the US, Russia and plants in North Africa. Transitional measures are needed to bridge the gap between the EU and other countries. Free allocation is the most effective transitional mechanism. |
b) quite adequate |
As long as emissions do not have the same cost in different countries, a level playing field can be achieved most effectively by equalising measures such as free allocation. The limited evidence of leakage and empirical studies demonstrates (see the report by Vivid Economics last June), in part, that free allocation is working. However, it should not be assumed that free allocation is insulating operators from all of the ETS costs as it does not mean ‘full free allocation’ because some operators will face higher costs than others depending on the allocation base year activity. Furthermore, the indirect costs of ETS have not been selected for compensation for cement in the Commission guidelines creating a distortion of competition with competitors. So, not only does the cement industry face the full indirect costs of ETS but competing construction sectors are able to be compensated for their additional costs related to indirect CO2. |
a) it absolutely keeps the incentive |
With free allocation based on benchmark, the incentive to invest is provided by the benchmark. The magnitude of the residual incentive is a function of carbon costs as a proportion of gross value added (GVA). Cement has one of the highest CO2 costs/GVA of any industrial sector so the residual effort is greater than in most sectors. In its search for a legal framework that fosters a competitive environment, CEMBUREAU has considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The EU cement industry has a relatively flat benchmark curve indicating that there is a narrow gap between the best and the worst performers; this limited level of abatement potential makes the task of emissions reduction more difficult in the cement sector compared to many other sectors. |
b) quite proportionate |
Overall, the administrative burden is quite proportionate but the system is extremely disproportionate for small/trivial combustion sources. In many cases these minor sources were not part of the benchmarking exercise and should not be included in reporting. |
d) there should be no limit to overall free allocation to industry |
There should be free allocation if there isn’t an international agreement which places all competing manufacturers on an equal footing. Until certain conditions can be met with regard to the veracity of the schemes within other countries then transitional arrangements need to be maintained. Free allocation is the most effective transitional arrangement. The share of allowances dedicated to free allocation should be sufficient to avoid carbon leakage. To uphold this principle that carbon leakage should be minimized, the cross sectoral correction factor should be replaced by an adjustment to the auctioned amount to maintain the cap trajectory. That does not mean “a free ride for industry” but it would mean that sufficient allowances are provided for the most efficient producers because at present the CSCF has the ability to reduce free allocation beyond what is technically possible. |
e) I don’t know |
There are too many uncertainties on what the post 2020 allowances budget will be for the cement industry to be able to decide what share of the budget should be dedicated to such innovation support. The EU ETS does not encourage investment in new technology. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) yes |
To date, the NER 300 has been ineffective at stimulating novel CO2 reduction projects in the cement industry. The power generation sector which is passing on investment costs has benefitted most from the NER 300. The cement sector is not experiencing the same level of investment de-risking. The cement industry needs - an investment enhancing climate should encourage investments over long term (30 y) cycles in a capital intensive industry. Legal stability and CO2 price predictability are key to achieve this goal - Safeguards against price fluctuations in market based policy instruments; which objectives, if kept, should be clearly defined and not be prone to abuse for speculation purposes - an innovation policy which provides clear incentives for breakthrough technologies in a cost-effective way. Policy makers should consider hypothecation (earmarking) of revenues from allowance auctions and direct innovation support to those sectors facing the greatest abatement challenges. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Given the high costs associated with breakthrough technologies, funding from auctioning revenues should account for both capital and operational cost of projects. There should in addition be a ring fenced fund for the manufacturing industry. |
a) yes |
In its search for a legal framework that fosters a competitive environment, CEMEX considers an improved ETS with a performance based free allocation for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions cost impacts. In order to protect “carbon leakage” sectors’ competitiveness, the system could foresee either an adjustment to the overall cap to the auction amount or a sectoral cap with the inclusion of importers. However, a carbon pricing mechanism which is market-based and prone to wide fluctuations militates against effective investment. CEMEX is ready to explore mechanisms which deliver price stabilization and global carbon price convergence. |
a) the present two groups should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price.One should consider a special treatment for process emissions e.g. full free allocation as those emissions are not linked to energy efficiency and are irreducible by their very nature. |
a) the present criteria should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. Nevertheless, as a static indicator trade intensity is of limited validity/conclusiveness. It is based solely on historic data and does not reflect future developments. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria e.g. a complete loss of 30% of GVA is normally economically not acceptable for any industry or sector. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
EU trade and economic data is not always exact and its comparability with the EUITL CO2 data not always appropriate so there will always be a need to hear special cases. |
d) in line with the duration of ETS Phase 4 |
It is essential for the predictability of the system to introduce as little changes as possible in the course of a trading period; hence the validity of the list of sector exposed should be in line with the duration of the ETS phase 4. |
c) the approach should be less stringent (please specify) |
The benchmark would be calculated in a statistically solid way and be updated periodically to ensure predictability. It should be set at an ambitious but reasonable level and should not be distorted by statistical outliers. This can be achieved by defining percentile (e.g. 10%-percentile) or e.g. the average of a range including the 5% to 15% top performers of specific direct emissions (excluding the extreme outliers between 0% and 5%). Only this way, the benchmarking methodology will achieve sufficient statistical robustness for international application in ETS system. |
a) yes (please specify how often) |
Benchmark should be updated between two trading periods depending on what has been achieved but not during one trading period. One should consider a special treatment for process emissions e.g. full free allocation as those emissions are not linked to energy efficiency and are irreducible by their very nature. |
c) other (please specify) |
In its search for a legal framework that fosters a competitive environment, CEMEX has considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The historic activity level (HAL) should be more closely aligned to recent production to avoid surplus allocation e.g. the average of the preceding 3 years. In this context, CEMEX considers the recently released EcoFys study (Dynamic allocation for the EU Emissions Trading System, Enabling sustainable growth, 20 June 2014) and its allowances allocation reserve as an interesting step forward. However, a more recent HAL has its potential downsides for installations that have extended shutdowns or breakdowns, provision will be necessary to deal with exceptional HAL circumstances. |
a) no, there should be no deviations |
A more recent HAL e.g. preceding 3 years average, has its potential downsides for installations that have extended shutdowns or breakdowns, provision will be necessary to deal with exceptional HAL circumstances. |
c) yes, in the form of additional free allocation |
CEMEX believes that EU Compensation should be granted for indirect emission impact where carbon leakage vulnerability is a combination of direct plus indirect emission cost. There is no need for two state aid guidelines and the compensation for indirect costs could be internalized in the ETD by providing free allocation for indirect CO2. |
Less important |
Important |
Most important |
I don't know |
CEMEX regrets the focus on carbon capture and storage and believes that carbn capture and re-use should be equally considered. CEMEX believes that funding should be technology neutral. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) from the Member States' auction budgets |
|
See full CEMEX position papers in the answer from CEMBUREAU to this questionnaire Annex - Post 2020 Climate and Energy Legislation - The cement industry's reflections on a post-2020 climate policy & POST 2020 CLIMATE AND ENERGY LEGISLATION PROPOSAL BY THE EUROPEAN CEMENT INDUSTRY In addition, CEMEX believes that the debate on the MSR should not be carried out in isolation from the broader ETS structural reform. |
a) Business |
SIAI SRL |
VIA MEDITERRANEO 40 86038 PETACCIATO (CB) 0875-67302 info@siailaterizi.it |
a) yes |
|
1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improvement |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies. |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. This would limit the list to sectors really exposed and would eliminate the risk of a carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
All energy intensive sectors as defined in the Energy Taxation Directive should be considered as exposed to the carbon leakage risk. As an alternative, trade and carbon intensity criteria should be used considering the following elements. GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS. Second, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥10%) should be introduced. |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
a) Business |
Siderúrgica Sevillana, S. A. |
Siderúrgica Sevillana, S. A. Autovía A-92 km-6 Polígono Industrial Hacienda Dolores 41500 Alcalá de Guadaira SEVILLA - España |
a) yes |
|
1) yes |
b) no |
Is really true for Steel producers sector. The reduction may be very small, in Europe we are working now with best efficient technology |
b) no |
Our installation is working according IPPC environmental regulation, we are less competitive than producers no EU ETS due to the direct and indirect CO2 cost. |
a) yes |
If the European Industry is not helped and supported, the steel production will move to non UE countries. |
a) very adequate |
EU producers must attend with the products a global steel market, but EU ETS scheme is a risk of delocalizing due to CO2 cost together with a "non harmonized" electricity cost compensation. |
b) it largely keeps the incentive |
CO2 emissions are directly joined to energy consumption, the industry is working very hard to reduce energy cost. |
c) quite exaggerated |
The templates must be simplified and specific for each sector. |
b) a higher share than in 2013-20 |
A new ETS should cover the risk of carbon leakage due to indirect CO2 cost for electricity consumption. |
e) I don’t know |
|
a) yes |
It must be without additional cost to the steel industry |
c) other types of funding (please specify) |
It must be a combination of funding sources, within and outside EU ETS |
a) yes |
An energy efficient installation should have no any extra cost due to ETS scheme. It should include the compensation for indirect electricity extra cost based on the marginal pass through cost to the electricity prices. Nowadays exist huge differences on the actual electricity compensation schemes in Europe. |
a) the present two groups should remain |
The actual list seems to be reasonable, the is an existing mechanism for including new sectors. |
g) I don’t know |
|
c) I don’t know |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
d) in line with the duration of ETS Phase 4 |
|
a) the present approach of average of the 10% most efficient installations should remain |
|
a) yes (please specify how often) |
Before every trading period |
c) other (please specify) |
The reference for allocation should be based on recent production. |
a) no, there should be no deviations |
|
c) yes, in the form of additional free allocation |
|
Most important |
Important |
Less important |
Least important |
|
e) I don't know |
|
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a) Business |
SLOVENSKÉ ELEKTRÁRNE (MEMBER OF ENEL GROUP) |
Slovenské elektrárne, a.s. Mlynské nivy 47 821 09 Bratislava 2 Slovenská republika Tel: +421 2 5866 1111 Fax 1: +421 2 5341 7525 Fax 2: +421 2 5341 7533 Email: infoseas@enel.com |
a) yes |
|
1) yes |
a) yes |
There is still large potential for decarbonisation as well as for improvement in energy efficiency taking place throughout the whole EU industry. Recent developments in ETS have not put ETS to the position of real decarbonisation and energy efficiency improvement driver. |
a) yes |
See Answer 1. Additionally we consider structurally reformed and well-functioning EU ETS as the key driver which can help to solve these problems. Then such ETS could promote investments into low-carbon innovation including implementation of next generation technologies. |
a) yes |
Properly set and justified transitional measures could contribute to find proper balance between fulfilling long-term reduction targets, avoiding carbon leakage and providing long-term incentives for EU industry sectors to develop the low-CO2 production patterns. |
b) quite adequate |
The adequacy shall be strictly linked to the fact that free CO2 allocation for carbon leakage sectors has to fully reflect business activity of the company to prevent windfall profits from free CO2 over allocation and has to motivate the company to behave more efficient. |
c) it largely compromises the incentive |
Free allocation as policy instrument actually provide incentives for relevant EU industry to innovate only in limited scale. As transitional tool it shall be improved with parameters mobilizing low carbon investments into sectors faced real global competitiveness. |
e) I don’t know |
Free allocation based on benchmarks brings some administration, however the most important is to set up this system with minimal administrative burden while keeping predictable and transparent framework. |
d) there should be no limit to overall free allocation to industry |
It is not a question of an exact figure (share), but the amount of free allocations for the carbon leakage purpose shall first of all fully reflect business activity of the companies and preventing windfall profits from free CO2 over allocation, what shall motivate the companies to behave more efficient. Sectors within the scheme of free allocations shall be identified so, that they are faced to real global competitiveness and factually endangered with carbon leakage. Carbon leakage should be strictly linked to the sectors which cannot pass carbon costs to final prices of their products due to exposure to global competition and their business activities would face the risk of significant reduction in the relevant geographical area. |
b) the same share as in Phase 3 |
Innovations are very important element of future development and successful operations of EU industry and thus it is important to have various financial toolkits supporting their practical implementation. Crucial is to follow the rational and effective utilization of incentives for innovation. On the other side the parameters and amount of these incentives shall not undermine the proper functioning of the market. Ex- post analysis of effectiveness and achievements should be carried out. |
a) yes |
See Answer 8. |
c) other types of funding (please specify) |
Various types of funding are possible, option a) and b) could be also envisaged. See also Answer 8. |
a) yes |
Trends in industrial development have to be seriously considered while taking in account carbon policy impact on it. If additional measures will be considered, it could not lead to over-compensating industry for emission reduction efforts. |
a) the present two groups should remain |
We consider actual framework with carbon leakage list as quite adequate and this approach we recommend to maintain also in post-2020 period. |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
The base for carbon leakage list shall be the already published list and relevant criteria in Guidelines on State aid for environmental protection and energy 2014-2020 (part dealing with Aid in the form of reductions in the funding of support for energy from renewable) which we recommend to follow while measuring risk of carbon leakage. On the top of that such list should exclude the sectors with NO real risk of the relocation of their production facilities to non EU ETS countries due to carbon costs (e.g. cement industry). |
b) other thresholds should be defined. Please specify below |
See Answer 13. |
b) no, all criteria should be based on simple metrics and linked to clearly defined thresholds |
No. Any kind of qualitative criteria could undermine proper functioning of ETS and endanger long term predictability of the system. |
d) in line with the duration of ETS Phase 4 |
We recommend to maintain carbon leakage list following the trading periods of ETS. However in extraordinary and justified cases some flexibility should be applied. |
d) I don’t know |
Application of benchmarks shall first of all fully reflect business activity of the companies and prevent windfall profits from free CO2 over allocation, what shall motivate the companies to behave more efficient. We support the idea to revise benchmarks in reasonable time periods taking in account technological state of art and innovation cycles within different sectors. |
a) yes (please specify how often) |
See Answer 17. |
c) other (please specify) |
In order to avoid using CO2 policy as a costly industrial support system (over-compensating industry for emission reduction efforts), the most accurate production data should be used for Phase 4 free allocation calculation. We support the idea to continuously follow the production data development in time and adjust the amount of allowances allocated freely according the verified data. |
d) both b) and c) |
Yes, but deviations shall be justified and based on transparent quantitative criteria and applied in advance in proper time, what might help to keep system more flexible. The necessity to avoid over-compensation for industry shall be taken in consideration. The production data development in time shall be continuously monitored for ensuring the adjustment of the amount of allowances allocated freely according the verified data. |
a) no, the present approach should be maintained, i.e. that Member States can provide such compensation based on state aid guidelines |
Post-2020 State Aid Guidelines could contain measures which should be used for the carbon leakage problem solving and protecting only real energy intensive consumers facing competition at global level. Such compensation for indirect emissions might be : ð to allow MS in some extent to compensate domestic industry for costs incurred due to increased electricity prices caused by the EU ETS ð financial and tax benefits could be granted to carbon leakage sectors on a project basis for mitigation of low-carbon technology development and diffusion, CCS development, GHG measuring and management, renewable energy and energy efficiency, other climate change adaptation measures ð support for “contracts for closure” programmes to speed and soften transition to low-carbon generation |
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According our opinion support for innovation is needed in all stages of innovation cycle, otherwise the deployment of innovative technologies into the practice will be under risk. |
c) from both |
We recognise both options as feasible and important, their targeted application must be based on transparent and non-discriminatory criteria with primary objective to support decarbonisation goals as well as to promote research, development and deployment of innovative decarbonisation technologies. |
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a) Business |
SMA Mineral AB: a member of EuLA |
Box 329, 68234 Filipstad Sweden +46706349363 robert.grasberg@smamineral.com |
a) yes |
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1) yes |
b) no |
Around 70% of the total CO2 emissions generated in lime production are "process emissions": they come from our raw material, limestone. These process emissions cannot be avoided without changing the quality of the final lime product which is however essential to serve specific applications. Currently, the most energy efficient kiln is near the thermodynamic minimum required for the chemical reaction needed for producing lime. The heat of the reaction for typical quicklime quality is 3.03 GJ/tonne, and the average fuel use 4.25. The energy consumption of the best available lime kiln (a Parallel Flow Regenerative Kiln, PFRK) is between 3.2 and 4.2 GJ/tonne. This type of kiln is already the most widely spread kiln technology today. However, one should keep in mind that horizontal rotary kilns (less energy efficient) provide a certain quality of lime and permit to optimize the extracted limestone due to their ability to treat the different sizes of stones. |
b) no |
The EU ETS will only remain the best solution for reducing CO2 emissions as long as the GHG reduction target is set at a level which is both technically and economically feasible. The current economic crisis and the further shrinking of the demand for lime products makes that there is at the moment a lot of “idle” production capacity in the EU. These installations are completely amortized which makes production in these installations cheaper than in a new one. A higher carbon price would not be a solution, as it would only draw money away from producers without enabling them to make an investment. When assessing the potential further ETS amendment in a sector, it is necessary to take account of the lifespan and replacement rate of kilns. Most of the time, investments costs always assume an investment in a new capacity (replacing the old capacity before its end of life). However, for the lime sector, kilns receive big maintenance periodically. |
a) yes |
Carbon Leakage will remain a big concern after 2020 in the absence of an international agreement putting forward a similar CO2 burden. EuLA believes that all energy intensive industries should be protected against carbon leakage, and that any increased level of ambition of Europe towards 2030 should lead to increased and not decreased protection against carbon leakage. Furthermore, the EU ETS is NOT addressing the following concerns: - The GHG reduction deficit (shortage of free allowances even for the installations with the best GHG performance. - Energy costs represent on average 40% of the lime industry’s manufacturing costs. Having access to energy at a reasonable cost is an essential condition for operating in the EU and for maintaining lime's competitiveness. - Further adequate incentives for low carbon investments is needed, with auctioning revenues being targeted for low carbon investment toward the industry |
c) quite inadequate |
The current carbon leakage mitigation measures do not take into account of: The importance of CO2 embodied in imports A unilateral reduction of CO2 emissions in Europe will not help fighting against climate change if a subsequent rise of imports from third countries is created. Carbon Trust, amongst others, demonstrated that the reduction in production-related CO2 is largely compensated by CO2 embodied in imports. The cumulative burden of the EU framework Several other EU legislations have an impact on the EU's industry competitiveness (renewables, energy efficiency). The Commission should ensure an integrated approach with no overlap. Energy costs Energy costs represent on average 40% of the lime industry’s manufacturing costs. Like for any energy intensive industry, having access to energy at a reasonable cost is an essential condition for operating in the EU and for maintaining its competitiveness. |
b) it largely keeps the incentive |
It is important to remind that the Commission has calculated product specific benchmarks based on the average GHG emissions of the 10% best performers. A comparison of these benchmark values with the minimum values that are technically feasible shows that the remaining potential in some sectors, like lime, is actually quite low. The current best available and most energy-efficient kilns (the Parallel Flow Regenerative Kiln, PFRK) is close to the thermodynamic minimum required for the chemical reaction needed for producing lime. In other words, no further breakthrough technologies in energy efficiency are expected. The drive towards the most energy efficient solutions can easily be explained by the fact that energy costs represent on average around 40% of the lime sector’s production costs. Outside the deployment of a commercially and technically feasible Carbon Capture and Storage solution, there is little margin for further CO2 abatement in the lime sector. |
c) quite exaggerated |
Lime is the most impacted sector by the EU ETS. The production of 1 tonne of lime generates 1 to 1.6 tonne of CO2. This means that the EU ETS has a strong impact on the sector, up to 35% of impact of the CO2 costs on Gross Value Added (Hourcade et al, 2008). Therefore, the full impact of carbon costs would have serious consequences in terms of carbon leakage for the lime industry. While the lime industry advocates in favor of less red tape and less administrative burden, it recognizes the importance of the free allocation for maintaining a competitive industry in the EU. |
d) there should be no limit to overall free allocation to industry |
There is still a need today for an international climate agreement that would bring a level playing field to EU manufacturing companies. In the absence of such agreement, and considering that several countries in the EU neighborhood are not following the EU’s climate leadership, there should be no limit to the overall free allocations to the industry. Furthermore, EuLA believes that all energy intensive industries should be protected against carbon leakage, and that any increased level of ambition of Europe towards 2030 should lead to increased and not decreased protection against carbon leakage. The most GHG Efficient installations should receive 100% of their needs for free. The industry cap should be adjusted so that the CSCF and linear reduction factor do not reduce the free allocations. |
c) a lower share than in Phase 3 |
It seems that the current state of efforts regarding the development of CCS (including the NER 300 program) will not reach the ambition to develop, by 2020, a commercially and technically available solution for the capture and storage of carbon. In 2012 TNO calculated for EuLA the costs of capturing CO2 at different kinds of lime kilns. For the state-of-the-art solvent (MEA) costs to capture CO2 were €94 per ton of avoided CO2. The cost to capture CO2 would more than double the production costs of around €60/ton lime. Currently, lime plants are typically located right next to the deposit, not clustered in large industrial agglomerations. Transport costs from the capture to the storage can add significantly to the capture costs. This is why EuLA believes that further R&D is necessary, but that it should be funded via a mobilization of different sources including auctioning revenues but not the new entrants' reserve. |
a) yes |
The auctioning revenues should be used to encourage low carbon investments. As a general principle, revenues should go back to industry to enable investments in low carbon solutions. Part of the revenues could for example be used to provide cheaper loans for low carbon investments in installations falling under the EU ETS. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The auctioning revenues should be used to encourage low carbon investments. As a general principle, revenues should go back to industry to enable investments in low carbon solutions. Part of the revenues could for example be used to provide cheaper loans for low carbon investments in installations falling under the EU ETS. |
a) yes |
EuLA strongly favors a level playing field within the EU and outside Europe. This is why EuLA believes that the EU should maintain its efforts to achieve an internationally accepted and legally-binding agreement proportionate to the burden in the EU. In the absence of such agreement, the EU should safeguard the competitiveness of the EU industry with any appropriate measure. EuLA has serious doubts that the current legal framework will ensure a level playing field beyond 2020. |
a) the present two groups should remain |
EuLA believes that no further complexity and calculations should be added to an already complex scheme. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
1. Share of carbon costs in the GVA should be maintained 2. Trade intensity should take especially into account the trade with EU's neighborhood In an internal survey realized by the lime sector (NERA " Energy and transport cost comparison of the EU lime industry to 10 non-EU regions"), it has been established that the threat for lime producers mainly come from the EU neighbor countries such as Russia, Maghreb and Middle east. 3. Energy / climate requirements in Free Trade Agreements should be taken into account “Energy and climate” clauses should be part of any Free Trade Agreement, especially if the trading partner in question has not assumed any carbon reduction commitments. 4. Fuel mix price should be taken into account Finally, EuLA recommends that the EU defines an affordable and available “fuel mix” for 2030, assesses its accessibility and compares its costs with the costs of the fuel mix used by the main EU competitors. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
It is important to point out that the revision of NACE code list (v2) implied that the assessment of the carbon leakage criteria for the lime sector is now done at a new disaggregation level, which includes not only lime but also plasters and aggregates. EuLA believe that this assessment should be done at the appropriate level of disaggregation, since that the industrial activities that are included in the NACE v2 code for lime do not share the same fundamentals (in terms of energy intensity and carbon intensity for instance). |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
EuLA believes that it is important to maintain a certain level of discretion in the system for justified cases. This concerns both the qualitative criteria and the possibility to conduct the assessment at the appropriate level of disaggregation (Prodcom 8). |
b) longer (please specify) |
The time validity of the list of sectors exposed to carbon leakage should take into account the investment cycles of the industry. It is also necessary to take account of the lifespan and replacement rate of kilns. Most of the time, investments costs always assume an investment in a new capacity (replacing the old capacity before its end of life). However, for the lime sector, kilns receive big maintenance periodically. It is therefore important to ensure that the investments made now will not become "stranded assets" in the future due to an unexpected change in the carbon leakage list. Furthermore, any trade intensity assessment for the carbon leakage list should take into account the impact of trade with EU neighbouring countries. |
a) the present approach of average of the 10% most efficient installations should remain |
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a) yes (please specify how often) |
The most GHG efficient producers have to be defined with ambitious, fact-based and realistic benchmarks to be periodically reviewed per commitment period so as to reflect technological progress and uptake of new proven technologies in the EU. It is however important to understand that the technological state of the art is not representative of what can be achieved in practice. Lime characteristics are so vast that multiple uses can be done from the same material. It is also highly dependent of the stone quality from the quarry. The benchmarks should only take into account innovations that have been proved to be commercially viable and that can be implemented on site. |
c) other (please specify) |
In the case of the current ex-ante system, the reference year should be adapted, and the baseline should be a longer period without offering a choice between different periods, and not known in advance. However EuLA believes that free allocation should reflect economic reality per installation based on the most recent years and should not be frozen by historic production. In this regards, EuLA suggest to the European Commission to start working on the development of a dynamic system that could replace the current system, under the condition that no correction factor (CSCF) should be applied in addition to a dynamic system. Also, such system should take into account the administrative burden, the robustness of the control of the declared production, and the confidentiality of commercially sensitive information. |
a) no, there should be no deviations |
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d) yes, in the form of financial compensation at EU-level |
EuLA defends a Full off-setting of CO2 costs pass through in electricity prices with a harmonised approach in all EU Member States. |
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a) from the Member States' auction budgets |
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a) Business |
Solvay SA |
Mr Johan Van Regemorter - 310 Rue de Ransbeek Bruxelles 1120 BELGIUM (+32) 2641457 |
a) yes |
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1) yes |
b) no |
Solvay is already reducing its GHG emissions wherever it makes sense technologically and financially. There are thermodynamic limits and some technological breakthrough needed for beyond 2020 that have not yet been invented. Moreover this potential innovation ought also to be commercially viable to be implemented. |
b) no |
The ETS system is the most efficient scheme for driving industry GHG emissions. However it adds costs to the European industry only, and doing so, it worsens the European industry competitiveness towards third countries. It should also be noted that the elements enhancing energy efficiency performance are not always the same to reduce carbon emissions. For instance, switching from natural gas to biomass will improve the carbon footprint, whilst worsening the energy efficiency performance. |
a) yes |
The measures must not be transitional but stable for the period until a level playing field of climate policy costs is achieved. |
b) quite adequate |
Free allocation is one of the necessary tools to address carbon leakage and it should encompass all effects of carbon costs like indirect emissions and low carbon price effects. |
a) it absolutely keeps the incentive |
The free allocations are based on ambitious benchmarks (10% bets) which maintain the incentive to innovate in emissions reductions. |
a) absolutely proportionate |
Currently benchmarks are set and are not difficult to apply. However establishing benchmarks was a complex exercise therefore doing the whole exercise once again should be avoided by all means. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage its share should be sufficient to avoid carbon leakage. An efficient producer in the EU must not have any competitiveness disadvantage compared to his competitors in third countries. |
d) there should be no such innovation support post-2020 |
Such support system is not adequate to finance non-competitive technologies as well as research programs. ETS is an instrument that must curb emissions at the lowest costs for participants. Dedicated funds, independent from the price of carbon, already exist for research and innovation projects in Europe. |
b) no |
ETS is not the right instrument for financing, through a specific support scheme, expensive or uncompetitive technologies. All ETS revenues from auctioning should simply be given back to industry for supporting the transition to a low carbon economy. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggest spending at least 50% of the auctioning revenues for this purpose. This 50% share should first be secured for industry through a compulsory mechanism and possibly become 100% share. |
a) yes |
Additional measures must include free allocation for indirect emissions, free allocations based on actual production (dynamic allocations) rather than historical ones, no cross sectoral correction factor for sectors exposed to carbon leakage, use of offsets (international credits). |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
The whole value chain is concerned by carbon leakage therefore the absence of any list would simplify the process since today almost 95% of the sectors are anyway included in the list. Moreover, it would reinforce the legislative predictability which is an important factor for securing investments in Europe. |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
Any manufacturing company subject to ETS must be protected against carbon leakage. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
For the sake of simplicity, administrative burden and full understanding by all, we should not change the parameters unless they would become obsolete by having all sectors listed as carbon leakage sectors. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
For some sectors heavily exposed to international competition (for instance PVC) the quantitative criteria might not be sufficient to reveal their particular situation. It then requires a qualitative assessment to justify the cases. |
b) longer (please specify) |
Longer and at least for the duration of phase 4. Industry needs the longest legislative predictability possible and preferably in line with the average industrial investment cycle (several decades). |
b) the approach should be more stringent (please specify) |
There should be no system (cross sectoral correction factor, linear reduction factor) that implicitly circumvent the level of benchmarks by reducing the allocation below this level leading to unrealistic values. |
b) no |
Legislative predictability is very important to keep industry investing in Europe. Moreover early movers would be discouraged to invest since it would contribute to decrease their benchmark and it would make them loose their payback on the investment. |
c) other (please specify) |
Frozen ex-ante allocation does prevent growth of the industry. A dynamic system with a rolling basis should be the system of choice to accompany the economic situation. |
a) no, there should be no deviations |
Harmonised rules must be kept in order to avoid any case of competition distortion |
c) yes, in the form of additional free allocation |
Free allocations for indirect emissions will avoid the current situation of diverging national approaches leading to competition distortion |
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The most difficult stage is usually to finance a successful large scale pilot |
a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This 50% share should first be secured for industry through a compulsory mechanism and possibly become a 100% share. ETS is not a scheme designed to finance members state budget deficit. |
Growth and competitiveness of the EU industry is of paramount importance for investments and jobs in the EU and should be at the top of criteria when assessing any change to the ETS. |
a) Business |
SSAB EMEA AB |
Tomas Hirsch 781 84 Borlänge Sweden |
a) yes |
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1) yes |
a) yes |
In steel industry, reduction of emissions towards 2020 may be achieved through increased efficiency by investments in known technology with current production levels. To maintain capacity in production equipment, it is essential to be able to vary production levels according to the economic situation. This is difficult with the current layout of EU ETS, resulting in increased cost on marginal products due to the cap on free allowances. This may lead to decreased investments, a slow dismantling of production capacity, and thus reduces production, which will be taken up by producers outside Europe. The incentive for increased production must be improved. In a longer perspective break through techniques are needed to significantly reduce emissions. |
b) no |
The EU-ETS is an extremely laborious system which was intended to be a market system, but is changed by EU and governmental authorities, leaving companies with high energy costs and plans for reduction of production to meet EU emission targets. This decreases the competiveness of the Swedish steel industry and the steel industry in Europe as a whole. The steel industry is energy intensive and constantly works to be more energy efficient. Energy efficiency is not always the same as CO2 efficiency. Investments also have to result in total positive return to increase the competitiveness. ETS increases the costs for industry and thereby reduces the financial possibilities for investments in energy efficiency. |
a) yes |
By pushing tough legislation in Europe, companies with world-wide sales become less competitive, if other countries do not follow fast enough to create a level playing field on the market. Therefore it is important to provide measures making it possible to keep competitiveness until a global agreement, with relevant commitments, is achieved. |
a) very adequate |
Carbon leakage is not a fictive construction, it is reality. Companies seldom "move" but lack of investment and in the end closure of industry in Europe, is a threat to the global greenhouse gas reduction scheme, if less efficient industry in countries outside Europe wins the race. Free allocation creates space for companies within Europe to make necessary investments and changes. Sectors at risk of carbon leakage should be provided with 100% free allocation, based on realistic benchmarks and without any correction factor. In Sweden the electricity cost increase due to EU-ETS not being compensated, which affects the energy intensive industry´s competiveness. Such compensations should be handled in a harmonized manner at EU level. |
a) it absolutely keeps the incentive |
The steel industry is extremely aware of the necessity to decrease the greenhouse gas emissions. The free allocation is, however, needed to create time to develop new techniques for lower emissions and doing the right investments, in order to stay competitive over time. The steel industry in Sweden has high ambitions for emission reductions in a longer perspective, including development of specialized products for globally improved climate efficiency. Increased cost due to lower free allocation does not incentivize such a development. |
d) absolutely exaggerated |
The process of getting free allocation and reporting CO2 emissions is extremely laborious. The changes which are implemented regularly, not enough information available in time and short time spans to act, add additional burden and uncertainty for strategic decisions. |
d) there should be no limit to overall free allocation to industry |
We prefer that the post-2020 free allowances are based on CO2 intensity for the carbon leakage industries and not an absolute cap. The methodology for free allocation needs to give possibilities for increased production, which is also covered by free allowances in relation to efficiency. Staying competitive on the world market is crucial for European industry. Without industry the welfare of the EU union will decrease and create a downward spiral, leaving little room for investments and development. Growth is therefore essential for continuing competitiveness. |
a) a substantially higher share than in Phase 3 |
Finding and testing technological solutions to decrease greenhouse gas emissions is of vital importance for the society. Making funds available for this as a part of the ETS system makes sense. The problem is that the support is linked to the allowances, which have an unknown value. The support has to be changed to a certain amount of money and may be financed in another way. A demonstration plant for CCS is a huge investment, which has to be almost completely subsidized by authorities, not requiring pay back if it fails. |
a) yes |
Just as renewable energy is a part of the solution of reducing greenhouse gas emissions, the development of industry is. Supporting industry development in terms of funds for research, innovation and pilot testing is a good way of making it easier to make informed and successful investments. Since industrial investments, such as in the steel industry, are very long-lived, it is important to dare to make large investments in Europe. |
c) other types of funding (please specify) |
The funding should be robust with a fixed volume of money rather than allowances. A variety of funding sources could be used. |
a) yes |
It is important for all countries to compensate for the increased energy cost due to the ETS system, which also is a source of decreased competitiveness. The compensation for indirect costs should be handled in a harmonized manner within EU |
a) the present two groups should remain |
It is important to have a reasonably simple and transparent system. |
a) the present criteria should remain |
The major focus at all times must be to keep or increase the competiveness of the European industry. When a cost cannot be transferred to a customer, competitiveness is lost. This includes products with international competition, even if trade intensity currently might be low. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
There will always be companies with production that does not fit into the bulk of the relevant sector. For these companies there should be a possibility to argue a case built on qualitative criteria. |
d) in line with the duration of ETS Phase 4 |
It makes sense to have an alignment between the ETS phase duration and criteria for carbon leakage to maintain reasonably stable conditions for industry. |
a) the present approach of average of the 10% most efficient installations should remain |
In the present approach, product groups include a variety of products; hence the benchmark is not technically achievable for all producers, especially for high quality products. More specialized benchmark groups might, however, make the system more complicated. Therefore the approach should not be more stringent. The benchmark for hot metal is today not set according to the 10% approach, and is thus not achievable for any producer and should be corrected. The benchmark for heat is clear, but the implementation of allocation rules for using heat differ between countries e.g. in Sweden early adopters using heat to increase their energy efficiency get less allocation than companies in other countries who don’t. |
a) yes (please specify how often) |
Not to get stuck in old technology, the benchmarks have to be revised on a regular basis. However, to do this more often than the trading periods makes no sense, as investments in our sector are long-term and often very expensive. Ten years is a minimum span between revisions of the benchmark. The revision should be based on actual industry performance within EU. |
c) other (please specify) |
It is necessary for the ETS system, and the industry, to allocate emission allowances based on actual production and not historic. This would allow for both economic growth and recession, without negatively influencing the ETS-system. |
a) no, there should be no deviations |
Favoring one installation on the expense of another should not be done. That would distort the competition |
d) yes, in the form of financial compensation at EU-level |
Compensation for increased electricity costs is an example of how different countries can influence the competitiveness of their industry by making different decisions. In a harmonized system also compensations should be fully harmonized at EU-level. Since the auctioning revenues are different in different countries, it is better to make a financial compensation at EU-level. |
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Large scale pilots are the hardest to find financing for, and for such an important area it makes sense to make some funds available. |
a) from the Member States' auction budgets |
Auctioning revenues may be used for funding low-carbon innovation support at EU level, instead of being used for various purposes on national level. |
The steel industry in Sweden has set up a vision for 2050, where we make the following commitments: Our research and innovation revolutionize technology for tomorrow´s society. Our steel constantly challenges the frontiers of engineering. Our working environment fosters new solutions for communities through global collaboration. Our creativity constantly challenges the limits of contemporary thinking. Our production uses resources so efficiently that only products of value to the community leave our plants. Our ambition constantly challenges the limits of the possible. We work very hard to reduce greenhouse gas emissions, but cannot do it on our own. We need to work together in the society to set up conditions for reducing emissions without losing competitiveness. On the contrary we need to increase competitiveness, to be able to continue to develop sustainable solutions for the whole world. This requires research and legislation which does not distort competitiveness on the market |
a) Business |
Stainless steel industry Outokumpu Stainless AB Sweden Business ID: 556001-8748 |
P.O. Box 74, SE-774 22 Avesta, Sweden Visiting adress: Bergsnäsgatan 11, Avesta +46(0)226-81000 Simon.Bengtsson@outokumpu.com |
a) yes |
1) yes |
a) yes |
In steel industry reduction of emissions towards 2020 may be achieved through increased efficiency through investments in known technology with current production levels. To maintain capacity in production equipment it is essential to be able to vary production levels according to the economic situation. This is difficult with the current layout of EU ETS resulting in increased cost on marginal products due to the cap on free allowances. This may lead to decreased investments, a slow dismantling of production capacity and thus reduces production. The incentive for increased production must be improved. In a longer perspective break through techniques are needed to significantly reduce emissions. |
b) no |
The EU-ETS is an extremely laborious system which was intended to be a market system, but is changed by EU and governmental authorities, leaving companies with high energy costs and plans for reduction of production to meet EU emission targets. This decreases the competiveness of the Swedish steel industry and the steel industry in Europe as a whole. The steel industry is energy intensive and constantly works to reduce energy use. Plants reducing iron ore are not given time to develop CO2-neutral technology and even plants which use best available technology face danger of losing competitiveness on the world market. If adding the insecurity of electricity supply within Europe in the future, the conditions for development and investment in the steel industry in Europe are very unfavorable. Energy efficiency is a continuous work within energy intensive industry. |
a) yes |
By pushing tough legislation in Europe, companies with world-wide sales become less competitive, if other countries do not follow fast enough to create a level playing field on the market. Therefore it is important to provide measures making it possible to keep competitiveness until global agreement, with relevant commitments, is achieved. |
a) very adequate |
Carbon leakage is not a fictive construction, it is an reality. Companies seldom "move" but lack of investment and in the end closure of industry in Europe is a threat to the global greenhouse gas reduction scheme, if less efficient industry in countries outside Europe wins the race. Free allocation creates space for companies within Europe to make necessary investments and changes. In Sweden the electricity cost increase due to EU-ETS is not compensated, which affects the energy intensive industry´s competiveness worldwide. |
a) it absolutely keeps the incentive |
The steel industry is extremely aware of the necessity to decrease the greenhouse gas emissions. The free allocation is though needed to create time to develop new techniques for lowered emissions and in the meantime do the right investments in order to stay competitive over time. The steel industry in Sweden has set targets for emissions which exceed the targets of EU and is therefore does not need tough legislation to get incentives. |
d) absolutely exaggerated |
The process of getting free allocation and reporting CO2 emissions is extremely laborious and time consuming. The changes which are implemented regularly, not enough information available in time and short time spans to act, add additional burden. |
d) there should be no limit to overall free allocation to industry |
The methodology for free allocation needs to give possibilities for increased production, which is also covered by free allowances in relation to efficiency. Staying competitive on the world market is crucial for European industry. Without industry the welfare of the EU union will decrease and create a downward spiral, leaving little room for investments and development. Growth is therefore essential for continuing competitiveness. |
b) the same share as in Phase 3 |
Finding and testing technological solutions to decrease greenhouse gas emissions is of vital importance for the society. Making funds available for this as a part of the ETS system makes sense. |
a) yes |
Just as renewable energy is a part of the solution of reducing greenhouse gas emissions, the development of industry is aswell. Supporting industry development in terms of funds for research, innovation and pilot testing is a good way of making it easier to make informed and successful investments. Since industrial investments, such as in the steel industry, are very long-lived it is important to dare to make large investments in Europe. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
In this sense it is purposeful to equate the importance of the industry to energy generation. |
a) yes |
It is important for all countries to compensate for the increased energy cost due to the ETS system, which also is a source of decreased competitiveness. The compensation for indirect costs should be handled in a harmonized manner within EU. |
a) the present two groups should remain |
It is important to have a fairly simple and transparent system. |
a) the present criteria should remain |
The major focus at all times must be to keep or increase the competiveness of the European industry. When a cost cannot be transferred to a customer competitiveness is lost. This includes also products with international competitors though trade intensity currently might be low. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
There will always be companies with production that does not fit into the bulk of the relevant sector. For these companies there should be a possibility to argue a case built on qualitative criteria. |
d) in line with the duration of ETS Phase 4 |
It makes sense to have an alignment between the ETS phase duration and criteria for carbon leakage to maintain a reasonably stable conditions for industry. |
a) the present approach of average of the 10% most efficient installations should remain |
In the present approach product groups include a variety of products hence the benchmark is not technically achievable for all producers especially high quality products. More specialized benchmark groups might though make the system more complicated. Therefore the approach should not be more stringent. The benchmark for hot metal is not set according to the 10% approach and is thus not achievable for any producer and should be corrected . |
b) no |
Investments in our sector are long-term and it is impossible to change rules along the way and to force new investments of major kind for every ETS phase. Industry could not comply with that. |
c) other (please specify) |
It is necessary for the ETS system and the industry to be allocated emission allowances based on actual production and not historic. This would allow for both economic growth and recession, without negatively influencing the ETS-system. |
a) no, there should be no deviations |
Favoring one installation on the expense of another would be a distort of the competition. |
d) yes, in the form of financial compensation at EU-level |
Compensation for increased electricity costs is an example of how different countries can influence the competitiveness of their industry by making different decisions. In a harmonized system also compensations should be fully harmonized at EU-level. Since the auctioning revenues are different in different countries it is better to make a financial compensation at EU-level. |
Important |
Least important |
Most important |
Less important |
Large scale pilots are the hardest to find financing for and for such an important area as this it makes sense to make a decent amount of funds available. |
a) from the Member States' auction budgets |
Auctioning revenues may be used for funding low-carbon innovation support at EU level instead of being used for various purposes on national level. |
The steel industry in Sweden has set up a vision for 2050, where we make the following commitments: Our research and innovation revolutionize technology for tomorrow´s society. Our steel constantly challenges the frontiers of engineering. Our working environment fosters new solutions for communities through global collaboration. Our creativity constantly challenges the limits of contemporary thinking. Our production uses resources so efficiently that only products of value to the community leave our plants. Our ambition constantly challenges the limits of the possible. We work very hard to reduce greenhouse gas emissions, but cannot do it on our own. We need to work together in the society to set up conditions for reducing emissions without losing competitiveness. On the contrary we need to increase competitiveness, to be able to continue to develop sustainable solutions for the whole world. This requires legislation which does not distort competitiveness on the world market. |
a) Business |
Standard Milk transformation industrie |
Nicolas Clerc Chef de Projet Energies ZI de l'Hermitage Direction Technique BP 80169 - 44155 Ancenis Tel : +33 (0)2 51 14 24 42 France Mob: +33 (0)6 72 60 65 59 |
a) yes |
|
1) yes |
b) no |
Industry is not the main emission source. The global emission reduction target shall consider transport (as well as rail, road, boat and air), and living building with segragated targets. Up today Industry is the only domain considered by TES and cannot support targets for the whole system. |
a) yes |
The difficulty is the timing : Increasing pressure on industry reduce competitiveness in the short and moderate term, and shall increase the contitiveness in the long term. If the pressure is too high, the EU industry will decrease in a significant way, and it will rest close to nothing in the long term. |
b) no |
/ |
c) quite inadequate |
The low carcob prices show that the system is not working. At the same time, EU industry are not up today able to support signifiacant charges increasement. |
e) I don’t know |
/ |
e) I don’t know |
/ |
a) a lower share than in 2013-20 |
/ |
a) a substantially higher share than in Phase 3 |
/ |
a) yes |
/ |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
German system is working and shall be generalized |
c) I don’t know |
/ |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
/ |
g) I don’t know |
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c) I don’t know |
/ |
b) no, all criteria should be based on simple metrics and linked to clearly defined thresholds |
Please back to basis - keep it simple |
c) shorter (please specify) |
As short as possible, the overall ETS system need to be rebuild, cause the low CO prices clearly indicate that tyhe system do not succeed. |
d) I don’t know |
/ |
a) yes (please specify how often) |
/ |
d) I don’t know |
/ |
a) no, there should be no deviations |
/ |
b) no, and there is no need for financial compensation by Member States, either |
/ |
Least important |
Less important |
Most important |
Important |
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a) from the Member States' auction budgets |
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a) Business |
Statoil ASA |
Address: Statoil ASA, Box 3, NO-1330 Fornebu, Norway. Att: Ragnhild Gundersen Bakken. Telephone: +47 41402197 Email: RGBA@statoil.com |
a) yes |
|
1) yes |
a) yes |
Coal to gas switching represents a huge potential for reduction of greenhouse gas emissions. Natural gas’ inherent qualities as a fuel (low carbon, low emissions, high efficiency and flexibility when converted to heat or power) make it well-placed to help the EU reach its 2050 energy and climate ambitions. An ambitious single GHG target for 2030 plus structural EU ETS reforms (going beyond back-loading and the Market Stability Reserve proposal) would provide further impetus for industry to reduce emissions and become more resource-efficient. Improved energy efficiency is a key measure to mitigate climate change. We therefore welcome EU efforts to encourage energy efficiency, particularly in end- use and in the non-traded sectors where energy costs are a small proportion of operating costs. Measures in the traded sectors risk being disproportionate and undermining the market signal from the EU ETS. Hence we do not support a separate 2030 energy efficiency target. |
a) yes |
A market based instrument as the EU ETS is considered the most cost efficient tool to reduce CO2 emissions. It is crucial to avoid overlapping and double regulation that undermines this mechanism. By improving its energy efficiency European industry becomes more cost efficient and better prepared to manage even stricter climate regulations in the future. |
a) yes |
Until equity of non-EU with EU abatement measures is achieved, support for EU industrial sectors exposed to carbon leakage must continue as a core element of the EU’s post-2020 climate policy framework. If carbon leakage was missing, allocation levels would default from 100% free allocation at the benchmark to below 30% of the benchmark already in 2020 and decreasing afterwards. |
a) very adequate |
In the absence of an international climate agreement, Statoil prefers free allocation for exposed sectors to deal with carbon leakage. |
a) it absolutely keeps the incentive |
Benchmark-based free allocation provides carbon leakage protection and helps keeping European industry alive, and also makes the reduction of GHG emissions just as economic attractive. An allowance has an economic alternative value and hence provides an incentive for reducing emissions, independent of how the allowance was obtained. |
b) quite proportionate |
|
f) I don’t know |
If there is a climate deal that provides more level playing field, the requirement for carbon leakage protection should be reconsidered. |
a) a substantially higher share than in Phase 3 |
Where the NER300 up to now has been successful for RES projects it has not been for CCS projects. This is due to a number of reasons but one of them is the limited amount of funding available to CCS projects in the current scheme. CCS projects are large in size meaning that individual projects require equally large amounts of support. It is therefore important that any support programme is able to generate sufficient funding for individual CCS projects. Any “new NER 300 like programme” should however be carefully re-designed given the learnings of the first programme in order to better suit its purpose. |
b) no |
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c) other types of funding (please specify) |
Support for additional technology development in the industry (compared with NER300) should be organized in separate programs. |
c) I don’t know |
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a) the present two groups should remain |
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a) the present criteria should remain |
If there is a climate deal that provides more level playing field, the requirement for carbon leakage protection should be reconsidered. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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b) no, all criteria should be based on simple metrics and linked to clearly defined thresholds |
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a) five years |
Industry requires stable framework conditions to create a healthy environment for business and investment decisions. |
a) the present approach of average of the 10% most efficient installations should remain |
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b) no |
It is reasonable to assume that the top 10% performers use the best available technology. |
c) other (please specify) |
The production data need to be updated, but open for flexibility to compensate for atypical production years due to maintenance / turnaround etc. A possibility to choose e.g. 2 years of the 3 years within the period 2015-2018 may open for that. |
a) no, there should be no deviations |
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a) no, the present approach should be maintained, i.e. that Member States can provide such compensation based on state aid guidelines |
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I don't know |
Important |
Less important |
Least important |
**The above answers should all be "I don't know", but the questionnaire does not allow for this** It is almost impossible to answer this question in general terms, because so much depends on the specific innovation, its cost, scale, impact etc. |
a) from the Member States' auction budgets |
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It is important to be forward looking and assess the level of risk of carbon leakage in the future, to be pro-active and avoid damage to competitiveness. Industry require stable framework conditions to create a healthy environment for business and investment decisions. The carbon leakage list is based on objective evaluation criteria set in the EU ETS Directive. The coverage of sectors and sub-sectors is as extensive as needed to meet these evaluation criteria, and also reflects the level of threat to EU industry competitiveness. While oil refining is exposed to increased international competition (and a corresponding risk of carbon leakage), upstream oil and gas assets cannot be moved to new locations. Therefore Statoil holds the view that upstream extraction of oil and gas should not be eligible for free emission allowances. |
a) Business |
STYROMAG Styromagnesit Steirische Magnesitindustrie GmbH |
Oberdorf41 A-8611 St. Katharein/Laming +433869/5100 office@styromag.at |
a) yes |
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1) yes |
a) yes |
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b) no |
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a) yes |
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b) quite adequate |
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b) it largely keeps the incentive |
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d) absolutely exaggerated |
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b) a higher share than in 2013-20 |
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e) I don’t know |
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a) yes |
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a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
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c) I don’t know |
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c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
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g) I don’t know |
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c) I don’t know |
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b) no, all criteria should be based on simple metrics and linked to clearly defined thresholds |
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d) in line with the duration of ETS Phase 4 |
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d) I don’t know |
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c) I don’t know |
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b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
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d) both b) and c) |
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c) yes, in the form of additional free allocation |
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Less important |
Least important |
Important |
Most important |
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c) from both |
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a) Business |
Swedish Lime Association |
Daniel Juvél, C/O SMA Mineral AB, Box 329, 68227 Filipstad, Sweden +4659016402 daniel.juvel@smamineral.com |
a) yes |
1) yes |
b) no |
Around 70% of the total CO2 emissions generated in lime production are "process emissions": they come from our raw material, limestone. These process emissions cannot be avoided without changing the quality of the final lime product which is however essential to serve specific applications. Currently, the most energy efficient kiln is near the thermodynamic minimum required for the chemical reaction needed for producing lime. The heat of the reaction for typical quicklime quality is 3.03 GJ/tonne, and the average fuel use 4.25. The energy consumption of the best available lime kiln (a Parallel Flow Regenerative Kiln, PFRK) is between 3.2 and 4.2 GJ/tonne. This type of kiln is already the most widely spread kiln technology today. However, one should keep in mind that horizontal rotary kilns (less energy efficient) provide a certain quality of lime and permit to optimize the extracted limestone due to their ability to treat the different sizes of stones. |
b) no |
The EU ETS will only remain the best solution for reducing CO2 emissions as long as the GHG reduction target is set at a level which is both technically and economically feasible. The current economic crisis and the further shrinking of the demand for lime products makes that there is at the moment a lot of “idle” production capacity in the EU. These installations are completely amortized which makes production in these installations cheaper than in a new one. A higher carbon price would not be a solution, as it would only draw money away from producers without enabling them to make an investment. When assessing the potential further ETS amendment in a sector, it is necessary to take account of the lifespan and replacement rate of kilns. Most of the time, investments costs always assume an investment in a new capacity (replacing the old capacity before its end of life). However, for the lime sector, kilns receive big maintenance periodically. |
a) yes |
Carbon Leakage will remain a big concern after 2020 in the absence of an international agreement putting forward a similar CO2 burden. EuLA believes that all energy intensive industries should be protected against carbon leakage, and that any increased level of ambition of Europe towards 2030 should lead to increased and not decreased protection against carbon leakage. Furthermore, the EU ETS is NOT addressing the following concerns: - The GHG reduction deficit (shortage of free allowances even for the installations with the best GHG performance. - Energy costs represent on average 40% of the lime industry’s manufacturing costs. Having access to energy at a reasonable cost is an essential condition for operating in the EU and for maintaining lime's competitiveness. - Further adequate incentives for low carbon investments is needed, with auctioning revenues being targeted for low carbon investment toward the industry |
b) quite adequate |
The current carbon leakage mitigation measures do not take into account of: The importance of CO2 embodied in imports A unilateral reduction of CO2 emissions in Europe will not help fighting against climate change if a subsequent rise of imports from third countries is created. Carbon Trust, amongst others, demonstrated that the reduction in production-related CO2 is largely compensated by CO2 embodied in imports. The cumulative burden of the EU framework Several other EU legislations have an impact on the EU's industry competitiveness (renewables, energy efficiency). The Commission should ensure an integrated approach with no overlap. Energy costs Energy costs represent on average 40% of the lime industry’s manufacturing costs. Like for any energy intensive industry, having access to energy at a reasonable cost is an essential condition for operating in the EU and for maintaining its competitiveness. |
b) it largely keeps the incentive |
It is important to remind that the Commission has calculated product specific benchmarks based on the average GHG emissions of the 10% best performers. A comparison of these benchmark values with the minimum values that are technically feasible shows that the remaining potential in some sectors, like lime, is actually quite low. The current best available and most energy-efficient kilns (the Parallel Flow Regenerative Kiln, PFRK) is close to the thermodynamic minimum required for the chemical reaction needed for producing lime. In other words, no further breakthrough technologies in energy efficiency are expected. The drive towards the most energy efficient solutions can easily be explained by the fact that energy costs represent on average around 40% of the lime sector’s production costs. Outside the deployment of a commercially and technically feasible Carbon Capture and Storage solution, there is little margin for further CO2 abatement in the lime sector. |
c) quite exaggerated |
Lime is the most impacted sector by the EU ETS. The production of 1 tonne of lime generates 1 to 1.6 tonne of CO2. This means that the EU ETS has a strong impact on the sector, up to 35% of impact of the CO2 costs on Gross Value Added (Hourcade et al, 2008). Therefore, the full impact of carbon costs would have serious consequences in terms of carbon leakage for the lime industry. While the lime industry advocates in favor of less red tape and less administrative burden, it recognizes the importance of the free allocation for maintaining a competitive industry in the EU. |
d) there should be no limit to overall free allocation to industry |
There is still a need today for an international climate agreement that would bring a level playing field to EU manufacturing companies. In the absence of such agreement, and considering that several countries in the EU neighborhood are not following the EU’s climate leadership, there should be no limit to the overall free allocations to the industry. Furthermore, EuLA believes that all energy intensive industries truly at risk of carbon leakage should be protected against carbon leakage, and that any increased level of ambition of Europe towards 2030 should lead to increased and not decreased protection against carbon leakage. The most GHG Efficient installations should receive 100% of their needs for free. The industry cap should be adjusted so that the CSCF and linear reduction factor do not reduce the free allocations. |
c) a lower share than in Phase 3 |
It seems that the current state of efforts regarding the development of CCS (including the NER 300 program) will not reach the ambition to develop, by 2020, a commercially and technically available solution for the capture and storage of carbon. In 2012 TNO calculated for EuLA the costs of capturing CO2 at different kinds of lime kilns. For the state-of-the-art solvent (MEA) costs to capture CO2 were €94 per ton of avoided CO2. The cost to capture CO2 would more than double the production costs of around €60/ton lime. Currently, lime plants are typically located right next to the deposit, not clustered in large industrial agglomerations. Transport costs from the capture to the storage can add significantly to the capture costs. This is why EuLA believes that further R&D is necessary, but that it should be funded via a mobilization of different sources including auctioning revenues but not the new entrants' reserve. |
a) yes |
The auctioning revenues should be used to encourage low carbon investments. As a general principle, revenues should go back to industry to enable investments in low carbon solutions. Part of the revenues could for example be used to provide cheaper loans for low carbon investments in installations falling under the EU ETS. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The auctioning revenues should be used to encourage low carbon investments. As a general principle, revenues should go back to industry to enable investments in low carbon solutions. Part of the revenues could for example be used to provide cheaper loans for low carbon investments in installations falling under the EU ETS. |
a) yes |
EuLA strongly favors a level playing field within the EU and outside Europe. This is why EuLA believes that the EU should maintain its efforts to achieve an internationally accepted and legally-binding agreement proportionate to the burden in the EU. In the absence of such agreement, the EU should safeguard the competitiveness of the EU industry with any appropriate measure. EuLA has serious doubts that the current legal framework will ensure a level playing field beyond 2020. |
a) the present two groups should remain |
EuLA believes that no further complexity and calculations should be added to an already complex scheme. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
1. Share of carbon costs in the GVA should be maintained 2. Trade intensity should take especially into account the trade with EU's neighborhood In an internal survey realized by the lime sector (NERA " Energy and transport cost comparison of the EU lime industry to 10 non-EU regions"), it has been established that the threat for lime producers mainly come from the EU neighbor countries such as Russia, Maghreb and Middle east. 3. Energy / climate requirements in Free Trade Agreements should be taken into account “Energy and climate” clauses should be part of any Free Trade Agreement, especially if the trading partner in question has not assumed any carbon reduction commitments. 4. Fuel mix price should be taken into account Finally, EuLA recommends that the EU defines an affordable and available “fuel mix” for 2030, assesses its accessibility and compares its costs with the costs of the fuel mix used by the main EU competitors. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
It is important to point out that the revision of NACE code list (v2) implied that the assessment of the carbon leakage criteria for the lime sector is now done at a new disaggregation level, which includes not only lime but also plasters and aggregates. EuLA believe that this assessment should be done at the appropriate level of disaggregation, since that the industrial activities that are included in the NACE v2 code for lime do not share the same fundamentals (in terms of energy intensity and carbon intensity for instance). |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
EuLA believes that it is important to maintain a certain level of discretion in the system for justified cases. This concerns both the qualitative criteria and the possibility to conduct the assessment at the appropriate level of disaggregation (Prodcom 8). |
b) longer (please specify) |
The time validity of the list of sectors exposed to carbon leakage should take into account the investment cycles of the industry. It is also necessary to take account of the lifespan and replacement rate of kilns. Most of the time, investments costs always assume an investment in a new capacity (replacing the old capacity before its end of life). However, for the lime sector, kilns receive big maintenance periodically. It is therefore important to ensure that the investments made now will not become "stranded assets" in the future due to an unexpected change in the carbon leakage list. Furthermore, any trade intensity assessment for the carbon leakage list should take into account the impact of trade with EU neighbouring countries. |
a) the present approach of average of the 10% most efficient installations should remain |
Eaach country's fuel mix (no natural gas available in Sweden) should be taken into account when defining 10% most efficient installations. |
b) no |
The most GHG efficient producers have to be defined with ambitious, fact-based and realistic benchmarks to be periodically reviewed per commitment period so as to reflect technological progress and uptake of new proven technologies in the EU. It is however important to understand that the technological state of the art is not representative of what can be achieved in practice. Lime characteristics are so vast that multiple uses can be done from the same material. It is also highly dependent of the stone quality from the quarry. The benchmarks should only take into account innovations that have been proved to be commercially viable and that can be implemented on site. |
c) other (please specify) |
In the case of the current ex-ante system, the reference year should be adapted, and the baseline should be a longer period without offering a choice between different periods, and not known in advance. However EuLA believes that free allocation should reflect economic reality per installation based on the most recent years and should not be frozen by historic production. In this regards, EuLA suggest to the European Commission to start working on the development of a dynamic system that could replace the current system, under the condition that no correction factor (CSCF) should be applied in addition to a dynamic system. Also, such system should take into account the administrative burden, the robustness of the control of the declared production, and the confidentiality of commercially sensitive information. |
a) no, there should be no deviations |
|
d) yes, in the form of financial compensation at EU-level |
EuLA defends a Full off-setting of CO2 costs pass through in electricity prices with a harmonised approach in all EU Member States. |
Less important |
Least important |
Important |
Most important |
|
a) from the Member States' auction budgets |
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No |
a) Business |
Tata Steel in Europe |
Tim Morris (tim.g.morris@tatasteel.com), +44 207 717 4598, 30 Millbank, London, SW1P 4WY, UK |
a) yes |
|
1) yes |
b) no |
For the steel industry Europe’s current ‘top down’ climate change targets substantially exceed challenging but realistic reduction potential for our industry within the current, highly optimised technology paradigm. Technology ‘step change’ in the steel sector, despite the ongoing efforts of companies such as Tata Steel Europe, is highly technically uncertain and economically unviable. Without significant change to the current regulatory environment concerning the treatment of the steel industry within a climate change context in Europe, the inevitable consequence of pursuing the current regulatory path is the reduction of industrial production in Europe, with its negative consequences for jobs, investment, skills and innovation. We believe there is a continuing strong demand for steel and steel made goods in Europe. Therefore there is the strong counterproductive risk of exporting jobs and importing (higher) carbon emissions embedded in Europe’s consumption of materials and goods. |
b) no |
It is essential to recognise some of the fundamental economic characteristics of the steel industry regionally and globally. Steel is a fiercely competitive global industry. This is the case for steel itself and also for key raw materials such as iron ore, metallurgical coal and ferrous scrap. Equally importantly, there is global competition for investment capital. Steel is inevitably an energy intensive business. Energy costs can make up a third or more of the addressable cost base of a steel maker. Regionally, numerous studies have confirmed that European energy costs for intensive users like steel makers are amongst the highest in the world. A combination of these factors drives energy efficiency to be an absolute imperative for European steel makers such as Tata Steel to remain competitive. Simply put, if you’re not energy efficient, you’re not in business. In this context the EU ETS has at best a marginal impact on increasing energy efficiency for steel makers. |
a) yes |
Steel is a highly global and competitive industry in dimensions like products, raw materials and capital. These are all readily transportable around the world. For products only, in 2013 Worldsteel estimated that there were 400mt+ of trade flows of steel, more than a quarter of all steel production. This proportion rises very substantially if adjusted for domestic Chinese production and consumption. Chinese steel production alone makes up around half of all global steel production (with EY estimating a gap of ~300mt of Chinese steelmaking capacity vs domestic consumption in 2014, 180% of estimated EU27 total production). We believe it is absolutely vital to the sustainability of Europe’s steel industry, a key foundation for much of Europe’s other industrial and construction activity, that robust transitional safeguards for a level playing field where there is ideally a global carbon cost or at least an equivalence of robust and verifiable regional schemes are put in place. |
b) quite adequate |
The best solution for Europe’s steel industry to address short and midterm competitiveness risks would be a robust global carbon price. This would embed carbon efficiency within the central ‘competitiveness’ dynamic of the industry. It would also avoid harmful and inefficient distortions between regions and materials. However, given the at best slow progress towards such a situation, measures that aim to preserve a level playing field are vital for truly globally competitive competitors like steel. Tata Steel Europe believes, to misquote Winston Churchill, free allocation is the worst form of competitiveness measure except for all the others. Free allocation, has its own issues, particularly in its current formulation, which need to be addressed. But Tata Steel Europe believes it presents less risk of harmful distortions and application complexity than other measures generally discussed, such as border tax adjustment and taxation. |
b) it largely keeps the incentive |
In a benchmark based system where the benchmark is set, as the ETS Directive describes, at the performance of the best 10%, there is a clear incentive for the other 90% of participants to improve towards this level. Tata Steel Europe supports a benchmark based system for free allocation. Whilst challenging, such benchmarks should nevertheless be set at a technically achievable level. We note that this is not the case today and is a major weakness of the current ETS system as applied to steel. We would also highlight another significant area for improvement in the ETS system as applied to steel – allocation is static. As such it does not respond to significantly changing economic conditions creating the risk of damaging the potential of sustainable growth plus the generation of unintended surpluses. |
b) quite proportionate |
The administrative burden can be significant, particularly at certain stages of the regulatory cycle. However Tata Steel Europe recognises that, before the advent of a global level playing field on carbon costs, robust measures to safeguard competitiveness are of almost existential importance to us as a company and the steel industry more generally. Therefore significant effort from all stakeholders is warranted. Nevertheless, as in all areas of Tata Steel Europe’s regulatory engagement, we would urge continuous efforts to increase administration efficiency and are committed to work alongside stakeholders to achieve this. |
d) there should be no limit to overall free allocation to industry |
The approach should start with the expression of need. Starting with a ‘rationing’ perspective makes a mockery of concerns of competitiveness and sustainable growth. Therefore the basis of the question is unsound. Although we support a benchmark based approach, important reform is required: 1) Benchmark levels should challenging but achievable (for best performers). 2) The periodic adjustment of such benchmarks to reflect evolving contexts could also be considered. 3) Allocation application should be dynamic, not static, responding to changing economic conditions. This would address so the issues highlighted by the ongoing economic crisis on the ETS market and demonstrate the compatibility of climate change regulation and economic growth. 4) These aspects should be underpinned by a shared understanding of technology development and potential to understand what is technically feasible. 5) Adequate frameworks for innovation development for at risk sectors must be implemented. |
a) a substantially higher share than in Phase 3 |
Innovation funding, including at ‘demonstration levels will be critical in Europe achieving a low carbon transition whilst preserving industrial activity and economic growth. It is only through such a demonstration that Europe can make a truly compelling case to other regions of the world. The motivation for selecting the “substantially higher share” option to answer this question is a function of not only scale of funding but also the distribution of the funding. Whilst CCS and the power sector (both related to CCS and more generally regarding decarbonisation) are clearly important parts of Europe’s low carbon road map, they are not only parts. Tata Steel Europe would therefore urge a broadening and deepening of the innovation funding agenda towards more industrial opportunities for low carbon innovation and change. This is likely to mean a higher share, but might be possible by re-tasking / re-prioritising / reviewing criteria for the deployment of current funding levels. |
a) yes |
Please see answer to Question 8. |
c) other types of funding (please specify) |
The scale and breath of funding required is likely to be substantial. Therefore although the format of this consultation form compels the selection of one option, we believe that the real answer will likely be a combination of all of the above. It would seem both logical and progressive for auction revenues to be recycled into low carbon innovation with Europe and Member States, hopefully, ‘investing’ in long term technological advantage. |
a) yes |
Free allocation is critical for those parts of industries most at risk from their direct emissions profile. We would highlight again that steel makers are inevitably energy intensive. Therefore there should be a continuation of measures aimed at mitigating the competitiveness risk that stems from the indirect ‘pass through’ impact of policies through energy prices. |
e) I don’t know |
It is vitally important that those sectors whose competitiveness is most endangered by policy measures are adequately and robustly safeguarded in this regard. This could have a number of implications for categorisation. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
Although using criteria which reflect both impact on economic sustainability and exposure to global competition seem appropriate, we would suggest further consideration and possible refinement of the ‘GVA’ based methodology. Such consideration could include if GVA based measures are the most reflection of economic sustainability and ensuring that the cumulative impact of policy costs is properly reflected. |
c) I don’t know |
We do not have a definitive view on what the criteria will be as consideration of such measures is inevitably a cross sectoral matter. However, such consideration must take adequate account of both economic sustainability and trade exposure dimensions. Also, such consideration should be subject to appropriate stakeholder consultation. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
There are frequently limitations to the scope and reliability of data and therefore the genuine insight it can provide. As such the option to include qualitative criteria to the extent that it is complementary to the central quantitative approach and provides additional insights should be maintained. |
d) in line with the duration of ETS Phase 4 |
We would regard stability of regulation during the relevant regulatory phase to be a key aspect of the credibility of the regulatory framework. Therefore we note with great disappointment interventions such as the Cross Sectoral Correction Factor and the current discussion about early adoption of the Market Stability Reserve. These introduce heightened levels of ‘political risk’ in investment considerations. Specifically regarding the Market Stability Reserve, Tata Steel Europe has profound concerns about attempts to accelerate the adoption of this measure. Such an acceleration whilst, as this consultation demonstrates, other vital aspects of the reform of the European climate change regulatory framework are still under early consideration is at best misguided and at worst risks being highly counterproductive. The need for reform is widely accepted. Piecemeal adoption of partial solutions is certainly not. |
a) the present approach of average of the 10% most efficient installations should remain |
Tata Steel Europe supports a benchmark based system for free allocation. Whilst challenging, such benchmarks should nevertheless be set at a technically achievable level. We note that this is not the case today and is a major weakness of the current ETS system as applied to steel. Setting the benchmark, as the ETS Directive describes, at the level of performance of the best 10% of actors gives a clear incentive for the other 90% of participants to improve towards this level. |
a) yes (please specify how often) |
The possibility to consider benchmarks on a periodic basis to assess levels vs evolving best practice and technological change could be considered. Tata Steel Europe strongly believes that such consideration should be rooted in practical considerations of technical feasibility and economic viability and be undertaken through a genuine stakeholder consultation process. A number of detailed ‘technology roadmapping’ exercises have already been undertaken at both European and national levels. |
c) other (please specify) |
Tata Steel Europe is generally in favour of a more dynamic approach to allocation calculation and application. As such we believe an approach should be considered which uses a rolling average of recent years of production data multiplied by a challenging but nevertheless realistic ‘best performers’ benchmark to set allocation levels. A reconciling mechanism to remove the risk of economically driven shortages or surpluses should be considered in combination with this dynamic allocation methodology. We consider that concerns about administrative complexity are overdone as much of the data required is collected today, albeit in different ways and for different purposes. We also repeat a comment made earlier in this consultation response – this is a vital issue for the steel sector and others. An amount of administrative effort is therefore required and deserved. |
a) no, there should be no deviations |
The main motivation for this entire consultation, we trust, is the provision of a ‘level playing field’ to safeguard the competitiveness of the globally traded, carbon policy exposed sectors. The level playing field should apply as far as possible within Europe as well. |
e) I don’t know |
Tata Steel Europe is aware both of the profound concerns of some Member States over fiscal subsidiarity and the ongoing impact of the economic crisis on national budgets. |
Important |
Less important |
Most important |
Least important |
Tata Steel Europe is proud to host the pilot plant of the HIsarna technology for lower carbon iron production, part of the multi-stakeholder "ULCOS” initiative. Our involvement with ULCOS, plus experience from other CO2 reduction and capture projects, suggests to us that whilst achieving funding support for ‘laboratory’ or small scale pilot phase projects is relatively straightforward, though still important to close an existing funding gap, there is a major problem with larger size ‘scale up’. As industrial innovation projects reach the large scale demonstrator stage costs can reach into the hundreds of millions of euros without there being an investable business case. Here, the scale, nature and sponsor arrangements for projects means such projects are struggling to find realistic funding routes given their considerable risk profiles. However, it is precisely the scale and nature of such projects that make them the vital stepping stone to commercialisation and adoption. |
d) other |
Funding / incentives could come from both. But consideration of funding sources should not be limited to these two routes alone. Our perspective is expressed in more detail in our response to Question 10, amongst others. |
Although the focus of this consultation is on the post 2020 landscape, to get to tomorrow we must first get through today. Therefore it is important to note that changes that have been imposed on the current Phase, or are being considered in an inappropriately accelerated way, risk reducing the competitiveness of the EU ETS and, through it, the Scheme’s credibility outside of Europe. Notably, both the Cross Sectoral Correction Factor and the Market Stability Reserve increases perceptions of ‘political risk’ for industrial investment decisions. This could have long term negative consequences for Europe’s industrial base, amplifying the threat from nearer term competitiveness disadvantages. Looking forward, we would stress that Tata Steel Europe strongly believes that the adequate funding of innovation, particularly at demonstration phase, is essential for the holistic success of Europe’s climate change policy framework. |
a) Business |
TAULELL, S.L. |
CTRA. ALCORA -QDRA LA TORTA, 2- 12006 - CASTELLÓN ESPAÑA +34 964250105 tau@tauceramica.com |
a) yes |
|
1) yes |
b) no |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improve |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010 |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored |
a) the present two groups should remain |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value) which are subject to international competition should be considered as exposed to the risk of carbon leakage, until an international agreement is established. It is important to limit the list to sectors that really compete globally, and thus it is vital to maintain an assessment based on trade intensity with third countries |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
The present criteria should be used, considering the following element. GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4 |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics |
c) other (please specify) |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
a) Business |
Teplo Neratovice, spol. s r.o. |
Školní 162 Neratovice 277 11 Czech Republic +420 266 752 300 TSluka@ptas.cz |
b) no |
|
1) yes |
b) no |
|
b) no |
|
a) yes |
|
a) very adequate |
|
a) it absolutely keeps the incentive |
|
b) quite proportionate |
|
d) there should be no limit to overall free allocation to industry |
|
c) a lower share than in Phase 3 |
|
a) yes |
|
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
|
b) no |
|
b) more carbon leakage categories should be defined |
There is urgent need for new category which should cover internal carbon leakage such as heat production sector where installations within EU ETS and outside EU ETS compete. GHGs emission limits imposed just to one segment of the heat market leads to unfair competitiveness distortions. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
Current criteria could be maintained for current two categories of sectors. For new category there should be only criterium incurred carbon costs compared to competitors on same market – e.g. carbon costs for district heating installations included in EU ETS compared to heat installations outside the scope of EU ETS, excessive carbon costs for EU ETS installations should be compensated by free allocation. |
b) other thresholds should be defined. Please specify below |
Current criteria could be maintained for current two categories of sectors. For new category there should be no minimum (threshold) for inclusion to “endangered sectors” category. Until alternative approach for covering GHGs emissions for sectors outside EU ETS will emerge (e.g. “Carbon tax” etc.), EU ETS installations with proven excessive carbon costs (in comparison with competitor on the same market) should be compensated by free allocation. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
d) in line with the duration of ETS Phase 4 |
|
c) the approach should be less stringent (please specify) |
Approach should be less stringent in terms of increasing the percentage from 10% to at least 20% of best performing installations in the EU for a given product to cover higher variability among installations thanks to development since 2008 – increasing share of RES, energy efficiency measures, more variety in technological solutions etc. |
b) no |
|
a) no, the same baseline period chosen for allocation in Phase 3 should be maintained also for post 2020 (Phase 4) allocation |
|
b) yes, there should be deviations with higher allowances for installations facing specific hardships |
|
d) yes, in the form of financial compensation at EU-level |
|
Important |
Most important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
|
ETS should be complemented by carbon tax for non-ETS installations in order to provide for level playing field on internal EU market between large and small installations. Current setting where carbon price is paid only by large installations disadvantages district heating, CHP and other low carbon technologies. |
a) Business |
TERREAL |
François AMZULESCO 15 rue Pagès 92150 SURESNES FRANCE |
a) yes |
|
1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improvement |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. This would limit the list to sectors really exposed and would eliminate the risk of a carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
As explained above, all energy intensive sectors as defined in the Energy Taxation Directive should be considered as exposed to the carbon leakage risk. As an alternative, trade and carbon intensity criteria should be used considering the following elements. First, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS. Second, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
a) Business |
Terremilia srl |
Lugli Lorenzo phone +390522740211 email luglilo@terremilia.com |
a) yes |
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1) yes |
c) I don’t know |
In my own experience, I think no, 'cause our business is totally dependant to fossil fuels, so there's little to do to reduce GHG emissions without the development of other forms of energy (maybe electric kilns powered by nuclear plants...) or without decreasing the production. |
b) no |
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a) yes |
In a global market, every cost an EU industry have to pay will decrease its competitiveness. Unfortunately I foresee that a earth-friendly marketing cannot stand against economical or nationalistical aspects. In a global market, EU cliamte policy should change, because there's no chance that it could be extended to every other non-EU country. |
b) quite adequate |
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b) it largely keeps the incentive |
Again economics is the primary aspect. So a climate policy, to be effective, should become an economic policy. And free allocations are given to sectors which are exposed to unfair competition against third countries industries. |
c) quite exaggerated |
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d) there should be no limit to overall free allocation to industry |
See previous comment regarding global market. For energy consuming industries, without a reliable alternative to fossil fuels, there should be no upper caps to free allovances to be competitive against no EU ETS goods. |
d) there should be no such innovation support post-2020 |
Where will the CCS be storaged? Can they grant that the captured CO2 won't be released sooner or later? I think this isn't a real emission cutting innovation. |
a) yes |
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d) I don’t know |
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c) I don’t know |
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c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Unless a global climate policy is estabilished, more stringent objectives will exposes more industries to carbon leakage. |
g) I don’t know |
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c) I don’t know |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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d) in line with the duration of ETS Phase 4 |
Heavy industries, like the one where I'm working, needs predictable long terms condition, because their plants (and thus investments) have very long lifetime. |
c) the approach should be less stringent (please specify) |
Though it is commendable, stringent approach amplifies the differences between EU industries to the limit that only the more efficient ones, in terms of GHG emission, will survive. But without economical sustainability, probably they will be outclassed by non EU ETS goods. I think EU climate policy, as it is, is a present to non EU industries: they can develop efficient goods for EU markets, while they can maintain inefficient and pollutant factories in the world. |
b) no |
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d) I don’t know |
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a) no, there should be no deviations |
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d) yes, in the form of financial compensation at EU-level |
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a) from the Member States' auction budgets |
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a) Business |
The Dow Chemical Company |
Christina von Westernhagen Director EU Government Affairs Avenue de Cortenberg 52 B-1000 Brussels Belgium Tel +3227387010 cvonwesternhagen@dow.com |
a) yes |
1) yes |
b) no |
EU chemical manufacturers have already significantly improved energy and carbon efficiency. Further improvements would require significant investment and growth in Europe. |
b) no |
ETS is not needed as high energy costs already provide sufficient incentive to improve energy efficiency. In case of no or insufficient global participation with equal or similar burdens, ETS only adds policy costs and weakens EU’s global competitiveness. This in turn discourages investment and growth in Europe. |
a) yes |
EU climate policy must not add costs to efficient EU manufacturers. |
b) quite adequate |
Free allocation is the best tool to avoid carbon leakage by shielding efficient producers from additional climate policy costs. |
a) it absolutely keeps the incentive |
It keeps resources inside company which can be used to invest in innovation in Europe. |
b) quite proportionate |
Administrative burden could be simplified. |
d) there should be no limit to overall free allocation to industry |
In the absence of equitable global action, EU industry must not be unilaterally burdened with limits and constraints. With free allocation based on benchmarks, the incentive to improve energy and carbon efficiency investments in Eruope are attracted. |
e) I don’t know |
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b) no |
All ETS revenues should be directed back to energy intensive industry to enhance industrial innovation in Europe. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The Directive already suggests to spend 50% of revenues by member states to be earmarked for such purposes. |
a) yes |
In addition free allocation for indirect emissions is needed. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Manufacturing of e.g. basic building blocks may not directly qualify under too strict parameters. However, these building blocks are essential for maintaining end production and employment of entire value chains that depend on thriving European supply manufacturing. A simplified carbon leakage list containing generating installations would also reduce administrative burden. |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
Non-electricity generating installations, if subject to ETS, should be protected against carbon leakage. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
If not all manufacturing ETS sectors are listed then the present parameters should be maintained. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Some sectors are exposed to the risk of carbon leakage even though they may not meet the quantitative criteria (e.g. due to market characteristics, abatement potential, etc.). In these cases it is justified and essential to apply qualitative criteria for their exposure assessment. |
d) in line with the duration of ETS Phase 4 |
For investment decisions it is important to have certainty about the policy costs. As these are impacted by the carbon leakage status the validity should as a minimum be in line with the duration of phase 4. |
c) the approach should be less stringent (please specify) |
The benchmark could be less stringent (e.g. closer to the weighted average). In any case, the application of a linear reduction factor and the cross sectoral correction factor brings allocation already below the level needed by even the most efficient producers. This adds costs en discourages investment and growth in Europe. |
b) no |
No. Benchmarks do not describe the state of the art but the level of performance of a plant population in a sector. Revising the benchmarks to make them more stringent would remove the advantage of early movers and discourage investment in performance improvements |
c) other (please specify) |
‘Frozen’ex-ante allocation requires companies to purchase allowances if their output exceeds historic reference levels, even if they meet performance benchmarks, thereby discouraging growth. On the other hand, companies that lower their output below their historic reference level production (or move production to outside Europe) may sell unused allowances. By basing the allocation on recent production output, this under- and over-allocation can be avoided. |
a) no, there should be no deviations |
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c) yes, in the form of additional free allocation |
Through harmonised allocation for indirect emissions, diversity of national approaches can be overcome. |
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a) from the Member States' auction budgets |
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a) Business |
TOTAL S.A. |
Rue de l'Industrie 52, B-1040 Bruxelles 32 2 288 90 76 francois-xavier.dumont-de-chassart@total.com |
a) yes |
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1) yes |
b) no |
While Total has committed to continue to aim for energy efficiency improvement, the proposed 43% emissions reduction objective by 2030 is technologically and economically unachievable, especially in Refining & Chemicals. Unless they benefit from a full carbon leakage protection, our sectors could only comply with ETS obligations through purchase of allowances (further undermining our competitiveness) or by reduction of capacity and closure of installations detrimental for employment, trade balance and security of supply. |
b) no |
Reporting and monitoring emissions helps to manage energy consumption. The carbon price adds marginally to the incentives to reduce emissions and improve efficiency. However, this is only a marginal factor, as the main driver for such improvements remains the high proportion of energy costs in total operating costs (e.g. around 60% in Refining). On the other hand, the EU ETS is an additional cost to EU industry and not to its non-EU competitors, which is potentially very damaging for competitiveness. This is why industry needs full carbon leakage protection. |
a) yes |
Within Total, the Refining and Chemicals sectors are under very heavy international competition and need full protection until a level playing ground is achieved through balanced agreements on a world scale or at least across main regions in competition with EU. |
b) quite adequate |
In the absence of a balanced international climate agreement, free allocation, and enhanced free allocation for exposed sectors are needed to avoid carbon leakage. For the Refining sector, the EU ETS benchmark was set from 2013 at the average of the top 10% performance level and the impact of such a tough benchmark is significant. According to the 2013 final allocation data, the refining industry has received less than 80% of its quota as free allocation and is the only major sector receiving less than its actual emissions. By 2030, even the most efficient installations would be left with only 65% free allocation if a 1.74% Linear Reduction Factor (LRF) continues to be applied (60% of free allocation with a LRF at 2.2%). This situation is unacceptable and requires urgent corrective actions. |
a) it absolutely keeps the incentive |
The benefits from reducing emissions are still the same and free allocation keeps the cash available for investment in innovation or for maintaining and improving the activity in Europe, rather than having to spend it on purchasing quotas. |
b) quite proportionate |
In our industry, with large scale complex installations, implementation of the benchmarking provisions was a major undertaking and involved considerable work by our sectors. Given the importance of the competitive threat, the work to create an accurate and fair mechanism is considered proportionate to the objectives. However, if the system could be simplified, we would be willing to cooperate to achieve this. |
d) there should be no limit to overall free allocation to industry |
If the intention is to provide carbon leakage protection to industry then the number of allowances need to fully cover direct and indirect emissions for installations at the benchmark level – hence no limit to overall free allocation. This implies cancellation of the CSCF and no application of a linear reduction factor after 2020. |
e) I don’t know |
The NER 300 programme, not only being complex to administer, also has a negative market impact by releasing allowances onto an oversupplied market. A large scale CCS demonstration project requires dedicated funding: in Phase 3 of Eu-ETS, auctioning is expected to generate substantial revenue to governments; these revenues should be returned to the economy, for innovation (including CCS), without creating distortions between energy sources and technologies.There might be a current perverse advantage under NER300 for coal, where EU should be promoting gas as a low CO2 intensity energy. |
b) no |
We are strongly in favour of greater innovation support by the EU and its member states but we don’t see this as a role for the ETS. |
c) other types of funding (please specify) |
Preference for enhancement of existing systems, funded by EU and Member States, rather than creating additional new systems. |
a) yes |
The current indirect emissions compensation system is not adequate. It should be reformed to allow free allocation for all electricity consumed in refineries and chemicals plants, at the benchmark level. In general, the strategic importance of manufacturing industries, such as Refining, needs to be sufficiently reflected across all EU policies; the cumulative impact of EU legislation on these industries including the EU ETS, must be carefully looked at. |
a) the present two groups should remain |
The current two groups should remain until progress is achieved in the international arena to level the competitive playing field by introducing similar carbon pricing in other regions that compete with EU Refining and Chemicals. Creating uncertainty about how the risk of carbon leakage in industrial sectors will be mitigated is not the right way to promote recovery. |
a) the present criteria should remain |
For the carbon leakage assessment, it is important to keep looking at the effect of carbon costs on Gross Value Added and to take sectors’ trade intensity into account. Carbon costs should cover both direct and indirect carbon costs due to their cumulative impact on our sectors’ competitiveness. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
If the criteria are tightened thus reducing the number of sectors/sub-sectors on the list, some key strategic sectors for the EU’s economy risk being excluded from carbon leakage protection, with potential negative spill-over effects on other industries (e.g. for the oil Refining industry and the petrochemical industry, which are strongly inter-connected). Carbon leakage is also about future investment decisions. Therefore the carbon price used in evaluating the GVA criteria must reflect future projected EUA prices and not current prices. This is common industry practice in our sectors when evaluating major projects. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
We support the use of qualitative assessments but these should be kept as simple as possible. Legislative requirements on the quality of fuels (e.g. marine fuels specifications) and the conversion of heavy residues into lighter products result in the increase of refineries’ energy intensity and GHG emissions. For instance, compliance with the new bunker specifications (SECA + worldwide) to reduce SO2 emissions from transport will result in +15 Mt CO2/year (+10% of the total EU refining emissions). If the Refining sector undergoes a qualitative assessment, this so-called “Refining paradox” needs to be taken into account. |
d) in line with the duration of ETS Phase 4 |
Mid-period review is detrimental to investment certainty, given the significant difference in the levels of free allocation according to the carbon leakage exposed status and the sectors considered as non-exposed (allocation at 100% at the benchmark vs. 80% in 2013 declining to 30% in 2020 and zero by 2027). Long term visibility is essential for investment decisions in the industry. |
c) the approach should be less stringent (please specify) |
The current benchmark has turned out to be very penalising for the Refining sector, in absolute terms and in comparison with other sectors. According to the 2013 final allocation data, the refining industry has received only 79% of its quota as free allocation and is the only major sector receiving less than its actual emissions. In combination with the CSCF the carbon leakage protection is currently not adequate. Corrective action before 2020 is required to assure a fair treatment amongst sectors and a correct protection of the European industry. |
b) no |
Benchmarks do not describe the “state of the art”, but describe the level of performance of a plant population in a given sector. Revising benchmarks to make them more stringent would remove the relative pioneer advantage of early movers and discourage performance improvements. |
c) other (please specify) |
Current “frozen” ex-ante allocation is adding costs on marginal production, thereby perversely rewarding relocation of production outside of Europe. Systems based on recent production output, such as the dynamic allocation proposals that have been published, would have most likely avoided the distortion observed in 2013 regarding the allocations - emissions balance of the main ETS sectors. Dynamic allocations should be seriously investigated for potential application in the future. |
a) no, there should be no deviations |
General harmonised allocation rules should continue to apply for all carbon leakage installations in the same manner. |
c) yes, in the form of additional free allocation |
Carbon leakage protection should also include free allocations for EU ETS cost pass-through in electricity prices for all sectors exposed to carbon leakage in a harmonised fashion, in addition to free allocation for direct emissions. The absence of an EU harmonised indirect compensation system, leaving decisions to Member States creates single market distortions as many of them do not grant such compensation. Free allocation should be granted for all electricity consumed in energy intensive plants, at the benchmark level and applying European average emission factors. |
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a) from the Member States' auction budgets |
We are strongly in favour of greater innovation support by the EU and its member states, which may bring more significant and cost-effective results than current renewables mandates. However, we do not believe that the use of ETS revenues is the right mechanism. |
1° ETS data from 2013 have shown that the Refining sector, receiving only 79% of its quota as free allocation, is heavily penalised in the current Phase 3, in absolute terms and in comparison with other sectors (cement and steel in particular). Therefore revision of the benchmark for the refining sector is strongly needed. 2° Discussions on dynamic allocation systems should be seriously investigated. 3° In order to effectively and timely tackle CO2 emissions, a Power Generation specific set of measures should be implemented to foster natural-gas based power generation and displace coal. |
a) Business |
Uniland Cementera, S.A.
Avda. Pla de l'Estació s/n.
08730 Stª Margarida i els Monjos (Barcelona). Spain
Tel: +34 93 898 39 00
http://www.valderrivas.es |
Francisco Zunzunegui Fernández
Director Negocio España/UK
Jose Abascal, 59 28003 Madrid. Spain
Tel: +34 91 396 01 00
Email:fran.zunzunegui@gcpv.com |
a) yes |
1) yes |
a) yes |
The cement industry is fully committed to reducing Greenhouse Gas emissions in line with overall EU policy objectives. This has been demonstrated by investments over the past 20 years which have driven down CO2 emissions from clinker production and by our roadmap to go much further in the coming decades. To achieve this, the industry needs to innovate and invest. This requires a return on investment above the cost of capital and a policy framework that promotes the competitiveness of the sector and allows for a secure access to raw materials and affordable energy prices. The cement companies in Europe need a stable legal framework with predictable CO2 pricing in order to justify and allocate scarce investment funds to realize carbon emission reduction ambitions. 2030 targets have to take into account each sector specific roadmap. The Commission’s proposals for a Climate Change Policy in 2030 imposes a proportionately higher reduction burden on energy-intensive sectors compared to other sectors such as transport and households and do not take into account the abatement potential per sector. Therefore, the proposed rules will only serve to reduce competitiveness and preclude the essential investment to drive down emissions, secure jobs and innovate in the years to come. This is unsustainable and will lead to progressive atrophy of the industry. |
b) no |
Measures to decrease energy consumption and improve resources efficiency will de facto reduce CO2 emissions. Some industries like cement have very high energy costs as a proportion of GVA or profit which means that energy efficiency is an integral part of manufacturing. The EU ETS emphasis is GHG efficiency and in this regard it does put pressure on businesses to become more GHG efficient. In doing so EU ETS places CO2 costs on power generators and these costs are passed on to electricity consumers. There are limitations to which added costs act as a driver for efficiency before imports become more attractive. Furthermore, the cement and lime industry are unique due to the fact that the majority of GHG emissions are not caused by energy use from fuel combustion but come from the raw materials themselves. Around 60% of total CO2 emissions from clinker production are released directly from limestone. On the other hand, energy efficiency and CO2 reduction represents conflicting goals when looking e.g. at CCS. With the current ETS design, the energy efficiency achieved by the industry is not valued, focusing only on the CO2 emissions direct, so it penalizes the most efficient facilities because they have not guaranteed it´s 100% free allocation limiting their ability to compete. |
a) yes |
The EU has aspirations of leading on CC policy but globally unequal carbon pricing has the ability to shift trade patterns. In order to direct investments to growth and jobs in Europe, the cement industry needs a global level playing field, including imports and exports: climate change is a global problem that needs a global solution. EU policy can only incentivize companies to aggressively work on further emissions reduction if there is predictability in and equality in carbon prices and if it is part of an overall industrial policy ensuring companies to be competitive in the international arena. This also applies to energy costs. For cement, energy costs are especially important representing 30 % of operational costs with European costs being substantially higher than in the US, Russia and plants in North Africa. Transitional measures are needed to bridge the gap between the EU and other countries. Free allocation is the most effective transitional mechanism. Take into account that there is no binding international climate agreement which imposes similar burdens on operators in the major cement producing jurisdictions; countries such as China, whose emissions account for 29% of global emissions, have already reached per capita emissions equal to the EU average and also they have increased their emissions by 290% from 1990. |
b) quite adequate |
As long as emissions do not have the same cost in different countries, a level playing field can be achieved most effectively by equalising measures such as free allocation. The limited evidence of leakage and empirical studies demonstrates (see the report by Vivid Economics last June), in part, that free allocation is working. However, it should not be assumed that free allocation is insulating operators from all of the ETS costs as it does not mean ‘full free allocation’ because of the CSRF and as some operators will face higher costs than others depending on the allocation base year activity. Furthermore, the indirect costs of ETS have not been selected for compensation for cement in the Commission guidelines creating a distortion of competition with competitors. So, not only does the cement industry face the full indirect costs of ETS but competing construction sectors are able to be compensated for their additional costs related to indirect CO2. Prices have risen to unprecedented levels in Europe at a time when our main competitor, the United States, is benefitting from increasingly lower energy prices. These price variations are affecting industrial competitiveness and leading to “investment leakage” with new investments in manufacturing sectors progressively moving outside Europe For cement manufacture, energy costs are especially important representing 30 % of operational costs with European costs being substantially higher than in the US, Russia and plants in North Africa. |
a) it absolutely keeps the incentive |
With free allocation based on benchmark, the incentive to invest is provided by the benchmark. The magnitude of the residual incentive is a function of carbon costs as a proportion of GVA. Cement has one of the highest CO2 costs/GVA of any industrial sector so the residual effort is greater than in most sectors. In its search for a legal framework that fosters a competitive environment, CEMBUREAU has considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The EU cement industry has a relatively flat benchmark curve indicating that there is a narrow gap between the best and the worst performers; this limited level of abatement potential makes the task of emissions reduction more difficult in the cement sector compared to many other sectors. |
b) quite proportionate |
Overall, the administrative burden is quite proportionate but the system is extremely disproportionate for small/trivial combustion sources. In many cases these minor sources were not part of the benchmarking exercise and should not be included in reporting. |
d) there should be no limit to overall free allocation to industry |
There should be free allocation if there isn’t an international agreement which places all competing manufacturers on an equal footing. Until certain conditions can be met with regard to the veracity of the schemes within other countries then transitional arrangements need to be maintained. Free allocation is the most effective transitional arrangement. The share of allowances dedicated to free allocation should be sufficient to avoid carbon leakage. To uphold this principle that carbon leakage should be minimized, the cross sectoral correction factor should be replaced by an adjustment to the auctioned amount to maintain the cap trajectory. That does not mean “a free ride for industry” but it would mean that sufficient allowances are provided for the most efficient producers because at present the CSCF has the ability to reduce free allocation beyond what is technically possible. Full compensation through free allocation must allow the most efficient companies to be globally competitive without being penalised by direct carbon costs. |
e) I don’t know |
There are too many uncertainties on what the post 2020 allowances budget will be for the cement industry to be able to decide what share of the budget should be dedicated to such innovation support. The EU ETS does not encourage investment in new technology. The rules for accessing NER allowances discourage investment due to the uncertainty of the postcommissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) yes |
To date, the NER 300 has been ineffective at stimulating novel CO2 reduction projects in the cement industry. The power generation sector which is passing on investment costs has benefitted most from the NER 300. The cement sector is not experiencing the same level of investment de-risking. The cement industry needs - an investment enhancing climate should encourage investments over long term (30 y) cycles in a capital intensive industry. Legal stability and CO2 price predictability are key to achieve this goal - safeguards against price fluctuations in market based policy instruments; which objectives, if kept, should be clearly defined and not be prone to abuse for speculation purposes - an innovation policy which provides clear incentives for breakthrough technologies in a cost-effective way. Policy makers should consider hypothecation (earmarking) of revenues from allowance auctions and direct innovation support to those sectors facing the greatest abatement challenges. The cement industry needs an innovation policy which provides clear incentives for breakthrough technologies for CO2 reduction in a cost-effective way. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Given the high costs associated with breakthrough technologies, funding from auctioning revenues should account for both capital and operational cost of projects. There should in addition be a ring fenced fund for the manufacturing industry. |
a) yes |
In its search for a legal framework that fosters a competitive environment, OFICEMEN has considered an improved ETS with a performance based free allocation for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions cost impacts. In order to protect “carbon leakage” sectors’ competitiveness, the system could foresee either an adjustment to the overall cap to the auction amount or a sectoral cap with the inclusion of importers. However, a carbon pricing mechanism which is market-based and prone to wide fluctuations militates against effective investment. OFICEMEN is ready to explore mechanisms which deliver price stabilization and global carbon price convergence to engage in a thorough reflection of a climate policy and energy policy that is fully integrated in a single industrial growth policy. |
a) the present two groups should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. One should consider a special treatment for process emissions e.g. full free allocation as those emissions are not linked to energy efficiency and are irreducible by their very nature. |
a) the present criteria should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. Nevertheless, as a static indicator trade intensity is of limited validity/conclusiveness. It is based solely on historic data and does not reflect future developments, i.e. resulting from changing cost patterns, at all. The competitiveness of European industry has deteriorated significantly as a result of the deep economic crisis and rising energy and electricity costs, caused by a combination of a non-integrated European electricity market and distribution network, support schemes for renewables that need to be cross-subsidized by energyintensive industries and pass through of CO2 prices by the power sector; it imperative to preserve industry’s competitiveness in order to guarantee survival of the industry in Europe in the years to come. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria e.g. a complete loss of 30% of GVA is normally economically not acceptable for any industry or sector. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
EU trade and economic data is not always exact and its comparability with the EUITL CO2 data not always appropriate so there will always be a need to hear special cases. |
d) in line with the duration of ETS Phase 4 |
It is essential for the predictability of the system to introduce as little changes as possible in the course of a trading period; hence the validity of the list of sector exposed should be in line with the duration of the ETS phase 4. Review list of sectors deemed to be exposed to a significant risk of 'carbon leakage' every five years give great uncertainty for companies leading to a lack of investment confidence for a capital-intensive industry with long-term investment cycles, like the cement industry, caused by the constant unpredictability of the regulatory framework. |
c) the approach should be less stringent (please specify) |
The benchmark would be calculated in a statistically solid way and be updated periodically to ensure predictability. It should be set at an ambitious but reasonable level and should not be distorted by statistical outliers. This can be achieved by defining percentile (e.g. 10%-percentile) or e.g. the average of a range including the 5% to 15% top performers of specific direct emissions (excluding the extreme outliers between 0% and 5%). Only this way, the benchmarking methodology will achieve sufficient statistical robustness for international application in ETS system. |
a) yes (please specify how often) |
Benchmark should be updated between two trading periods depending on what has been achieved but not during one trading period. |
c) other (please specify) |
In its search for a legal framework that fosters a competitive environment, OFICEMEN has considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The historic activity level (HAL) should be more closely aligned to recent production to avoid surplus allocation e.g. the average of the preceding 3 years. In this context, OFICEMEN considers the recently released EcoFys study (Dynamic allocation for the EU Emissions Trading System, Enabling sustainable growth, 20 June 2014) and its allowances allocation reserve as an interesting step forward. However, a more recent HAL has its potential downsides for installations that have extended shutdowns or breakdowns, provision will be necessary to deal with exceptional HAL circumstances. |
a) no, there should be no deviations |
A more recent HAL e.g. preceding 3 years average, has its potential downsides for installations that have extended shutdowns or breakdowns, provision will be necessary to deal with exceptional HAL circumstances. |
c) yes, in the form of additional free allocation |
OFICEMEN believes that EU Compensation should be granted for indirect emission impact where carbon leakage vulnerability is a combination of direct plus indirect emission cost. There is no need for two state aid guidelines and the compensation for indirect costs could be internalized in the ETD by providing free allocation for indirect CO2. |
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I don't know |
OFICEMEN regrets the focus on carbon capture and storage and believes that carbn capture and re-use should be equally considered. OFICEMEN believes that funding should be technology neutral. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) from the Member States' auction budgets |
a) Business |
United Energy, a.s. |
Name:Lucie Martincova Address: Teplárenská 2, 434 03 Most - Komořany Czech Republic Email: lucie.martincova@e.cz |
a) yes |
1) yes |
b) no |
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b) no |
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a) yes |
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a) very adequate |
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a) it absolutely keeps the incentive |
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b) quite proportionate |
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d) there should be no limit to overall free allocation to industry |
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c) a lower share than in Phase 3 |
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a) yes |
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b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
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b) no |
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b) more carbon leakage categories should be defined |
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e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
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b) other thresholds should be defined. Please specify below |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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d) in line with the duration of ETS Phase 4 |
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c) the approach should be less stringent (please specify) |
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b) no |
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a) no, the same baseline period chosen for allocation in Phase 3 should be maintained also for post 2020 (Phase 4) allocation |
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b) yes, there should be deviations with higher allowances for installations facing specific hardships |
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d) yes, in the form of financial compensation at EU-level |
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Important |
Least important |
I don't know |
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a) from the Member States' auction budgets |
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a) Business |
Utility Support Group (USG) BV, for site Chemelot (chemicals). ID-number Transparency Register: 434122110691-24 |
Utility Support Group (USG) BV Transportlaan 123, 6163 CX Geleen, Netherlands. Vianney Schyns, Vianney.Schyns@usgbv.com and Vianney.Schyns@planet.nl Mobile telephone +31-6-205 385 71. Michiel Cornelissen, Michiel.Cornelissen@usgbv.com Mobile telephone +31-6-1010 2875 |
a) yes |
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1) yes |
a) yes |
Cefic Roadmap 2050 shows an efficiency improvement potential of about 0.8%/year for the chemical industry in Europe, this varies per sub-sector. E.g. existing crackers can improve with 23%-34%, or 0.8%/year (30%/37 years to 2050) but existing ammonia plants with 19% ex feed use (65%), or 0.5%/year (Cefic Roadmap p 166). Existing ammonia incl. feed can thus improve with 6.5% or 0.17%/year until 2050. The EU ETS cap decrease by 1.74% (2.2% > 2020) is higher than the feasible carbon efficiency improvement rate in industry. And there will be production growth. Innovations, CCS and decarbonised electricity are needed for deep absolute reductions. Without a Global Climate Agreement with a global level playing field, CCS is not feasible before 2030. CCS requires high investment and there are barriers and risks (public acceptance, lack of infrastructure). This is acknowledged in the Commission’s Roadmaps and impact assessment climate package 22-1-2014 (CCS electricity <1% until 2030, p 148). |
a) yes |
“Yes, but …” To contribute to the industry’s competitiveness, the EU ETS needs to set an economic incentive for carbon efficiency without increasing the unilateral cost burden and thereby fostering to avoid carbon leakage. The EU ETS must be improved. The incentive to reduce emissions is provided by the carbon price and the benchmark principle. However, the current EU ETS design does not adequately protect against carbon leakage because reduction factors reduce free allocation significantly below benchmark level, carbon leakage status of industry is uncertain and the ex-ante principle hinders growing efficient enterprises. Ex-ante allocation incentivises production carbon leakage (lowering production, selling allowances to cover product transport cost into the EU) and causes investment carbon leakage due to many difficulties and risks to get allowances for growth. |
a) yes |
As long as the ambitious EU Climate policy is not mirrored by comparable international efforts and the same or similar burdens of a vital share of global production, the EU needs to provide for measures that minimise the unilateral cost burden of EU industry. This is important not only from an economic but also from an environmental point of view: the EU emission reduction targets should not be achieved through carbon leakage. EU climate policy must at the very least not add costs to efficient EU manufacturers: 100% free direct and indirect allocation according to realistic benchmarks are needed. Allocation should be dynamic according to actual production output in order to avoid over-allocation during recession and under-allocation during growth, thus not rewarding relocation outside Europe. We need a clear commitment that without comparable global climate action and burden as from or soon after 2020, the EU climate policy approach including the EU ETS cap must be reviewed. |
b) quite adequate |
Free allocation is essential but not enough. Crucial complementary elements of “dynamic allocation” are: (1) Realistic benchmarks (not top 10% benchmarks decreasing with CSCF/LRF, > rate of industrial carbon efficiency improvements). (2) Dynamic allocation (actual instead of fixed historical production volume; the current flawed new entrant rules form huge barriers and risks for growth, thus a clear incentive for carbon leakage). (3) Compensation indirect emissions by indirect allocation (not restricted). (4) Allocation Supply Reserve. The allocation rules must be revised to prevent carbon leakage also at higher CO2-prices. The system must be revisited if the EU remains isolated with its ambitious climate policy. As from 2020 or soon afterwards global participation is needed, an ambitious climate policy and effective protection against carbon leakage cannot be united forever with a transitional measure such as free allocation. |
a) it absolutely keeps the incentive |
The incentive to reduce emissions is given by the CO2 price and the benchmark principle, not by the absolute level of the benchmarks. However, too stringent benchmarks are not compatible with avoiding carbon leakage, present focus is too much on the real top 10%. The incentive is also distorted in present EU ETS by the use of historical production data. A normal update of the present top 10% benchmarks by the end of phase 3 would be detrimental for the incentive to reduce emissions (update problem), because emission reductions would then automatically lead to a lower allocation in phase 4. The alternative is study of the technological potential per sub-sector, with as first input the sector roadmaps. The top 10% may be adjusted or not, aim is finding the balance between realistically achievable benchmarks while still avoiding carbon leakage. For deeper reductions technology innovations are essential. A normal update of the benchmarks would be squarely against stimulating innovations. |
b) quite proportionate |
Getting allowances for growth by new manufacturing plants (also replacing older less efficient plants on other sites) and by extensions of existing manufacturing plants is very cumbersome and risky, thus giving rise to investment carbon leakage. Basing the allocation on actual production (provisional production ex-post adjusted to actual production) will simplify the EU ETS and creates less administrative burdens while removing the incentives and risks for production and investment carbon leakage. Thus the 3 aims of the EU ETS reform by DG Climate Action and Enterprise – simplicity, predictability and effectiveness – will be fully realised. The fear that an ex-post regime would require an annual Commission Decision on allocation is unfounded; presently the Commission does not check the annual emissions (more complicated than production data) and there is no Commission Decision (and checks) after lower allocations because of the present partial cessation rules and closures. |
d) there should be no limit to overall free allocation to industry |
What is necessary to adequately prevent carbon leakage? Carbon leakage cannot be avoided when the allocation is strongly reduced below the already ambitious top 10% benchmark level. Therefore, free allocation to industry should be guided by: • Realistic benchmarks (differentiated by sub-sector) and actual production. Note that the chemical industry’s 0.8%/year improvement potential is based on the average performers, not on the top 10% performers. • No decrease of the ambitious top 10% by unrealistic reduction factors. • An adequate reserve for growth is needed (see Ecofys study: Allocation Supply Reserve, ASR).The backload volume plus about 300 Mton seems to be needed (ASR until 2030 thus 1200 Mton). • At a lower than historical production (median 2005-08 or 2009-10) the excess flows into the ASR, at a higher production the extra comes from the ASR. • ASR is win-win; guaranteed allocation for growth and no need for new measures for the backload volume. |
b) the same share as in Phase 3 |
The situation must be avoided in which the benchmark levels are unrealistically low to enable a type of NER300 support and a new NER300 type of support for industrial innovations and carbon reductions. Therefore, we first need realistic benchmarks. The higher the carbon price is targeted to be, the higher the benchmark level should be. The EU ETS Directive already suggests to spend 50% of revenues by Member States to be earmarked for such purposes. A 300 (600) Mton volume is 30 (60) Mton/year in phase 4, therefore such a volume for CCS and one for industrial innovation seems feasible. A type of NER300 funded from the auction volumes should be seen in view of the objective to accelerate CO2 reductions in the longer term. |
a) yes |
After realistic benchmarks are adopted, a type of NER300 mechanism could accelerate innovations and reduction investments, provided that access is no lottery with complicated risky rules and arbitrary thresholds. Industry’s direct emissions were some 1050 Mton (809 Mton/0.94 CSCF + 30 Mton heat allocation to electricity generators divided by 20% (top 10% reduction) minus short term abatement non-CO2 gases). Acceleration from 1% to 2% per year would be quite an achievement: ~10 Mton extra reduction per year (100 Mton by end phase 4). Arbitrary thresholds are avoided by linearly rewarding real improvements from 0% (0% reward) to 10% or higher improvement by X% reward (5% improvement is then 0.5 x X%). Real improvements are based on actual production (zero reward for lowering production). Prerequisite for an effective innovation support is that the normal allocation will not drop after frontrunners have implemented innovative technologies (full implementation takes at least 2-3 decades). |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
As mentioned, the EU ETS Directive already suggests to spend 50% of revenues by Member States to be earmarked for such purposes. In view of the desired policy to keep industry by maintaining the present capacities and attracting new capacity investments in Europe, clear priority should be given to industrial process technology innovations and industrial abatement investments. This is even more important in the light of relatively high prices for natural gas, chemical feedstocks and electricity in Europe versus those of major trading partners. Extra allowances for industrial innovations and industrial abatements should be seen as win-win situation: these create more revenues from corporate taxes, from personal taxes by keeping and expanding jobs and avoid social costs of unemployment. However, these industrial benefits are often not mentioned in the present debate about auction revenues. |
a) yes |
Free allocation for indirect (electricity) emissions is essential. The present financial compensation for the indirect emissions is in fact a policy failure, now indirect emissions are treated inferior to direct emissions. The compensation is severely restricted, for products without a product benchmark to 80% x 75% aid intensity in 2020 equals only 60% compensation. The compensation is only given in a limited number of Member States, and even there the compensation can change in the future. In the Netherlands there is no compensation for growth. The stance that a full indirect allocation would be difficult because of the consequence of lower auction revenues for Member States is not correct because: (1) the present compensation is given (although incomplete) in about 5 Member States, thus proving it can be done; (2) the industrial benefits as mentioned above (more corporate taxes, personal taxes and less social costs of unemployment) are not taken in the equation. |
a) the present two groups should remain |
Sectors exposed to the risk of carbon leakage should be given more confidence and predictability. The EU ETS contains many globally competing industries. In the present debate it is often stated that the carbon leakage list should become more focused, meaning that then fewer allowances are needed “to save industry”. However the question remains, which sectors or sub-sectors are less exposed while we see that the economy is further globalising continuously. There may be quite a few smaller sectors which are less exposed, but the impact on the needed allowances volume will be rather small. Therefore, in case of absence of a true level playing field by or soon after 2020 the EU ETS target for and beyond 2030 and the modalities for free allocation for direct and indirect emissions should be revisited. A more focused carbon leakage list is no substitute for an effective global climate agreement, we fear it will be an illusion to try to make possible what is in reality not possible. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
The criteria to become acknowledged as exposed to the risk of carbon leakage should be complemented with essential new elements: • Carbon costs comparison: the CO2 costs (carbon price level and, very important, the allocation rules for direct and indirect emissions) in Europe should be compared with the same costs in most other major industrial regions in the world. • Same comparison for the CO2 “shadow” costs: CO2 taxes, surcharges for renewables, etc. It is important to focus on the real costs per sector or sub-sector (e.g. energy intensive sectors are often exempted from a general rule). • Clear definition of “a decisive share of global production” (with the same carbon costs and the same carbon price in the decisive share of global production). Only China and USA are not enough. • Use of the marginal power plants for the indirect carbon cost. • Prudent auctioning factor. • Impacts of value chain effects e.g. industrial gases for chemicals. • Forward looking carbon price. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The 30% carbon cost threshold is less in debate. At high carbon cost carbon leakage will easily occur because global transportation costs are relatively low. But maintaining the 30% trade intensity threshold is also logical. Such a high trade intensity shows that the markets are already very agile thus additional carbon costs will easily tip the balance. In that respect it should be realised that the industrial sectors which are selected to be in the EU ETS are relatively carbon intensive. There may be sub-sectors on the carbon leakage list which have a high trade intensity combined with a low carbon intensity, e.g. this might be clock making (to our knowledge). However, removing such small sub-sectors will have hardly any effect on the volume of free allocation and thus on the volume of auctioning. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Qualitative criteria are needed in addition to quantitative criteria e.g. as the latter are solely based on historic data. Historic data does not in all cases reveal the current situation for competing products at the world market. The following parameters are proposed for a forward looking qualitative assessment: • The future score on carbon costs and trade intensity. • New build efficiency by 2020 (for products with product benchmark indication 0.95 x “top 10%”), without CCS or biomass feedstock or biomass energy. • All costs related to climate change policy along the value chain, in particular upstream costs, should be taken into account. The value chain analysis should also consider the implication for downstream sectors if an upstream sector would be deleted from the carbon leakage list. • The inability to pass through locally imposed costs for sectors whose product prices are determined internationally should be taken into account and the expected effect on profitability. |
d) in line with the duration of ETS Phase 4 |
The carbon leakage status is a fundamental parameter for investment decisions of companies in Europe. Any change has sharp consequences: the sector can get 100% free allocation in one year and 0% the next year. To avoid negative consequences for decisions to invest in maintaining or expanding manufacturing capacity in Europe, uncertainty about the carbon leakage status should be avoided. Therefore, we need a rather long stable validity of the CL status of the involved players. Once per trading period could be an acceptable compromise which is, however, much shorter than support and planning horizons realised for investors into RES according to the most MSs’ RES-E support schemes. |
c) the approach should be less stringent (please specify) |
The stringency of the benchmarks should in the first place be related to comparisons globally. The level of the benchmarks should be designed to provide an effective resistance to carbon leakage at forward looking higher carbon prices in the longer term future. See study “A closer look at carbon leakage” discussed with DG Climate Action. Benchmarks should be set at weighted average with a realistic annual carbon efficiency improvement rate when carbon prices between € 50/ton to € 100/ton in the period to 2030 are targeted. In case of targeted more moderate carbon prices (€ 50/ton) the present top 10% benchmark could be applied, but due to this stringent benchmark there should be no annual correction factor until 2030. The correction factor must move away from the present stringent CSCF for incumbents and LRF for new entrants based on 1.74% points/year, intended to increase to 2.2%. Cefic Roadmap 2050 indicates 0.8%/year improvement for the average plant, not for the top 10%. |
b) no |
A normal update of the benchmarks would be detrimental for the effectiveness of the EU ETS. Matthes and Neuhoff (2007, p 14): “Grandfathering according to a moving baseline seriously undermines the incentives for emission reductions. This is frequently referred to as the strong early action problem – reducing emissions too early reduces future allocation. If the EU ETS would continue with grandfathering according to a moving baseline, then most emission reductions could thus be postponed indefinitely.” In case of a normal update of the benchmarks, efficiency improvements would lead to a lower allocation and therefore to a delay of investments and innovations. Thus, any benchmark adaptation for 2021-2030 (with inclusion of indirect emissions) should be based on the original data submitted in 2007/2008. An update based on these data should balance technological development with carbon leakage protection (with test: arbitrage production carbon leakage break-even price at € 100/ton CO2). |
c) other (please specify) |
Actual production data should be used (ref. Ecofys report dynamic allocation): the provisional historical production (median 2005-2008 or 2009-2010) is then ex-post adjusted to actual realised production. An Allocation Supply Reserve (ASR) should be adopted. At a lower than historical production, the over-supply flows back in the ASR, at a higher than historical production the extra needed allowances come from the ASR. Advantages: (1) it avoids over-allocation during recession, (2) removes the incentive for production carbon leakage until 49% of historical production and (3) removes the risk of investment carbon leakage due to barriers and risks for growth of the present new entrant allocation rules by avoiding under-allocation for growth. Dynamic allocation is simple (production data are simpler than emissions’ data), predictable and effective in terms of incentive to reduce emissions (same as auctioning) and in avoiding carbon leakage. No need for an annual Commission Decision. |
a) no, there should be no deviations |
The proposed reform of the allocation rules is in our analysis based on logic (dynamic allocation with realistic achievable benchmarks and actual production). Therefore there seems to be no reason for deviations. |
c) yes, in the form of additional free allocation |
Direct and indirect emissions must be treated equally since they are equally harmful for installations covered by the EU ETS. Indirect emissions are so far treated inferior versus direct emissions. The treatment of indirect (electricity) emissions is based on an incomplete and inherently unstable system for financial compensation (depending on budget available, political decisions, can be changed every year). The incompleteness regards the sectors covered, the reduction factors and the absence of this compensation in many Member States. The present financial compensation can thus be seen as a policy failure, as feared beforehand by Commissioner Almunia. The treatment of indirect (electricity) emissions should be based on a more solid and predictable alternative, which is indirect allocation without undue reduction factors and restrictions to contribute to make European manufacturing industry resistant to carbon leakage. |
Least important |
Less important |
Most important |
Important |
For deep absolute reductions industrial process technology innovations are needed. Only then the presently foreseen carbon efficiency improvement rates can be accelerated. Innovations are also needed for CCS, especially the capture step. Innovations typically makes processes simpler, thus more efficient and much cheaper. There are always uncertainties: which process option will be the winner and when, if it is, will it be realised. An innovation takes usually 2-3 decades. Examples: gas phase polypropylene and a novel melamine process with 70% lower GHG emissions. Often the first implementations are very risky and costly. Examples: a novel low-energy ammonia plant (more than one year before the plant operated well) and the novel melamine process (almost a decade to solve complicated technological problems). The new entrant rules (based on 2 months of 3 or 6 months after start) are always risky (thus a threat for investment carbon leakage), especially for novel processes. |
a) from the Member States' auction budgets |
Free allocation has to protect against carbon leakage adequately. Therefore, the free allocation should not be used for innovation support. There should be no competition between carbon leakage protection and innovation support. The revenues from auctioning should be reinvested for low carbon technology support, as foreseen in the EU ETS Directive. See further the answer to question 10. |
The present allocation rules are very complex, partly illogical and pose huge barriers and risks for growth. See Cefic-IFIEC (2012) study “A reality check of the EU Emissions Trading Scheme” of 18-6-2012 discussed on 11-4-2014 with DG Clima. Effectiveness has two aspects (supported by the Commission): • The incentive to reduce emissions (yes for benchmark-based allocation); • The countermeasure to avoid carbon leakage. The countermeasure to avoid carbon leakage can only be effective when the allocation is based on realistic benchmark multiplied with actual production (provisional production ex-post adjusted to actual production). See Cefic study (2014) “A closer look at carbon leakage” of 8-1-2014 also discussed on 11-4-2014 with DG Clima. DG Climate Action sees dynamic allocation as very complex, maximum red tape. We are convinced of the opposite, because we, not the Commission, must then report the production volumes (we monitor them already under the present rules). |
a) Business |
Vargön Alloys AB 468 80 Vargön Sweden |
Staffan Rahmn Vargön Alloys AB 468 80 Vargön Sweden staffan.rahmn@vargonalloys.se |
a) yes |
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1) yes |
b) no |
There is a large risk that our owner will move production to allready excisting production plants outside EU! |
a) yes |
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a) yes |
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b) quite adequate |
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b) it largely keeps the incentive |
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c) quite exaggerated |
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d) there should be no limit to overall free allocation to industry |
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e) I don’t know |
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a) yes |
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c) other types of funding (please specify) |
A fund for industrial innovation is clearly needed. |
a) yes |
Compensation for indirect emissions must also be covered at EU level through additional free allocation. |
a) the present two groups should remain |
Ferro-alloys and silicon are globally priced and are price takers; hence the European producers are faced with competitors who do not abide by the same rules. As long as there is no operational global binding climate agreement with equal commitments, the carbon leakage risk will subsist for European industry. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
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a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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b) longer (please specify) |
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c) the approach should be less stringent (please specify) |
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b) no |
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a) no, the same baseline period chosen for allocation in Phase 3 should be maintained also for post 2020 (Phase 4) allocation |
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a) no, there should be no deviations |
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c) yes, in the form of additional free allocation |
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Less important |
Most important |
Important |
Least important |
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a) from the Member States' auction budgets |
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The entry into function of a binding global climate agreement which entails equal commitments from all parties is of major importance for the European system of protection against carbon leakage. As long as there is no joint action, unilateral increases of European emission reduction targets will harm more and more European industry. Therefore the protection against carbon leakage granted at European level must be in line with the European level of ambition. |
a) Business |
VETROPACK AG |
CH-8160 Bülach Schützenmattstr.48 attila.mueller@vetroconsult.ch |
a) yes |
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1) yes |
c) I don’t know |
The glass industry is making continuous improvement in energy efficiencies and process technologies to reduce CO2, energy consumption and environmental impacts. While further reductions in the glass industry are possible, what is important is the magnitude of this reduction. All official EU publications such as the “Sector Competitiveness Studies - Competitiveness of the Glass Sector - ENTR/06/054 - Final report, 14 October 2008” or more recently the Glass BREF and the BAT Conclusions show that no breakthrough technology is currently available to reduce CO2 emissions to the extent imposed by the energy and climate package 2030 (-43% for ETS sectors between 2005 and 2030). Emissions reductions cannot be repeated ad infinitum. There is a thermodynamic limit to the glass melting process which is an absolute limit, and that current technology is already approaching.Moreover, further reductions will strongly depend upon external factors such as cullet (= recycled glass) availability. |
b) no |
The main driver for energy efficiency improvements in the glass industry is the high share of energy costs within production costs. In fact, the glass industry has continuously improved energy efficiency over previous decades. Regulatory instruments and the EU ETS in particular, have only a marginal effect on energy efficiency improvements of glass melting activities, if any. Whilst there is no global ETS in place, the EU ETS is only a source of costs for glass industries (direct but also indirect CO2 costs linked to electricity), and therefore weakens the competitive position of European based glass industries vis-a-vis third country competitors. As such, it indirectly favors production reduction in the EU and rises in imports from non EU countries without carbon constraints into the EU. For these reasons, glass industries need to be fully protected against risks of carbon leakage. |
a) yes |
The EU glass industry faces higher costs for environmental protection, energy, labour and raw materials, than the majority of extra-EU competitors. In the absence of an international climate agreement and a level playing field between EU and extra EU competitors, the EU industry needs to be provided with measures to safeguard its competitiveness. Measures to avoid carbon leakage under the EU ETS are therefore essential. Measures should cover both the direct and indirect CO2 costs. Such measures under the EU ETS must be established in a way that ensures the ETS’ coherence with the EU’s ambition to revitalize European manufacturing activities, as proposed in the EC Communication on Industrial Renaissance. |
c) quite inadequate |
Free allocation has been key up to now to mitigate the negative impacts of a unilateral climate policy. However, the Cross Sectoral Correction Factor which is applied already from 2013 reduces the free allocation, even for the most GHG efficient installations, and will dramatically increase in the future, thus further reducing free allocation. This current system is unsustainable and should be changed in order to ensure that the most GHG efficient installations receive 100% of their allowance needs. |
a) it absolutely keeps the incentive |
Free allocation does not reduce the incentive to innovate; on the contrary, the majority of installations in the sector (about 95%) do not have enough allowances, which encourages industry to invest in the efficiency of its plants to avoid having to purchase a high level of allowances, which would render the sector uncompetitive. For the installations under the benchmark (about 5%), they can sell their allowances on the market, which is also an incentive to continue reducing emissions. The incentive is therefore present. Below, we also call for a periodic revision of the benchmarks (in exchange of the cancellation of the cross-sectoral factor), which also provides for a strong incentive to improve. In addition, free allowances preserve investment capacity. Free allowances offer industry the incentive to purchase less CO2 allowances if they become more GHG efficient. However this last incentive would be better preserved if the CSCF was not forcing an unrealistic and arbitrary reduction |
b) quite proportionate |
Administrative burden is accepted, since it is necessary to maintain the free allocation system. However opportunities or improvement to this process should be considered. Conversely, the administration and calculation rules for new entrants are overly complex and can lead to under-allocation. They can therefore be seen as disproportionate and can be a disincentive to new investments. |
d) there should be no limit to overall free allocation to industry |
The current system is unsustainable (from a competition point of view) because the cross sectoral correction factor continually reduces the free allocation given to industry, even for the most GHG efficient installations. Ideally, installations whose efficiency is equal or better than the (periodically reviewed) benchmark should receive 100% of free allocations to produce in the EU and so there should be no limit. In practice, this is likely to lead to a higher share in phase IV. An increased level of EU ambition in terms of GHG reduction would require enhanced measures against carbon leakage and therefore an increase in total free allocations. |
e) I don’t know |
Overall financing for technological innovation (and not only connected with CO2 reductions) in manufacturing should be increased in the EU. However R & D should be funded via a mobilization of different sources of funding - including but not limited to - auctioning revenues. It should not come from the free entrants reserve or Free Allowances reserve. Allowances should be primarily used to ensure that the most GHG efficient installations get 100% of their needs to produce in the EU. Furthermore, financing for R&D and demonstration projects should be technology-neutral and not focused only on CCS or renewables. New technologies such as Carbon Capture and Use (CCU) and others should not be excluded. |
a) yes |
As stated above, industrial innovation, with a focus on the process and on new energy sources for industry, should be promoted. It should not be financed by shares of allowances reserved for free allocation or for new entrants, but rather from a mobilization of different sources, and not limited to auctioning revenues. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Industrial innovation should be promoted in a technology-neutral way. However this should not be done at the expense of free allocation which aims to provide effective support and protection against carbon leakage. Therefore it should be financed via other sources. This could include, among other sources, money from the auctioning revenues, as suggested in the ETS directive (Art 10.3). |
a) yes |
Unequitable carbon costs should not place EU industries at a competitive disadvantage with extra-EU competitors and this should be the ultimate objective pursued in order to achieve the EU’s ambition of 20% GDP realized by industrial activities in 2020. To that end, measures against carbon leakage are a pre-requisite but are not enough. An EU scheme for compensation of indirect costs due to higher electricity prices and some raw materials (e.g. soda ash, industrial gases, ..) should also be developed for Energy Intensive Industries. More generally, the EU needs to assess, and if needed reform, all its policies and in particular energy and environmental ones against the re-industrialisation objective. A longer term re-industrialisation objective for 2030 should be established. |
a) the present two groups should remain |
This binary model ensures that all sectors benefit from carbon leakage protection measures as soon as a risk is detected. This is essential to ensure that carbon leakage measures are effective and that protection is not granted too late, when industries are already in jeopardy. |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
The competitiveness of energy-intensive industries is sensitive to energy and carbon costs, therefore a risk exists for all these industries. For the sake of simplicity and consistency in legislation, all energy-intensive industries, as defined in Art 17 (1) a of the Energy taxation directive 2003/96/EC could be automatically placed on the carbon leakage list, i.e. An "energy-intensive business" shall mean a business entity, (…) where either the purchases of energy products and electricity amount to at least 3,0 % of the production value or the national energy tax payable amounts to at least 0,5 % of the added value. In case ETS-specific criteria are maintained, they should continue being based on both the CO2 intensity and the trade intensity metrics. The CO2 cost metric should be made more relevant to analyze the impacts of carbon cost on sectors’ profitability. To that end, the CO2 cost over GVA criteria could be replaced by a CO2 cost over Gross Operating Surplus (GOS) criteria. |
b) other thresholds should be defined. Please specify below |
The competitiveness of energy-intensive industries is sensitive to energy and carbon costs, therefore a risk exists for all these industries. For the sake of simplicity and consistency in legislation, all energy-intensive industries, as defined in Art 17 (1) a of the Energy taxation directive 2003/96/EC could be automatically placed on the carbon leakage list, i.e. An "energy-intensive business" shall mean a business entity, (…) where either the purchases of energy products and electricity amount to at least 3,0 % of the production value or the national energy tax payable amounts to at least 0,5 % of the added value. In case ETS-specific criteria are maintained, thresholds must be maintained at their current levels even if the denominator of the carbon cost criteria is changed to Gross Operating Surplus. Raising thresholds would send a damaging signal to EU industries, meaning that fixing a cap to free allowances is more important than safeguarding industrial competitiveness . |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The current criteria under the quantitative assessment at NACE 3 or 4 level should be maintained and used as the first assessment option. When an assessment at NACE 3 or 4 level is not appropriate to identify the relevant industrial activities falling under the EU ETS, then a quantitative assessment at 6- or 8-digit should be carried as a second option. Finally, as a third option, a qualitative assessment must remain possible. Other parameters can be studied as part of qualitative assessments, such as methodology and evidences of investment leakage. |
d) in line with the duration of ETS Phase 4 |
As long as there are no equivalent GHG reduction measures taken by major trading partners, the list of sectors exposed to the risk of carbon leakage should remain valid. This is essential to provide predictability to industries faced with long investment cycles (typically > 15 years). |
c) the approach should be less stringent (please specify) |
Glass industries support ambitious benchmark levels, which reflect the technological capabilities of the sectors best performers using the best available and proven technologies in Europe. It must be kept in mind however that this approach also has limits. Indeed, benchmark curves do not always reflect a difference in terms of « best » (the least GHG emitters per tonne of glass) or « worst » GHG players, but a difference in terms of products produced, cullet availability, age of furnace, available fuels, etc. The 10% best GHG performers can therefore be regarded as extremely challenging, especially for plants producing a wider range of more sophisticated products with higher added-value (as this usually entails higher energy consumption). |
a) yes (please specify how often) |
It seems logical to revise the benchmarks from time to time to reflect GHG improvements over time. Revision cycles should be linked to ETS phases and remain unchanged over this period. Periodical revision of the benchmark should be based on the actual EU based installations. The periodic revision of benchmarks should be the sole instrument leading to a reduction of free allowances over time, as benchmarks reflect true possibilities of GHG improvements according to state-of-the-art technologies deployed in Europe. The periodic revision of benchmarks therefore justifies that the CSCF is abandoned. |
c) other (please specify) |
Ex-ante allocation can only lead to over-allocation in crisis times, and under-allocation when the economy is growing. A better approach is to design an « ex post » system, where real allocation is corrected according to the real production. |
a) no, there should be no deviations |
In principle, there shall be no deviation from the general harmonized allocation rules at the level of an individual installation as this could cause distortion of competition. Only in the case of very specific hardship, should deviations be envisaged for an entire sector after a careful assessment of the competitive effects of such deviations. |
d) yes, in the form of financial compensation at EU-level |
Rules for the compensation of indirect costs should be revised and need to be effective to reflect the real burden of CO2 included in electricity costs for industry. A differentiated compensation approach by Member States is not acceptable from a competitiveness point of view. A harmonized approach at EU level is therefore needed. The harmonized measure should take the form of financial compensation. Free allocation should be kept aside to ensure full relief for direct emissions (most GHG efficient installations should receive 100% of their needs). A compensation system should also be put in place to compensate for higher prices of some raw materials (e.g. soda ash) and industrial gases. |
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a) from the Member States' auction budgets |
Allowances funding low-carbon innovation support should be financed from the Member States’ auction revenues and from a mobilization of additional sources. However, this should not be financed at the expense of free allocation or the new entrants reserve which must be principally used for measures against risks of carbon leakage. |
Generally speaking, glass industries welcome the opportunity to express their views on carbon leakage measures post 2020 and appreciate that this discussion is held without further delay. It is however regrettable that industry is asked to comment on such measures whereas the rules for EU ETS Phase IV have not yet been fully decided. The glass industry wishes to reiterate that so long that there is no comparable ETS system (which means that similar costs are born by competitors) operating in most part of the world and in extra-EU countries with glass industries, EU based glass industries will need to receive full and effective protection against carbon leakage. The recent assessment carried by DG CLIMA on exposure to carbon leakage risks, i.e. the carbon leakage list of 2009 and its recent revision, shows that between 2009 and 2014, risks of carbon leakage has grown in most glass sectors. For these reasons, glass industries need effective protection moving forward. |
a) Business |
Vetropack Ltd. |
Attila Müller Manager Business Development & Engineering Vetroconsult AG Schützenmattstrasse 48 CH-8180 Bülach Phone: +41 44 863 32 56 Mobile: +41 79 104 34 13 Fax: +41 44 863 31 22 Email: attila.mueller@vetroconsult.ch |
a) yes |
|
1) yes |
b) no |
The question is ill-formulated. Of course, further reductions in the glass industry are possible. What is important is the magnitude of this reduction. All official EU publications (see FWC “Sector Competitiveness Studies - Competitiveness of the Glass Sector. Within the Framework Contract of Sectoral Competitiveness Studies – ENTR/06/054. Final report, 14 October 2008” or more recently the Glass BREF and the BAT Conclusions) show that no breakthrough technology is currently available to reduce CO2 emissions to the extent imposed by the energy and climate package 2030 (-43% for ETS sectors between 2005 and 2030). Emissions reductions can not be repeated ad infinitum. There is a thermodynamic limit to the glass melting process which is an absolute limit, and that current technology is already approaching. Moreover, process emissions (arising from the decomposition of the raw materials such as carbonates, and leading to non-fuel related CO2 emissions) are impossible to reduce, limiting |
b) no |
If the ETS was a global system, the answer to this question is “yes”, ETS can help improving energy efficiency. Unfortunately, being only applied in the EU, it rather favors production reduction in the EU and imports from non EU countries into the EU. It has also to be underlined that high energy prices in the EU compared to competitors (US, North Africa, Eastern countries,..) is already an incentive to increase energy efficiency, but is also a cause of relocation |
a) yes |
EU industry already faces higher costs for energy, labour and raw materials. In the absence of a global agreement, it is absolutely vital to provide special measures to mitigate the financial impact on EU industry of unilateral CO2 (direct and indirect) costs to keep industry (and therefore jobs and welfare) in the EU. |
b) quite adequate |
Free allocation has been key up to now to mitigate the negative impacts of a unilateral climate policy. However, the Cross Sectoral Correction Factor which kicks in already in 2013 reduces the free allocation, even for best players, and will dramatically increase in the future, reducing largely free allocation. This current system is unsustainable and should be changed in order to ensure that best performers receive 100% of their needs. |
a) it absolutely keeps the incentive |
Free allocation does not reduce the incentive to innovate because good performers still have allocation that they can sell on the market. |
b) quite proportionate |
Administrative burden is consequent, but it is necessary to maintain the free allocation system alive. On the other side, rules for new entrants are disproportionate to the objective. They are a real obstacle for new investments and should be simplified in the future. |
d) there should be no limit to overall free allocation to industry |
The current system with a cross sectoral correction factor reducing from 2013 the free allocation given to industry, even the best players, is unsustainable. It is therefore essential to have a higher share of free allocation in order to ensure that best performers can get 100% of what they need to produce in the EU. |
c) a lower share than in Phase 3 |
The first objective should be to ensure that best performers get 100% of their needs to produce in the EU. The money to finance such demonstration project should in fact not come from the New Entrance Reserve, but from the auctioning revenue as suggested in the ETS directive (Art 10.3). It is very doubtful that CCS is the right direction to go, considering impact on energy efficiency (enormous extra energy consumption for CCS), and investments and public acceptance. |
a) yes |
Industrial innovation (focus on the process and on new energy sources for industry) should be promoted, using money from the auctioning revenue as suggested in the ETS directive (Art 10.3) |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Industrial innovation (focus on the process and on new energy sources for industry) should be promoted, using money from the auctioning revenue as suggested in the ETS directive (Art 10.3) |
a) yes |
Innovation support has to be enlarged. Also, a EU scheme for compensation of indirect costs due to higher electricity prices and some raw materials (e.g. soda ash) should be developed for manufacturing industry. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
In the absence of a global agreement, the whole manufacturing industry should be protected against the risks of carbon leakage as we face a global economy. |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
As long as there is no global level playing field, the whole manufacturing industry should be protected against the risks of carbon leakage as we face a global economy. |
b) other thresholds should be defined. Please specify below |
As long as there is no global level playing field, the whole manufacturing industry should be protected against the risks of carbon leakage as we face a global economy. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
As long as there is no global level playing field, the whole manufacturing industry should be protected against the risks of carbon leakage as we face a global economy. If this is not the option chosen by the legislator, it is indeed vital to keep some discretion is needed to cope with special cases. |
b) longer (please specify) |
As long as there is no global level playing field, the whole manufacturing industry should be protected against the risks of carbon leakage as we face a global economy. The duration should therefore be until there is a global agreement ensuring that all competitors face similar carbon costs. |
c) the approach should be less stringent (please specify) |
The benchmark curve does not always reflect a difference in terms of « best » or « worst » players, but a difference in terms of products produced, cullet availability, age of furnace, available fuels,.. Therefore, the 10% best can be regarded as extremely challenging, especially for plants which add a relatively high share of value to their products (as this entails generally higher energy consumption). |
a) yes (please specify how often) |
It seems logical to revise the benchmarks from time to time to reflect improvements over time. But maximum once every 10 years (due to long lifetime of the installations). |
c) other (please specify) |
Ex-ante allocation can only lead to overallocation in crisis times, and underallocation when the economy is growing. A better approach is to design an « ex post » system, where real allocation is corrected according to the real production. |
b) yes, there should be deviations with higher allowances for installations facing specific hardships |
It is important to have some specific rules for companies facing hardships, but this should remain an exception |
d) yes, in the form of financial compensation at EU-level |
A differentiated compensation approach by Member States is not acceptable from a competitiveness point of view. Financial compensation is the best option because free allocation should be kept aside to ensure full relief for direct emissions (best performers should receive 100% of their needs). A compensation system should be put in place for indirect emissions but also to compensate for higher prices of some raw materials (e.g. soda ash). |
Least important |
Less important |
Most important |
Important |
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a) from the Member States' auction budgets |
Industrial innovation (focus on the process and on new energy sources for industry) should be promoted, using money from the auctioning revenue as suggested in the ETS directive (Art 10.3) |
There should be more participation on ETS from major countries outside EU. It is not sustainable for the EU industry on long term to have only ETS in EU. There should be a global agreement. |
a) Business |
VICAT SA |
VICAT SA Gilbert ALCAZER Environnemental Manager gilbert.alcazer@vicat.fr |
a) yes |
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1) yes |
b) no |
The emission level in cement inductry is composed of a fixed part from calcination of lime ( about 530 kg/tck) which cannot be reduced. That leaves a very low margin to redude emissions levels under the benchmark level of 766 kg/tck because the remaining 236 kg/tck related to combustion is difficult to reach. Emissions level will be reduce to the benchmarking level but not under this level without production reduction |
b) no |
A too big strengh on european emissions could contribute to promote building new capacities out of EU, then to lower investments levels in Europe. Even if energy cost reduction is incentive, the investment levels in EU could then decrease which could be contrary to energy efficiency and competitiveness. |
a) yes |
Emissions reduction in cement indutry will need important ivestments which will impact european plants competitiveness if no countrepart is available. until emission reducing is not a global matter, european industry will have to be supported to keepp competitive and take part in the sustainable development of EU. This support could be through additionnal allocations to take in account indirect emissions on bought energy, and a reasonnable and reachable benchmark. |
a) very adequate |
see before |
a) it absolutely keeps the incentive |
The incentive is to reach the benchmark level which is very challenging |
b) quite proportionate |
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d) there should be no limit to overall free allocation to industry |
In a global economy, a limit to free allocations in european industry will lead to a loss of competitiveness |
e) I don’t know |
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a) yes |
innovation is a key if not "the" key to perform such an ambitious program in emissions reduction and must be widely supported and encouraged. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
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a) yes |
As cement industry is electro-intensive, CO2 cost repercussion on bought energy will also contribute to carbon leakage. This impact must be neutralized for cement industry. |
a) the present two groups should remain |
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a) the present criteria should remain |
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a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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d) in line with the duration of ETS Phase 4 |
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c) the approach should be less stringent (please specify) |
the first 5% of the european plants should be disregarded as non representative of a typical artificial cement plant in a typical area without outstanding advantages such as : acces to gas energy, to a high rate of biomass fuels etc which are not available at the level of a typical plant. The representativeness should be considered at the average level of the plants in between 5% and 15%. |
a) yes (please specify how often) |
Benchmark should be updated before a new trading period and not during it. |
a) no, the same baseline period chosen for allocation in Phase 3 should be maintained also for post 2020 (Phase 4) allocation |
Cement industry is a cyclic business which needs long term rules for an effective investment Policy. Changing the allocation basis from one period to another could introduce discrepancy in the long term programs |
a) no, there should be no deviations |
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c) yes, in the form of additional free allocation |
Supporting increases in energy costs because of carbon cost in energy production is another way to carbon leakage exposure . |
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a) from the Member States' auction budgets |
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a) Business |
Villeroy and Boch Kft. (Villeroy and Boch Ltd) |
Erzsébeti út 7. 6800 Hódmezővásárhely HUNGARY Tel: 0036 (62) 530 565 Tel: 0036 (62) 530 530/ Fax: 0036 (62) 530 573/ Fax: 0036 (62) 888 571/ www.alfoldi.hu KerekesneSz.Magdolna@villeroy-boch.com |
a) yes |
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1) yes |
b) no |
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c) I don’t know |
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a) yes |
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a) very adequate |
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a) it absolutely keeps the incentive |
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a) absolutely proportionate |
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c) a constant share as in 2013-20 |
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a) a substantially higher share than in Phase 3 |
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a) yes |
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a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
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a) yes |
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a) the present two groups should remain |
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a) the present criteria should remain |
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a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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d) in line with the duration of ETS Phase 4 |
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a) the present approach of average of the 10% most efficient installations should remain |
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a) yes (please specify how often) |
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a) no, the same baseline period chosen for allocation in Phase 3 should be maintained also for post 2020 (Phase 4) allocation |
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e) I don’t know |
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c) yes, in the form of additional free allocation |
and also financial compensation at EU-level |
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e) I don't know |
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a) Business |
voestalpine AG |
Markus Steinhäusler +43/50304/15/76827 markus.steinhaeusler@voestalpine.com voestalpine-Straße 1 4020 Linz Austria |
a) yes |
|
1) yes |
b) no |
Following the request of EU Commission most energy intensive sectors developed their own low-carbon industrial roadmaps. Most of those roadmaps show only small incremental GHG emission reductions possible between now and 2030.Furthermore, most of the sectors will need the development, piloting, demonstration and of breakthrough technologies to meet long term goals of around -80%. These technologies, if ever developed, would only come in play after 2030. This is particularly true for the steel sector. As demonstrated in the Steel Roadmap 2050, technologies able to drastically decrease the sector’s emissions are either uncompetitive because relying on expensive reducing agents (pre-reduction of iron) or involving Carbon Capture and Storage. |
b) no |
First of all, being exposed to fierce competition from third countries in the EU market and in the export market, the EU steel sector is not able to pass on direct and indirect CO2 costs on prices. Therefore, CO2 costs can potentially damage the operating margins and thus, financial means available for investment. Secondly, investments in energy efficiency make the industry more competitive only if the return on investment is positive i.e. the savings exceeds the investment costs. With the ETS, investments are made only if their cost is offset by the avoided carbon costs. As such, the ETS doesn’t make the industry more competitive as ETS-driven energy efficiency measures are there only to compensate a cost that wouldn’t be there without the ETS. |
a) yes |
The EU steel industry delivered goods that are globally traded. As regards steel sector, steel is a global traded commodity and steel companies are competing on global markets. From the global crude steel output of 1,607 Mio t, China comes first with around 779 Mio t followed by the EU-28, with the EU-28 being the first steel importing region in the world and the third in term of exports. This shows that the EU steel sector faces fierce competition from third countries not only on the domestic market but also on a global level; EUROFER is therefore convinced that a comprehensive, all parties equally obliging and legally binding international climate deal is the best way to address climate change whilst solving distortion of competition issues due to asymmetric carbon constraints. In the absence of an international climate agreement providing level playing field special measures are needed to support EU industry covered by the EU ETS to address the competitiveness issue and avoid leakag |
b) quite adequate |
As shown in the Ecorys ‘Carbon leakage evidence project’ - fact sheet for steel, one of the main reasons why no evidence of leakage could be found in the first two trading periods is the effectiveness of the protection provided by free allocation. Free allocation is the best instrument to date to address carbon leakage risk for certain industrial sectors. Sectors at risk of carbon leakage shall be provided with 100% free allocation at the level of the most efficient installations, based on achievable benchmarks and without any correction factor. Equally they shall be provided with full off-setting of CO2 cost-pass through in electricity prices in all member states by either financial compensation, free allocation, or the electricity market shall be re-designed in a way that it prevents any carbon price pass-through in electricity prices, or a combination of these. |
b) it largely keeps the incentive |
With a free allocation based on achievable benchmarks companies in the tail of the benchmarks have an incentive to catch up more quickly to the benchmark due to the level of carbon related costs. Companies in the lead are incentivised to innovate to perform even better. On the contrary, a higher level of auctioning for sectors exposed to leakage (as induced by the Cross Sectoral Correction Factor) decreases the profit margins and the financial ability to invest. This is particularly true in these periods of restricted access to capital. |
b) quite proportionate |
The implementation of the benchmarks through the NIMs requires significant resources, both from the industry as well as from the competent authorities. However, not having free allocation would have dramatic consequences for the sectors most exposed to carbon leakage. The cost impact (for the companies as well as for the society because of the costs deriving from lost market shares and possibly plant closures) would in any case be much higher than the administrative burden. Nevertheless, it has to be kept in mind that the administrative burden adds to the risks and disadvantages whenever comparing sites within the EU with sites in other regions of the world, therefore adding to the carbon leakage risk. |
d) there should be no limit to overall free allocation to industry |
To safeguard EU industries’ global competitiveness in absence of a comprehensive international agreement on climate change establishing a global level playing field for industry, sectors at risk of carbon leakage need to be provided with 100% free allocation at the level of the most efficient installations, based on achievable benchmarks and no correction factor. A bottom-up approach is needed for cap setting. The cap should be flexible so as to be in line with what is technically and economically feasible in terms of CO2 reduction potential. Benchmarks need to be revised periodically (e.g. 5 years), in order to take into consideration technological development. In the absence of major technological change able to decrease the sector’s emissions, a flat rate of free allocation must be guaranteed. To protect sectors at risk of leakage due to indirect CO2 costs, it should be considered to fully offset CO2 costs passed through in electricity prices by granting free allowances accordingly |
e) I don’t know |
Funding of low carbon innovation must be consistent with the level of ambition of the objectives. Funding should come preferably from sources outside the EU-ETS and supplementary from earmarking of the revenues from the EU ETS, in particular for mitigation at source and financing of related infrastructures. |
a) yes |
This should cover all carbon abatement measures and according R&D activities as well as all investments, provided that there will be no additional burden for the industry. |
c) other types of funding (please specify) |
Adequate funding should be provided by a well-balanced mix of funding sources, within and outside the EU ETS. However, funding should come preferably from sources outside the EU-ETS to ensure predictability and covering of the needs. |
a) yes |
Sectors at risk of carbon leakage shall be provided with 100% free allocation at the level of the most efficient installations, based on achievable benchmarks and no correction factor. Equally they shall be provided with full off-setting of CO2 cost-pass through in electricity prices in all member states by either financial compensation, free allocation, or the electricity market shall be re-designed in a way that it prevents any carbon price pass-through in electricity prices, or a combination of these. |
a) the present two groups should remain |
The present two groups should remain to ensure predictability. It is important that the sectors most exposed to carbon leakage should get a flat rate of 100% free allowances. |
a) the present criteria should remain |
The present criteria should remain to ensure continuity and, thus, predictability. However, with the aim to safeguard, or even strengthen, the global competitiveness of the European energy intensive industries, targeted improvements of the criteria might be considered. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The present criteria should remain to ensure continuity and, thus, predictability. However, with the aim to safeguard, or even strengthen, the global competitiveness of the European energy intensive industries, targeted improvements of the criteria might be considered. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
For some sectors, statistical data doesn’t fully capture the reality of their exposure to leakage. This is often due to boundary issues or linked to the complexity of the sector and its market (e.g. existence of substitutes). There the option to have a qualitative assessment should be kept. |
d) in line with the duration of ETS Phase 4 |
This enables the required predictability for investments and decisions with a longer term perspective. On top of this, there should be the possibility to add sectors to the leakage list during the trading period, if a change of conditions justifies it. |
a) the present approach of average of the 10% most efficient installations should remain |
With a fair and realistic benchmark the goal of the 10% best performers is ambitious enough to lead the EU-ETS on an economical way to success. The benchmarks need to reflect real technical and economical possibilities to produce the product to be benchmarked AND to sell it on the relevant market taking international trade into account. However, in a sector with a relative low number of installations, abatement of carbon by an individual installation affects the benchmark substantially. Any adaptation of benchmarks for 2021 onwards should be considered only if the best performers of sectors at risk of carbon leakage receive truly 100% free allocation and full off-set of CO2 costs pass-through in electricity prices in a harmonized way in all Member States. |
a) yes (please specify how often) |
A periodical review of the benchmarks once per commitment period should be made, so as to reflect technological progress and uptake of new and proven technologies in the EU. This should be done by assessing the benchmarks through an analysis of the CO2 performance of the EU industry and not be based on best available techniques (BAT), because BAT feasibility depends to a large extent on local conditions (e.g. cheap natural gas for DRI). |
c) other (please specify) |
Allocation should be based on real production levels or, if actual data cannot be used, on a rolling average of production levels over close years (e.g. n-1, n-2) with respect to the reporting year (n). |
a) no, there should be no deviations |
Distortion of competition within the single market shall be avoided. |
c) yes, in the form of additional free allocation |
Full off-setting of CO2 cost-pass through in electricity prices should be provided in an harmonized way in all member states by either free allocation, financial compensation, or the electricity market shall be re-designed in a way that it prevents any carbon price pass-through in electricity prices, or a combination of these. |
Important |
Less important |
Most important |
Least important |
A large scale pilot plant usually bears the highest risk in terms of process and equipment development and functioning as well as financial expenditures. The commercialisation stage will mostly show the least risks as by then the functioning should be proven and a demand for it will evolve. |
d) other |
The allowances funding low-carbon innovation support should come from other public and private funding sources. MS’s auction budgets should also be considered but will not be enough to meet to requirements, especially when it comes to predictability and the necessary amount to match the level of ambition of the EU climate policies. |
In order to provide enough predictability and assurance any cornerstones of the post 2020 climate regime, such as targets, structural measures or allocation methodologies, need to be defined and adopted only in combination with adequate measures to protect the EU from carbon and investment leakage. |
a) Business |
Wienerberger AG |
DI Gerhard Koch gerhard.koch@wienerberger.com A-1100 Wien, Wienerberg City, Wienerbergstraße 11 |
a) yes |
|
1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improvement |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. This would limit the list to sectors really exposed and would eliminate the risk of a carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
As explained above, all energy intensive sectors as defined in the Energy Taxation Directive should be considered as exposed to the carbon leakage risk. As an alternative, trade and carbon intensity criteria should be used considering the following elements. First, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the GOS. On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS. Second, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
a) Business |
Wienerberger Téglaipari zRt. |
Laszlo Serfozo H-1119 Budapest, Bártfai utca 34 T+36(1)464-7030/397 F+36(1)203-0565 M+36(30)684-2990 laszlo.serfozo@wienerberger.hu |
a) yes |
|
1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improvements. |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
d) absolutely exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies. |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. This would limit the list to sectors really exposed and would eliminate the risk of a carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
As explained above, all energy intensive sectors as defined in the Energy Taxation Directive should be considered as exposed to the carbon leakage risk. As an alternative, trade and carbon intensity criteria should be used considering the following elements. 1)GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry.Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS).On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS. 2)the current criteria enable either to have a trade intensity≥30%, or a carbon intensity≥30%, or a trade intensity≥10% combined with a carbon intensity≥5%.Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity≥5% combined with a carbon intensity≥10%) should be introduced. |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Important |
Most important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
a) Business |
Wopfinger Baustoffindustrie GmbH |
Gerhard Philipp Wopfing 156 2754 Waldegg Austria 0043-2633-400-433 g.philipp@wopfinger.baumit.com |
a) yes |
|
1) yes |
b) no |
We have reduced our emissions wherever it makes sense technologically and financially. The abatement potential has become very narrow and further marginal reductions will be very expensive. Reductions are only achievable by reducing industrial production as such or by transposing production outside of EU. The targets energy efficiency and emission reduction are controversal. So increasing energy efficiency leads in many cases to higher CO2-emissions. |
b) no |
See answer above |
a) yes |
|
a) very adequate |
Free allocation is in principle an adequate instrument to reduce cost distortions between the EU and competing economies. However, its real effectiveness in achieving such result depends on the details of the technical rules. In particular, free allocation has to be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter new investments. Free allocation shall be done in a dynamic form based on current production levels. That way increased free allocation will be automatically granted to installations/sectors in economic growth. The risk of carbon leakage could be minimized by an international agreement on CO2 reduction targets. |
b) it largely keeps the incentive |
The current free allocation system is based on ambitious benchmarks set at the level of the average emissions of the 10% most performing installations. Taking this average into account, and considering also the cross sectoral correction factor, virtually all installations will have to purchase allowances. Moreover, it should be reminded that free allocation does not primarily aim at creating incentives for reducing emissions, but at preventing the risk of carbon leakage in the industry If industry can rely on sufficient free allocation for an adequate period of time, investment decisions will trigger improvements in a long term run. Review processes shall be adapted to decision cycles in investment intensive industries and adequate financing instruments shall be available. The currently foreseen 5 years interval for a periodic update of the carbon leakage list is definitely too short to guarantee investment and planning reliability. |
c) quite exaggerated |
|
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage its share should be sufficient to achieve such objective. Post 2020 carbon leakage measures have to be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 requires increased and not decreased protection against carbon leakage. An efficient producer in the EU should not have any competitiveness disadvantage compared to his competitors in third countries. Therefore, its free allocation should not be subject to any reduction. If there is a relative target and a dynamic allocation system in place, no extra limitation in any way is needed. Free allocation can only address the risk of carbon leakage when it is not limited by other provision in the system (like the cross sectorial correction factor). |
e) I don’t know |
I think CCS is not the right technology for Europe |
a) yes |
|
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
100% from the auctioning revenues must be used as a support for industry. This should be a binding requirement for every single member state. It should not be left open as an option of choice for member states. |
a) yes |
I have serious doubts that the current legal framework will ensure a level playing field beyond 2020. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
With a dynamic allocation with strict benchmarks no CL-list is needed. The effort is to high to detect the sectors which are exposed or not. |
g) I don’t know |
|
c) I don’t know |
|
b) no, all criteria should be based on simple metrics and linked to clearly defined thresholds |
The qualitiative assessment is to complex and can also be cancelled. |
d) in line with the duration of ETS Phase 4 |
When there is still a CL-list post 2020 then the validity shall be in line with the phase 4. Currently the revision interval for the carbon leakage list is not coping with the ETS period. The new CL List is valid until 2019 while the ETS period 3 ends 2020. This means a lot of confusion and insecurity for business decisions. |
a) the present approach of average of the 10% most efficient installations should remain |
|
a) yes (please specify how often) |
Benchmarks should be updated periodically. It must be ensured that benchmark values can be achieved with a certain technical standard in every country and on every production site. Only then they should be revised in in line with the emission trading periods. In case a relative emission target is implemented benchmark values can also be updated by EUTL data on a more frequent basis. |
c) other (please specify) |
We suggest taking the recent production level into account. By this, equal treatment of installations within an industrial sector can be assured, distortions within the system can be avoided and further importance to the benchmarks can be given. |
a) no, there should be no deviations |
To avoid distortions within the ETS-System, no deviations should be given. The calculation should be simple and transparent. |
c) yes, in the form of additional free allocation |
A Union wide and unique approach is needed. Only by this, distortions within the member states can be avoided. Indirect costs can be compensated for example via financial compensation, in form of free allocation, or by including them in the benchmark. If they are included in allocation no state aid guidelines are needed. |
Less important |
Important |
Most important |
Least important |
|
a) from the Member States' auction budgets |
100% from the auctioning revenues must be used as a support for industry. |
|
a) Business |
Yara S.A./N.V. , Avn. da Vinci 1, 1935 Zaventem, BELGIUM |
Jean Paul Beens Head of Public Affairs and Industry relations Yara S.A./N.V. 1, Avn. da Vinci B-1935 Zaventem BELGIUM Mobile : + 32 (0) 475 80 56 96 |
a) yes |
|
1) yes |
a) yes |
The EU industry in general is able to continue reducing GHG emissions, however, it should be noted that the easiest efforts have already been done. To further increase the reduction rate will require much higher investments. Whilst Carbon Capture and storage can further reduce GHG emissions, these options are still quite far from a commercial implementation. When it comes to the EU fertilizer industry, GHG reductions by end of pipe, as for example the N2O abatement have been implemented in many plants already. This resulted in an overall reduction by more than 80% in the N2O emissions since 2004. It is expected that all fertilizer companies based in EU will have implemented N2O abatement in the coming years.Further reduction of GHG emissions via energy efficiency is more difficult and will require the construction of new plant with the newest technology. In the case of ammonia production, the inevitable GHG release from ammonia production raw materials should be excluded from ETS. |
b) no |
The EU ammonia industry is already the most efficient in the world. However, the extra ETS costs do not increase the competitiveness of the European industry, if the cost becomes excessive (cost of implementing and operating new technology and/or cost of CO2 allowances) compared to the cost for industries operating in countries with less ambitious climate policy. High EU ETS costs may lead to closure of emission efficient European industries and carbon leakage. |
a) yes |
Special measures (100 % free allocations according to achievable benchmarks without correction factors) must be provided to EU industries that are exposed to carbon leakage. This allocation should be based on actual production (instead of historical production). This support must exist as long as international agreements are not reached and the European industry is facing stricter regulations than others. |
a) very adequate |
Free allocation is the best tool available under ETS to avoid carbon leakage. Free allocation should be regulated in such a way that it fully protects industries exposed to carbon leakage, especially energy intensive industries, from higher climate costs compared to industries located in other parts of the world with less strict climate regulation |
a) it absolutely keeps the incentive |
‘Free allocation’ should be 100% free for the best performer Today this is not the case due to too tight benchmarks, CSCF and ex ante allocation system. Even if the best performers get 100% free allocation fFor the large majority of ETS production sites the system will be a driver for innovation of more efficient technology and use of renewables |
b) quite proportionate |
Allocation on actual production levels will not lead to an additional administrative burden since reporting on manufacturing output is already done anyway. |
d) there should be no limit to overall free allocation to industry |
Energy intensive industries should have an unlimited free allocation based on actual production and achievable benhmarks without correction factor to compensate for differences in climate policies of countries with less ambitious targets than EU. The EU industry must not be unilaterally burdened with limits and constraints. The incentive to continue improving energy efficiency is guaranteed by a benchmark-based allocation. |
a) a substantially higher share than in Phase 3 |
Cost efficient, reliable and publically acceptable carbon capture and storage is essential for reaching the long term emission reduction targets. |
a) yes |
It is highly surprising that such a support scheme has not yet been established, since the challenge of climate change is of major importance. However, such a scheme should not be a large administrative burden and cover the project development phase rather than the operational stag (see answer to question 22). |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
ETS revenues should be directed back to the industry to continue promoting research and project helping to reduce GHG emissions. |
a) yes |
In addition: - compensation of indirect carbon costs associated with the consumption of electricity - development of an energy pricing system which is competitive with the energy pricing in other parts of the world |
b) more carbon leakage categories should be defined |
Sectors that are severely exposed to the risk of carbon leakage, should be placed in a separate category and given preferential treatment |
a) the present criteria should remain |
The present criteria include the use of a specific carbon price to calculate the share of carbon costs in their GVA. The carbon price must be kept at the current level; otherwise it will be unclear if an industry will be compensated for the carbon costs in the future. This uncertainty will negatively influence investment and maintenance costs. The system should also be modified such as “process emissions” should be exempted from ETS. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
d) in line with the duration of ETS Phase 4 |
The validity should be long to come to a consistent and predictable policy for the industry sectors. A review of the carbon leakage list together with the review of the ETS is therefore a logical choice. |
c) the approach should be less stringent (please specify) |
In a less stringent system the benchmarks should be based on the weighted average and not on the top 10%. If the present approach (10%) is decided, the benchmark levels should remain unchanged at the present levels. Moreover, the combination of the 10% benchmark and the application of a CSCF or linear reduction factor results in unrealistic low free allocations. For the ammonia industry even the best performing plant will not receive enough free allocation to compensate for the unavoidable feedstock related emission and they will face additional costs. These costs can only be avoided by reduction of the production (to max.49%) and import of the product from outside the EU, which is carbon leakage. This is fully undesired for the company, the environment and the EU economy. |
b) no |
Benchmarks should describe the level of performance of the industry and not the state of the art (which for many industry sectors will never materialize in Europe given the fact that the state of the art technology can only be implemented in new plants.) The competitive environment in Europe (energy costs, climate cost, changing climate legislation every 8-10 years) is prohibitive for multibillion investments with long payback times. Revising benchmark would also punish the early adaptors of innovations and will stop them innovating again. |
c) other (please specify) |
Historical production data should not be used. Instead, production data for the year of concern should be the basis for issuing allowances. |
a) no, there should be no deviations |
There should be no deviations as long as (1) industries severely exposed to the risk of carbon leakage are placed in a special category with preferential treatment, (2) the benchmarks remain at the present levels, and (3) actual production data is used for calculating allowances |
d) yes, in the form of financial compensation at EU-level |
A harmonised EU-wide compensation scheme avoids discrepancies between Member States and ensures equal competition between EU industries. The indirect costs are invoice in euros (as integral part of the electricity invoice) and not in emission rights. Therefore the compensations should also be given in euros. |
Important |
Less important |
Most important |
Least important |
|
a) from the Member States' auction budgets |
Climate change is a global challenge of utmost importance to address today through technology developments. It seems unwise to limit the funding only from auction budgets and free allocations. The challenge demands a special EU R&D technology agenda. |
|
a) Business |
Yara Sluiskil BV |
gijsbrecht.gunter@yara.com |
a) yes |
|
1) yes |
a) yes |
For the EU industry in general it will be possible to reduce GHG emissions further, but is should ben noted that the industry has done a lot already. This means that further reduction will require higher investments and is sometimes conflicting with the ambitions of Europe to stimulate the EU industry sector by the program 'renaissance industry' of the EU Commision. The fertilzer industry has reduced GHF emissions more than 50% since 2005. Further reduction will require high investments. Moreover, in the case of ammonia production always CO2 is released due to the chemical reaction (3CH4 + 6H2O + 4N2 --> 8 NH3 + 3 CO2). The unavoidable process GHG release from feedstock in ammonia (because CH4 is feedstock in stead of energy source) production should therefore be excluded from ETS. NH3 producers should only be penalized on energy related emissions. |
b) no |
EU ETS motivates the industry to become more energy efficient, but the NH3 industry in Euopre is already most efficient in the world. Extra costs via ETS do not increase the competitiveness of the EU industry, if the cost becomes excessive compared with regions in the world where the climate ambiotions and policy is less ambitious than Europe. High EY ETS costs may lead to the end of European industries and thus carbon leakage. |
a) yes |
As long as international agreements are not reached and European industry is 'stand alone' in this politic ambitions and therefore sensitive for carbon leakage, 100% free allocations according achievable benchmarks without correction factors(!) must be provided to EU industries. This allications should be based on actual production levels (in stead of historical production). |
a) very adequate |
|
a) it absolutely keeps the incentive |
Free allocations should be 100% free for the best performer. Today this is not the case due to too high benchmarks, CSCF and ex-ante allocation system. |
b) quite proportionate |
|
d) there should be no limit to overall free allocation to industry |
|
a) a substantially higher share than in Phase 3 |
|
a) yes |
However, this scheme should be practical covering the project development phase, rather than the operational stag and shouldn't be a large administrative burden. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
ETS revenues should be directly flow back to the industry to continue promoting research and projects helping reduce GHG emissions. |
a) yes |
- free allocation for indirect emissions (carbon costs contained in electricity costs) are needed to get an GHG pricing system which is competitive with the energy pricing in other parts of the world |
b) more carbon leakage categories should be defined |
sectors that are severely exposed to the risk of carbon leakage, should be given special status and preferential treatment. |
a) the present criteria should remain |
It's very important for (world wide operating) companies that policy, legislation, rules and criteria (eg. carbon price ) are consistent. Because changing criteria and basic ruls will negative influence investments and maintenance costs. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
d) in line with the duration of ETS Phase 4 |
|
c) the approach should be less stringent (please specify) |
A less stringent system should be based on a weighted average and not on the best 10%. Moreover, the combination of a 10% benchmark and CSCF or lineair reduction factors results in unrealistic low free allocations. For the NH3 industry even the best performing plant will not receive enough free allocation to compensate for the unavoidable FEEDSTOCK related emission and they will face additional costs. This costs can only be avoided by reduction of the production and import of the product from outside the EU, which is carbon leakage. This is not what the EU ETS wants and is also not good for the environment as well as the (ammonia) industry |
b) no |
Benchmarks should describe the level of performance of the industry and not the state of the art, which can be only implemented by building new production plants. The competitive environment in Europe (energy costs, climate costs, changing climate legislation every 8-10 years) doesn't promote major investments with long pay-back times in Europe. Revising benchmark would also punish the early adaptors of innovations and will stop them continuing innocating. |
c) other (please specify) |
The current type of allocation, based on historical data should be changed in a dynamic allocation model, based on actual production data. Because, ex-ante allocation is adding costs on the production of efficient plants and inhibits the idea of production growth, thereby discouraging growth and perversely rewarding relocation to outside Europe. |
a) no, there should be no deviations |
|
d) yes, in the form of financial compensation at EU-level |
|
Important |
Less important |
Most important |
Least important |
|
a) from the Member States' auction budgets |
|
|
a) Business |
Zakład Walcowniczy PROFIL S.A. |
UL. Ujastek 1 31-752 Cracow, Poland info@zwprofil.pl krystyna.soltys@zwprofil.pl |
a) yes |
|
1) yes |
b) no |
|
b) no |
|
a) yes |
|
a) very adequate |
|
b) it largely keeps the incentive |
|
c) quite exaggerated |
|
b) a higher share than in 2013-20 |
|
a) a substantially higher share than in Phase 3 |
|
a) yes |
|
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
|
a) yes |
|
b) more carbon leakage categories should be defined |
|
c) the share of 'carbon costs' in the GVA should be maintained, but 'carbon costs' should be taken into account to the extent that they can't be recuperated in product prices |
|
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
a) five years |
|
c) the approach should be less stringent (please specify) |
it should be the average of all performing installations ine EU for a given product |
a) yes (please specify how often) |
once every five years |
a) no, the same baseline period chosen for allocation in Phase 3 should be maintained also for post 2020 (Phase 4) allocation |
|
d) both b) and c) |
|
d) yes, in the form of financial compensation at EU-level |
|
Least important |
Less important |
Important |
Most important |
|
c) from both |
|
|
a) Business |
Zakłady Wapiennicze Lhoist S.A. |
ul. Świerczewskiego 5, Tarnów Opolski, Tel. +48 77 45 16 250, bronislaw.cieslik@lhoist.com |
a) yes |
|
1) yes |
b) no |
The reply concerns lime production sector only: the emission reduction potential is practically depleted, due to the fact that about 70% of total emission is a process emission coming from the calcination of calcium carbonate (a raw material for lime production) and this part of emission is not possible to avoid. Only ~30% of emission comes from fuel. Deeply modernised lime kilns and recent technology have reached the highest possible energy efficiency. Localisation of burning installation close to the geological deposits of limestone limits application of fuel mix. Any further reductions of emission must result by the production decrease. |
b) no |
In the world wide economy and trading of goods the ETS has really a negative impact on many important issues, like: • decreases the competitiveness of the European industry; • have a negative impact on economic growth of the EU countries. • slows down the development of emerging economy countries, • in the scope of global CO2 emission - import of goods from the outside of ETS generates a higher global CO2 emission if they have been produced in EU. |
a) yes |
We consider, that the most concerned industries (as lime industry, cement, fertilisers etc.) that are affected by the ETS negative impact should be given as much free emission allowances as they need, to guaranty the production on the market demand level. Energy intensive industries should also be extra compensated (at least partly) for the increase of energy price resulted by ETS. It can be realized by the tax reduction or by granting (subventions). |
b) quite adequate |
The allocation of free allowances for industrial sectors covered by the ETS, is considered to be absolutely necessary in order to: • keep the production on the market demand level • keep the European competitiveness • enable the owners of installations making decisions concerning modernisation of installation and new construction (based on low or emission-free technologies, if possible) The benchmark supported method of granting allowances we consider quite sufficient to force emission reduction by ETS covered industries. |
a) it absolutely keeps the incentive |
Benchmark based rules of free allowances strongly forces the rational and complex actions oriented to implementation of the innovative and best available technologies. Nonetheless it should be noted that: o lime installations are expensive with payback period of ~30 years o the modernisation is enforced not only because of the CO2 reduction but mainly by reduction of burning energy consumption cost for ~40% of total production cost o all kilns erected in last 25 years use the advanced technologies of energy recuperation, resulting with high energy efficiency and minimising of CO2 emission o lime kilns have to be located close to the deposits of the raw material, and as a result, in many cases, far from the gas network. Benchmark based on the natural gas only, penalises the fuel mix composed of other accessible fuels o some customers need for their obsolescent technologies the lime with “higher emission” level - we have to respect their needs. |
c) quite exaggerated |
Lime production is strongly affected by the ETS restrictions: ~70% of CO2 emission are process emissions that are absolutely not possible to avoid as they are resulting from thermal decomposition of calcium carbonate into calcium oxide and CO2: CaCO3 => CaO + CO2 Implementation of the current rules of granting free allowances made their quota close to the level of process emission. Any further reductions of emission must result in production decrease. This is the reason why, in our opinion, it is necessary to exclude the process emission from the ETS. The benchmarks should include the fuel mix – now they are based only on natural gas as a less emissive fuel . The benchmark allocation system based on the current conditions will be a huge burden for the lime industry, by limiting the production and paralysing any development of the lime sector. |
d) there should be no limit to overall free allocation to industry |
The amount of free CO2 allowances granted to the industry after 2020, must absolutely ensure and remain the competitiveness of the European industry, provide conditions for economic growth, and development of infrastructure for all EU countries. The scope of EU climate politics has to be adequate and proportional with pro-climatic activity of all other countries being the biggest CO2 emitters. |
e) I don’t know |
We do not fell competent to take a position concerning the development of CCS, nor to allocate funds for this purpose. However, we share the widespread concern that: • CCS implementation will drastically decrease efficiency of conventional energy production systems, which will result in significant energy price increase • CCS could be installed only for the several biggest CO2 emitters - the biggest thermal power plants, but never for the industry. • the progress and fast development of renewable energy, could affect the CCS installations that will not be efficient (capital-intensive with very long pay-back, and expensive during exploitation). We consider it reasonable to support the development of renewable energy. We suggest to not engage NER for supporting the CCS. |
a) yes |
We consider incentive supporting of low emission and low carbon technologies as the best way to decrease the negative climate changes. Financial support could be ensured by country governments with revenues of allowances auctioning. It is necessary to protect by the EU regulation the minimal % ratio of auctioning revenues to be dedicated for this goal. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
|
a) yes |
We consider fully reasoned the need to exclude process emission from the ETS for those industries where process emissions appear i.e.: lime, cement, chemistry - fertilisers, glass, steel. Process emissions are defined as those emissions that are not deriving from fuel and are not possible to avoid regardless technology and investments. The process emissions are predictable, easy to monitor and report. For lime industry process emissions coming from calcination of raw material account about 70% of total emission. |
a) the present two groups should remain |
We consider the current system of Carbon Leakage risk classification as fully adequate. The only reservation is the mode of classification of sectors accordingly to the NACE 4 Eurostat classification, as it would be better, more adequate and representative to go one step deeper i.e. PRODCOM 6. Currently lime production is deeply threatened by Carbon Leakage risk as it is classified with plaster sector which is indifferent to Carbon Leakage. |
a) the present criteria should remain |
As mentioned in answer 12 – the current rules may remain with reservation of Eurostat classification the sectors dimmed on Carbon Leakage risk. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
We consider indispensable to maintain a certain level of discretion within the system in appropriate cases. |
d) in line with the duration of ETS Phase 4 |
It is absolutely essential that the rules concerning Carbon Leakage risk exposure as well as all other substantial ETS regulations remain unchanged for at least 10 years, in order to ensure clear and stable conditions of running business and enable making rational investment decisions. |
c) the approach should be less stringent (please specify) |
We consider reasonable: • to exclude process emission from ETS (see comments to question 1,6,11,24) • to base the “fuel part” of benchmark on the fuel mix and not only on the natural gas. Lime burning installations has been located close to the stone deposit, very often far from the gas network. |
a) yes (please specify how often) |
Revision and eventual update of product benchmarks could take place simultaneously with the revision and update of BAT/BREF, i.e. each 10 years . It is to note that the benchmark has to be achievable and reflect realistic production conditions. |
c) other (please specify) |
It seems that the proposal of “Dynamic allocation of free allowances”, if introduced: • will enable to correlate the allocations with the substantive needs of allowances for each installation; • at the same time will push through reduction of emission; • will restrict the speculation with allowances by the third person not directly implemented to ETS. |
a) no, there should be no deviations |
We suggest to exclude process emission from ETS as it is the part of CO2 emission that is impossible to avoid. |
d) yes, in the form of financial compensation at EU-level |
We support common initiative of all European energy intensive industries to be financially compensated (at least partly) due to the increase of the energy costs caused by ETS restrictions. Such compensation would be paid from auctioning revenues. |
Less important |
Important |
Most important |
I don't know |
|
a) from the Member States' auction budgets |
|
Production of lime is the most, from the entire manufacturing industry, threatened by the ETS restrictions due to the fact that production of 1 tonne of lime generates ~0,95 t up to 1,6 t of CO2. Additionally, about 70% of CO2 emission is absolutely not possible to avoid as it comes not from fuel but from calcination of carbonates. This part of the emission is called process emission. Lime is an irreplaceable product widely used in environment protection (flue gas treatment in conventional energy production, water and sludge treatment), in construction, civil engineering, steel industry, metallurgy, chemistry, paper, glass, in agriculture for optimizing the pH of soils and in cattle farming. We suggest to consider the exclusion of process emission from ETS. We also strongly suggest to base the “fuel part of benchmark” on fuel mix, as otherwise the market competition conditions might be threatened. |
a) Business |
Zalakerámia Ltd |
address: H-1239 Budapest, Grassalkovich u. 255. mobile: +36 (30) 288 0832 tel.: +36 (1) 289 7072 fax: +36 (1) 286 0183 mail: Andras.Csaszar@hu.lasselsberger.com web: www.zalakeramia.hu |
a) yes |
|
1) yes |
a) yes |
|
b) no |
|
a) yes |
|
a) very adequate |
|
a) it absolutely keeps the incentive |
|
b) quite proportionate |
|
d) there should be no limit to overall free allocation to industry |
|
d) there should be no such innovation support post-2020 |
|
a) yes |
|
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
|
a) yes |
|
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
|
a) the present criteria should remain |
|
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
d) in line with the duration of ETS Phase 4 |
|
a) the present approach of average of the 10% most efficient installations should remain |
|
b) no |
|
a) no, the same baseline period chosen for allocation in Phase 3 should be maintained also for post 2020 (Phase 4) allocation |
|
a) no, there should be no deviations |
|
c) yes, in the form of additional free allocation |
|
Least important |
Most important |
Important |
Less important |
|
a) from the Member States' auction budgets |
|
|
a) Business |
Zementwerk Leube GmbH 5083 Gartenau Austria |
Günter Waldl guenter.waldl@leube.at +43 50 5108 - 0 |
a) yes |
|
1) yes |
a) yes |
|
b) no |
|
a) yes |
|
b) quite adequate |
|
a) it absolutely keeps the incentive |
|
b) quite proportionate |
|
d) there should be no limit to overall free allocation to industry |
|
e) I don’t know |
|
a) yes |
|
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
|
a) yes |
|
a) the present two groups should remain |
|
a) the present criteria should remain |
|
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
d) in line with the duration of ETS Phase 4 |
|
c) the approach should be less stringent (please specify) |
|
a) yes (please specify how often) |
|
c) other (please specify) |
|
a) no, there should be no deviations |
|
c) yes, in the form of additional free allocation |
|
Less important |
Important |
Most important |
Least important |
|
a) from the Member States' auction budgets |
|
|
a) Business |
ZOLTEK Zrt. (ZOLTEK Ltd) |
Varga József tér 1. Nyergesujfalu, H-2537 HUNGARY Office: +36-33-536-000 Sales: +36-33-536-021 E-mail: europe-sales@zoltek.com |
a) yes |
|
1) yes |
b) no |
|
b) no |
|
a) yes |
|
c) quite inadequate |
|
a) it absolutely keeps the incentive |
|
b) quite proportionate |
|
c) a constant share as in 2013-20 |
|
a) a substantially higher share than in Phase 3 |
|
c) I don’t know |
|
d) I don’t know |
|
c) I don’t know |
|
e) I don’t know |
|
c) the share of 'carbon costs' in the GVA should be maintained, but 'carbon costs' should be taken into account to the extent that they can't be recuperated in product prices |
|
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
d) in line with the duration of ETS Phase 4 |
|
c) the approach should be less stringent (please specify) |
Szükséges a speciális, egyedi esetek részleteinek figyelembe vétele. |
a) yes (please specify how often) |
5 - 10 évente |
a) no, the same baseline period chosen for allocation in Phase 3 should be maintained also for post 2020 (Phase 4) allocation |
|
d) both b) and c) |
továbbá figyelembe veendő szempontok: ipari katasztrófa, környezeti katasztrófa, elháríthatatlan piaci esemény, |
d) yes, in the form of financial compensation at EU-level |
|
Least important |
Most important |
Important |
Less important |
|
b) from free allocation |
|
|
b) Trade association representing businesses |
AAF - Association des Amidonniers et Féculiers - European Starch Industry Association |
Loïc Gruson - AAF 43 Avenues des Arts B-1040 Bruxelles l.gruson@aaf-eu.org Tel: +32 2 289 67 60 Direct line: +32 2 289 67 65 Transparency register number: ASSOC997988483 |
a) yes |
|
1) yes |
c) I don’t know |
It is not obvious that there is room for further energy efficiency improvements in the EU industry, and in particular in the starch industry. The processing of starch requires both electricity and heat and this leads to a wide use of Combined Heat and Power generation (or cogeneration) in starch plants, already achieving high energy efficiency. If producing heat alone, boilers are also often close to the highest possibly achievable energy efficiency. In addition, the use of renewable energy sources, such as biomass, can lead to an immediate increase in CO2 emissions (although lowering the emissions along the life cycle of the fuel here used). Finally, and as starch is mainly produced for food use, any change in the production processes, be it to achieve a higher energy efficiency of the processes, would have to be checked against the high level of safety and quality requirements for food. |
b) no |
The EU ETS is meant to reduce GHG emissions, not energy efficiency, and both are not always improving together (e.g. switching from natural gas to biomass for boiler is less energy efficient but more carbon efficient). For an energy intensive industry like the starch industry, energy and resource efficiency is a natural target, due to the share that energy represents in the total production costs. This is especially true in the context of high energy prices for EU industry, compared to non EU competitors. The EU ETS only leads to additional spending that could be better used (e.g. in Research and Development); Without an international agreement ensuring fully harmonised requirements for climate policies, the EU ETS only decreases the competitiveness of the starch industry. The incentive from the EU ETS is negligible compared to the one from the differences in energy prices with the rest of the world. |
a) yes |
Based on arguments presented under question 2, it is clear that attention should be given to the competitiveness disadvantages faced by EU industries covered by the EU ETS, given the little incentive the EU ETS gives to achieve the EU ETS target. In addition, the complete climate policy of the EU should be reviewed in order to achieve the goals set and avoid carbon leakage: having multiple targets and conflicting/overlapping policies, as is now the case in the EU (RED, EED, ETS, national measures…) is detrimental both for EU industries’ competitiveness and for the EU climate policy. To help the economy reach climate change targets, there should be a single scheme, with clear rules and incentives, and on the longer term. This is the only way for the industry to focus investments on achieving climate change targets. |
a) very adequate |
Allocation of free allowances, thanks to the establishment of the carbon leakage (CL) list, limits the costs of the EU ETS, thus limiting the negative impact on our international competitiveness. Without free allocations, CL would first result in a decline in investments in EU countries due to the uncertainty of the EU climate policy and carbon market. When prices of EU emission allowances increase, CL will likely result in the closing down of production installations in the EU. The allocation of free allowances is of particular importance for energy-intensive sectors like starch that have already achieved most of the possible improvements in energy-efficiency and in the reduction of their relative emissions. Sectors like starch cannot reduce further the costs of the EU ETS by investing in lower-carbon technologies, as these are not available to date. The possibility to receive free allocations is the only way to reduce the risk of CL. |
a) it absolutely keeps the incentive |
If energy efficiency improvements are limited, as it is the case for the starch industry, free allocation can only have a positive impact at global level and with regards to the EU ETS goals: the incentive being to keep producing in Europe as opposed to producing outside of Europe where energy efficiency is lower, hence with higher relative emissions. |
b) quite proportionate |
The benchmarks currently used are set and were understood by stakeholders, although establishing these benchmarks was a complicated and burdensome exercise. Doing this whole exercise again should therefore be avoided. |
d) there should be no limit to overall free allocation to industry |
This should remain true as long as no agreement is reached at GLOBAL level, when a level playing field regarding climate policies would be restored. The EU ETS must not create additional competitiveness disadvantages compared to competitors in third countries. |
e) I don’t know |
|
c) I don’t know |
|
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This 50% share should be first secured for industries covered by the EU ETS and this share should be extended. Nevertheless, innovation could also be supported by giving the industry a single, clear, consistent and long term set of objectives and incentives, contrary to what is currently the case in the EU (please see answer to question 3). |
a) yes |
Improvements in the access to affordable energy is needed in the EU to prevent delocalisation of industries to non-EU countries that could occur due to energy prices in the EU – such delocalisation leading to a form of carbon leakage, as production outside the EU usually reaches a lower energy efficiency compared to production in the EU. Additional measures should include free allocations for indirect emissions. |
e) I don’t know |
|
g) I don’t know |
|
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
c) I don’t know |
|
b) longer (please specify) |
Investments to improve the energy efficiency are of a type that has long return on investment period. Therefore, the industry should be provided with a long term visibility of the climate policy framework to decide on such investments. The validity of the next list should be at least the duration of phase 4 of the EU ETS. |
d) I don’t know |
|
b) no |
Legislative predictability is important for the industry to keep investing in the EU. In addition, this is a very complex and burdensome exercise. |
d) I don’t know |
|
a) no, there should be no deviations |
|
c) yes, in the form of additional free allocation |
Free allocation for indirect emissions will avoid having a competition distortion within the EU single market, as it is the case due to diverging national approaches linked to energy policies and industry support. |
Important |
Less important |
Least important |
I don't know |
Although answering question 22 above was compulsory, it is premature at this stage for the European Starch Industry to give its views on this. Therefore, please do not take the answer above into account. |
e) I don't know |
|
Again, the complete climate policy of the EU should be reviewed in order to achieve the goals set and avoid carbon leakage: having multiple targets and conflicting/overlapping policies, as is now the case in the EU (RED, EED, ETS, national measures…) is detrimental both for EU industries’ competitiveness and for the EU climate policy. To help the economy reach climate change targets, there should be a single scheme, with clear rules and incentives, and on the longer term. This is the only way for the industry to focus investments on achieving climate change targets. |
b) Trade association representing businesses |
AFEP (French Association of Large Companies) and Cercle de l’industrie. The purpose of AFEP is to present the views of large French companies to the European Institutions and the French authorities, mainly with regard to the drafting of non-sectoral legislation. In 2014, Afep represents more than 100 of the top private sector companies operating in France. Cercle de l’Industrie brings together the Chairmen of 34 French large businesses in all industrial sectors and policy-makers. |
AFEP : www.afep.com (Transparency register identification number: 953933297-85) - Justine Richard - European Affairs Deputy Director 4‐6, rue Belliard, 1040 Bruxelles, Belgique E-mail: justine.richard@afep.be Tel: +32 2 227 57 25; Cercle de l’Industrie : www.cercleindustrie.eu (Transparency register identification number: 60974102057-03) - Marianne Gicquel - Chargée de mission relations institutionnelles - 5, rue Tronchet, 75008 Paris France Email: marianne.gicquel@cercleindustrie.eu Tél : +33 (0)1 53 05 10 96 |
a) yes |
|
1) yes |
a) yes |
Reducing GHG emissions through low carbon technologies produced in the EU contributes to reduce global emissions, thanks to the effect on the whole sector. The ability to further reduce GHG emissions depends on the level of maturity of the technologies each industrial sector uses in their effort to reduce greenhouse gas emissions. It is essential to distinguish between technical and economic feasibility. Some industrial sectors use technologies that have already reached their maximum level of efficiency regarding greenhouse gas emissions and need to find breakthrough technologies in order to change their technological model. Contrarily, other sectors can improve their carbon efficiency by pursuing their investments in low carbon technologies. However, the decarbonisation cost is already high and is expected to increase in the future. Consequently, in both types of sectors the ability to reduce GHG emissions depends on the effectiveness of protection measures against carbon leakage. |
a) yes |
The EU ETS is an adequate instrument to reduce emissions at the lowest costs and must remain the key instrument to reduce GHG emissions. However, improvements should be taken further as ETS has not sufficiently boosted low-carbon investments. It has not increased competitiveness so far: a/ Neither it has succeeded in ensuring confidence and long-term predictability, nor in creating a carbon price signal, this, mainly because its objectives had not been clarified. b/ Currently free allocation mechanisms based on historical data induce additional distortion as enterprises will first adapt production volume rather than energy consumption. Historical volumes are not always the optimum to ensure installation efficiency. To ensure energy efficiency, a dynamic allocation should be put in place. Therefore the answer to this question is yes, but should be conditioned to the revision of ETS. Moreover, EU industry needs an international level playing field to be more competitive in the long run. |
a) yes |
Transitional measures are needed to establish the level playing field with our main competitors in third countries. As long as there is no international agreement on climate change, significant differences will remain between the national regulations. Up to now, the major competing economies of the EU (USA, BRIC) have neither implemented an equivalent ETS, nor set up similar targets. This widens the existing distortions of external competiveness on other fields between the EU and these countries. The comparison with major competitors must be carried out on the basis of the climate policy cost paid by the whole industry (the US EPA rule would reduce emissions only from power plants). Furthermore, energy costs for industrial sectors are higher in the EU (and are rising comparing to them): EU industrial retail electricity prices are more than twice those in the US and Russia, 20% more than China's. Concerning gas, prices for EU industrial consumers are 3 to 4 times higher than in the US. |
b) quite adequate |
1. Enhanced free allocation is a quite adequate tool for the sectors which are currently on the carbon leakage list. Furthermore, the instruments currently used could be complemented, in order to reduce competitiveness distortions. A better and harmonised compensation of indirect emissions for industrial sectors should be implemented at EU level. 2. The current benchmarks of the EU ETS, based on the first 10 % of best GHG emissions per unit of output, are the most requiring provisions in the world in terms of GHG efforts. The application of the -1.74 %/year coefficient to reduce the cap of allowances will continue to widen the gap between the EU ETS and the other tools across the world and will increase the EU competitiveness disadvantage. |
a) it absolutely keeps the incentive |
Companies have to innovate for reducing emissions in order to be competitive at international level. Free allocation ensures that the investment capacity of companies benefiting from free allowances be maintained. Without any free allocation, ETS sectors would not have been able to bear the climate policy cost. Consequently, they would have not been able to fund their R&D&I processes. Furthermore, when the access to credit and companies’ own resources are particularly limited, free allocation maintains companies’ financial margins and then their ability to innovate. |
a) absolutely proportionate |
The establishment of product benchmarking have been a heavy process at the beginning. However, it has now been completed: allocation methods and methodologies of calculation are implemented and already integrated in companies’ processes. Therefore, the investment for companies and administration in terms of costs and time is now paid for itself. Updating benchmarks may not be a heavy working process, as they will be close to the Best Available Techniques. |
d) there should be no limit to overall free allocation to industry |
The share of free allocation depends on economic data and methodologies of calculation. It cannot be decided in abstracto. To calculate the share of free allowances, the Commission should take into account the investment leakage. This covers the case of missed investments within the EU, which are ultimately directed to third countries because of the EU climate and energy policies. EUAs allocation methodology should be dynamic. The Commission should assess the case of adapting the number of free allowances on the basis of the real level of activity of an installation, for example the production level of the preceding year. This would enable to allocate more allowances for an installation with a higher level of production than expected, and reduce the allocation in the opposite case. The main driver for investment would be to reach the best practices in terms of emissions/unit of production. This would thus avoid the current situation where the production level is an adjustment factor. |
b) the same share as in Phase 3 |
NER 300 has been a successful tool for funding innovative renewable energy. However, conversely to the initial objective of the Commission, CCS programmes have less benefitted from this fund. They require a large amount of investment and long-term capacities from companies. In addition, the lower than expected price of carbon has reduced the total amount for funding. Positive market support together with long term visibility and predictability of expected revenues is needed to incentivize the deployment of the technology. EU should encourage such positive incentive to be implemented at Member State’s level for CCS, following the example of the Electricity Market Reform in the UK, where the government plans to set Contracts for Difference for CCS and other low carbon technologies. |
a) yes |
The EU must reach its targets by using low carbon technologies which are produced in Europe. For this purpose, R&D and financial instruments must be focused on the identification and deployment of low carbon technologies which can help companies to meet the strategic targets for the future. There is a need for support of R&D in favour of low carbon technologies and cross-sectoral building blocks of innovation (upstream), and of constituting sectors that offer competitive industrial solutions (downstream). It is essential to allocate funds to pilot or demonstration projects and to the pre-commercial phase, which play a key role in creating new business opportunities for European companies. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Auctioning revenues must be collected wholly (100%) and directly at EU level (binding earmarking), and dedicated to fund R&D projects in low carbon technologies and to compensate indirect emission costs. This would create a critical mass, enabling to finance large-scale projects. In this context, clear and strong governance is needed to ensure that intellectual property rights (IPRs) are duly enforced: there must be a guarantee that companies’ IPRs will be used only in the framework and for the purpose of the R&D or innovation projects, especially when those projects have an international dimension (since the enforcement of IPR is still limited by national legal and judiciary frameworks). |
a) yes |
1/Project-based mechanisms succeeded in driving investments all over the world. The use of CDMs should thus be allowed not only for LDCs, but also for low emitting developing countries, as long as there is no satisfactory international agreement. 2/Companies should be authorised to conclude long-term energy supply contracts (more than 15 years) to rely on stable energy supply at reasonable cost. The conformity to EU competition rules should be ascertained at an early stage to ensure legal certainty and stability. The development at EU level of mechanisms such as Exeltium in FR or Mankala in FI, should be explored. 3/The EIB’s role must be reassessed and oriented more strongly on supporting non-financial companies’ investments in R&D&I. 4/The potential of unconventional hydrocarbons must be assessed. R&D must be carried out into exploration/exploitation conditions that are compatible with environmental protection rules. 5/Generally, all CL sectors should benefit from these measures. |
a) the present two groups should remain |
In order to preserve predictability, and avoid changing the whole spectrum of rules after each period, the two groups of sectors (exposed and not exposed to the carbon leakage risk) should remain. |
a) the present criteria should remain |
Idem question 12. In order to preserve predictability, and avoid changing the whole spectrum of rules after each period, the present criteria (carbon costs and trade intensity) should remain. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
Idem question 12 and 13. In order to preserve predictability, and avoid changing the whole spectrum of rules after each period, the current thresholds should be maintained. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Idem questions 12, 13 and 14. In order to preserve predictability, and avoid changing the whole spectrum of rules after each period, the qualitative assessment should remain. |
d) in line with the duration of ETS Phase 4 |
In order to ensure predictability and legal certainty over the period, the validity period of the list should be the same as the ETS phase, which is not the case up to now. |
c) the approach should be less stringent (please specify) |
The current EU ETS benchmarks, which gives free allowances based on the first 10 % of best GHG emissions per unit of output, are too restrictive as they are the most requiring provisions in the world in terms of GHG efforts. Basically, the general approach should be less stringent. In addition to the 10% rate, the implementation of the cross-sectoral correction factor further caps the amount of free allowances. It reduces the financial capacity for EU industry – which is still recovering from the economic crisis – to invest in the low-carbon technologies that are needed to reach its GHG reduction objectives. In accordance with the dynamic allocation approach (see Q°7 and 19), the repartition of allowances given for free and to be auctioned is not prefixed while respecting the cap. Then the cross-sectoral correction factor must be removed. |
b) no |
Benchmarks could be revised in principle, especially to lead to representative values, every 5 to 10 years. However they must not be revised to reflect the technological state of the art. A continuous revision of benchmarks would result in an "unsteady benchmark" and undermine the incentive to invest in the long term, as the investment decisions would be quickly out-dated. Benchmarks should be representative of the whole installations, and therefore be based on sectoral evolution of “best in class” installations. |
c) other (please specify) |
Historical data are not adapted to the actual level of the activity of an installation: this leads to use the production level as an adjustment factor. In order to avoid this current situation and support investment in low-carbon technologies rather than the reduction of production, EUAs allocation methodology should be dynamic. It would be interesting for the Commission to assess the case of adapting the number of free allowances on the basis of the actual level of the activity of an installation, i.e. the production level of the preceding year. This would enable to allocate more allowances for an installation with a higher level of production than expected, and reduce the allocation in the opposite case. In both situations, the main driver for investments would be reaching the best practices in terms of emissions/unit of production existing in the same field of activity. |
a) no, there should be no deviations |
In order to achieve an efficient and integrated energy market at EU level, rules have to be harmonised. Any deviation would create differences among national policies, and therefore distortions between the Member States, undermining the functioning and efficiency of the market. Therefore they should be forbidden. Should any deviation such “safe harbour clause” be authorised, it is essential that it is strictly defined and applied at EU level, on the basis of common criteria. |
c) yes, in the form of additional free allocation |
French companies very much support the harmonisation at EU level of the compensation scheme for indirect emissions. To be effective, it should not depend on the difficult and long EU budget negotiations. This could indeed delay the implementation of support mechanism, then maintaining the current competition distortions between EU companies. It should thus be given in the form of additional free allocation. |
Least important |
Less important |
Most important |
Important |
1. The 4th stage mentioned in this question (« at the commercial stage ») must be understood as « at the PRE-commercial stage ». 2. This ranking is elaborated without prejudice of sectoral specificities. 3. Beside the emission issues, potentially fundable projects could also include R&D on GHG use and valorisation. |
a) from the Member States' auction budgets |
The allowances funding low-carbon innovation support should come from the Member States’ auction budgets or any kind of budget, with the exception of free allowances. For example, a share (in %) could be withdrawn from each auctioned allowance and dedicated to a European fund. At least, Article 10 paragraph 3 of the ETS Directive should be modified in order to oblige Member States to use auctioning revenues to fund low-carbon technologies. However, the allowances should not come from free allocation. Indeed, should the allocation of free allowances be dynamic, it cannot be rationed on the long term. |
Currently indirect emissions guidelines introduce competition distortion between the Member States as well as between technologies (heat vs electricity or air vs industrial gases such as oxygen). List of exposed sector to indirect emissions should therefore be revised to include additional sector and correct competition distortion cases. |
b) Trade association representing businesses |
AIVE - ASSOCIAÇÃO DOS INDUSTRIAIS DE VIDRO DE EMBALAGEM Register ID: 192594214094-84 |
Largo do Andaluz, nº 16 1º Dto. 1050-004 Lisboa Portugal Tel. 00351 213549810 Fax. 00351 213549185 email: aive@aive.pt |
a) yes |
|
1) yes |
c) I don’t know |
The glass industry is making continuous improvement in energy efficiencies and process technologies to reduce CO2, energy consumption and environmental impacts. While further reductions in the glass industry are possible, what is important is the magnitude of this reduction. All official EU publications such as the “Sector Competitiveness Studies - Competitiveness of the Glass Sector - ENTR/06/054 - Final report, 14 October 2008” or more recently the Glass BREF and the BAT Conclusions show that no breakthrough technology is currently available to reduce CO2 emissions to the extent imposed by the energy and climate package 2030 (-43% for ETS sectors between 2005 and 2030). Emissions reductions cannot be repeated ad infinitum. There is a thermodynamic limit to the glass melting process which is an absolute limit, and that current technology is already approaching. However, process emissions cannot be eliminated, limiting therefore the reduction potential of the glass industries. |
b) no |
The main driver for energy efficiency improvements in the glass industry is the high share of energy costs within production costs. In fact, the glass industry has continuously improved energy efficiency over previous decades. Regulatory instruments and the EU ETS in particular, have only a marginal effect on energy efficiency improvements of glass melting activities, if any. Whilst there is no global ETS in place, the EU ETS is only a source of costs for glass industries (direct but also indirect CO2 costs linked to electricity), and therefore weakens the competitive position of European based glass industries vis-a-vis third country competitors. As such, it indirectly favors production reduction in the EU and rises in imports from non EU countries without carbon constraints into the EU. For these reasons, glass industries need to be fully protected against risks of carbon leakage. |
a) yes |
The EU glass industry faces higher costs for environmental protection, energy, labour and raw materials, than the majority of extra-EU competitors. In the absence of an international climate agreement and a level playing field between EU and extra EU competitors, the EU industry needs to be provided with measures to safeguard its competitiveness. Measures to avoid carbon leakage under the EU ETS are therefore essential. Measures should cover both the direct and indirect CO2 costs. Such measures under the EU ETS must be established in a way that ensures the ETS’ coherence with the EU’s ambition to revitalize European manufacturing activities, as proposed in the EC Communication on Industrial Renaissance. |
c) quite inadequate |
Free allocation has been key up to now to mitigate the negative impacts of a unilateral climate policy. However, the Cross Sectoral Correction Factor which is applied already from 2013 reduces the free allocation, even for the most GHG efficient installations, and will dramatically increase in the future, thus further reducing free allocation. This current system is unsustainable and should be changed in order to ensure that the most GHG efficient installations receive 100% of their allowance needs. |
a) it absolutely keeps the incentive |
Free allocation does not reduce the incentive to innovate; on the contrary, the majority of installations in the sector (about 95%) do not have enough allowances, which encourages industry to invest in the efficiency of its plants to avoid having to purchase a high level of allowances, which would render the sector uncompetitive. For the installations under the benchmark (about 5%), they can sell their allowances on the market, which is also an incentive to continue reducing emissions. The incentive is therefore present. Below, we also call for a periodic revision of the benchmarks (in exchange of the cancellation of the cross-sectoral factor), which also provides for a strong incentive to improve. Free allow. preserve investment capacity and offer industry the incentive to purchase less CO2 allow if they become more GHG efficient. However this last incentive would be better preserved if the CSCF was not forcing an unrealistic and arbitrary reduction of the number of free allow. |
b) quite proportionate |
Administrative burden is accepted, since it is necessary to maintain the free allocation system. However opportunities or improvement to this process should be considered. Conversely, the administration and calculation rules for new entrants are overly complex and can lead to under-allocation. They can therefore be seen as disproportionate and can be a disincentive to new investments. |
d) there should be no limit to overall free allocation to industry |
The current system is unsustainable (from a competition point of view) because the cross sectoral correction factor continually reduces the free allocation given to industry, even for the most GHG efficient installations. Ideally, installations whose efficiency is equal or better than the (periodically reviewed) benchmark should receive 100% of free allocations to produce in the EU and so there should be no limit. In practice, this is likely to lead to a higher share in phase IV. An increased level of EU ambition in terms of GHG reduction would require enhanced measures against carbon leakage and therefore an increase in total free allocations. |
e) I don’t know |
Overall financing for technological innovation in manufacturing should be increased in the EU. However R & D should be funded via a mobilization of different sources of funding - including but not limited to - auctioning revenues. It should not come from the free entrants reserve or Free Allowances reserve. Allowances should be primarily used to ensure that the most GHG efficient installations get 100% of their needs to produce in the EU. Furthermore, financing for R&D and demonstration projects should be technology-neutral and not focused only on CCS or renewables. New technologies such as Carbon Capture and Use (CCU) and others should not be excluded. |
a) yes |
As stated above, industrial innovation, with a focus on the process and on new energy sources for industry, should be promoted. It should not be financed by shares of allowances reserved for free allocation or for new entrants, but rather from a mobilization of different sources, and not limited to auctioning revenues. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Industrial innovation should be promoted in a technology-neutral way. However this should not be done at the expense of free allocation which aims to provide effective support and protection against carbon leakage. Therefore it should be financed via other sources. This could include, among other sources, money from the auctioning revenues, as suggested in the ETS directive (Art 10.3). |
a) yes |
Unequitable carbon costs should not place EU industries at a competitive disadvantage with extra-EU competitors and this should be the ultimate objective pursued in order to achieve the EU’s ambition of 20% GDP realized by industrial activities in 2020. To that end, measures against carbon leakage are a pre-requisite but are not enough. An EU scheme for compensation of indirect costs due to higher electricity prices and some raw materials (e.g. soda ash, industrial gases, ..) should also be developed for Energy Intensive Industries. More generally, the EU needs to assess, and if needed reform, all its policies and in particular energy and environmental ones against the re-industrialisation objective. A longer term re-industrialisation objective for 2030 should be established. |
a) the present two groups should remain |
This binary model ensures that all sectors benefit from carbon leakage protection measures as soon as a risk is detected. This is essential to ensure that carbon leakage measures are effective and that protection is not granted too late, when industries are already in jeopardy. |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
The competitiveness of energy-intensive industries is sensitive to energy and carbon costs, therefore a risk exists for all these industries. For the sake of simplicity and consistency in legislation, all energy-intensive industries, as defined in the Energy taxation directive, could be automatically placed on the carbon leakage list:"energy-intensive business" shall mean a business entity, (…) where either the purchases of energy products and electricity amount to at least 3,0 % of the production value or the national energy tax payable amounts to at least 0,5 % of the added value. In case ETS-specific criteria are maintained, they should continue being based on both the CO2 intensity and the trade intensity metrics. The CO2 cost metric should be made more relevant to analyze the impacts of carbon cost on sectors’ profitability. To that end, the CO2 cost over GVA criteria could be replaced by a CO2 cost over Gross Operating Surplus (GOS) criteria. |
b) other thresholds should be defined. Please specify below |
The competitiveness of energy-intensive industries is sensitive to energy and carbon costs, therefore a risk exists for all these industries. For the sake of simplicity and consistency in legislation, all energy-intensive industries, as defined in the Energy taxation directive, could be automatically placed on the carbon leakage list:"energy-intensive business" shall mean a business entity, (…) where either the purchases of energy products and electricity amount to at least 3,0 % of the production value or the national energy tax payable amounts to at least 0,5 % of the added value. In case ETS-specific criteria are maintained, they should continue being based on both the CO2 intensity and the trade intensity metrics. The CO2 cost metric should be made more relevant to analyze the impacts of carbon cost on sectors’ profitability. To that end, the CO2 cost over GVA criteria could be replaced by a CO2 cost over Gross Operating Surplus (GOS) criteria. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The current criteria under the quantitative assessment at NACE 3 or 4 level should be maintained and used as the first assessment option. When an assessment at NACE 3 or 4 level is not appropriate to identify the relevant industrial activities falling under the EU ETS, then a quantitative assessment at 6- or 8-digit should be carried as a second option. Finally, as a third option, a qualitative assessment must remain possible. Other parameters can be studied as part of qualitative assessments, such as methodology and evidences of investment leakage. |
d) in line with the duration of ETS Phase 4 |
As long as there are no equivalent GHG reduction measures taken by major trading partners, the list of sectors exposed to the risk of carbon leakage should remain valid. This is essential to provide predictability to industries faced with long investment cycles (typically > 15 years). |
a) the present approach of average of the 10% most efficient installations should remain |
Glass industries support ambitious benchmark levels, which reflect the technological capabilities of the sectors best performers using the best available and proven technologies in Europe. It must be kept in mind however that this approach also has limits. Indeed, benchmark curves do not always reflect a difference in terms of « best » (the least GHG emitters per tonne of glass) or « worst » GHG players, but a difference in terms of products produced, cullet availability, age of furnace, available fuels, etc. The 10% best GHG performers can therefore be regarded as extremely challenging, especially for plants producing a wider range of more sophisticated products with higher added-value (as this usually entails higher energy consumption). |
a) yes (please specify how often) |
It seems logical to revise the benchmarks from time to time to reflect GHG improvements over time. Revision cycles should be linked to ETS phases and remain unchanged over this period. Periodical revision of the benchmark should be based on the actual EU based installations. The periodic revision of benchmarks should be the sole instrument leading to a reduction of free allowances over time, as benchmarks reflect true possibilities of GHG improvements according to state-of-the-art technologies deployed in Europe. The periodic revision of benchmarks therefore justifies that the CSCF is abandoned. |
c) other (please specify) |
Ex-ante allocation can only lead to over-allocation in crisis times, and under-allocation when the economy is growing. A better approach is to design an « ex post » system, where real allocation is corrected according to the real production. |
a) no, there should be no deviations |
In principle, there shall be no deviation from the general harmonized allocation rules at the level of an individual installation as this could cause distortion of competition. Only in the case of very specific hardship, should deviations be envisaged for an entire sector after a careful assessment of the competitive effects of such deviations. |
d) yes, in the form of financial compensation at EU-level |
Rules for the compensation of indirect costs should be revised and need to be effective to reflect the real burden of CO2 included in electricity costs for industry. A differentiated compensation approach by Member States is not acceptable from a competitiveness point of view. A harmonized approach at EU level is therefore needed. The harmonized measure should take the form of financial compensation. Free allocation should be kept aside to ensure full relief for direct emissions (most GHG efficient installations should receive 100% of their needs). A compensation system should also be put in place to compensate for higher prices of some raw materials (e.g. soda ash) and industrial gases. |
Important |
Less important |
Most important |
Least important |
|
a) from the Member States' auction budgets |
Allowances funding low-carbon innovation support should be financed from the Member States’ auction revenues and from a mobilization of additional sources. However, this should not be financed at the expense of free allocation or the new entrants reserve which must be principally used for measures against risks of carbon leakage. |
Generally speaking, glass industries welcome the opportunity to express their views on carbon leakage measures post 2020 and appreciate that this discussion is held without further delay. It is however regrettable that industry is asked to comment on such measures whereas the rules for EU ETS Phase IV have not yet been fully decided. The glass industry wishes to reiterate that so long that there is no comparable ETS system (which means that similar costs are born by competitors) operating in most part of the world and in extra-EU countries with glass industries, EU based glass industries will need to receive full and effective protection against carbon leakage. The recent assessment carried by DG CLIMA on exposure to carbon leakage risks, i.e. the carbon leakage list of 2009 and its recent revision, shows that between 2009 and 2014, risks of carbon leakage has grown in most glass sectors. For these reasons, glass industries need effective protection moving forward. |
b) Trade association representing businesses |
ANCADE (ASOCIACIÓN NACIONAL DE FEABRICANTES DE CAL Y SUS DERIVADOS DE ESPAÑA - SPANISH LIME ASSOCIATION -) |
ANCADE C/ GOYA 23 3º DERECHA 28007 MADRID SPAIN TF: 00 34 91 246 12 91 rfaller@ancade.es |
a) yes |
|
1) yes |
b) no |
Around 70% of the total CO2 emissions generated in lime production are "process emissions": they come from our raw material, limestone. These process emissions cannot be avoided without changing the quality of the final lime product which is however essential to serve specific applications. Currently, the most energy efficient kiln is near the thermodynamic minimumrequired for the chemical reaction needed for producing lime. The heat of the reaction for typical quicklime quality is 3.03 GJ/tonne, and the average fuel use 4.25. The energy consumption of the best available lime kiln (a Parallel Flow Regenerative Kiln, PFRK) is between 3.2 and 4.2 GJ/tonne. This type of kiln is already the most widely spread kiln technology today.However, one should keep in mind that horizontal rotary kilns (less energy efficient) provide a certain quality of lime and permit to optimize the extracted limestone due to their ability to treat the different sizes of stones. |
b) no |
The EU ETS will only remain the best solution for reducing CO2 emissions as long as the GHG reduction target is set at a level which is both technically and economically feasible. The current economic crisis and the further shrinking of the demand for lime products makes that there is at the moment a lot of “idle” production capacity in the EU. These installations are completely amortized which makes production in these installations cheaper than in a new one. A higher carbon price would not be a solution, as it would only draw money away from producers without enabling them to make an investment. When assessing the potential further ETS amendment in a sector, it is necessary to take account of the lifespan and replacement rate of kilns. Most of the time, investments costs always assume an investment in a new capacity (replacing the old capacity before its end of life). However, for the lime sector, kilns receive big maintenance periodically. |
a) yes |
Carbon Leakage will remain a big concern after 2020 in the absence of an international agreement putting forward a similar CO2 burden. ANCADE believes that all energy intensive industries should be protected against carbon leakage, and that any increased level of ambition of Europe towards 2030 should lead to increased and not decreased protection against carbon leakage. Furthermore, the EU ETS is NOT addressing the following concerns: - The GHG reduction deficit (shortage of free allowances even for the installations with the best GHG performance. - Energy costs represent on average 40% of the lime industry’s manufacturing costs. Having access to energy at a reasonable cost is an essential condition for operating in the EU and for maintaining lime's competitiveness. - Further adequate incentives for low carbon investments is needed, with auctioning revenues being targeted for low carbon investment toward the industry |
c) quite inadequate |
The current carbon leakage mitigation measures do not take into account of: The importance of CO2 embodied in imports A unilateral reduction of CO2 emissions in Europe will not help fighting against climate change if a subsequent rise of imports from third countries is created. Carbon Trust, amongst others, demonstrated that the reduction in production-related CO2 is largely compensated by CO2 embodied in imports. The cumulative burden of the EU framework Several other EU legislations have an impact on the EU's industry competitiveness (renewables, energy efficiency). The Commission should ensure an integrated approach with no overlap. Energy costs Energy costs represent on average 40% of the lime industry’s manufacturing costs. Like for any energy intensive industry, having access to energy at a reasonable cost is an essential condition for operating in the EU and for maintaining its competitiveness. |
b) it largely keeps the incentive |
It is important to remind that the Commission hascalculated product specific benchmarks based on the average GHG emissions of the 10% best performers. A comparison of these benchmark values with the minimum values that are technically feasible shows that the remaining potential in some sectors, like lime, is actually quite low. The current best available and most energy-efficient kilns (the Parallel Flow Regenerative Kiln, PFRK) is close to the thermodynamic minimum required for the chemical reaction needed for producing lime. In other words, no further breakthrough technologies in energy efficiency are expected. The drive towards the most energy efficient solutions can easily be explained by the fact that energy costs represent on average around 40% of the lime sector’s production costs. Outside the deployment of a commercially and technically feasible Carbon Capture and Storage solution, there is little margin for further CO2 abatement in the lime sector. |
c) quite exaggerated |
Lime is the most impacted sector by the EU ETS. The production of 1 tonne of lime generates 1 to 1.6 tonne of CO2. This means that the EU ETS has a strong impact on the sector, up to 35% of impact of the CO2 costs on Gross Value Added (Hourcade et al, 2008). Therefore, the full impact of carbon costs would have serious consequences in terms of carbon leakage for the lime industry. While the lime industry advocates in favor of less red tape and less administrative burden, it recognizes the importance of the free allocation for maintaining a competitive industry in the EU. |
d) there should be no limit to overall free allocation to industry |
There is still a need today for an international climate agreement that would bring a level playing field to EU manufacturing companies. In the absence of such agreement, and considering that several countries in the EU neighborhood are not following the EU’s climate leadership, there should be no limit to the overall free allocations to the industry. Furthermore, ANCADE believes that all energy intensive industries should be protected against carbon leakage, and that any increased level of ambition of Europe towards 2030 should lead to increased and not decreased protection against carbon leakage.The most GHG Efficient installations should receive 100% of their needs for free.The industry cap should be adjusted so that the CSCF and linear reduction factor do not reduce the free allocations. |
c) a lower share than in Phase 3 |
It seems that the current state of efforts regarding the development of CCS (including the NER 300 program) will not reach the ambition to develop, by 2020, a commercially and technically available solution for the capture and storage of carbon. In 2012 TNO calculated for ANCADE the costs of capturing CO2 at different kinds of lime kilns. For the state-of-the-art solvent (MEA) costs to capture CO2 were €94 per ton of avoided CO2. The cost to capture CO2 would more than double the production costs of around €60/ton lime. Currently, lime plants are typically located right next to the deposit, not clustered in large industrial agglomerations. Transport costs from the capture to the storage can add significantly to the capture costs. This is why ANCADE believes that further R&D is necessary, but that it should be funded via a mobilization of different sources including auctioning revenues but not the new entrants' reserve. |
a) yes |
The auctioning revenues should be used to encourage low carbon investments. As a general principle, revenues should go back to industry to enable investments in low carbon solutions. Part of the revenues could for example be used to provide cheaper loans for low carbon investments in installations falling under the EU ETS. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The auctioning revenues should be used to encourage low carbon investments. As a general principle, revenues should go back to industry to enable investments in low carbon solutions. Part of the revenues could for example be used to provide cheaper loans for low carbon investments in installations falling under the EU ETS. |
a) yes |
ANCADE strongly favors a level playing field within the EU and outside Europe. This is why ANCADE believes that the EU should maintain its efforts to achieve an internationally accepted and legally-binding agreement proportionate to the burden in the EU. In the absence of such agreement, the EU should safeguard the competitiveness of the EU industry with any appropriate measure. ANCADE has serious doubts that the current legal framework will ensure a level playing field beyond 2020. |
a) the present two groups should remain |
ANCADE believes that no further complexity and calculations should be added to an already complex scheme. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
1. Share of carbon costs in the GVA should be maintained 2. Trade intensity should take especially into account the trade with EU's neighborhood In an internal survey realized by the lime sector (NERA " Energy and transport cost comparison of the EU lime industry to 10 non-EU regions"), it has been established that the threat for lime producers mainly come from the EU neighbor countries such as Russia, Maghreb and Middle east. 3. Energy / climate requirements in Free Trade Agreements should be taken into account “Energy and climate” clauses should be part of any Free Trade Agreement, especially if the trading partner in question has not assumed any carbon reduction commitments. 4. Fuel mix price should be taken into account Finally, ANCADE recommends that the EU defines an affordable and available“fuel mix” for 2030, assesses its accessibility and compares its costs with the costs of the fuel mix used by the main EU competitors. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
It is important to point out that the revision of NACE code list (v2) implied that the assessment of the carbon leakage criteria for the lime sector is now done at a new disaggregation level, which includes not only lime but also plasters and aggregates. ANCADE believe that this assessment should be done at the appropriate level of disaggregation, since that the industrial activities that are included in the NACE v2 code for lime do not share the same fundamentals (in terms of energy intensity and carbon intensity for instance). |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
ANCADE believes that it is important to maintain a certain level of discretion in the system for justified cases. This concerns both the qualitative criteria and the possibility to conduct the assessment at the appropriate level of disaggregation (Prodcom 8). |
b) longer (please specify) |
The time validity of the list of sectors exposed to carbon leakage should take into account the investment cycles of the industry. It is also necessary to take account of the lifespan and replacement rate of kilns. Most of the time, investments costs always assume an investment in a new capacity (replacing the old capacity before its end of life). However, for the lime sector, kilns receive big maintenance periodically. It is therefore important to ensure that the investments made now will not become "stranded assets" in the future due to an unexpected change in the carbon leakage list. Furthermore, any trade intensity assessment for the carbon leakage list should take into account the impact of trade with EU neighbouring countries. |
a) the present approach of average of the 10% most efficient installations should remain |
|
a) yes (please specify how often) |
The most GHGefficient producers have to be defined with ambitious, fact-based and realistic benchmarks to be periodically reviewed per commitment period so as to reflect technological progress and uptake of new proven technologies in the EU. It is however important to understand that the technological state of the art is not representative of what can be achieved in practice. Lime characteristics are so vast that multiple uses can be done from the same material. It is also highly dependent of the stone quality from the quarry. The benchmarks should only take into account innovations that have been proved to be commercially viable and that can be implemented on site. |
c) other (please specify) |
In the case of the current ex-ante system, the reference year should be adapted, and the baseline should be a longer periodwithout offering a choice between different periods, and not known in advance. However ANCADE believes that free allocation should reflect economic reality per installation based on the most recent years and should not be frozen by historic production. In this regards, ANCADE suggest to the European Commission to start working on the development of a dynamic system that could replace the current system, under the condition that no correction factor (CSCF) should be applied in addition to a dynamic system. Also, such system should take into account the administrative burden, the robustness of the control of the declared production, and the confidentiality of commercially sensitive information. |
a) no, there should be no deviations |
|
d) yes, in the form of financial compensation at EU-level |
ANCADE defends a Full off-setting of CO2 costs pass through in electricity prices with a harmonised approach in all EU Member States. |
Least important |
Most important |
Important |
Less important |
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a) from the Member States' auction budgets |
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|
b) Trade association representing businesses |
ANDIL Associazione Nazionale degli Industriali dei Laterizi / Italian Association of clay brick and roof tile producers |
D'Anna Giovanni Via A. Torlonia, 15 – 00161 ROMA tel. +39.06.44236926 fax +39.06.44237930 g.danna@laterizio.it |
a) yes |
|
1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improvement |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies. |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. This would limit the list to sectors really exposed and would eliminate the risk of a carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
All energy intensive sectors as defined in the Energy Taxation Directive should be considered as exposed to the carbon leakage risk. As an alternative, trade and carbon intensity criteria should be used considering the following elements. GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS. Second, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥10%) should be introduced. |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
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a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
b) Trade association representing businesses |
ANIA (Association Nationale des Industries Alimentaires), the French food industry association |
Laura Farrant ANIA 21, rue Leblanc, 75015 Paris, France + 33 1 53 83 86 06 lfarrant@ania.net |
a) yes |
|
1) yes |
b) no |
The food industry has globally reduced its emissions since 1990. The processing of food products requires both electricity and heat and this has led to a wide use of combined Heat and Power generation (i.e. cogeneration) in plants, already achieving a high energy efficiency. In the case of heat production only, boilers are also often close to the highest possible achievable energy efficiency. Therefore it is not obvious that there is room for further important energy efficiency improvements in the EU food industry. Furthermore any change in the production processes, even if it could achieve a higher energy efficiency in the processes, would have to be checked against the high level of safety and quality requirements of food that can limit possible improvements. |
b) no |
The objective of ETS is to contribute to a global reduction of CO2 emissions worldwide. Improvements in energy efficiency normally go in that direction, but not necessarily. That’s why ANIA wishes to call for greater coherence between EU energy and climate policies. Without an international agreement ensuring fully harmonised requirements for climate policies, the risk is that EU ETS would only decrease the competitiveness of the EU food industry. The reason for this is that any improvement that would result from the EU ETS incentives would be negligible compared to the differences in energy prices with the rest of the world. This is particularly true in the context of high energy costs in the EU compared to non-EU countries where international competitors operate. Moreover, ETS represents added costs only to the EU industry, decreasing de facto its competitiveness. |
a) yes |
Special measures are needed in order to address potential competitiveness disadvantages vis-à-vis other countries with a less ambitious climate policy. These measures must not be transitional but stable until a level playing field of climate policy costs can be achieved. |
b) quite adequate |
Free emission allowances limit the costs of the EU ETS, thus limiting the negative impact on our international competitiveness. Without free allocations, carbon leakage would first result in a decline in investments in EU countries. The allocation of free allowances is of particular importance to energy-intensive sectors that have already achieved most of the possible improvements in energy-efficiency and in the reduction of their relative emissions. But if it is one of the necessary tools to address carbon leakage, it should be completed by other relevant tools to take into account all effects of carbon costs like indirect emissions and low carbon price effects. |
a) it absolutely keeps the incentive |
Even if possible improvements are limited, as is the case for the most energy intensive sectors, free allocation has a positive impact at global level and with regard to the EU ETS goals: the incentive being to keep producing in Europe as opposed to producing outside of Europe where energy efficiency is lower, hence with higher relative emissions. Free allocations are based on very ambitious benchmarks (10% best) which already maintain the incentive to innovate in emissions reductions. |
b) quite proportionate |
Protecting the EU food industry competitiveness means keeping jobs and investments in the EU. Any measure which helps to protect the competiveness of the EU industry should be implemented. The excuse of "administrative burden" is in our view not appropriate to question a tool that is efficient. |
b) a higher share than in 2013-20 |
Since free emission allowances are the main instrument to avoid carbon leakage, its share should be sufficient for this purpose. An efficient producer in the EU must not have any competitiveness disadvantage compared to competitors outside the EU (energy price is already weighing heavily on EU industry!). |
e) I don’t know |
|
b) no |
ETS is not the right instrument for financing, through a specific support scheme, expensive or uncompetitive technologies. ETS revenues from auctioning should simply be recycled back towards the industry to support the transition to a low carbon economy. This should remain true as long as no agreement is reached at GLOBAL level, when a level playing field regarding climate policies would be restored. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS directive already suggests spending at least 50% of the auctioning revenues for this purpose. This 50% share should first be secured for industry through a compulsory mechanism and increased. |
a) yes |
Additional measures must include free allocation for indirect emissions and no cross-sectoral correction factor for sectors exposed to carbon leakage |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
The absence of a list would simplify the process since today almost 95% of the industrial sectors are included anyway. Moreover it would reinforce the legislative predictability of the system, which is important for securing investments in the EU. If these two categories are to be maintained, ANIA would suggest examining the possibility of a graduation mechanism to avoid a black and white system (to be or not to be on the list). |
a) the present criteria should remain |
Ideally any manufacturing company subject to ETS must be protected against carbon leakage. Nonetheless if a carbon leakage list is to be maintained, the present criteria should be kept. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
For reasons of simplicity and full understanding by all, those thresholds should not be changed. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
If a carbon leakage list is to be maintained, a qualitative assessment should be possible for some sectors. |
b) longer (please specify) |
And at least for the duration of phase 4 since industry needs the longest legislative predictability possible and preferably in line with the average heavy industrial investment cycle that may run to several decades. Indeed, investments to improve the energy efficiency are of a type that has long return on investment period. Therefore, the industry should be provided with a long term visibility of the climate policy framework to decide on such investments. |
c) the approach should be less stringent (please specify) |
The current rules (average of the 10% most efficient installations) are already very stringent. There should be no cross sectoral correction factor that circumvents the levels of the benchmarks by reducing the allocation below. |
b) no |
Legislative predictability is very important to keep industry investing in the EU. |
c) other (please specify) |
A dynamic system with a rolling basis should be the system of choice to adapt the allowances to the economic situation. |
a) no, there should be no deviations |
Harmonised rules must be kept in order to avoid any case of competition distortion. |
c) yes, in the form of additional free allocation |
Free allocations for indirect emissions will help to avoid the current situation of diverging national approaches leading to competition distortion. In this context ANIA recalls its demand that free allowances are given for emissions linked to the production of electricity in Combined Heat and Power generation industrial units, when this electricity is produced and used in the plants. |
Less important |
Least important |
Most important |
Important |
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b) from free allocation |
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b) Trade association representing businesses |
APEP Association des Producteurs Européens de Potasse, International Scientific Association Transparency Register 416092911321-16 |
Avenue Louise 489, B 1050 Bruxelles, Tel. 0032-2-237-61 51 Fax 0032-2-237-61 36 friedhelm.mester@kali-gmbh.com |
a) yes |
1) yes |
b) no |
all possibilities to reduce greenhouse gas emissions have been exhausted |
b) no |
a) yes |
competition on the world and the EU-market against russian and belarussian potash producers with substantial energy advantages and less ambitious climate policies |
b) quite adequate |
b) it largely keeps the incentive |
c) quite exaggerated |
b) a higher share than in 2013-20 |
d) there should be no such innovation support post-2020 |
a) yes |
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
a) yes |
a) the present two groups should remain |
a) the present criteria should remain |
final decision all to depends on the requirements governing the assessment in the future |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
a) five years |
a) the present approach of average of the 10% most efficient installations should remain |
b) no |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
a) no, there should be no deviations |
a) no, the present approach should be maintained, i.e. that Member States can provide such compensation based on state aid guidelines |
I don't know |
e) I don't know |
b) Trade association representing businesses |
APEQ Associação Portuguesa das Empresas Químicas |
Avenida D. Carlos I, 45, 3º 1200-646 Lisboa Portugal +351213932069 luisaraujo@apequimica.pt |
a) yes |
|
1) yes |
a) yes |
Increasing energy efficiency and developing better technologies can decrease emissions, so a general answer should be “yes”. But in some industries, such as Chemicals, there are limits related with Chemistry and Thermodynamics which cannot be overcame. In these situations reduction of production will be the only solution. |
a) yes |
“YES” just to a certain limit. From the moment when the industry has to choose between buying licenses or decrease production, the competitiveness is affected. |
a) yes |
As referred, there are scientific and technologic limits for reduction of emissions and buying licenses implies a cost which can endanger competitiveness |
a) very adequate |
|
a) it absolutely keeps the incentive |
Installations below benchmark (90% of them) must improve to be competitive |
b) quite proportionate |
The burden may be significant for small companies |
c) a constant share as in 2013-20 |
The benchmark should be the rule. Changes must be dependent of proved new available technologies |
e) I don’t know |
|
a) yes |
|
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
|
a) yes |
|
a) the present two groups should remain |
|
b) only the share of 'carbon costs' in the GVA should be maintained |
|
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
d) in line with the duration of ETS Phase 4 |
|
c) the approach should be less stringent (please specify) |
The list of the 10% most efficient plants should not include plants using technologies that, by exceptional features, cannot be adopted by other existing plants (for instance, not available technologies, special raw materials, technologies only available for complete new plants) |
a) yes (please specify how often) |
Not less than 5 Years |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
|
a) no, there should be no deviations |
|
d) yes, in the form of financial compensation at EU-level |
The present situation (decision by the Members States) causes distortions and unfair concurrence |
I don't know |
Important |
Less important |
Least important |
The answer will depend of the particular branch of the industry. My logic answer should be "I don´t know " in all options, but this was not allowed by the template |
c) from both |
|
|
b) Trade association representing businesses |
APICER - Portuguese Association for Ceramics and Domestic Glass |
Rua Coronel Veiga Simão, 3025-307 Coimbra, Portugal T: +351 239 497 600 email: info@apicer.pt |
a) yes |
|
1) yes |
b) no |
For the sector we represent, ceramics, its not possible, with the existing technology, to reduce anymore our CO2 emissions. There are somo possibilities of reduction but they require significant investment in new processes, technologies and equipment. In recent years emissions have reduced because many businesss have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions are unavoidable and cannot be reduced since they are inherent in the raw materials. |
b) no |
Ceramic industry represents less than 1% of CO2 European emissions, the administrative burden of being in the scope has no significant contribution to CO2 emissions reduction nor to more energy efficiency. Economic restrictions caused by recession make it impossible to the industry to invest in new technologies to further increase energy efficiency. The ceramic industry has already made the possible efforts to improve. ETS is only a bureaucratic burden for our companies, and a significant cost. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation, a high carbon price and indirect costs on electricity prces. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry. Cerami production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essencial that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increase (and not decreased) protection against carbon leakage. |
b) quite adequate |
But with the benchmarks in force (very ambitious) it might be insufficient to prevent carbon leakage. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed- through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. In Portugal for example, authorities have considered there were no advantages for small instalations to opt-out because they didn't envisaged any possible simplification in what concerns the administrative burden for those companies. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects. Moreover, sectors’ characteristics should be taken into account. For instance, CCS will remain prohibitively expensive for ceramic installations for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. This would limit the list to sectors really exposed and would eliminate the risk of a carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
All energy intensive sectors as defined in the Energy Taxation Directive should be considered as exposed to the carbon leakage risk. As an alternative, trade and carbon intensity criteria should be used considering the following elements. First, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading. The real impact of ETS-related costs can be better estimated if it is compared with the GOS. Second, current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with carbon intensity ≥10%) should be introduced. |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
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d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
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a) from the Member States' auction budgets |
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b) Trade association representing businesses |
APIGCEE - Associação Portuguesa dos Industriais Grandes Consumidores de Energia Eléctrica |
APIGCEE - Associação Portuguesa dos Industriais Grandes Consumidores de Energia Eléctrica Avenida das Forças Armadas, 125 - 7º 1600-079 Lisboa PORTUGAL Phone: +351 217 927 105 Mobile: +351 918 730 515 directorexecutivo@apigcee.pt |
a) yes |
|
1) yes |
a) yes |
The ability of EU industry to further reduce GHG emissions depends on a stable cost level playing field which still allows for investments in efficiency improvements. This requires a return on investment above the cost of capital and a policy framework that promotes the competitiveness of the sector and allows for a secure access to raw materials and affordable energy prices. That’s why the EU reduction targets should be balanced with the EU target for a growing industry share. And the political commitment regarding the EU climate targets should be reviewed if by 2020 no global level playing field is achieved. 2030 targets have to take into account each sector specific roadmap. To achieve further emission reductions cost-efficiently, the effort sharing should be in line with the impact assessment for the Energy Efficiency Directive: accordingly, the remaining economic potential is much larger in other sectors (building, power, transport) than in industry. |
b) no |
In its original understanding ETS is an effective and efficient market based instrument providing climate protection at lowest costs by being a factor in decisions on investment and efficiency improvement. However, the EU ETS emphasis is GHG efficiency and in this regard it does put pressure on businesses to become more GHG efficient. In doing so EU ETS places CO2 costs on power generators and these costs are passed on to electricity consumers. These higher power costs will affect the competitiveness of the energy-intensive industries either in importing or exporting from the EU. To better protect competitiveness and at the same time set incentives for efficiency improvements it should be developed a fully benchmark based free allocation with no further reduction factors and based on current production volumes. More, energy efficiency and CO2 reduction can have conflicting goals, e.g. Carbon Capture and Storage. |
a) yes |
As long as the ambitious EU Climate policy is not mirrored by comparable international efforts, the EU needs to provide for measures that minimize the unilateral cost burden for EU industry. These measures must be predictable and stable. The following changes will at least partially tackle the competitiveness disadvantages the EU industry faces under ETS: The system of free allocation should be revised to a fully benchmark based system without further reduction factors and based on current production volumes. This is important from an economic and also from an environmental point of view: the EU emission reduction targets should not be achieved through carbon or investment leakage. Without international commitments on climate protection and more level cost burdens for competing regions, the EU target must be determined by a bottom-up analysis of the technically and economically feasible reduction potential. |
b) quite adequate |
Free allocation is an adequate instrument to address the risk of carbon leakage. However, the faults made when implementing EU ETS must be corrected in order to optimise its effectiveness. Free allocation should give a positive stimulation for good performers and enable bad performers to improve. To that aim, free allocation post-2020 must be based on: (1) realistic benchmark levels, (2) the actual activity level (= production volume), (3) no correction factors, (4) a compensation for the costs of the indirect CO2. With such reforms, free allocation can minimize carbon leakage also at higher CO2-prices. Furthermore, the system needs fundamental revision if the EU remains isolated with its ambitious climate policy. In the medium- to long-term, an isolated ambitious climate policy and effective protection against carbon leakage are hardly compatible. |
a) it absolutely keeps the incentive |
With free allocation based on benchmarks, the incentive to make the investment for emission efficiency improvements is provided by the benchmark, i.e. the cost difference (savings) achievable through an investment. This incentive is distorted in the current design of free allocation based on historical instead of actual production data. Product substitution towards more carbon-efficient products is not achieved with free allocation as there is no full carbon cost pass-through into product prices. This is a trade off: full carbon cost pass through is not compatible with the avoidance of carbon leakage. However; energy costs and market development have been driving product replacements since a long time. The market effects are based on life-cycle views, taking also energy consumption during the use phase into account. |
c) quite exaggerated |
The initial application for free allocation, the set-up of monitoring plans and the annual monitoring and reporting is a considerable administrative burden for companies. The complexity of the system results from: the rules to account for any changes between the historical base period and now (it is massive red tape and administrative burden, which could be avoided by a better alternative: allocation based on actual production data) and specificities of national implementation (implementing authorities should only request those data which is actually required). Establishing benchmarks has been a complex exercise, so in its review the benchmark should be calculated in a statistically solid way, based on what has been achieved. |
d) there should be no limit to overall free allocation to industry |
The share of allowances dedicated to free allocation should be sufficient to avoid carbon leakage. That does not mean “a free ride for industry”, but sufficient allowances for efficient producers. In other words: free allocation based on realistic benchmarks. This way an efficient producer in the EU has no cost disadvantage from the EU ETS compared to competitors worldwide. This approach helps to stimulate efficient production in the EU. |
e) I don’t know |
Research and development in various technologies is crucial for the EU decarbonisation path towards 2050 (i.e. CCS and CCU). However, support and funding for these technologies depending on the allowances volume is not a solution due too many uncertainties on what the post 2020 allowances budget will be for the industry. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. For other technologies, there is no need for additional funds, i.e. for renewable energies which are supported by separate national schemes. |
a) yes |
To date, the NER 300 has been ineffective at stimulating novel CO2 reduction projects in the industry. The power generation sector which is passing on investment costs has benefitted most from the NER 300. The industry sector usually is not experiencing the same level of investment de-risking. So, the industry needs: (1) an investment enhancing climate which encourages investments over long term cycles in a capital intensive industries (legal stability and CO2 price predictability are key to achieve this goal), (2) safeguards against price fluctuations in market based policy instruments; (3) an innovation policy which provides clear incentives for breakthrough technologies in a cost-effective way. Policy makers should consider hypothecation (earmarking) of revenues from allowance auctions and direct innovation support to those sectors facing the greatest abatement challenges. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Given the high costs associated with breakthrough technologies, funding from auctioning revenues should account for both capital and operational cost of projects. There should in addition be a ring fenced fund for the manufacturing industry innovation purposes rather than going into national budgets. |
a) yes |
The following measures are needed: (1) a reform of the EU ETS providing more effective carbon leakage measures (see Q4); (2) an adequate compensation of the indirect CO2 costs (the current system does not compensate for the full CO2 costs in electricity prices and, in addition, it does not take into account electricity consumption of infrastructure which is necessary to run the eligible processes; (3) to minimize the total costs, politicians should commit to rethink the EU targets and the EU climate change policy if a global level playing field is not be achieved by 2020; (4) to achieve further emission reductions cost-efficiently, the effort sharing between ETS and non-ETS sectors should be in line with the findings of the impact assessment for the Energy Efficiency Directive (the remaining economic potential is much larger in other sectors - building, power, transport - than in industry); (5) a more consistent – on EU and on MS level – overall energy and climate policy. |
a) the present two groups should remain |
We see no reason why the carbon leakage list – established on a thorough investigation of the statistical material - should change: there is no sign of a reduced need for protection, especially taking into consideration the increasing level of globalization and the shrinking cap (which will lead to an increase of the carbon price and the danger of carbon leakage). In general, the notion underlying the debate on those sectors exposed to carbon leakage should be: how to give more confidence and predictability to globally competing industries and how to attract more investment into Europe. In this context, it is important to look into possible solutions of the key disadvantage of the present two groups: the sharp consequences for individual sectors of changing the list, i.e. a sector can get 100% free allocation in one year and 0% the next year. |
a) the present criteria should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria. The trade intensity, nevertheless, as a static indicator is of limited validity/conclusiveness. It is based solely on historic data and does not reflect future developments (i.e. resulting from changing cost patterns) at all. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking carbon price. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Qualitative criteria are needed in addition to quantitative criteria as the latter are based on historic data. Historic data does not in all cases reveal the current situation for competing products at the world market. The following parameters should be taken in consideration for a forward looking qualitative assessment: (1) all costs related to climate change policy along the value chain should be taken into account, in particular upstream costs; (2) the value chain analysis should also consider the implication for downstream sectors if an upstream sector is deleted from the carbon leakage list; (3) the inability to pass through locally imposed costs to sectors whose product prices are determined internationally (“price takers”) should be taken into account. |
d) in line with the duration of ETS Phase 4 |
The carbon leakage status is a fundamental parameter for investment decisions of companies because a change in the status has sharp consequences: the sector can get 100% free allocation in one year and 0% the next year. To avoid negative consequences for decisions to invest in maintaining or expanding manufacturing capacity in Europe, uncertainty about the carbon leakage status should be avoided. Therefore, planning stability as realized in RES-E schemes (15-20 years) should be realized also for industry and should be shortened / terminated only in case a global level playing field is reached. As a minimum, the carbon leakage list should be valid for the duration of the fourth trading period. |
c) the approach should be less stringent (please specify) |
Currently the allocation based on the already stringent top 10% benchmarks is significantly reduced through the cross-sectoral correction factor or the linear reduction factor. This adds costs even for the most efficient producers and thereby discourages investments and growth. This approach is not sustainable. The benchmark should be calculated in a statistically solid way and it should be set at an ambitious but reasonable level and should not be distorted by statistical outliers. The level of the benchmark should therefore better be based on what has been achieved and /or reflect the penetration of a given efficiency technology within the period. Furthermore, the stringency of the benchmarks should be comparable to benchmarks in other schemes globally. The overarching question should be: Which benchmark provides an effective resistance to carbon leakage at forward looking carbon prices? |
a) yes (please specify how often) |
An update of the benchmark levels should only take place between the trading periods and not within one trading period. |
c) other (please specify) |
The free allocation should be based on the most current data to better reflect the need for free allocation of the companies and to allow for industrial growth. This way, over- and underallocation to the most efficient producers would also be avoided. In contrast, the current ex-ante allocation is adding costs to the production of efficient plants thereby discouraging growth and perversely rewarding relocation to outside Europe. The overarching goal should be: Efficient producers should receive full compensation for direct and indirect costs using an allocation system based on actual industrial output. A reserve should be established to balance any differences between forecasted and actual allocations (The EcoFys study “Dynamic allocation for the EU Emissions Trading System, Enabling sustainable growth, 20 June 2014” and its allowances allocation reserve constitutes an interesting step forward). |
a) no, there should be no deviations |
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c) yes, in the form of additional free allocation |
Today, the treatment of indirect (electricity) emissions is based on an incomplete and inherently unstable system for financial compensation (it can be changed every year and depends on the availability of national budget and political decisions). The incompleteness regards the sectors covered, the reduction factors and the absence of this compensation in many Member States. So, direct and indirect emissions must be treated equally since they are equally harmful for based on a more solid and predictable alternative: indirect allocation without unrealistic reduction factors. |
Less important |
Important |
Most important |
I don't know |
We see a lack of support for large scale pilots in industries and would wish to have the EU more active in this area. |
a) from the Member States' auction budgets |
Free allocation has to protect against carbon leakage adequately. Therefore, the free allocation should not be used for innovation support. The revenues from auctioning should be reinvested for low carbon technology support, as foreseen in the ETS Directive. |
This consultation on carbon leakage is welcome. Resulting policy initiatives should frame the system in the medium term perspective. Any decisions should allow for industrial growth and the climate change policy of the future should fit with the EU’s industrial renaissance strategy. The results of COP 21 and in general the commitment of the major world regions to climate change policies are a precondition that EU climate policies will have a future in the manner we see it today. Whether avoidance of carbon leakage is really feasible with the high carbon reduction targets foreseen depends on a number of breakthrough technologies. Whether these breakthroughs will come is the crucial question. The EU can help such developments with focused support of innovation and R&D. Giving industry access to funds for these purposes is a no regret strategy. |
b) Trade association representing businesses |
Asociación Española de Fabricantes de Ladrillos y Tejas (Hispalyt) |
C/ Orense nº 10 2ª - 28020 MADRID - Teléfono 91 770 94 80 - Fax 91 770 94 81 E-mail: alejandrofo@hispalyt.es |
a) yes |
|
1) yes |
b) no |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improvement |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. This would limit the list to sectors really exposed and would eliminate the risk of a carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
As explained above, all energy intensive sectors as defined in the Energy Taxation Directive should be considered as exposed to the carbon leakage risk.As an alternative, trade and carbon intensity criteria should be used considering the following elements.First, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS. Second, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥10% |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
b) Trade association representing businesses |
ASOCIACION ESPAÑOLA DE OPERADORES DE PRODUCTOS PETROLIFEROS (AOP) |
ADDRESS: Sor Ángela de la Cruz, 2-11ª 28020- Madrid (Spain) TELEPHONE: +34 91 572 10 05 EMAIL: aop@aop.es |
a) yes |
|
1) yes |
a) yes |
Some industries may be able to reduce emissions through further energy efficiency improvements. However, the Refining industry has already used most of the options to improve its energy efficiency cost-effectively: The GHG intensity of Western European refineries is already world leading. The proposed 43% emissions reduction objective is very ambitious and technologically and economically unachievable for the refining industry itself at the pace implied by the Linear Reduction Factor. |
a) yes |
Reporting and monitoring emissions does quantify emissions at installation level. The carbon price does incentivise industrial installations to reduce emissions and improve efficiency. However, for the Refining sector, this is only a marginal factor, as the main driver for such improvements remains the high proportion of energy costs in total operating costs (63% on average for EU-28 refineries, according to Solomon). EU refineries in Western Europe are collectively the least carbon intensive in the world, driven not by legislation but by measuring the economic cost of energy use. However, the EU ETS is an additional cost to EU industry and not to its non-EU competitors, which is potentially very damaging for competitiveness. This is why industry needs sufficient carbon leakage protection. |
a) yes |
Until there are equivalent carbon pricing policies in competing sectors, support for EU industrial sectors exposed to carbon leakage must continue as a core element of the EU’s post-2020 climate policy framework. Removing carbon leakage protection would result in a sudden decrease in free allocation: from allocation at 100% at the benchmark to 80% in 2013 declining to 30% in 2020 and zero by 2027. For Refining, competing regions include Russia, Middle East, USA, and parts of Asia and so support measures should remain until these key refining competitors adopt carbon pricing. Delocalisation of petroleum products production outside the EU is also likely to have negative effects of global GHG emissions. According to a recent study from Vivid Economics, commissioned by the UK Department of Energy & Climate Change, EU Refining is on average less emissions-intensive than non-EU firms. Carbon leakage therefore exceeds output leakage and is about 135%. |
b) quite adequate |
In the absence of an international climate agreement, AOP prefers both free allocation and enhanced free allocation for exposed sectors to deal with carbon leakage. For the Refining sector, the EU ETS benchmark was set from 2013 at the average of the top 10% performance level and the impact of such a tough benchmark is significant. According to the 2013 final allocation data, the refining industry has received less than 80% of its quota as free allocation and is one of the sectors receiving less than its actual emissions. Therefore the methodology has reduced free allocation at the benchmark even lower than expected according to the approved methodology. This situation is highly detrimental to the refining industry’s competitiveness and requires corrective actions. Additionally, under the current system, protection will be further eroded due the decreasing industry cap and the CSCF without taking into account likely improvements in future energy efficiency. |
a) it absolutely keeps the incentive |
The main incentive for reducing emission in Refining is reducing energy costs. Carbon cost does add to this incentive. The incentive for any installation with the capacity for cost effective emissions reduction is the carbon price: either avoiding buying allowance or being able to sell their surplus allowances whether these are received free or not. Therefore, free allocation is used to protect industry from carbon leakage while keeping the incentive intact. |
b) quite proportionate |
In the Refining sector with large scale complex installations, implementation of the CWT benchmarking provisions was a major undertaking and involved considerable work by the sector, national governments and the Commission. Given the importance of the competitive threat, the work to create an accurate and fair system is considered proportionate to the objectives. However, if the system could be simplified, we would be willing to work with Commission to achieve this. |
d) there should be no limit to overall free allocation to industry |
Until the issue of carbon leakage is addressed through an international climate change agreement, sufficient levels of protection to industry are needed. To provide an adequate protection for the European refining industry, a CSCF should not be employed to avoid reductions in the amount of free allocation If the intention is to provide carbon leakage protection to industry, then the number of allowances needs to fully cover direct and indirect emissions for best performing installations – hence no limit to overall free allocation. There is no centralised post 2020 allowance budget - control of proceeds from auctioning is delegated to Member States, with some redistribution via the solidarity and growth provisions. |
e) I don’t know |
AOP is in favour of greater innovation support by the EU and its member states but we do not believe that the use of ETS revenues is the right mechanism. The NER 300 programme has been complex to administer, had a market impact of releasing allowances onto the market early, and has not delivered large scale CCS demonstration project. A large scale CCS demonstration project requires dedicated funding outside EU ETS. In Phase 3, auctioning is expected to generate substantial revenue to governments; these revenues should be returned to the economy without creating distortions between energy sources and technologies. |
b) no |
The NER 300 programme is dependent on market pricing. There should be more innovation support and new low carbon technologies require more financial stability, thus existing funds such as Horizon 2020, 7th Framework and SET programmes should be augmented, rather than creating new funding frameworks. |
c) other types of funding (please specify) |
Support for innovative low-carbon technologies should be technology neutral as well as time- and cost- limited. All energy sources should be integrated under normal market conditions, without subsidies (including system connection, balancing cost and exposure to price risk) as soon as possible. Rather than establishing new bureaucracies, existing funds such as Horizon 2020, 7th Framework and SET programmes should, where required, be augmented by EU and Member State funding. |
a) yes |
EU industry needs first and foremost greater equity of non-EU with EU abatement measures. Until there are equivalent carbon pricing policies in competing sectors, EU industry needs carbon leakage protection to remain competitive, via free allocations. There are currently no EU ETS measures addressing carbon leakage post-2020. Thus, the ETS Directive needs to be reviewed to make sure that levels of free allocation after 2020 adequately reflect the industry’s carbon leakage exposure. The current indirect emissions compensation system is unsuitable. It should be reformed to allow free allocation for all electricity consumed in refineries. In general, the strategic importance of manufacturing industries, such as Refining, needs to sufficiently reflected across all EU policies; the cumulative impact of EU legislation on these industries including the EU ETS, must be carefully looked at. |
a) the present two groups should remain |
Industrial capacity in EU has declined (according to the Commission communication for a European industrial renaissance, the share of manufacturing in GDP has fallen from 15.4% to 15.1% in 2013) and exposure to international competition remains a key concern for many energy intensive industries, including Refining. Creating uncertainty about how the risk of carbon leakage in industrial sectors such as Refining will be mitigated is not the right way to promote recovery. The current two groups should remain until progress is achieved in the international arena to re-level the competitive playing field by introducing similar carbon pricing in other regions that compete with EU Refining. |
a) the present criteria should remain |
For Refining as a mixed sector both trade and GVA exposure and thresholds are very important. Refining is a “margin business”, acting between two international, open commodity markets: crude oil market and refined products market. EU Refining is also open to traded imports so that pass through of EU carbon costs is limited by non- or less-regulated trading partners. This becomes more difficult as imports rise. For the carbon leakage assessment, it is therefore important to keep looking at the effect of carbon costs on Gross Value Added rather than production costs and to take sectors’ trade intensity into account. Carbon costs should cover both direct and indirect carbon costs due to their cumulative impact on Refining’s competitiveness. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
If the criteria are tightened thus reducing the number of sectors/sub-sectors on the list, some key strategic sectors for the EU’s economy risk being excluded from carbon leakage protection, with potential negative spill-over effects on other industries (e.g. for the oil Refining industry and the petro-chemical industry, which are strongly inter-connected). Carbon leakage is also about future investment decisions. Therefore the GVA criteria carbon price must reflect future projected EUA prices and not current prices. This is common refining industry practice in evaluating major projects. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
AOP supports the use of qualitative assessments but these should be kept as simple as possible. Legislative requirements on the quality of fuels (e.g. marine fuels specifications) and the conversion of heavy residues into lighter products result in the increase of refineries’ energy intensity and GHG emissions. If the Refining sector undergoes a qualitative assessment this so-called “Refining paradox” would need to be taken into account. |
d) in line with the duration of ETS Phase 4 |
Mid-period review is detrimental to investment certainty, given the significant difference in the levels of free allocation according to the carbon leakage status and the rest (allocation at 100% at the benchmark vs. 80% in 2013 declining to 30% in 2020 and zero by 2027). Long term visibility is essential for investment decisions in the refining industry. |
c) the approach should be less stringent (please specify) |
A benchmark excluding sector outlying installations would take account of typical carbon leakage exposure rather than average of top 10% which may be atypical in character, depending on sector. This is particularly important as EU benchmarks do not rate performance of installations outside the EU thus potentially penalising EU installations that are more efficient than their non EU competitors. Potential effects on EU strategic industrial sectors including those integral to the supply chains of other sectors must be considered. The current benchmark has turned out to be penalising for the refining sector, both in absolute terms and in comparison with other sectors. In combination with the CSCF, carbon leakage protection currently covers less than 80% of emissions to the refining sector which is subject to carbon leakage. The CSCF application mechanism should be reviewed for current and next EU ETS phase. |
b) no |
In order to provide free allocation in an effective way, the benchmark should accurately reflect the performance of ETS installations. However AOP does not support a revision of the benchmarks based on the technological state of the art, as the latter is subject to interpretation (e.g. do we look at progress worldwide where verified data is lacking, or only the situation in the EU?). Integrating state of the art technologies implies a change in the refineries configuration, which is challenging and extremely costly due to physical and other operational constraints. Investments into such technologies have to pay their way. |
c) other (please specify) |
Free allocation should reflect economic reality per installation based on the most recent years. More recent verified data should be used: free allocation should reflect installations’ economic activity, based on representative years. In the case of refineries, a regular turn-around period is required for regulatory inspection, maintenance and capital projects. If this is not taken into account, refining installations will be penalised in terms of future allocation. Alternative approaches such as extending baseline periods or some form of dynamic allocation should be considered. |
a) no, there should be no deviations |
General harmonised allocation rules should continue to apply for all carbon leakage installations in the same manner. |
c) yes, in the form of additional free allocation |
Carbon leakage protection should also include free allocations for EU ETS cost pass-through in electricity prices for all sectors exposed to carbon leakage in a harmonised fashion, in addition to free allocation for direct emissions. The absence of an EU harmonised indirect compensation system, leaving decisions to Member States restricts compensation to a few sectors as many of them do not grant such compensation, thereby creating single market distortions. It should be reformed to allow free allocation for all electricity consumed in refineries (e.g. net power used). If a sector is deemed at risk of direct carbon leakage, then free allocation should automatically be given for indirect carbon emissions to all installations in that sector. |
Important |
Most important |
Less important |
I don't know |
|
d) other |
AOP is strongly in favour of greater innovation support by the EU and its Member States, which may bring more significant and cost-effective results than current renewables mandates. But we do not believe that the use of ETS revenues is the right mechanism. Innovation should be supported by existing funds such as Horizon 2020, 7th Framework and SET programmes. |
Competitiveness and carbon leakage risk must be kept under constant review. Assessments should not look for evidence that leakage has occurred and competitiveness already damaged, but rather assess the level of risk in future. The allocation system must not penalise economic recovery or growth. Regarding the format of the questionnaire, we believe that some of the questions are not neutral and push the respondents to make a certain response. The answer cannot always be as simple as yes or no. Many of the answers are provided as yes or no, with additional conditions – which are required as part to the answer. This does not necessarily mean that the respondent “does not know” and has no valuable input to bring. |
b) Trade association representing businesses |
Associação Portuguesa de Empresas Petrolíferas - APETRO |
Av. Engº Duarte Pacheco - Amoreiras - Torre 2, 6º piso, Sala 1 1070-102 Lisboa Portugal Telf. +351 213 844 065 apetro@apetro.pt |
a) yes |
|
1) yes |
a) yes |
Some industries may be able to reduce emissions through further energy efficiency improvements. However, the Refining industry has already used most of the options to improve its energy efficiency cost-effectively: the GHG intensity of European refineries is already world class. The proposed 43% emissions reduction objective is technologically and economically unachievable for the refining industry at the pace implied by the Linear Reduction Factor. As a consequence of a too ambitious target, industry would have either to purchase allowances (sunk cost with no return on investment) or reduce capacity and close installations - detrimental for employment, trade balance and security of supply. |
a) yes |
Reporting and monitoring emissions does quantify emissions at installation level. The carbon price does incentivise industrial installations to reduce emissions and improve efficiency. However, for the Refining sector, this is not the most significant factor, as the main driver for such improvements remains the high proportion of energy costs in total operating costs (63% on average for EU-28 refineries, according to Solomon Associates). EU refineries in Europe are the least carbon intensive in the world, driven not by legislation but by measuring the economic cost of energy use. However, the EU ETS is an additional cost to EU industry and not to its non-EU competitors, which is potentially very damaging for competitiveness. This is why industry needs sufficient carbon leakage protection. |
a) yes |
Until there are equivalent carbon pricing policies in competing sectors, support for EU industrial sectors exposed to carbon leakage must continue as a core element of the EU’s post-2020 climate policy framework. Removing carbon leakage protection would result in a sudden decrease in free allocation: from the current allocation at 100% at the benchmark to 80% in 2013 declining to 30% in 2020 and zero by 2027 (EU ETS Article 10a 11). For Refining, competing regions include Russia, Middle East, USA, and parts of Asia and so support measures should remain until these key refining competitors adopt carbon pricing. Delocalisation of petroleum products production outside the EU is also likely to have negative effects of global GHG emissions. According to a recent study from Vivid Economics, commissioned by the UK Department of Energy & Climate Change, EU Refining is on average less emissions-intensive than non-EU competitors. Carbon leakage therefore exceeds output leakage and is about 135% |
b) quite adequate |
In the absence of an international climate agreement, APETRO prefers both free allocation, and enhanced free allocation for exposed sectors to deal with carbon leakage. However, according to the 2013 final allocation data, the refining industry has received less than 80% of its quota as free allocation and is the only major sector receiving less than its actual emissions. This situation is highly detrimental to the refining industry’s competitiveness and requires corrective action. In addition, under the current system, protection will be further eroded due the decreasing industry cap and the CSCF (by 2030, even the most efficient installations would be left with only 60% free allocation if a 2.2% Linear Reduction Factor continues to be applied). The EU ETS needs to be reformed to provide sufficient levels of protection to industry until carbon leakage is addressed through an international climate change agreement. |
a) it absolutely keeps the incentive |
The main incentive for reducing emission in Refining is reducing energy costs. Carbon cost does add to this incentive. The incentive for any installation with the capacity for cost effective emissions reduction is the carbon price: either avoiding buying allowance or being able to sell their surplus allowances whether these are received free or not. Therefore, free allocation is used to protect industry from carbon leakage while keeping the incentive intact. |
b) quite proportionate |
In the refining sector with large scale complex installations, implementation of the CWT benchmarking provisions was a major undertaking and involved considerable work by the sector, national governments and the Commission. Given the importance of the competitive threat, the work to create an accurate and fair system is considered proportionate to the objectives. |
d) there should be no limit to overall free allocation to industry |
If the intention is to provide carbon leakage protection to industry then the number of allowances need to fully cover direct and indirect emissions for best performing installations – hence no limit to overall free allocation. There is no centralised post 2020 allowance budget - control of proceeds from auctioning is delegated to Member States, with some redistribution via the solidarity and growth provisions. Until the issue of carbon leakage is addressed through an international climate change agreement, sufficient levels of protection to industry are needed. To provide an adequate protection for the European refining industry, a CSCF should not be employed to avoid reductions in the amount of free allocation. |
e) I don’t know |
The NER 300 programme has been complex to administer, had a market impact of releasing allowances onto the market early, and has not delivered large scale CCS demonstration project. A large scale CCS demonstration project requires dedicated funding outside EU ETS. In Phase 3, auctioning is expected to generate substantial revenue to governments; these revenues, should be returned to the economy without creating distortions between energy sources and technologies. |
b) no |
The NER 300 programme funding is too dependent on market pricing. Instead, there should be more innovation support and new low carbon technologies require more financial stability, thus existing funds such as Horizon 2020, 7th Framework and SET programmes should be augmented, rather than creating new funding frameworks. |
c) other types of funding (please specify) |
Rather than establishing new bureaucracies, existing funds such as Horizon 2020, 7th Framework and SET programmes should, where required, be augmented by EU and Member State funding. In addition, support for innovative low-carbon technologies should be technology neutral as well as time- and cost- limited - all energy sources should be integrated under normal market conditions, without subsidies (including system connection, balancing cost and exposure to price risk) as soon as possible. |
a) yes |
EU industry needs first and foremost greater equity of non-EU with EU abatement measures. Until there are equivalent carbon pricing policies in competing sectors, EU industry need carbon leakage protection to remain competitive, via free allocations. There are currently no EU ETS measures addressing carbon leakage post 2020. Thus, the ETS Directive needs to be reviewed to make sure that levels of free allocation after 2020 adequately reflect the industry’s carbon leakage exposure. The current indirect emissions compensation system is unsuitable. It should be reformed to allow free allocation for all electricity consumed in refineries. In general, the strategic importance of manufacturing industries, such as Refining, needs to sufficiently reflected across all EU policies; the cumulative impact of EU legislation on these industries including the EU ETS, must be carefully looked at. |
a) the present two groups should remain |
Industrial capacity in EU has declined (According to the Commission communication for a European industrial renaissance, the share of manufacturing in GDP has fallen from 15.4% to 15.1% in 2013) and exposure to international competition remains a key concern for many energy intensive industries, including Refining. Creating uncertainty about how the risk of carbon leakage in industrial sectors such as Refining will be mitigated is not the right way to promote recovery. The current two groups should remain until progress is achieved in the international arena to re level the competitive playing field by introducing similar carbon pricing in other regions that compete with EU Refining. |
a) the present criteria should remain |
For Refining as a mixed sector both trade and GVA exposure and thresholds are very important. Refining is a “margin business”, acting between two international, open commodity markets: the crude oil market and the refined products market. EU Refining is also open to traded imports so that pass-through of EU carbon costs is limited by non- or less-regulated trading partners. Pass-through becomes even more difficult as imports rise. For the carbon leakage assessment, it is therefore important to keep looking at the effect of carbon costs on Gross Value Added rather than production costs and to take sectors’ trade intensity into account. Carbon costs should cover both direct and indirect carbon costs due to their cumulative impact on Refining’s competitiveness. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
If the criteria are tightened thus reducing the number of sectors/sub-sectors on the list, some key strategic sectors for the EU’s economy risk being excluded from carbon leakage protection, with potential negative spill-over effects on other industries (e.g. for the oil Refining industry and the petro-chemical industry, which are strongly inter-connected). Specifically for the Refining sector, the thresholds calculation for GVA and Trade Intensity is problematic. The EUROSTAT database shows some 1,000 plants under NACE code 19.20, but there are less than 100 Refineries in the EU covered by the EU ETS. Objective analysis of GVA requires more granular data for the Refining sector. Carbon leakage is also about future investment decisions. Therefore the GVA criteria carbon price must reflect future projected EUA prices and not current prices. This is common refining industry practice in evaluating major projects. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
APETRO supports the use of qualitative assessments but these should be kept as simple as possible. Legislative requirements on the quality of fuels (e.g. marine fuels specifications) and the conversion of heavy residues into lighter products result in the increase of refinery energy intensity and GHG emissions. If the Refining sector undergoes a qualitative assessment, this so-called “Refining paradox” would need to be taken into account. |
d) in line with the duration of ETS Phase 4 |
Mid-period review is detrimental to investment certainty, given the significant difference in the levels of free allocation according to the carbon leakage status, and the rest (allocation at 100% at the benchmark vs. 80% in 2013 declining to 30% in 2020 and zero by 2027). Long-term visibility is essential for investment decisions in the refining industry. |
c) the approach should be less stringent (please specify) |
A benchmark excluding outlying installations would take account of typical carbon leakage exposure rather than average of top 10% which may be atypical in character, depending on sector. This is particularly important as EU benchmarks do not rate performance of installations outside the EU - thus potentially penalising EU installations that are more efficient than their non EU competitors. Potential effects on EU strategic industrial sectors - including those integral to the supply chains of other sectors - must be considered. The current benchmark has turned out to be penalising for the refining sector, both in absolute terms and in comparison with other sectors. In combination with the CSCF, carbon leakage protection currently covers less than 80% of emissions to the refining sector even though it is subject to carbon leakage. |
b) no |
In order to provide free allocation in an effective way, the benchmark should accurately reflect the performance of ETS installations. However APETRO does not support a revision of the benchmarks based on the technological state of the art, as the latter is subject to interpretation (e.g. do we look at progress worldwide where verified data is lacking, or only the situation in the EU?). Integrating state of the art technologies implies a change in the refineries configuration, which is challenging and extremely costly due to physical and other operational constraints. Investments into such technologies have to pay their way. |
c) other (please specify) |
Free allocation should reflect economic reality per installation based on the most recent years. More recent verified data should be used: free allocation should reflect installations’ economic activity, based on the most recent years. In the case of refineries, a regular turn-around period is required for regulatory inspection, maintenance and capital projects. If this is not taken into account, refining installations will be penalised in terms of future allocation. Alternative approaches such as extending baseline periods or some form of dynamic allocation should be considered. |
a) no, there should be no deviations |
General harmonised allocation rules should continue to apply for all carbon leakage installations in the same manner. |
c) yes, in the form of additional free allocation |
Carbon leakage protection should also include free allocation for EU ETS cost pass-through in electricity prices for all sectors exposed to carbon leakage and in a harmonised fashion. This is in addition to free allocation for direct emissions. The absence of an EU harmonised indirect emission compensation system, by leaving decisions to Member States, restricts compensation to a few sectors. As many Member States do not grant such compensation, this creates single market distortions. Compensation should be reformed to allow free allocation for all electricity consumed in refineries (i.e. net power used). If a sector is deemed at risk of direct carbon leakage, then free allocation should automatically be given for indirect carbon emissions to all installations in that sector. |
Important |
Most important |
Less important |
I don't know |
|
d) other |
APETRO is strongly in favour of greater innovation support by the EU and its member states, which may bring more significant and cost-effective results than current renewables mandates, but we do not believe that the use of ETS revenues is the right mechanism. Innovation should be supported by existing funds such as Horizon 2020, 7th Framework and SET programmes. |
Competitiveness and carbon leakage risk must be kept under constant review. Assessments should not look for evidence that leakage has occurred and competitiveness already damaged, but rather assess the level of risk in future. The allocation system must not penalise economic recovery or growth. Regarding the format of the questionnaire, we believe that some of the questions are not neutral and push the respondents to make a certain response. The answers cannot always be as simple as yes or no. Many of the answers are provided as yes or no, with additional conditions – which are required as part to the answer. This does not necessarily mean that the respondent “does not know” and has no valuable input to bring. The report of the consultation should look and separately evaluate the responses from the stakeholder organisations which represent a wider share of civil society and industry. This is to avoid giving undue weight to responses from individuals. |
b) Trade association representing businesses |
Association of the Austrian Glass Industry |
Wiedner Hauptstraße 63, 1045 Vienna, Austria Tel. +43 5 90 900 3449 Fax. +43 5 90 900 281 Email: office@fvglas.at |
a) yes |
|
1) yes |
c) I don’t know |
The glass industry is making continuous improvement in energy efficiencies and process technologies to reduce CO2, energy consumption and environmental impacts. While further reductions in the glass industry are possible, what is important is the magnitude of this reduction. All official EU publications such as the “Sector Competitiveness Studies - Competitiveness of the Glass Sector - ENTR/06/054 - Final report, 14 October 2008” or more recently the Glass BREF and the BAT Conclusions show that no breakthrough technology is currently available to reduce CO2 emissions to the extent imposed by the energy and climate package 2030 (-43% for ETS sectors between 2005 and 2030). Emissions reductions cannot be repeated ad infinitum. There is a thermodynamic limit to the glass melting process which is an absolute limit, and that current technology is already approaching. However, process emissions cannot be eliminated, limiting therefore the reduction potential of the glass industries. |
b) no |
The main driver for energy efficiency improvements in the glass industry is the high share of energy costs within production costs. In fact, the glass industry has continuously improved energy efficiency over previous decades. Regulatory instruments and the EU ETS in particular, have only a marginal effect on energy efficiency improvements of glass melting activities, if any. Whilst there is no global ETS in place, the EU ETS is only a source of costs for glass industries (direct but also indirect CO2 costs linked to electricity), and therefore weakens the competitive position of European based glass industries vis-a-vis third country competitors. As such, it indirectly favors production reduction in the EU and rises in imports from non EU countries without carbon constraints into the EU. For these reasons, glass industries need to be fully protected against risks of carbon leakage. |
a) yes |
The EU glass industry faces higher costs for environmental protection, energy, labour and raw materials, than the majority of extra-EU competitors. In the absence of an international climate agreement and a level playing field between EU and extra EU competitors, the EU industry needs to be provided with measures to safeguard its competitiveness. Measures to avoid carbon leakage under the EU ETS are therefore essential. Measures should cover both the direct and indirect CO2 costs. Such measures under the EU ETS must be established in a way that ensures the ETS’ coherence with the EU’s ambition to revitalize European manufacturing activities, as proposed in the EC Communication on Industrial Renaissance. |
c) quite inadequate |
Free allocation has been key up to now to mitigate the negative impacts of a unilateral climate policy. However, the Cross Sectoral Correction Factor which is applied already from 2013 reduces the free allocation, even for the most GHG efficient installations, and will dramatically increase in the future, thus further reducing free allocation. This current system is unsustainable and should be changed in order to ensure that the most GHG efficient installations receive 100% of their allowance needs. |
a) it absolutely keeps the incentive |
Free allocation does not reduce the incentive to innovate; on the contrary, the majority of installations in the sector (about 95%) do not have enough allowances, which encourages industry to invest in the efficiency of its plants to avoid having to purchase a high level of allowances, which would render the sector uncompetitive. For the installations under the benchmark (about 5%), they can sell their allowances on the market, which is also an incentive to continue reducing emissions. The incentive is therefore present. Below, we also call for a periodic revision of the benchmarks (in exchange of the cancellation of the cross-sectoral factor), which also provides for a strong incentive to improve. Free allow. preserve investment capacity and offer industry the incentive to purchase less CO2 allow if they become more GHG efficient. However this last incentive would be better preserved if the CSCF was not forcing an unrealistic and arbitrary reduction of the number of free allow. |
b) quite proportionate |
Administrative burden is accepted, since it is necessary to maintain the free allocation system. However opportunities or improvement to this process should be considered. Conversely, the administration and calculation rules for new entrants are overly complex and can lead to under-allocation. They can therefore be seen as disproportionate and can be a disincentive to new investments. |
d) there should be no limit to overall free allocation to industry |
The current system is unsustainable (from a competition point of view) because the cross sectoral correction factor continually reduces the free allocation given to industry, even for the most GHG efficient installations. Ideally, installations whose efficiency is equal or better than the (periodically reviewed) benchmark should receive 100% of free allocations to produce in the EU and so there should be no limit. In practice, this is likely to lead to a higher share in phase IV. An increased level of EU ambition in terms of GHG reduction would require enhanced measures against carbon leakage and therefore an increase in total free allocations. |
e) I don’t know |
Overall financing for technological innovation in manufacturing should be increased in the EU. However R & D should be funded via a mobilization of different sources of funding - including but not limited to - auctioning revenues. It should not come from the free entrants reserve or Free Allowances reserve. Allowances should be primarily used to ensure that the most GHG efficient installations get 100% of their needs to produce in the EU. Furthermore, financing for R&D and demonstration projects should be technology-neutral and not focused only on CCS or renewables. New technologies such as Carbon Capture and Use (CCU) and others should not be excluded. |
a) yes |
As stated above, industrial innovation, with a focus on the process and on new energy sources for industry, should be promoted. It should not be financed by shares of allowances reserved for free allocation or for new entrants, but rather from a mobilization of different sources, and not limited to auctioning revenues. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Industrial innovation should be promoted in a technology-neutral way. However this should not be done at the expense of free allocation which aims to provide effective support and protection against carbon leakage. Therefore it should be financed via other sources. This could include, among other sources, money from the auctioning revenues, as suggested in the ETS directive (Art 10.3). |
a) yes |
Unequitable carbon costs should not place EU industries at a competitive disadvantage with extra-EU competitors and this should be the ultimate objective pursued in order to achieve the EU’s ambition of 20% GDP realized by industrial activities in 2020. To that end, measures against carbon leakage are a pre-requisite but are not enough. An EU scheme for compensation of indirect costs due to higher electricity prices and some raw materials (e.g. soda ash, industrial gases, ..) should also be developed for Energy Intensive Industries. More generally, the EU needs to assess, and if needed reform, all its policies and in particular energy and environmental ones against the re-industrialisation objective. A longer term re-industrialisation objective for 2030 should be established. |
a) the present two groups should remain |
This binary model ensures that all sectors benefit from carbon leakage protection measures as soon as a risk is detected. This is essential to ensure that carbon leakage measures are effective and that protection is not granted too late, when industries are already in jeopardy. |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
The competitiveness of energy-intensive industries is sensitive to energy and carbon costs, therefore a risk exists for all these industries. For the sake of simplicity and consistency in legislation, all energy-intensive industries, as defined in the Energy taxation directive, could be automatically placed on the carbon leakage list:"energy-intensive business" shall mean a business entity, (…) where either the purchases of energy products and electricity amount to at least 3,0 % of the production value or the national energy tax payable amounts to at least 0,5 % of the added value. In case ETS-specific criteria are maintained, they should continue being based on both the CO2 intensity and the trade intensity metrics. The CO2 cost metric should be made more relevant to analyze the impacts of carbon cost on sectors’ profitability. To that end, the CO2 cost over GVA criteria could be replaced by a CO2 cost over Gross Operating Surplus (GOS) criteria. |
b) other thresholds should be defined. Please specify below |
The competitiveness of energy-intensive industries is sensitive to energy and carbon costs, therefore a risk exists for all these industries. For the sake of simplicity and consistency in legislation, all energy-intensive industries, as defined in the Energy taxation directive, could be automatically placed on the carbon leakage list:"energy-intensive business" shall mean a business entity, (…) where either the purchases of energy products and electricity amount to at least 3,0 % of the production value or the national energy tax payable amounts to at least 0,5 % of the added value. In case ETS-specific criteria are maintained, they should continue being based on both the CO2 intensity and the trade intensity metrics. The CO2 cost metric should be made more relevant to analyze the impacts of carbon cost on sectors’ profitability. To that end, the CO2 cost over GVA criteria could be replaced by a CO2 cost over Gross Operating Surplus (GOS) criteria. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The current criteria under the quantitative assessment at NACE 3 or 4 level should be maintained and used as the first assessment option. When an assessment at NACE 3 or 4 level is not appropriate to identify the relevant industrial activities falling under the EU ETS, then a quantitative assessment at 6- or 8-digit should be carried as a second option. Finally, as a third option, a qualitative assessment must remain possible. Other parameters can be studied as part of qualitative assessments, such as methodology and evidences of investment leakage. |
d) in line with the duration of ETS Phase 4 |
As long as there are no equivalent GHG reduction measures taken by major trading partners, the list of sectors exposed to the risk of carbon leakage should remain valid. This is essential to provide predictability to industries faced with long investment cycles (typically > 15 years). |
a) the present approach of average of the 10% most efficient installations should remain |
Glass industries support ambitious benchmark levels, which reflect the technological capabilities of the sectors best performers using the best available and proven technologies in Europe. It must be kept in mind however that this approach also has limits. Indeed, benchmark curves do not always reflect a difference in terms of « best » (the least GHG emitters per tonne of glass) or « worst » GHG players, but a difference in terms of products produced, cullet availability, age of furnace, available fuels, etc. The 10% best GHG performers can therefore be regarded as extremely challenging, especially for plants producing a wider range of more sophisticated products with higher added-value (as this usually entails higher energy consumption). |
a) yes (please specify how often) |
It seems logical to revise the benchmarks from time to time to reflect GHG improvements over time. Revision cycles should be linked to ETS phases and remain unchanged over this period. Periodical revision of the benchmark should be based on the actual EU based installations. The periodic revision of benchmarks should be the sole instrument leading to a reduction of free allowances over time, as benchmarks reflect true possibilities of GHG improvements according to state-of-the-art technologies deployed in Europe. The periodic revision of benchmarks therefore justifies that the CSCF is abandoned. |
c) other (please specify) |
Ex-ante allocation can only lead to over-allocation in crisis times, and under-allocation when the economy is growing. A better approach is to design an « ex post » system, where real allocation is corrected according to the real production. |
a) no, there should be no deviations |
In principle, there shall be no deviation from the general harmonized allocation rules at the level of an individual installation as this could cause distortion of competition. Only in the case of very specific hardship, should deviations be envisaged for an entire sector after a careful assessment of the competitive effects of such deviations. |
d) yes, in the form of financial compensation at EU-level |
Rules for the compensation of indirect costs should be revised and need to be effective to reflect the real burden of CO2 included in electricity costs for industry. A differentiated compensation approach by Member States is not acceptable from a competitiveness point of view. A harmonized approach at EU level is therefore needed. The harmonized measure should take the form of financial compensation. Free allocation should be kept aside to ensure full relief for direct emissions (most GHG efficient installations should receive 100% of their needs). A compensation system should also be put in place to compensate for higher prices of some raw materials (e.g. soda ash) and industrial gases. |
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a) from the Member States' auction budgets |
Allowances funding low-carbon innovation support should be financed from the Member States’ auction revenues and from a mobilization of additional sources. However, this should not be financed at the expense of free allocation or the new entrants reserve which must be principally used for measures against risks of carbon leakage. |
Generally speaking, glass industries welcome the opportunity to express their views on carbon leakage measures post 2020 and appreciate that this discussion is held without further delay. It is however regrettable that industry is asked to comment on such measures whereas the rules for EU ETS Phase IV have not yet been fully decided. The glass industry wishes to reiterate that so long that there is no comparable ETS system (which means that similar costs are born by competitors) operating in most part of the world and in extra-EU countries with glass industries, EU based glass industries will need to receive full and effective protection against carbon leakage. The recent assessment carried by DG CLIMA on exposure to carbon leakage risks, i.e. the carbon leakage list of 2009 and its recent revision, shows that between 2009 and 2014, risks of carbon leakage has grown in most glass sectors. For these reasons, glass industries need effective protection moving forward. |
b) Trade association representing businesses |
Associazione Italiana fra gli Industriali della Carta, Cartoni e Paste per Carta (Assocarta) European Union Transparency Register Identification number: 06627705641-03 User name: Assoc297596446 |
Assocarta Bastioni di Porta Volta 7 20121 Milan - Italy Phone +39 0229003018 massimo.ramunni@assocarta.it |
a) yes |
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1) yes |
c) I don’t know |
The pulp, paper & board manufacturing industry, already invested significantly to reduce its GHG emissions. Although this industry is very varied in terms of manufacturing processes, features and uses, it can be safely said that major investments on actual available technologies have already been made across the sector. The potential for improvement with available technologies is very limited and it has to fit with market conditions for investment cycles. Forcing such investments makes little economic sense: they will only increase the competitive gap with international competitors. Technological breakthroughs are needed in order to further reduce GHG emission. This requires time and financial support (research and investment cycles). |
b) no |
Key is the long-term investment cycle. The high costs of energy and the related tax burden already act like an incentive for the pulp, paper and board manufacturing industry to reduce energy costs, thus reduce GHG emissions. Moreover, due to the energy price in Europe it is not a question of GHG reduction but a question of competitiveness. The EU ETS adds further costs that competitors outside the EU do not have. In addition, the continuous interventions to modify the regulatory framework create additional risks, thus costs, to industry. Overall, the EU ETS severely impairs our industry competitiveness. The short-term visibility provided by the EU ETS (rules set for single trading periods) does not give industry the long-term visibility needed to invest. |
a) yes |
Since the EU ETS was set up in 2005, the international economic context dramatically changed: the shale gas production in the USA offered a significant competitive edge to the American industry, the oil price increased dramatically, the debt crisis in Europe further increased the tax burden, the very low margins of the pulp, paper and board industry impaired its ability to invest, etc. The European countries suffer from a deficit of competitiveness on the international playing field. The EU ETS adds a substantial cost that is unmatched by industry in other parts of the world, thus negatively impacting on EU competitiveness. In a world of growing asymmetries in climate change policies, measures to support EU industry are a must. |
b) quite adequate |
The free allocation has been a shield for the competitiveness of the EU industry and helped maintain economic activity within EU borders. However, competitiveness is not secured over the short and medium term as the fast decrease of free allocation, the CSCF, the inadequate compensation for indirect costs, and the expected increase in carbon prices are a threat the EU industry faces in the future. Without a global agreement (that could lead to comparable burdens for competing industrial installations around the world), Europe will have to mitigate the impact of its policies for industries producing globally trading goods. Overall, mechanisms should be set up to help the EU industry improve its energy efficiency and reduce its GHG emissions. In addition, regarding the carbon leakage issue, the objective should be to attract more industrial activity while reducing the GHG emission and not only to avoid the decrease of industrial activity. |
b) it largely keeps the incentive |
There is no direct correlation between free allocation and the incentive to innovate to reduce GHG emissions. The GHG emissions still represents a significant energy-related cost for the pulp, paper and board industry which companies try to minimize through incremental innovation. Free allocation does not affect what just stated, as what matters is the opportunity cost. In addition, free allocation is used as collateral for raising finances to invest in GHG emission reductions. No free allocation would mean a lot less ability to access to capital to invest in CAPEX for GHG emissions reduction. As explained above, further incentive should come as funding investments and research aiming at innovative breakthroughs in low GHG emission production of energy-intensive goods. |
b) quite proportionate |
One of the main causes of administrative burden has been the continuous changes in ETS framework and implementing rules. This has caused uncertainty among industry. There is an urgent need for a more stable and consistent ETS policy. Specifically on implementation, the initial administrative burden is very high. Afterwards, it depends on Member States. We have registered constant changes, almost every year, in implementation of MRV rules, without these changes delivering any environmental benefits. Fines in place due to wrong entries are also disproportionately high, especially in view of constant changes in rules. Administrative cost are absolutely exaggerated for small and medium size company. |
b) a higher share than in 2013-20 |
There is only one overall EU allowance budget. The risk of carbon leakage due to EU energy-climate policies has to be prevented with additional credits available in the system, including the ones covering indirect costs for increased electricity prices. In fact, carbon leakage would mean failure of the EU ETS to contain global GHG emission. Thus, the avoidance of carbon leakage should be an absolute priority. Given the current economic context, a higher share of allowances is needed to ensure growth in Europe and prevent businesses from moving abroad. Looking at current rules, the linear factor and correction factor makes that even being carbon leakage installations are allocated bellow benchmarks values. Moreover, there is a need to reconsider the need to provide free allocation to electricity produce in industrial CHP, as it is considered a BAT for energy efficiency in industry. |
b) the same share as in Phase 3 |
It is not so much a matter of budget allocated, but of policy uncertainty. |
a) yes |
EU ETS revenues from auctioning to be returned exclusively the industry in a way that supports the transition to a low GHG emission economy. This should include subsides for low GHG emission investments and funding of low GHG emission technology research. The sole EU ETS only will not be sufficient to improve energy efficiency and GHG emission reduction. The support of energy savings and GHG reduction investments will be a determinant factor of success of the EU ETS. Therefore, the development of new low-carbon technologies for industrial innovation should be as transversal as possible. |
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
Prevention of carbon leakage is a pre-requisite for innovation. As explained above, EU ETS auctioning revenues should be returned to the EU industry to support low GHG emission investments and research projects. |
a) yes |
The pulp, paper and board manufacturing sector suffer from a lack of competitiveness partly due to high energy cost, high level of taxation and high direct and indirect GHG emission reduction cost relative to their competitors outside the EU. A global agreement (that could lead to comparable burdens for competing industrial installations around the world) would be the most effective way to address the risk of carbon leakage. In the absence of that, EU-wide harmonised measures addressing indirect costs should include both the rising of electricity costs due to energy-climate related policies (ETS + Renewables) and rising of wood raw material costs. Specifically on the latter, the ETS and renewables targets provide an incentive to burn wood instead of fossil fuels. Today even round wood suitable as rawmaterial for forest industry is increasingly burnt across Europe. In some European countries the pulp wood prices have already increased and are expected to further increase. |
a) the present two groups should remain |
There is no need for a revision of the carbon leakage list. The pulp, paper & board manufacturing industry needs stability in the regulatory framework. |
a) the present criteria should remain |
The current criteria should remain. HOWEVER the “carbon costs” criteria should be expanded to include support schemes for Renewables in electricity (implicit carbon cost) and the cost of rising wood raw material cost due to ETS (see answer to Question 11). Move to NACE 3 level in assessing integrated sectors, such as the pulp and paper, should also be considered. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
See comment above (question 13) |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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b) longer (please specify) |
Stability is crucial for investments in Europe. Fiscal and legislative instability triggers insecurity of return on investment and should therefore be avoided. The validity of the carbon leakage list should then be extended to reflect typical investment cycles (10 to 15 years) and should remain unchanged until global climate agreement (which would guarantee equal competition conditions). |
a) the present approach of average of the 10% most efficient installations should remain |
Fiscal and legislative stability is important for investment and decision-making. Therefore, we advise not to revise the benchmarks, thus to keep the currently existing specific benchmark values. Moreover, revising the benchmarks would greatly reduce the benefits that industrial installations should receive for their last energy-saving and GHG reduction investments, resulting in a loss of confidence and thus a decrease in investments. It should be reminded that the ETS in general, and the benchmarks in particular, should reward installations and sectors reducing GHG emissions. Revising benchmarks will only penalise early movers and new investment made. |
b) no |
Fiscal and legislative stability is important for investment and decision-making. Therefore, we advise not to revise the benchmarks, thus to keep the currently existing specific benchmark values. Moreover, revising the benchmarks would greatly reduce the benefits that industrial installations should receive for their last energy-saving and GHG reduction investments, resulting in a loss of confidence and thus a decrease in investments. It should be reminded that the ETS in general, and the benchmarks in particular, should reward installations and sectors reducing GHG emissions. Revising benchmarks will only penalise early movers and new investment made. |
c) other (please specify) |
Three year average of relevant period could be OK, but there should be some flexibility in the reference years to take into consideration economic activities. Nevertheless, it should be kept the possibility to revise according to the state of the economy, crises, catastrophes etc. The allocation system should not constrain economic growth. |
a) no, there should be no deviations |
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d) yes, in the form of financial compensation at EU-level |
Any system should be mandatory and harmonised for all the states. |
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Support for these stages is absolutely important and largely missing at EU level. However, it presupposes that all preceding R&D stages are adequately supported as well. |
c) from both |
Any support for innovation in industry should not come at the expenses of carbon leakage protection. Allowances for innovation will have to come on top of free allowances for industry. |
To mitigate climate change the EU should focus on promoting recovery and growth of industrial production in Europe, which is good for the environment and climate. Beside the high environmental standards set worldwide by European industries, the average CO2-emissions caused by electricity production in Europe are also low in global comparison. Hence, the more industry produces in Europe, the lower the global CO2-emissions. |
b) Trade association representing businesses |
ASSOMET - Associazione Nazionale Industrie Metalli non Ferrosi |
Mr. Orazio ZOCCOLAN - Assomet via dei Missaglia 97, 20142 Milano, Italy. Email o.zoccolan@assomet.it Tel +39289303679 Website www.assomet.it |
a) yes |
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1) yes |
b) no |
UNLESS: *Extra cost due to climate policy is sufficiently compensated. Shrinking margins reduces options to invest in energy efficiency and will lead to closures of capacity. Currently a key Carbon Leakage prevention mechanism compensation for ETS indirect costs, exist only in few MS. *We have a stable, predictable and investment friendly environment in EU. Non Ferrous Metals industries are price taker in global markets; cost raise is not reflected in higher product selling prices. Electricity cost is a main localization factor and investment in EU are unlike since electricity cost is higher, due to cost linked to climate policy. *Conditions are put in place to ensure that EU industry can remain globally competitive to continue investing in innovation along its entire value chain. *Clear political commitment, that EU climate policy, including targets, will be reviewed if by 2020 no global level playing field is achieved. |
b) no |
Energy intensive industry has an innate incentive to become more energy efficient due to high share of energy cost, independently of the extra cost related to ETS. In these industries the EU ETS may reduce the ability to become more energy efficient. Improvements will require investments, either in upgrading of existing capacity or in new plants. Extra cost due to climate policy is insufficiently compensated and will reduce the margins of the industry. Shrinking margins lead to reduced energy efficiency investments. Investment in more energy efficient technology in energy intensive industry requires that: 1. The industry is guaranteed full compensation for the extra costs related to European climate policy until a level playing fild is restored through a comprehensive global climate agreement. 2. New capacity created through the project also gets full compensation. |
a) yes |
In most energy intensive industres, product prices are set in global markets. Until a significantly larger share of competitors is influenced by similar increases in energy cost, there is a need for such measures. Otherwise such industries will disappear from Europe. |
a) very adequate |
Compensation for direct and indirect costs, linked to actual output and realistic benchmarks, would be a very adequate measure to address the risk of carbon leakage (predictability and effectiveness is ensured in the long term for both, direct and indirect costs). The current implementation faults however lead to a reduced effectiveness of the policy instrument. |
a) it absolutely keeps the incentive |
Full compensation for direct and indirect costs is absolutely necessary for the competitive position of EUrope as a localization of energy intensive industries. Compensation should be linked to actual output in order to provide an incentive for growth and to allow production flexibility through business cycles. Realistic benchmarks are necessary for full compensation to new capacity and for the preservation of the undistorted environmental incentive. Expressed differently, allocation of free allowances will not reduce the environmental incentive for the recipient. On the contrary, full compensation for direct and indirect effects of ETS through allocation or otherwise is a precondition for investment in new capacity in Europe. |
b) quite proportionate |
The administrative burden is not insignificant, but proportionate in the sense that no better solutions to solve the carbon leakage issue have been pro¬posed. |
d) there should be no limit to overall free allocation to industry |
Carbon leakage undermines the environmental efficiency of EU ETS as well as EU’s industrial growth. Certain industries have to be protected for unfair international competition until fair conditions are restored by an international climate agreement. Without a comprehensive international agreement giving the global competitors of European industry a similar cost element related to emissions and electricity consumption, the cost of carbon leakage mitigation will be more or less stable, whereas the number of allowances to cover this cost will gradually diminish. This is a cost that is directly linked to emission trading and should be covered by the ETS system itself before any money is taken out of the system. If in the future, there is an inadequate number of allowances available to cover the need for carbon leakage mitigation, compensation could be provided as a sum of money propor¬tio-nate to a given number of allowances from another source of finance. |
d) there should be no such innovation support post-2020 |
Financing of CCS should not be a priority for the allowance budget. It is illogical to reserve a given share of the budget for this purpose: When the EUA prices are low the need for support is high and vice versa. Furthermore, the lack of stability in the EUA market creates a high project risk and high financing cost. This adds the project cost and the need for support. |
b) no |
ETS should be focused on emission trading and mitigating the effects of such trading. Financing is tight, and there is no room for further programs. |
c) other types of funding (please specify) |
ETS should be focused on emission trading and mitigating the effects of such trading. Auction income should not be diverted to general innovation support. |
a) yes |
The use of free allowances will also have to be extended to cover indirect effects through increased electricity prices. With significantly higher EUA prices, the pre¬sent solution for indirect costs based on State Aid will: - be insufficient for long term survival of these industries in Europe, - not create the predictability needed for investments, and, as well, - create significant distur¬bances in the internal market for energy intensive products. Effective carbon leakage prevention will also require exemption from extra costs related to other elements of climate policy like support to development of renew¬able electricity generation and extra grid costs related to transmission and balan¬cing of electricity from renewable sources. |
b) more carbon leakage categories should be defined |
Non ferrous metals industries are particularly exposed to carbon leakage and need full compensation of extra cost until a significant share of competitors is influenced by similar cost increases. EUA costs are passed on into electricity prices through the marginal cost of the marginal sources of electricity, and for these industries, electricity related cost make up a high share of total cost. Most non ferrous metals products have a high value compared to their weight, and may be moved between markets at a cost that is small compared to their value. They are thus globally priced with only a minimal price differentiation between markets. Other industries may need compensation, but not necessarily to the same degree. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
A single carbon leakage list (with several categories) should be estab¬lished. The list should be based on the combined effect of direct cost (emission allowances) and indirect costs (increases in electricity costs due to climate policy). The following set of criteria should be established: 1. The exposure to global competition. 2. The exposure to EUA cost 3. The unit is in the most exposed category of the carbon leakage list if both criteria are met being simultaneously at a high threshold. If one or both of the criteria only meets a lower threshold, the unit will be in the less exposed category of the list. The intensity of trade with third countries is a weak proxy to competitive exposure, and should not be used in this context. |
b) other thresholds should be defined. Please specify below |
The levels of the thresholds should be based proper ana¬lysis of the proposed new set of categories and criteria (see response to Q12 and Q13). |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The risk of carbon leakage is not fully measurable by metric criteria. A set of qualitative indicators may help to select the sector at risk in an adequate and suitable manner. |
d) in line with the duration of ETS Phase 4 |
Predictability is the key to incentive efficiency. There is reason to believe that the set of criteria described above will establish robust and stable lists. |
a) the present approach of average of the 10% most efficient installations should remain |
We support the approach of a 10% benchmarks. However, currently, not even the most efficient 10% of the industry receive full compensation. In the fallback industries this is even less and it should be avoided to increase these reductions further. |
c) I don’t know |
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c) other (please specify) |
The main advice to be found in the literature is to use output based allocation linked to realistic benchmarks. For each industry, the baseline will then be set by the realistic benchmark. Indirect emission should also be set by realistic benchmarks and actual output. The compensation will be linked to a sum of two benchmarks, one derived from emissions and one derived from electricity consumption. |
a) no, there should be no deviations |
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c) yes, in the form of additional free allocation |
Compensation inside the EU ETS should be extended to cover indirect effects through increased electricity prices. With significantly higher EUA prices, the present solution for indirect costs based on State Aid will be insufficient for long term survival of these industries in Europe and, as well, create significant disturbances in the internal market. The cost of any compensation measures will be proportionate to the EUA price, thus corresponding to the value of free allowances. Compensation could be provided as free allowances or as a sum of money proportionate to a given number of allowances from another source of finance. |
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d) other |
ETS should be focused on emission trading and mitigating the undesirable effects of such trading. Innovation support should mainly come out of MS general budgets and not from auction income. |
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b) Trade association representing businesses |
ASSOVETRO - ASSOCIAZIONE NAZIONALE DEGLI INDUSTRIALI DEL VETRO REGISTER ID: 841386910709-86 DENOMINATION: Assoc9410380532 |
ASSOVETRO - VIA BARBERINI 67 00187 ROMA - ITALY TEL. 06 4871130 FAX 06 42011162 E-MAIL: ASSOVETRO@ASSOVETRO.IT |
a) yes |
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1) yes |
c) I don’t know |
The glass industry is making continuous improvement in energy efficiencies and process technologies to reduce CO2, energy consumption and environmental impacts. While further reductions in the glass industry are possible, what is important is the magnitude of this reduction. All official EU publications such as the “Sector Competitiveness Studies - Competitiveness of the Glass Sector - ENTR/06/054 - Final report, 14 October 2008” or more recently the Glass BREF and the BAT Conclusions show that no breakthrough technology is currently available to reduce CO2 emissions to the extent imposed by the energy and climate package 2030 (-43% for ETS sectors between 2005 and 2030). Emissions reductions cannot be repeated ad infinitum. There is a thermodynamic limit to the glass melting process which is an absolute limit, and that current technology is already approaching. However, process emissions cannot be eliminated, limiting therefore the reduction potential of the glass industries. |
b) no |
The main driver for energy efficiency improvements in the glass industry is the high share of energy costs within production costs. In fact, the glass industry has continuously improved energy efficiency over previous decades. Regulatory instruments and the EU ETS in particular, have only a marginal effect on energy efficiency improvements of glass melting activities, if any. Whilst there is no global ETS in place, the EU ETS is only a source of costs for glass industries (direct but also indirect CO2 costs linked to electricity), and therefore weakens the competitive position of European based glass industries vis-a-vis third country competitors. As such, it indirectly favors production reduction in the EU and rises in imports from non EU countries without carbon constraints into the EU. For these reasons, glass industries need to be fully protected against risks of carbon leakage. |
a) yes |
The EU glass industry faces higher costs for environmental protection, energy, labour and raw materials, than the majority of extra-EU competitors. In the absence of an international climate agreement and a level playing field between EU and extra EU competitors, the EU industry needs to be provided with measures to safeguard its competitiveness. Measures to avoid carbon leakage under the EU ETS are therefore essential. Measures should cover both the direct and indirect CO2 costs. Such measures under the EU ETS must be established in a way that ensures the ETS’ coherence with the EU’s ambition to revitalize European manufacturing activities, as proposed in the EC Communication on Industrial Renaissance. |
c) quite inadequate |
Free allocation has been key up to now to mitigate the negative impacts of a unilateral climate policy. However, the Cross Sectoral Correction Factor which is applied already from 2013 reduces the free allocation, even for the most GHG efficient installations, and will dramatically increase in the future, thus further reducing free allocation. This current system is unsustainable and should be changed in order to ensure that the most GHG efficient installations receive 100% of their allowance needs. |
a) it absolutely keeps the incentive |
Free allocation does not reduce the incentive to innovate; on the contrary, the majority of installations in the sector (about 95%) do not have enough allowances, which encourages industry to invest in the efficiency of its plants to avoid having to purchase a high level of allowances, which would render the sector uncompetitive. For the installations under the benchmark (about 5%), they can sell their allowances on the market, which is also an incentive to continue reducing emissions. The incentive is therefore present. Below, we also call for a periodic revision of the benchmarks (in exchange of the cancellation of the cross-sectoral factor), which also provides for a strong incentive to improve. Free allow. preserve investment capacity and offer industry the incentive to purchase less CO2 allow if they become more GHG efficient. However this last incentive would be better preserved if the CSCF was not forcing an unrealistic and arbitrary reduction of the number of free allow. |
b) quite proportionate |
Administrative burden is accepted, since it is necessary to maintain the free allocation system. However opportunities or improvement to this process should be considered. Conversely, the administration and calculation rules for new entrants are overly complex and can lead to under-allocation. They can therefore be seen as disproportionate and can be a disincentive to new investments. |
d) there should be no limit to overall free allocation to industry |
The current system is unsustainable (from a competition point of view) because the cross sectoral correction factor continually reduces the free allocation given to industry, even for the most GHG efficient installations. Ideally, installations whose efficiency is equal or better than the (periodically reviewed) benchmark should receive 100% of free allocations to produce in the EU and so there should be no limit. In practice, this is likely to lead to a higher share in phase IV. An increased level of EU ambition in terms of GHG reduction would require enhanced measures against carbon leakage and therefore an increase in total free allocations. |
e) I don’t know |
Overall financing for technological innovation in manufacturing should be increased in the EU. However R & D should be funded via a mobilization of different sources of funding - including but not limited to - auctioning revenues. It should not come from the free entrants reserve or Free Allowances reserve. Allowances should be primarily used to ensure that the most GHG efficient installations get 100% of their needs to produce in the EU. Furthermore, financing for R&D and demonstration projects should be technology-neutral and not focused only on CCS or renewables. New technologies such as Carbon Capture and Use (CCU) and others should not be excluded. |
a) yes |
As stated above, industrial innovation, with a focus on the process and on new energy sources for industry, should be promoted. It should not be financed by shares of allowances reserved for free allocation or for new entrants, but rather from a mobilization of different sources, and not limited to auctioning revenues. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Industrial innovation should be promoted in a technology-neutral way. However this should not be done at the expense of free allocation which aims to provide effective support and protection against carbon leakage. Therefore it should be financed via other sources. This could include, among other sources, money from the auctioning revenues, as suggested in the ETS directive (Art 10.3). |
a) yes |
Unequitable carbon costs should not place EU industries at a competitive disadvantage with extra-EU competitors and this should be the ultimate objective pursued in order to achieve the EU’s ambition of 20% GDP realized by industrial activities in 2020. To that end, measures against carbon leakage are a pre-requisite but are not enough. An EU scheme for compensation of indirect costs due to higher electricity prices and some raw materials (e.g. soda ash, industrial gases, ..) should also be developed for Energy Intensive Industries. More generally, the EU needs to assess, and if needed reform, all its policies and in particular energy and environmental ones against the re-industrialisation objective. A longer term re-industrialisation objective for 2030 should be established. |
a) the present two groups should remain |
This binary model ensures that all sectors benefit from carbon leakage protection measures as soon as a risk is detected. This is essential to ensure that carbon leakage measures are effective and that protection is not granted too late, when industries are already in jeopardy. |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
The competitiveness of energy-intensive industries is sensitive to energy and carbon costs, therefore a risk exists for all these industries. For the sake of simplicity and consistency in legislation, all energy-intensive industries, as defined in the Energy taxation directive, could be automatically placed on the carbon leakage list:"energy-intensive business" shall mean a business entity, (…) where either the purchases of energy products and electricity amount to at least 3,0 % of the production value or the national energy tax payable amounts to at least 0,5 % of the added value. In case ETS-specific criteria are maintained, they should continue being based on both the CO2 intensity and the trade intensity metrics. The CO2 cost metric should be made more relevant to analyze the impacts of carbon cost on sectors’ profitability. To that end, the CO2 cost over GVA criteria could be replaced by a CO2 cost over Gross Operating Surplus (GOS) criteria. |
b) other thresholds should be defined. Please specify below |
The competitiveness of energy-intensive industries is sensitive to energy and carbon costs, therefore a risk exists for all these industries. For the sake of simplicity and consistency in legislation, all energy-intensive industries, as defined in the Energy taxation directive, could be automatically placed on the carbon leakage list:"energy-intensive business" shall mean a business entity, (…) where either the purchases of energy products and electricity amount to at least 3,0 % of the production value or the national energy tax payable amounts to at least 0,5 % of the added value. In case ETS-specific criteria are maintained, they should continue being based on both the CO2 intensity and the trade intensity metrics. The CO2 cost metric should be made more relevant to analyze the impacts of carbon cost on sectors’ profitability. To that end, the CO2 cost over GVA criteria could be replaced by a CO2 cost over Gross Operating Surplus (GOS) criteria. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The current criteria under the quantitative assessment at NACE 3 or 4 level should be maintained and used as the first assessment option. When an assessment at NACE 3 or 4 level is not appropriate to identify the relevant industrial activities falling under the EU ETS, then a quantitative assessment at 6- or 8-digit should be carried as a second option. Finally, as a third option, a qualitative assessment must remain possible. Other parameters can be studied as part of qualitative assessments, such as methodology and evidences of investment leakage. |
d) in line with the duration of ETS Phase 4 |
As long as there are no equivalent GHG reduction measures taken by major trading partners, the list of sectors exposed to the risk of carbon leakage should remain valid. This is essential to provide predictability to industries faced with long investment cycles (typically > 15 years). |
a) the present approach of average of the 10% most efficient installations should remain |
Glass industries support ambitious benchmark levels, which reflect the technological capabilities of the sectors best performers using the best available and proven technologies in Europe. It must be kept in mind however that this approach also has limits. Indeed, benchmark curves do not always reflect a difference in terms of « best » (the least GHG emitters per tonne of glass) or « worst » GHG players, but a difference in terms of products produced, cullet availability, age of furnace, available fuels, etc. The 10% best GHG performers can therefore be regarded as extremely challenging, especially for plants producing a wider range of more sophisticated products with higher added-value (as this usually entails higher energy consumption). |
a) yes (please specify how often) |
It seems logical to revise the benchmarks from time to time to reflect GHG improvements over time. Revision cycles should be linked to ETS phases and remain unchanged over this period. Periodical revision of the benchmark should be based on the actual EU based installations. The periodic revision of benchmarks should be the sole instrument leading to a reduction of free allowances over time, as benchmarks reflect true possibilities of GHG improvements according to state-of-the-art technologies deployed in Europe. The periodic revision of benchmarks therefore justifies that the CSCF is abandoned. |
c) other (please specify) |
Ex-ante allocation can only lead to over-allocation in crisis times, and under-allocation when the economy is growing. A better approach is to design an « ex post » system, where real allocation is corrected according to the real production. |
a) no, there should be no deviations |
In principle, there shall be no deviation from the general harmonized allocation rules at the level of an individual installation as this could cause distortion of competition. Only in the case of very specific hardship, should deviations be envisaged for an entire sector after a careful assessment of the competitive effects of such deviations. |
d) yes, in the form of financial compensation at EU-level |
Rules for the compensation of indirect costs should be revised and need to be effective to reflect the real burden of CO2 included in electricity costs for industry. A differentiated compensation approach by Member States is not acceptable from a competitiveness point of view. A harmonized approach at EU level is therefore needed. The harmonized measure should take the form of financial compensation. Free allocation should be kept aside to ensure full relief for direct emissions (most GHG efficient installations should receive 100% of their needs). A compensation system should also be put in place to compensate for higher prices of some raw materials (e.g. soda ash) and industrial gases. |
Important |
Less important |
Most important |
Least important |
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a) from the Member States' auction budgets |
Allowances funding low-carbon innovation support should be financed from the Member States’ auction revenues and from a mobilization of additional sources. However, this should not be financed at the expense of free allocation or the new entrants reserve which must be principally used for measures against risks of carbon leakage. |
Generally speaking, glass industries welcome the opportunity to express their views on carbon leakage measures post 2020 and appreciate that this discussion is held without further delay. It is however regrettable that industry is asked to comment on such measures whereas the rules for EU ETS Phase IV have not yet been fully decided. The glass industry wishes to reiterate that so long that there is no comparable ETS system (which means that similar costs are born by competitors) operating in most part of the world and in extra-EU countries with glass industries, EU based glass industries will need to receive full and effective protection against carbon leakage. The recent assessment carried by DG CLIMA on exposure to carbon leakage risks, i.e. the carbon leakage list of 2009 and its recent revision, shows that between 2009 and 2014, risks of carbon leakage has grown in most glass sectors. For these reasons, glass industries need effective protection moving forward. |
b) Trade association representing businesses |
ATIC - Associação Técnica da Indústria de Cimento (Portuguese Cement Association) |
Cândido Costa - Technical Director
Edifício 3, Rua Central Park, 6 - 1ºC, 2795-242 Linda-a-Velha
Tel: +21 3510835 - Email: candidocosta@atic.pt |
a) yes |
1) yes |
a) yes |
Over the last 20 years, in order to reduce GHG emissions in line with overall EU policy objectives, cement industry made investments that have driven down CO2 emissions from clinker production. Additionally, prepared a roadmap to go much further in the coming decades, what obliges to further investment and innovation and requires a return on investment above the cost of capital and a stable legal framework, with predictable CO2 pricing, that promotes the competitiveness of the sector and allows for a secure access to raw materials and affordable energy prices. 2030 targets have to take into account each sector specific roadmap. |
b) no |
Cement industry is CO2, energy and material intensive. Focusing on energy efficiency, the power costs will be higher, which can imply lack of competitiveness of intensive energy industries vs importing. Although measures to decrease energy consumption and improve resources efficiency may be applied to reduce CO2 emissions, cement and lime industry are unique due to the fact that around 60% of total CO2 emissions from clinker production are released directly from limestone. These emissions come from raw materials themselves, not caused by energy use from fuel combustion. On the other hand, energy efficiency and CO2 reduction represents conflicting goals when looking e.g. at CCS. |
a) yes |
The cement industry needs a global level playing field, including for exports and imports, in order to direct investments to growth and jobs in Europe. To incentivize companies on further reduction of their emissions, predictability in carbon pricing is crucial as part of an overall industrial policy, as well as an adequate free allocations scheme, ensuring companies, namely those performing better than their sector Benchmark, to be competitive in the international arena (export market). This also applies to energy costs, representing 30% of operational costs (substantially higher than in the US, Russia and plants in North Africa). Beyond this, the maintenance of jobs (direct and indirect) will be at risk, particularly in sectors which have a local structure, that are using European raw materials and that have an important role in terms of local or regional employment and development (high level of regional or national added value). |
b) quite adequate |
As long as emissions do not have the same cost in different countries, a level playing field can be achieved most effectively by equalization measures such as free allocation. The limited evidence of leakage demonstrates that free allocation is working. However, it should not be assumed that free allocation is insulating operators from all of the ETS costs. Free allocation does not mean ‘full free allocation’ and some operators will face higher costs than others depending on the allocation base year activity. Furthermore, in the case of the cement sector, the indirect costs of ETS have not been selected for compensation in the Commission guidelines. Not only the cement industry is electrical energy intensive, is at risk of carbon leakage and is facing the full indirect costs of ETS as other directly competing construction materials sectors are on the contrary able to be compensated. |
a) it absolutely keeps the incentive |
Being free allocation based on benchmark, the incentive to invest is provided by the benchmark. Additionally, cement has one of the highest CO2 costs/GVA of any industrial sector so the residual effort is greater than in most sectors. Looking for a legal framework that fosters a competitive environment, cement industry has considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The EU cement industry has a relatively flat benchmark curve indicating that as a result of early actions and past investments in energy efficiency there is now a narrow gap between the best and the worst performers; this limited level of abatement potential makes the task of emissions reduction more difficult in the cement sector compared to many other sectors. |
b) quite proportionate |
Overall, the administrative burden is quite proportionate but the system is extremely disproportionate for small/trivial combustion sources. In many cases these minor sources were not part of the benchmarking exercise and should not be included in reporting. |
d) there should be no limit to overall free allocation to industry |
There should be free allocation if there isn’t an international agreement which places all competing manufacturers on an equal footing. Until certain conditions (namely rules in terms of verification and monitoring) can be met with regard to the veracity of the schemes within other countries then transitional arrangements need to be maintained. If a global agreement, between the great majority of Kyoto countries, including the largest emitters, is achieved, and only in this very case, there should be no free allocation to industry since the carbon leakage risk will then be eliminated. The share of allowances dedicated to free allocation has to be determined in function of the number of industrial sectors subject to carbon leakage risk and should be sufficient to avoid carbon leakage. That does not mean “a free ride for industry” but sufficient allowances for efficient producers. CSCF should be replaced by an adjustment to the auctioned amount to maintain the cap trajectory. |
e) I don’t know |
There are too many uncertainties on what the post 2020 allowances budget will be for the cement industry to be able to decide what share of the budget should be dedicated to such innovation support. The EU ETS does not encourage investment in new technology due to a continuous change of the rules of the game. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) yes |
To date, the NER 300 hasn’t been useful for cement sector. The power generation sector which is passing through investment costs has benefitted the most from the NER 300. The cement sector is not experiencing the same level of investment de-risking. The cement industry needs: an investment enhancing policy climate should encourage investments over long term (30 years) cycles in a capital intensive industry. Legal stability and CO2 price predictability are key to achieve this goal / Safeguards against price fluctuations in market based policy instruments; the objective of these instruments, if kept, should be clearly defined and not be prone to abuse for speculation purposes / An innovation policy which provides clear incentives for breakthrough technologies for CO2 reduction in a cost-effective way. Policy makers should consider hypothecation (earmarking) of revenues from allowance auctions and direct innovation support to those sectors facing the greatest abatement challenges. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Given the high costs associated with breakthrough technologies, funding from auctioning revenues should account for both capital and operational cost of projects. There should in addition be a ring fenced fund for the manufacturing industry. |
a) yes |
Cement industries considers the need of the following additional measures: An improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production, with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts / An adjustment to the overall cap to the auction amount or a sectoral cap with the inclusion of importers, in order to protect “carbon leakage” sectors’ competitiveness / However, a carbon pricing mechanism which is market-based and prone to wide fluctuations has a negative impact on effective investment / Cement industry is ready to explore mechanisms which deliver price stabilization and is ready to engage in a thorough reflection of a climate policy and energy policy that is fully integrated in a single industrial growth policy. |
a) the present two groups should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion (GVA) is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. |
a) the present criteria should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential. Therefore, the cost intensity criterion (GVA) is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price.
Nevertheless, as a static indicator trade intensity is of limited validity/conclusiveness. It is based solely on historic data and does not reflect future developments, i.e. resulting from changing cost patterns, at all. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion (GVA) is the most important of the current two criteria e.g. a complete loss of 30% of GVA is normally economically not acceptable for any industry or sector. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
EU trade and economic data is not always exact and its comparability with the EUITL CO2 data isn’t always appropriate so there will always be a need to hear special cases. These cases, even not on the scope of quantitative criteria, must be considered. |
d) in line with the duration of ETS Phase 4 |
It is essential for the predictability of the system to introduce as less changes as possible in the course of one ETS phase, which means that the list of sectors exposed to the risk of carbon leakage should be fully in line with the duration of ETS Phase 4. |
c) the approach should be less stringent (please specify) |
The benchmark would be calculated in a statistically solid way and be updated periodically to ensure predictability. It should be set at an ambitious but reasonable level and should not be distorted by statistical outliers. This can be achieved by defining percentile (e.g. 10%-percentile) or e.g. the average of a range including the 5% to 15% top performers of specific direct emissions (excluding the extreme outliers between 0% and 5%). Only this way, the benchmarking methodology will achieve sufficient statistical robustness for international application in ETS system. |
a) yes (please specify how often) |
Benchmark should be updated between two trading periods depending on each sector reduction potential, not during one trading period.
One should also consider a special treatment for process emissions e.g. full free allocation as those emissions are not linked to energy efficiency and are irreducible by their very nature. Only when the technology CCS will be available, probably after 2030, the cement industry will be able to tackle this issue of process emissions. |
c) other (please specify) |
Allocation should be more dynamic. The sector has considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. Historic activity level (HAL) should be closely aligned to recent production to avoid surplus allocation e.g. the average of the preceding 3 years. The sector considers EcoFys study (Dynamic allocation for the EU Emissions Trading System, Enabling sustainable growth, 20 June 2014) and its allowances allocation reserve as an interesting step forward, in order to compensate CSCF elimination. Notwithstanding this, we should be cautious in approaching situations of cement market growth. If this situation is not duly tackled an installation might be forced to buy allowances to support this market growth during a certain year until it gets the compensation for its production increase the year after. |
a) no, there should be no deviations |
A more recent HAL e.g. preceding 3 years average has its potential downsides for installations that have extended shutdowns or breakdowns, provision will be necessary to deal with exceptional HAL circumstances. |
d) yes, in the form of financial compensation at EU-level |
Cement industry believes that EU Compensation should be granted for indirect emission impact where carbon leakage vulnerability is a combination of direct plus indirect emission cost.
The compensation for indirect costs should be internalized in the ETD by providing free allocation for indirect CO2, in order to harmonize the procedure of compensation in Europe.
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Less important |
Important |
Most important |
I don't know |
Cement industry regrets the focus on carbon capture and storage and believes that carbon capture and re-use should be considered in an equal footing. We believe that funding should be technology neutral. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) from the Member States' auction budgets |
As Cembureau members, we support the prepared position papers: “Post 2020 Climate and Energy Legislation - The cement industry's reflections on a post-2020 climate policy” and “Post 2020 Climate and Energy Legislation Proposal by the European Cement Industry”.
In addition, cement industry believes that the debate on the MSR should not be carried out in isolation from the broader ETS structural reform. |
b) Trade association representing businesses |
BDEW German Association of Energy and Water Industries Interest Representative Register ID: 20457441380-38 |
BDEW German Association of Energy and Water Industries Avenue de Cortenbergh 52 B-1000 Brussels +32 (0) 2 771 9642 michael.wunnerlich@bdew.de |
a) yes |
|
1) yes |
a) yes |
Industry’s ability to reduce emissions without reducing industrial production in the EU depends strongly on the existence of a comparable climate framework and CO2-pricing in the competing world markets. In the absence of comparable efforts in Non-EU-countries the pro-longation of suitable direct and indirect carbon leakage measures is needed. |
a) yes |
Besides the EU ETS, a plenty of further policy measures have been established to improve energy efficiency in the industry including, among others, research funding, eco-design standards and eco-taxation. For example, in Germany, the exemption from the eco-tax re-quirements is coupled with the implementation of a certified energy management system on the site-level and the achievement of specific energy efficiency improvements on a cross-sectoral level monitored by an independent body. |
a) yes |
See answer to question 1. |
b) quite adequate |
The system of free allocation must be maintained as a transitional instrument to address di-rect carbon leakage. The system must reflect progress being made in the international cli-mate change negotiations with respect to the competitive situation of the affected industry sectors in the competing markets. It should be based on an efficiency benchmark approach (as currently designed). The allocation of free emission allowances should be based on EU-wide harmonized effi-ciency benchmarks that provide incentives for reductions in greenhouse gas emissions and for application of energy efficient techniques and should not provide incentives to increase emissions. See also answers to questions 17 – 19. |
a) it absolutely keeps the incentive |
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b) quite proportionate |
The administrative burden for small emitters should be further reduced. The deadline for plant operators for informing the competent authorities on a “partial cessation of operations of an installation” in accordance with Article 23 of the Benchmarking decision should be extended to 31 March of the following year. This issue is of particular relevance for district heat producers that supply district heat to carbon leakage affected Non-ETS installations. The required information is usually not available before March. |
f) I don’t know |
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a) a substantially higher share than in Phase 3 |
The share of the post-2020 allowance budget should be substantially higher than in phase 3 to support R&D in climate efficient investment at the European level. Innovation funds on the national level have to compete with other national needs and political targets in the general allocation of the budget funds. Therefore, the EU should establish a community-wide tech-nology fund considering the experience and lessons learnt of the NER 300. The administrative burden for project application should be reduced and the decision proce-dures for granting support must be faster and much more efficient to avoid insecurities and delays for the operators. The application of cross-border projects involving several member states and companies should be more facilitated. |
a) yes |
A re-channeling of funds to industry may increase the acceptance of the ETS. A financial support scheme on EU level may be less distortive than one on the national level. Further-more, funds of this support scheme would not compete with conflicting national financial in-terests. In addition, an EU fund may be more technology neutral than possible national funds where auction revenues have to compete with general budget needs. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
See also answer to question 9: A European approach may be more technology neutral and does not conflict with national interests in allocating scarce national budgets. |
a) yes |
Besides measures for addressing direct carbon leakage, the continuation of compensation schemes for addressing indirect carbon leakage is also needed. See also answer to Question n° 21. |
b) more carbon leakage categories should be defined |
The required number of European CL categories depends on the international exposure of identified industry sectors after considering regional or multinational climate agreements. The pure existence of an agreement is less important, more important is a comparison of the ef-fective carbon pricing with the main competitors on the global market. In those cases, the system of transitional free allocation needs to be re-assessed. In some cases it might be jus-tified to reduce the share of free allocation to a certain extent to take into account equivalent carbon pricing in other major industrialized or emerging countries. For this purpose, the sys-tem of carbon leakage provisions must be more flexible to be able to react to gradual im-provements of the competitive situation in comparison with major EU competitors. |
g) I don’t know |
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c) I don’t know |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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a) five years |
On the one hand, the validity of the CL list must consider the duration and timing of the legis-lative process to update the list. Besides this, industry needs a stable regulatory framework and a certain level of investment security for taking investment decisions. On the other hand, the longer the validity of the CL list, the more – not easily accessible – knowledge on future market and price developments are needed for the process. Keeping the validity of five years seems to be appropriate. |
a) the present approach of average of the 10% most efficient installations should remain |
In general, the ambition level for setting benchmarks should reflect the reduction trajectory needed to avoid as far as possible the application of the unilateral cross-sectoral correction factor. The efficiency benchmarks should be periodically updated to reflect technical pro-gress. However, benchmarks have to be based on widely proven and accepted “best availa-ble technology” and should not be based on outliers. Historical activity rates should be peri-odically updated using more recent production data. |
a) yes (please specify how often) |
Benchmarks should be revised every 5 years in line with the corresponding revision of the carbon leakage list and to reflect technical progress in accordance with corresponding sector roadmaps and BREF documents on Best Available Technology. |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
The activity data should reflect recent data from the third trading period. However, adequate provisions need to be established to take into account significant capacity changes and new built before the beginning of the fourth trading period. |
a) no, there should be no deviations |
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d) yes, in the form of financial compensation at EU-level |
The present approach based on the state aid guidelines should be maintained, but to avoid market distortions the compensation system should be as far as possible extended to cover all industrial installations in the member states affected by indirect carbon leakage. The list of industrial sectors deemed to be exposed to indirect carbon leakage should be periodically revised using the same frequency and intervals like the revision procedure for updating the list of sectors exposed to direct carbon leakage. |
Important |
Less important |
Most important |
Least important |
The conception stage should be preferably addressed at individual member state level. The commercialization stage should in principle not be subject to the EU’s innovation support schemes, but should fall under the responsibility of the respective plant operators. |
a) from the Member States' auction budgets |
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All provisions for addressing carbon leakage and/or granting free carbon allowances must be designed in a way to avoid or minimize distortions of competition within the Community. Hence, they should avoid undue distortions of competition on the markets for electricity and heating and cooling supplied to industrial installations in particular between industrial activities carried out in installations operated by a single operator (“auto-producer”) and production in out sourced installations (“energy supplier”). Those rules should equally apply to new entrants, significant capacity extensions and existing installations as well as to heat deliveries by ETS installations to carbon leakage affected industrial installations outside the scope of the community system. |
b) Trade association representing businesses |
Belgian Petroleum Federation |
Jean-Pierre Van Dijk advisor / engineer Belgian Petroleum Federation Avenue des Arts 39 B-1040 Bruxelles +32 2 508 30 02 jeanpierre.vandijk@petrolfed.be |
a) yes |
1) yes |
a) yes |
While some industries may be able to reduce emissions through further energy efficiency improvements the Refining industry has already used most of the options technically and economically at hand to improve its energy efficiency. Benchmarking shows that the GHG intensity of Belgian refineries is already in the “top of the world” group. The proposed 43% emissions reduction objective at the pace implied by the Linear Reduction Factor is technologically and economically not achievable for the refining industry. As a consequence of a too ambitious target, industry would have either to purchase allowances at the expense of its competitiveness reduce capacity at the advantage of competition. The reduction of emissions should also take account the so-called refining paradox: the increased share of transport fuels in refinery output and the tighter environmental specifications on products require process installations which need additional energy to convert to those products. |
b) no |
Reporting and monitoring emissions contributes at managing energy consumption. The carbon price does contribute at incentivising industrial installations to reduce emissions and improve efficiency, which with all other things remaining equal would be beneficial indeed.. For the European Refining sector, the main driver for such improvements remains the high cost of energy and its high share in total operating costs. The EU ETS is an additional cost to EU industry while it is not to its non-EU competitors. As this additional cost cannot be passed on to the product in the market it reduces the competitiveness of our industry. This is why European industry needs sufficient carbon leakage protection. |
a) yes |
The European Refining industry is under heavy international competition and needs full protection until a level playing ground is achieved through balanced agreements on a world scale or at least across main regions in competition with EU. Until there are equivalent carbon pricing policies across sectors worldwide, support for EU industrial sectors exposed to carbon leakage must continue as a core element of the EU’s post-2020 climate policy framework. Removing carbon leakage protection would result in a reduction in free allocation For the European Refining industry , competing regions, with less ambitious climate policies, include Russia, Middle East, USA, and parts of Asia , wherefrom refined products are imported or where to refined products are exported. Support measures should remain until these competing regions adopt carbon pricing. Delocalisation of petroleum products production outside the EU is also likely to have negative effects on worldwide GHG emissions. |
b) quite adequate |
In the absence of an international climate agreement, to deal with carbon leakage the Refining sector prefers both free allocation and enhanced free allocation for exposed sectors. For the Refining sector, the EU ETS benchmark was set from 2013 at the average of the top 10% performance level which is a tough benchmark with significant impact. For 2013 the refining industry has received less than 80% of its quota as free allocation and is the only major sector receiving less than its actual emissions. This puts the refining industry in a situation where it will have to recourse to purchases of further rights, increasing thereby its operating costs at the detriment of its competitiveness. In addition, under the current system, protection will be further eroded due to the Linear Reduction of the industry cap and due to the CSCF : by 2030, even the most efficient installations like the Belgian refineries would be left with only 60% free allocation (if a 2.2% Linear Reduction Factor co |
a) it absolutely keeps the incentive |
The benefits from reducing emissions remain but free allocation keeps the cash available for investment in innovation or for maintaining and improving the activity in Europe, rather than having to spend it on purchasing quotas. |
b) quite proportionate |
In our industry, with large scale complex installations, implementation of the benchmarking provisions was a major undertaking and involved considerable work by our sectors. Given the importance of the competitive threat, the work to create an accurate and fair mechanism is considered proportionate to the objectives. |
d) there should be no limit to overall free allocation to industry |
If the intention is to provide carbon leakage protection to industry then the allowance needs to cover direct and indirect emissions for installations performing at the benchmark level . Until the issue of carbon leakage is addressed through an international climate change agreement, sufficient levels of protection to industry are needed. This implies cancellation of the CSCF and no application of a linear reduction factor after 2020. |
e) I don’t know |
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c) I don’t know |
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d) I don’t know |
Preference for enhancement of existing systems, funded by EU and Member States, rather than creating additional new systems. In general support for innovative low-carbon technologies should be technology neutral as well as time- and cost- limited. |
a) yes |
The current indirect emissions compensation system is not adequate. It should be reformed to allow free allocation for all electricity consumed in refineries and chemicals plants, at the benchmark level. The importance of manufacturing industries, such as Refining, must be reflected across all EU policies and the cumulative impact of EU legislation on these industries including the EU ETS must be looked at. |
a) the present two groups should remain |
The current two groups should remain until progress is achieved in the international arena to thee level the competitive playing field by introducing similar carbon pricing in other regions that compete with EU Refining. |
a) the present criteria should remain |
Refining is a sector where both trade and GVA exposure and thresholds are important. Refining is a “margin business”, operating between two international, open commodity markets: the crude oil market and the refined products market. Europe is open to traded imports of refined products which are not submitted to EU carbon costs. For the carbon leakage assessment, it is therefore important to consider the effect of carbon costs on Gross Value Added rather than production costs and the trade intensity. Carbon costs should cover both direct and indirect carbon costs due to their cumulative impact. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
If the criteria are tightened it will reduce the number of sectors/sub-sectors on the list and some key strategic sectors for the EU’s economy risk being excluded from carbon leakage protection, with potential negative spill-over effects on other industries: e.g. for the oil Refining industry onto the petro-chemical industry. The use of analysis of GVA through European statistics does also require the right granularity of data analysis to avoid including in the Refining sector plants which are not refineries. Carbon leakage is also about future investment decisions. Therefore the carbon price must reflect future EUA projected prices and not current prices. This is common refining industry practice in evaluating major projects. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Qualitative assessments should be kept as simple as possible. If the Refining sector undergoes a qualitative assessment, the so-called “Refining paradox” would need to be taken into account: requirements on the quality of fuels (e.g. marine fuels specifications) and demand for light fuels generate increased conversion of heavy residues in the refining process, which all result in the increase of refinery energy intensity and GHG emissions. |
d) in line with the duration of ETS Phase 4 |
Mid-period review is detrimental to investment certainty Long-term visibility is essential for investment decisions in the refining industry. |
c) the approach should be less stringent (please specify) |
The current benchmark has turned out to be penalising for the refining sector, both in absolute terms and in comparison with other sectors. In combination with the CSCF, carbon leakage protection currently covers less than 80% of emissions to the refining sector even though it is subject to carbon leakage. Corrective action before 2020 is required to assure a fair treatment of the refining sector. |
b) no |
In order to provide free allocation in an effective way, the benchmark should accurately reflect the performance of ETS installations . Benchmarks do not describe the “state of the art”, but describe the level of performance of a plant population in a given sector. Revising benchmarks to make them more stringent would remove the relative pioneer advantage of early movers and discourage performance improvements. |
c) other (please specify) |
Free allocation should reflect economic reality per installation based on the most recent years. More recent verified data should be used: free allocation should reflect installations’ economic activity, based on the most recent years. Each refinery requires at regular intervals a shutdown period for regulatory inspection, maintenance and construction projects. If this is not taken into account in the determination of its future allocation, the refinery will be penalised. Dynamic allocations should be investigated for potential application . |
a) no, there should be no deviations |
General harmonised allocation rules should continue to apply for all carbon leakage installations in the same manner. |
c) yes, in the form of additional free allocation |
In addition to free allocation for direct emissions, carbon leakage protection should also include free allocation for EU ETS cost pass-through in electricity prices for all sectors exposed to carbon leakage. The absence of an EU harmonised indirect emission compensation system, by leaving decisions to Member States, restricts compensation to a few sectors and might create single market distortions. Compensation should be reformed to allow free allocation for all electricity consumed in refineries (i.e. net power used). |
Important |
Most important |
Less important |
I don't know |
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d) other |
Greater innovation support by the EU and its member states would be beneficial as it may bring more significant and cost-effective results than current renewables mandates, but we do not believe that the use of ETS revenues is the right mechanism for funding. |
The EU Fitness Check on Refining is due shortly. It merits use as a reference point for understanding the cumulative effects of existing and future legislation on the refining competitiveness. As such a cross check of issues related to ETS and carbon leakage should be performed to ensure further completeness. |
b) Trade association representing businesses |
Belgian Petroleum Federation Jean-Pierre Van Dijk engineer / advisor jeanpierre.vandijk@petrolfed.be +32 2 508 30 02 |
Belgian Petroleum Federation Avenue des Arts 39, box 2 B-1040 Bruxelles +32 2 508 30 00 info@petrolfed.be |
a) yes |
1) yes |
a) yes |
While some industries may be able to reduce emissions through further energy efficiency improvements the Refining industry has already used most of the options technically and economically at hand to improve its energy efficiency. Benchmarking shows that the GHG intensity of Belgian refineries is already in the “top of the world” group. The proposed 43% emissions reduction objective at the pace implied by the Linear Reduction Factor is technologically and economically not achievable for the refining industry. As a consequence of a too ambitious target, industry would have either to purchase allowances at the expense of its competitiveness reduce capacity at the advantage of competition. The reduction of emissions should also take account the so-called refining paradox: the increased share of transport fuels in refinery output and the tighter environmental specifications on products require process installations which need additional energy to convert to those products. |
b) no |
Reporting and monitoring emissions contributes at managing energy consumption. The carbon price does contribute at incentivising industrial installations to reduce emissions and improve efficiency, which with all other things remaining equal would be beneficial indeed.. For the European Refining sector, the main driver for such improvements remains the high cost of energy and its high share in total operating costs. The EU ETS is an additional cost to EU industry while it is not to its non-EU competitors. As this additional cost cannot be passed on to the product in the market it reduces the competitiveness of our industry. This is why European industry needs sufficient carbon leakage protection. |
a) yes |
The European Refining industry is under heavy international competition and needs full protection until a level playing ground is achieved through balanced agreements on a world scale or at least across main regions in competition with EU. Until there are equivalent carbon pricing policies across sectors worldwide, support for EU industrial sectors exposed to carbon leakage must continue as a core element of the EU’s post-2020 climate policy framework. Removing carbon leakage protection would result in a reduction in free allocation For the European Refining industry , competing regions, with less ambitious climate policies, include Russia, Middle East, USA, and parts of Asia , wherefrom refined products are imported or where to refined products are exported. Support measures should remain until these competing regions adopt carbon pricing. Delocalisation of petroleum products production outside the EU is also likely to have negative effects on worldwide GHG emissions. |
b) quite adequate |
In the absence of an international climate agreement, to deal with carbon leakage the Refining sector prefers both free allocation and enhanced free allocation for exposed sectors. For the Refining sector, the EU ETS benchmark was set from 2013 at the average of the top 10% performance level which is a tough benchmark with significant impact. For 2013 the refining industry has received less than 80% of its quota as free allocation and is the only major sector receiving less than its actual emissions. This puts the refining industry in a situation where it will have to recourse to purchases of further rights, increasing thereby its operating costs at the detriment of its competitiveness. In addition, under the current system, protection will be further eroded due to the Linear Reduction of the industry cap and due to the CSCF : by 2030, even the most efficient installations like the Belgian refineries would be left with only 60% free allocation (if a 2.2% Linear Reduction Factor co |
a) it absolutely keeps the incentive |
The benefits from reducing emissions remain but free allocation keeps the cash available for investment in innovation or for maintaining and improving the activity in Europe, rather than having to spend it on purchasing quotas. |
b) quite proportionate |
In our industry, with large scale complex installations, implementation of the benchmarking provisions was a major undertaking and involved considerable work by our sectors. Given the importance of the competitive threat, the work to create an accurate and fair mechanism is considered proportionate to the objectives. |
d) there should be no limit to overall free allocation to industry |
If the intention is to provide carbon leakage protection to industry then the allowance needs to cover direct and indirect emissions for installations performing at the benchmark level . Until the issue of carbon leakage is addressed through an international climate change agreement, sufficient levels of protection to industry are needed. This implies cancellation of the CSCF and no application of a linear reduction factor after 2020. |
e) I don’t know |
|
c) I don’t know |
|
d) I don’t know |
Preference for enhancement of existing systems, funded by EU and Member States, rather than creating additional new systems. In general support for innovative low-carbon technologies should be technology neutral as well as time- and cost- limited. |
a) yes |
The current indirect emissions compensation system is not adequate. It should be reformed to allow free allocation for all electricity consumed in refineries and chemicals plants, at the benchmark level. The importance of manufacturing industries, such as Refining, must be reflected across all EU policies and the cumulative impact of EU legislation on these industries including the EU ETS must be looked at. |
a) the present two groups should remain |
The current two groups should remain until progress is achieved in the international arena to thee level the competitive playing field by introducing similar carbon pricing in other regions that compete with EU Refining. |
a) the present criteria should remain |
Refining is a sector where both trade and GVA exposure and thresholds are important. Refining is a “margin business”, operating between two international, open commodity markets: the crude oil market and the refined products market. Europe is open to traded imports of refined products which are not submitted to EU carbon costs. For the carbon leakage assessment, it is therefore important to consider the effect of carbon costs on Gross Value Added rather than production costs and the trade intensity. Carbon costs should cover both direct and indirect carbon costs due to their cumulative impact. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
If the criteria are tightened it will reduce the number of sectors/sub-sectors on the list and some key strategic sectors for the EU’s economy risk being excluded from carbon leakage protection, with potential negative spill-over effects on other industries: e.g. for the oil Refining industry onto the petro-chemical industry. The use of analysis of GVA through European statistics does also require the right granularity of data analysis to avoid including in the Refining sector plants which are not refineries. Carbon leakage is also about future investment decisions. Therefore the carbon price must reflect future EUA projected prices and not current prices. This is common refining industry practice in evaluating major projects. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Qualitative assessments should be kept as simple as possible. If the Refining sector undergoes a qualitative assessment, the so-called “Refining paradox” would need to be taken into account: requirements on the quality of fuels (e.g. marine fuels specifications) and demand for light fuels generate increased conversion of heavy residues in the refining process, which all result in the increase of refinery energy intensity and GHG emissions. |
d) in line with the duration of ETS Phase 4 |
Mid-period review is detrimental to investment certainty Long-term visibility is essential for investment decisions in the refining industry. |
c) the approach should be less stringent (please specify) |
The current benchmark has turned out to be penalising for the refining sector, both in absolute terms and in comparison with other sectors. In combination with the CSCF, carbon leakage protection currently covers less than 80% of emissions to the refining sector even though it is subject to carbon leakage. Corrective action before 2020 is required to assure a fair treatment of the refining sector. |
b) no |
In order to provide free allocation in an effective way, the benchmark should accurately reflect the performance of ETS installations . Benchmarks do not describe the “state of the art”, but describe the level of performance of a plant population in a given sector. Revising benchmarks to make them more stringent would remove the relative pioneer advantage of early movers and discourage performance improvements. |
c) other (please specify) |
Free allocation should reflect economic reality per installation based on the most recent years. More recent verified data should be used: free allocation should reflect installations’ economic activity, based on the most recent years. Each refinery requires at regular intervals a shutdown period for regulatory inspection, maintenance and construction projects. If this is not taken into account in the determination of its future allocation, the refinery will be penalised. Dynamic allocations should be investigated for potential application . |
a) no, there should be no deviations |
General harmonised allocation rules should continue to apply for all carbon leakage installations in the same manner. |
c) yes, in the form of additional free allocation |
In addition to free allocation for direct emissions, carbon leakage protection should also include free allocation for EU ETS cost pass-through in electricity prices for all sectors exposed to carbon leakage. The absence of an EU harmonised indirect emission compensation system, by leaving decisions to Member States, restricts compensation to a few sectors and might create single market distortions. Compensation should be reformed to allow free allocation for all electricity consumed in refineries (i.e. net power used). |
Important |
Most important |
Less important |
I don't know |
|
d) other |
Greater innovation support by the EU and its member states would be beneficial as it may bring more significant and cost-effective results than current renewables mandates, but we do not believe that the use of ETS revenues is the right mechanism for funding. |
The EU Fitness Check on Refining is due shortly. It merits use as a reference point for understanding the cumulative effects of existing and future legislation on the refining competitiveness. As such a cross check of issues related to ETS and carbon leakage should be performed to ensure further completeness. |
b) Trade association representing businesses |
Belgische Baksteenfederatie - Fédération Belge de la Brique |
Kartuizersstraat 19/19 1000 Brussel Belgium tel 02/5112581 mailto : aerts@baksteen.be |
a) yes |
|
1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry. Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improvements |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies. |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. This would limit the list to sectors really exposed and would eliminate the risk of a carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
All energy intensive sectors as defined in the Energy Taxation Directive should be considered as exposed to the carbon leakage risk. As an alternative, trade and carbon intensity criteria should be used considering the following elements. First, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. GVA consists of both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS. Second, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced. |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
b) Trade association representing businesses |
British Ceramic Confederation |
Dr Andrew McDermott Technical Director British Ceramic Confederation Federation House Station Road Stoke-on-Trent ST4 2SA UK +44 1782 572 847 andrewm@ceramfed.co.uk |
a) yes |
|
1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. In some cases, a CO2 target and an energy efficiency target can contradict each other, e.g. pore forming agents used in the clay block industry can contribute to a lower fuel consumption but can raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improvements |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS are forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States and where it has been used (such as here in the UK) the scheme remains complicated. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support renewables in Member States. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies. |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs > 3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. A global system would eliminate the risk of carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
As explained above, all energy intensive sectors as defined in the Energy Taxation Directive must be considered as exposed to the carbon leakage risk Nevertheless, if trade and carbon intensity criteria are to be used, they need to be adapted: Firstly, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). Average, labour costs can be up to 70% for some ceramic sectors. Therefore, using GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with GOS Secondly, the current criteria entail either: i) to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or ii) a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) introduced |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have: i) a trade intensity ≥ 30% or a carbon intensity ≥ 30%, or ii) a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. The application of this correction factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have limited impact since no major breakthrough technologies have been implemented following the initial benchmarking exercise. Furthermore, benchmark revision would entail a major administrative burden, especially for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
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a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
b) Trade association representing businesses |
British Glass Manufacturers' Confederation |
Address: British Glass, Unit 9 Churchill Way, Sheffield S35 2PY, UK Tel: +44 114 2901850 Email: j.staves@britglass.co.uk |
a) yes |
|
1) yes |
c) I don’t know |
The glass industry is making continuous improvement in energy efficiencies and process technologies to reduce CO2, energy consumption and environmental impacts. While further reductions in the glass industry are possible, what is important is the magnitude of this reduction. All official EU publications show that no breakthrough technology is currently available to reduce CO2 emissions to the extent imposed by the energy and climate package 2030. There is a thermodynamic limit to the glass melting process which is an absolute limit, and that current technology is already approaching. Moreover, process emissions (arising from the decomposition of the raw materials such as carbonates, and leading to non-fuel related CO2 emissions) cannot be eliminated, limiting therefore the reduction potential of the glass industries. The high ambition level of the package, applied unilaterally in the EU, is likely to increase the risk of carbon leakage. |
b) no |
The main driver for energy efficiency improvements in the glass industry is the high share of energy costs within production costs. In fact, the glass industry has continuously improved energy efficiency over previous decades. Regulatory instruments and the EU ETS in particular, have only a marginal effect on energy efficiency improvements of glass melting activities, if any. Whilst there is no global ETS in place, the EU ETS is only a source of costs for glass industries (direct but also indirect CO2 costs linked to electricity), and therefore weakens the competitive position of European based glass industries vis-a-vis third country competitors. As such, it indirectly favors production reduction in the EU and rises in imports from non EU countries without carbon constraints into the EU. For these reasons, glass industries need to be fully protected against risks of carbon leakage. |
a) yes |
The EU glass industry faces higher costs for environmental protection, energy, labour and raw materials, than the majority of extra-EU competitors. In the absence of an international climate agreement and a level playing field between EU and extra EU competitors, the EU industry needs to be provided with measures to safeguard its competitiveness. Measures to avoid carbon leakage under the EU ETS are therefore essential. Measures should cover both the direct and indirect CO2 costs. Such measures under the EU ETS must be established in a way that ensures the ETS’ coherence with the EU’s ambition to revitalize European manufacturing activities, as proposed in the EC Communication on Industrial Renaissance. |
b) quite adequate |
Free allocation has been key up to now to mitigate the negative impacts of a unilateral climate policy. However, the Cross Sectoral Correction Factor, which has been applied from 2013, reduces the free allocation, even for the most GHG efficient installations, and will dramatically increase in the future, thus further reducing free allocation. This current system is unsustainable and should be changed in order to ensure that the most GHG efficient installations receive 100% of their allowance needs. |
a) it absolutely keeps the incentive |
Free allocation does not reduce the incentive to innovate; the majority of installations in the sector do not have enough allowances, which encourages industry to invest in energy efficiency to avoid having to purchase a high level of allowances. The installations under the benchmark can sell their allowances on the market, which is also an incentive to continue reducing emissions. The incentive is therefore present. Below, we also call for a periodic revision of the benchmarks (in exchange of the cancellation of the cross-sectoral factor), which also provides for a strong incentive to improve. In addition, free allowances preserve investment capacity. Free allowances offer industry the incentive to purchase less CO2 allowances if they become more GHG efficient. However this last incentive would be better preserved if the CSCF was not forcing an unrealistic and arbitrary reduction of the number of free allowances even for producers who are the most GHG efficient in the sector. |
b) quite proportionate |
Administrative burden is accepted, since it is necessary to maintain the free allocation system. However opportunities or improvement to this process should be considered. Conversely, the administration and calculation rules for new entrants are overly complex and can lead to under-allocation. They can therefore be seen as disproportionate and can be a disincentive to new investments. |
d) there should be no limit to overall free allocation to industry |
The current system is unsustainable (from a competition point of view) because the cross sectoral correction factor continually reduces the free allocation given to industry, even for the most GHG efficient installations. Ideally, installations whose efficiency is equal or better than the (periodically reviewed) benchmark should receive 100% of free allocations to produce in the EU and so there should be no limit. In practice, this is likely to lead to a higher share in phase IV. An increased level of EU ambition in terms of GHG reduction would require enhanced measures against carbon leakage and therefore an increase in total free allocations. |
e) I don’t know |
Overall financing for technological innovation in manufacturing should be increased in the EU. However R & D should be funded via a mobilization of different sources of funding - including but not limited to - auctioning revenues. It should not come from the free entrants reserve or Free Allowances reserve. Allowances should be primarily used to ensure that the most GHG efficient installations get 100% of their needs to produce in the EU. Furthermore, financing for R&D and demonstration projects should be technology-neutral and not focused only on CCS or renewables. New technologies such as Carbon Capture and Use (CCU) and others should not be excluded. |
a) yes |
As stated above, industrial innovation, with a focus on the process and on new energy sources for industry, should be promoted. It should not be financed by shares of allowances reserved for free allocation or for new entrants, but rather from a mobilization of different sources, and not limited to auctioning revenues. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Industrial innovation should be promoted in a technology-neutral way. However this should not be done at the expense of free allocation which aims to provide effective support and protection against carbon leakage. Therefore it should be financed via other sources. This could include, among other sources, money from the auctioning revenues, as suggested in the ETS directive (Art 10.3). |
a) yes |
Unequitable carbon costs should not place EU industries at a competitive disadvantage with extra-EU competitors and this should be the ultimate objective pursued in order to achieve the EU’s ambition of 20% GDP realized by industrial activities in 2020. To that end, measures against carbon leakage are a pre-requisite but are not enough. An EU scheme for compensation of indirect costs due to higher electricity prices and some raw materials (e.g. soda ash, industrial gases, etc.) should also be developed for energy intensive industries. More generally, the EU needs to assess, and if needed reform, all its policies and in particular energy and environmental ones against the re-industrialisation objective. A longer term re-industrialisation objective for 2030 should be established. |
a) the present two groups should remain |
This binary model ensures that all sectors benefit from carbon leakage protection measures as soon as a risk is detected. This is essential to ensure that carbon leakage measures are effective and that protection is not granted too late, when industries are already in jeopardy. |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
The competitiveness of energy-intensive industries is sensitive to energy and carbon costs, therefore a risk exists for all these industries. For the sake of simplicity and consistency in legislation, all energy-intensive industries, as defined in Art 17 (1) a of the Energy taxation directive 2003/96/EC could be automatically placed on the carbon leakage list, In case ETS-specific criteria are maintained, they should continue being based on both the CO2 intensity and the trade intensity metrics. The CO2 cost metric should be made more relevant to analyse the impacts. of carbon cost on sectors’ profitability. To that end, the CO2 cost over GVA criteria could be replaced by a CO2 cost over Gross Operating Surplus (GOS) criteria. |
b) other thresholds should be defined. Please specify below |
The competitiveness of energy-intensive industries is sensitive to energy and carbon costs, therefore a risk exists for all these industries. For the sake of simplicity and consistency in legislation, all energy-intensive industries, as defined in Art 17 (1) a of the Energy taxation directive 2003/96/EC could be automatically placed on the carbon leakage list, i.e. the purchases of energy products and electricity amount to at least 3,0 % of the production value or the national energy tax payable amounts to at least 0,5 % of the added value. In case ETS-specific criteria are maintained, they should continue being based on both the CO2 intensity and the trade intensity metrics. The CO2 cost metric should be made more relevant to analyse the impacts of carbon cost on sectors’ profitability. To that end, the CO2 cost over GVA criteria could be replaced by a CO2 cost over Gross Operating Surplus (GOS) criteria. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The current criteria under the quantitative assessment at NACE 3 or 4 level should be maintained and used as the first assessment option. When an assessment at NACE 3 or 4 level is not appropriate to identify the relevant industrial activities falling under the EU ETS, then a quantitative assessment at 6- or 8-digit should be carried as a second option. Finally, as a third option, a qualitative assessment must remain possible. Other parameters can be studied as part of qualitative assessments, such as methodology and evidences of investment leakage. |
d) in line with the duration of ETS Phase 4 |
As long as there is are no equivalent GHG reduction measures taken by major trading partners, the list of sectors exposed to the risk of carbon leakage should be remain valid for the entire duration of the trading period for which it is established. This is essential to provide predictability to industries faced with long investment cycles (typically > 15 years). |
a) the present approach of average of the 10% most efficient installations should remain |
Glass industries support ambitious benchmark levels, which reflect the technological capabilities of the sector's best performers using the best available and proven technologies in Europe. It must be kept in mind however that this approach also has limits. Indeed, benchmark curves do not always reflect a difference in terms of « best » (the least GHG emitters per tonne of glass) or « worst », but a difference in terms of products produced, cullet availability, age of furnace, available fuels, etc. The 10% best GHG performers can therefore be regarded as extremely challenging, especially for plants producing a wider range of more sophisticated products with higher added-value (as this usually entails higher energy consumption). |
a) yes (please specify how often) |
It seems logical to revise the benchmarks from time to time to reflect GHG improvements over time. Revision cycles should be linked to ETS phases and remain unchanged over this period. Periodical revision of the benchmark should be based on the actual EU based installations. The periodic revision of benchmarks should be the sole instrument leading to a reduction of free allowances over time, as benchmarks reflect true possibilities of GHG improvements according to state-of-the-art technologies deployed in Europe. The periodic revision of benchmarks therefore justifies that the CSCF is abandoned. |
c) other (please specify) |
Ex-ante allocation can only lead to over-allocation in crisis times, and under-allocation when the economy is growing. A better approach is to design an « ex post » system, where real allocation is corrected according to the real production. |
a) no, there should be no deviations |
In principle, there shall be no deviation from the general harmonized allocation rules at the level of an individual installation as this could cause distortion of competition. Only in the case of very specific hardship, should deviations be envisaged for an entire sector after a careful assessment of the competitive effects of such deviations. |
d) yes, in the form of financial compensation at EU-level |
Rules for the compensation of indirect costs should be revised and need to be effective to reflect the real burden of CO2 included in electricity costs for industry. A differentiated compensation approach by Member States is not acceptable from a competitiveness point of view. A harmonized approach at EU level is therefore needed. The harmonized measure should take the form of financial compensation. Free allocation should be kept aside to ensure full relief for direct emissions (most GHG efficient installations should receive 100% of their needs). A compensation system should also be put in place to compensate for higher prices of some raw materials (e.g. soda ash) and industrial gases. |
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a) from the Member States' auction budgets |
Allowances funding low-carbon innovation support should be financed from the Member States’ auction revenues and from a mobilization of additional sources. However, this should not be financed at the expense of free allocation or the new entrants reserve which must be principally used for measures against risks of carbon leakage. |
Glass industries welcome the opportunity to express their views on carbon leakage measures post 2020 and appreciate that this discussion is held without further delay. It is however regrettable that industry is asked to comment on such measures whereas the rules for EU ETS Phase IV have not yet been fully decided. The glass industry wishes to reiterate that so long that there is no comparable ETS system operating in most part of the world and in extra-EU countries with glass industries, EU based glass industries will need to receive full and effective protection against carbon leakage. The recent assessment carried by DG CLIMA on exposure to carbon leakage risks, i.e. the carbon leakage list of 2009 and its recent revision, shows that between 2009 and 2014, risks of carbon leakage has grown in most glass sectors. Glass industries need effective protection moving forward, which may even require a higher % of the allowances allocated for free. |
b) Trade association representing businesses |
Bundesverband der Deutschen Industrie e.V. (BDI)
Federation of German Industries |
BDI
Dr. Joachim Hein
Breite Straße 29
10178 Berlin
Germany
Phone: +49 30 2028 1555
j.hein@bdi.eu |
a) yes |
1) yes |
a) yes |
In principle this is possible. It must however be considered that we are not starting from scratch. German industries have greatly contributed to GHG emissions reductions in the past, as can be seen from the National Inventory Reports sent to the UNFCCC Secretariat and from the Verified Emissions Tables as far as traded sectors are concerned. It has been and will continue to be imperative to reconcile (further) emission reductions with the safeguarding of our industries’ competitiveness. The climate will not benefit from the relocation of businesses to non-EU sites. It is therefore in the common interest of the EU and the climate to have effective CL provisions in place. |
c) I don’t know |
The ETS has been designed to contribute to cost-effective emissions reductions and thus pave the way for a cost-effective low carbon transition. |
a) yes |
Yes, carbon leakage protection is a must as long as competitors in non-EU countries do not face comparable burdens (e.g. carbon pricing). |
b) quite adequate |
Since there appears not to be any other equally or more effective solution the concept of free-of-charge allocation has been quite adequate in addressing the risk of carbon leakage. |
a) it absolutely keeps the incentive |
The benchmark-based approach as of the 3rd trading period guarantees a permanent incentive for improving production processes further. |
b) quite proportionate |
The companies themselves want to be on the safe side when applying for free allocation. This necessitates some bureaucracy. Notwithstanding, all potentials to alleviate the bureaucratic burden on companies should be realized. |
d) there should be no limit to overall free allocation to industry |
As long as non-EU competitors do not have to face similar cost burden there should be no limit to overall free allocation to industries. Ways should be sought to avoid the application of the cross-sectoral correction factor, or better even, an industry cap beneath the overall cap. |
e) I don’t know |
There are pros and cons concerning the NER300-approach. It could be helpful to evaluate the effectiveness of this approach with respect to its “revenue and expense” ratio. |
b) no |
No, not within the ETS. Distributional questions would not be easy to solve. Apart from that some MS have their own ideas of how to promote innovation. Enhanced EU support should go to R&D&D to foster innovation. |
c) other types of funding (please specify) |
See answer to Q 9. |
a) yes |
A much more consistent – on EU and on MS levels – overall energy and climate policy strategy is called for. The effort-sharing between ETS- and non-ETS-sectors need to be more balanced – the huge GHG reduction potentials e.g. in the building sector will have to be realized for a cost-efficient GHG mitigation. The overall burden on our companies must be cut back; at least, it must not be further increased. There will be a continued need for compensation schemes to address indirect CL risks. A global agreement that leads to a level playing field for world-wide competing installations would be the most effective way to address CL risks. As long as there is no such agreement CL risk prevention measures will be indispensable. |
a) the present two groups should remain |
At any rate, as long as non-EU competitors do not have to face similar cost burden an effective CL protection has to be maintained. |
a) the present criteria should remain |
The current eligibility criteria appear to be adequate. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The current eligibility criteria appear to be adequate. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Qualitative criteria will continue to be needed in addition to quantitative criteria in order to provide a means for protecting sectors/subsectors that would otherwise fall through the cracks. |
d) in line with the duration of ETS Phase 4 |
In general the list should have rather a longer validity so as to contribute to investment security. |
d) I don’t know |
At any rate, the benchmarks have to be realistic and need to be based on widely proven and accepted technologies; “exotic” technologies that exist in other parts of the world under “exotic” circumstances must not be taken into account for defining EU-benchmarks. The fundamental principle that installations that comply with the benchmarks shall not be penalized by the ETS has to be safeguarded. |
c) I don’t know |
Revising the benchmarks would devaluate the latest energy-saving and GHG reduction investments into installations and would thus lead to a loss of investors’ confidence and therefore to less investments. The ETS in general, and the benchmarks in particular, should reward installations and sectors that reduce GHG emissions and comply with the benchmarks. |
d) I don’t know |
Dynamic allocation as proposed by Ecofys in their study “Dynamic allocation for the EU Emissions Trading System – Enabling sustainable growth” commissioned by the Dutch government should be explored to allow for future industrial growth. |
a) no, there should be no deviations |
Specific hardships should be dealt with on a MS basis, in accordance with state aid rules. |
e) I don’t know |
Compensating indirect costs is important for maintaining the competitiveness of electro-intensive sectors/subsectors. |
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Most important |
Important |
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d) other |
See answer to Q 9.
Innovation should not explicitly be promoted through the ETS. The ETS was designed as a contribution to cost-effective reduction of GHG emissions. |
CL is a barely perceptible process. As recent research indicates energy-intensive industries in Germany run their facilities until they gradually wear out. It is striking to note that even in 2010 and 2011, when German real GDP expanded by a total of 7.5%, the energy-intensive sectors posted negative net fixed capital formation. As a result of the low investment activity, the energy-intensive industrial sectors reported an over 11% decline in net fixed assets between 1995 and 2011, while there was an increase of close to 5% in the other sectors.
Source: Deutsche Bank Research, January 2014.
This trend of barely perceptible de-industrialisation must be stopped. Still functioning value chains have to be preserved in Germany and in Europe. In its January 2014 Communication „For a European Industrial Renaissance“ the European Commission “is calling on MS to recognise the central importance of industry for creating jobs and growth, and of mainstreaming industry-related competitiveness concerns across all policy areas.”
In this vein it is important to note that CL protection is not „nice to have“, it is not a treat for industry. CL protection is absolutely vital to compensate for serious disadvantages and cost burden that no other competitor outside the EU has to shoulder. There is more than one way how post-2020 CL protection can be implemented. Yet, any future CL protection regime will need to send a strong signal to investors that industrial investment in Europe is and will be worthwhile and welcome. |
b) Trade association representing businesses |
Bundesverband der Deutschen Kalkindustrie e.V. |
Dr. Werner Fuchs
Geschäftsführer
Annastr. 67-71
D-50968 Köln
Fon: +49(0)221 93467420
Fax: +49(0)221 93467414
Mobil: +49(0)172 2958650
Mail: werner.fuchs@kalk.de
Internet: www.kalk.de
|
1) yes |
b) no |
Around 70% of the total CO2 emissions generated in lime production are "process emissions": they come from our raw material, limestone. These process emissions cannot be avoided without changing the quality of the final lime product which is however essential to serve specific applications.
Currently, the most energy efficient kiln is near the thermodynamic minimum required for the chemical reaction needed for producing lime. The heat of the reaction for typical quicklime quality is 3.03 GJ/tonne, and the average fuel use 4.25. The energy consumption of the best available lime kiln (a Parallel Flow Regenerative Kiln, PFRK) is between 3.2 and 4.2 GJ/tonne. This type of kiln is already the most widely spread kiln technology today. However, one should keep in mind that horizontal rotary kilns (less energy efficient) provide a certain quality of lime and permit to optimize the extracted limestone due to their ability to treat the different sizes of stones. |
b) no |
The EU ETS will only remain the best solution for reducing CO2 emissions as long as the GHG reduction target is set at a level which is both technically and economically feasible.
The current economic crisis and the further shrinking of the demand for lime products makes that there is at the moment a lot of “idle” production capacity in the EU. These installations are completely amortized which makes production in these installations cheaper than in a new one. A higher carbon price would not be a solution, as it would only draw money away from producers without enabling them to make an investment.
When assessing the potential further ETS amendment in a sector, it is necessary to take account of the lifespan and replacement rate of kilns. Most of the time, investments costs always assume an investment in a new capacity (replacing the old capacity before its end of life). However, for the lime sector, kilns receive big maintenance periodically. |
a) yes |
Carbon Leakage will remain a big concern after 2020 in the absence of an international agreement putting forward a similar CO2 burden. EuLA believes that all energy intensive industries should be protected against carbon leakage, and that any increased level of ambition of Europe towards 2030 should lead to increased and not decreased protection against carbon leakage.
Furthermore, the EU ETS is NOT addressing the following concerns:
- The GHG reduction deficit (shortage of free allowances even for the installations with the best GHG performance.
- Energy costs represent on average 40% of the lime industry’s manufacturing costs. Having access to energy at a reasonable cost is an essential condition for operating in the EU and for maintaining lime's competitiveness.
- Further adequate incentives for low carbon investments is needed, with auctioning revenues being targeted for low carbon investment toward the industry |
b) quite adequate |
The current carbon leakage mitigation measures do not take into account of:
The importance of CO2 embodied in imports
A unilateral reduction of CO2 emissions in Europe will not help fighting against climate change if a subsequent rise of imports from third countries is created. Carbon Trust, amongst others, demonstrated that the reduction in production-related CO2 is largely compensated by CO2 embodied in imports.
The cumulative burden of the EU framework
Several other EU legislations have an impact on the EU's industry competitiveness (renewables, energy efficiency). The Commission should ensure an integrated approach with no overlap.
Energy costs
Energy costs represent on average 40% of the lime industry’s manufacturing costs. Like for any energy intensive industry, having access to energy at a reasonable cost is an essential condition for operating in the EU and for maintaining its competitiveness. |
b) it largely keeps the incentive |
It is important to remind that the Commission has calculated product specific benchmarks based on the average GHG emissions of the 10% best performers. A comparison of these benchmark values with the minimum values that are technically feasible shows that the remaining potential in some sectors, like lime, is actually quite low.
The current best available and most energy-efficient kilns (the Parallel Flow Regenerative Kiln, PFRK) is close to the thermodynamic minimum required for the chemical reaction needed for producing lime. In other words, no further breakthrough technologies in energy efficiency are expected. The drive towards the most energy efficient solutions can easily be explained by the fact that energy costs represent on average around 40% of the lime sector’s production costs.
Outside the deployment of a commercially and technically feasible Carbon Capture and Storage solution, there is little margin for further CO2 abatement in the lime sector. |
c) quite exaggerated |
Lime is the most impacted sector by the EU ETS. The production of 1 tonne of lime generates 1 to 1.6 tonne of CO2. This means that the EU ETS has a strong impact on the sector, up to 35% of impact of the CO2 costs on Gross Value Added (Hourcade et al, 2008). Therefore, the full impact of carbon costs would have serious consequences in terms of carbon leakage for the lime industry.
While the lime industry advocates in favor of less red tape and less administrative burden, it recognizes the importance of the free allocation for maintaining a competitive industry in the EU. |
d) there should be no limit to overall free allocation to industry |
There is still a need today for an international climate agreement that would bring a level playing field to EU manufacturing companies. In the absence of such agreement, and considering that several countries in the EU neighborhood are not following the EU’s climate leadership, there should be no limit to the overall free allocations to the industry. |
a) a substantially higher share than in Phase 3 |
The current state of efforts regarding the development of CCS (including the NER 300 program) will not reach the ambition to develop, by 2020, a commercially and technically available solution for the capture and storage of carbon. EuLA believes that further R&D is necessary for CCS, but that it should be funded via a mobilization of different sources including auctioning revenues, not through the new entrants' reserve. The New Entrant Reserve should be reserved to new entrants and the expected growth of the EU industry.
In 2012 TNO calculated for EuLA the costs of capturing CO2 at different kinds of lime kilns. For the state-of-the-art solvent (MEA) costs to capture CO2 were €94 per ton of avoided CO2. The cost to capture CO2 would more than double the production costs of around €60/ton lime. Currently, lime plants are typically located right next to the deposit, not clustered in large industrial agglomerations. Transport costs can add significantly to the capture costs. |
a) yes |
The auctioning revenues should be used to encourage low carbon investments. As a general principle, revenues should go back to industry to enable investments in low carbon solutions. Part of the revenues could for example be used to provide cheaper loans for low carbon investments in installations falling under the EU ETS. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The auctioning revenues should be used to encourage low carbon investments. As a general principle, revenues should go back to industry to enable investments in low carbon solutions. Part of the revenues could for example be used to provide cheaper loans for low carbon investments in installations falling under the EU ETS. |
a) yes |
EuLA strongly favors a level playing field within the EU and outside Europe. This is why EuLA believes that the EU should maintain its efforts to achieve an internationally accepted and legally-binding agreement proportionate to the burden in the EU.
In the absence of such agreement, the EU should safeguard the competitiveness of the EU industry with any appropriate measure. EuLA has serious doubts that the current legal framework will ensure a level playing field beyond 2020. |
a) the present two groups should remain |
EuLA believes that no further complexity and calculations should be added to an already complex scheme.
1. Share of carbon costs in the GVA should be maintained
2. Trade |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
1. Share of carbon costs in the GVA should be maintained
2. Trade intensity should take especially into account the trade with EU's neighborhood
In an internal survey realized by the lime sector (NERA " Energy and transport cost comparison of the EU lime industry to 10 non-EU regions"), it has been established that the threat for lime producers mainly come from the EU neighbor countries such as Russia, Maghreb and Middle east.
3. Energy / climate requirements in Free Trade Agreements should be taken into account question has not assumed any carbon reduction commitments.
4. Fuel mix price should be taken into account
Finally, EuLA recommends that the EU defines an affordable and available “fuel mix” for 2030, assesses its accessibility and compares its costs with the costs of the fuel mix used by the main EU competitors.
“Energy and climate” clauses should be part of any Free Trade Agreement, especially if the trading partner in |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
It is important to point out that the revision of NACE code list (v2) implied that the assessment of the carbon leakage criteria for the lime sector is now done at a new disaggregation level, which includes not only lime but also plasters and aggregates. EuLA believe that this assessment should be done at the appropriate level of disaggregation, since that the industrial activities that are included in the NACE v2 code for lime do not share the same fundamentals (in terms of energy intensity and carbon intensity for instance). |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
EuLA believes that it is important to maintain a certain level of discretion in the system for justified cases. This concerns both the qualitative criteria and the possibility to conduct the assessment at the appropriate level of disaggregation (Prodcom 8). |
b) longer (please specify) |
The time validity of the list of sectors exposed to carbon leakage should take into account the investment cycles of the industry. It is also necessary to take account of the lifespan and replacement rate of kilns. Most of the time, investments costs always assume an investment in a new capacity (replacing the old capacity before its end of life). However, for the lime sector, kilns receive big maintenance periodically. It is therefore important to ensure that the investments made now will not become "stranded assets" in the future due to an unexpected change in the carbon leakage list.
Furthermore, any trade intensity assessment for the carbon leakage list should take into account the impact of trade with EU neighbouring countries. |
a) the present approach of average of the 10% most efficient installations should remain |
b) no |
The benchmark exercise created an important workload on both the industry and the administration, and also triggered some issues regarding sensitive information. EuLA believes that any update should only been undertaken when sufficient evidence exist of technological progress. It is important to underline that the technological state of the art is not representative of what can be achieved in practice. Lime characteristics are so vast that multiple uses can be done from the same material. It is also highly dependent of the stone quality from the quarry.
Any update in the benchmarks should only take into account innovations that have been proved to be commercially viable and that have been implemented on site. These benchmarks should further take into account each sectors characteristics into account, such as the existence of several end-products, the thermal energy efficiency of the sector, and its process CO2 emissions. |
c) other (please specify) |
In the case of the current ex-ante system, the reference year should be adapted, and the baseline should be a longer period without offering a choice between different periods, and not known in advance.
However EuLA believes that free allocation should reflect economic reality per installation based on the most recent years and should not be frozen by historic production.
In this regards, EuLA suggest to the European Commission to start working on the development of a dynamic system that could replace the current system, under the condition that no correction factor (CSCF) should be applied in addition to a dynamic system. Also, such system should take into account the administrative burden, the robustness of the control of the declared production, and the confidentiality of commercially sensitive information. |
a) no, there should be no deviations |
d) yes, in the form of financial compensation at EU-level |
EuLA defends a Full off-setting of CO2 costs pass through in electricity prices with a harmonised approach in all EU Member States. |
Most important |
Important |
Less important |
Least important |
a) from the Member States' auction budgets |
b) Trade association representing businesses |
Bundesverband der Deutschen Ziegelindustrie e. V. |
Kochstr. 6-7 10969 Berlin Germany armbrecht@ziegel.de |
a) yes |
|
1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improvement |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Furthermore, EuLA believes that all energy intensive industries that are truly at risk of carbon leakage should be protected against carbon leakage, and that any increased level of ambition of Europe towards 2030 should lead to increased and not decreased protection against carbon leakage. The most GHG Efficient installations should receive 100% of their needs for free. The industry cap should be adjusted so that the CSCF and linear reduction factor do not reduce the free allocations. |
d) there should be no such innovation support post-2020 |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. This would limit the list to sectors really exposed and would eliminate the risk of a carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
All energy intensive sectors as defined in the Energy Taxation Directive should be considered as exposed to the carbon leakage risk. As an alternative, trade and carbon intensity criteria should be used considering the following elements. First, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS. Second, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be intr |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
b) Trade association representing businesses |
CELPA - Portuguese Pulp and Paper Association |
Ana Fernandes Rua Marquês Sá da Bandeira, n.º 74 - 2º 1069-076 LISBOA Tel.: 00351 21 761 15 14 email: ana.fernandes@celpa.pt |
a) yes |
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1) yes |
b) no |
The pulp, paper & board manufacturing industry, already invested significantly to reduce its GHG emissions. Major investments on actual available technologies have already been made across the sector. The potential for improvement with available technologies is very limited and makes little economic sense: they will only increase the competitive gap with international competitors. Technological breakthroughs are needed in order to further reduce GHG emission. This requires time and financial support (research and investment cycles). Furthermore, please do not confuse energy efficiency measures with downgrading of products and quality products. Forcing the companies to produce poor quality products which require less energy is not energy efficiency and it goes on the opposite direction of making the European industry more competitive. |
b) no |
Key is the long-term investment cycle. The high costs of energy and the related tax burden already act like an incentive for the pulp, paper and board manufacturing industry to reduce energy costs, thus reduce GHG emissions. Moreover, due to the energy price in Europe it is not a question of GHG reduction but a question of competitiveness. The EU ETS adds further costs that competitors outside the EU do support. In addition, the continuous interventions to modify the regulatory framework create additional risks, thus costs, to industry. Overall, the EU ETS severely impairs our industry competitiveness. It provides short-term visibility to industry (rules set for single trading periods) which does not give the long-term investment visibility needed to industry. |
a) yes |
Since the EU ETS was set up in 2005, the international economic context dramatically changed: the shale gas production in the USA offered a significant competitive edge to the American industry, the oil price increased dramatically, the debt crisis in Europe further increased the tax burden, the very low margins of the pulp, paper and board industry impaired its ability to invest, etc. The European countries suffer from a deficit of competitiveness on the international playing field. The EU ETS adds a substantial cost that is unmatched by industry in other parts of the world, thus negatively impacting on EU competitiveness. In a world of growing asymmetries in climate change policies, measures to support EU industry are a must. |
b) quite adequate |
The free allocation has been a shield for the competitiveness of the EU industry and helped maintain economic activity within EU borders. However, competitiveness is not secured over the short and medium term as the fast decrease of free allocation, the CSCF, the inadequate compensation for indirect costs, and the expected increase in carbon prices are a threat the EU industry faces in the future. Without a global agreement (that could lead to comparable burdens for competing industrial installations around the world), Europe will have to mitigate the impact of its policies for industries producing globally trading goods. Overall, mechanisms should be set up to help the EU industry improve its energy efficiency and reduce its GHG emissions. In addition, regarding the carbon leakage issue, the objective should be to attract more industrial activity while reducing the GHG emission and not only to avoid the decrease of industrial activity. |
b) it largely keeps the incentive |
There is no direct correlation between free allocation and the incentive to innovate to reduce GHG emissions. The GHG emissions still represents a significant cost for the pulp, paper and board industry which companies try to minimize. Hence the EU ETS being a major concern. In addition, free allocation is a counterpart to the investments conceded to reduce GHG emission. No free allocation would mean a lot less ability to invest in CAPEX for GHG emissions reduction. As explained above, further incentive should come as funding investments and research aiming at low GHG emission production of energy-intensive goods. |
b) quite proportionate |
One of the main causes of administrative burden has been the continuous changes in ETS framework and implementing rules. This has caused uncertainty among industry. There is an urgent need for a more stable and consistent ETS policy. The initial burden is very high. Afterwards, it depends on Member States. Constant changes, almost every year, in MRV rules, without delivering any environmental benefits. |
b) a higher share than in 2013-20 |
There is only one overall EU allowance budget. If there is a risk of carbon leakage due to EU energy-climate policies, this has to be prevented with additional credits available in the system, including the ones covering indirect costs for increased electricity prices. In fact, carbon leakage would mean failure of the EU ETS to contain global GHG emission. Thus, the avoidance of carbon leakage should be an absolute priority. Given the current economic context, a higher share of allowances is needed to ensure growth in Europe and prevent businesses from moving abroad. Looking at current rules, the linear factor and correction factor makes that even being carbon leakage installations are allocated bellow benchmarks values. Moreover, there is a need to reconsider the need to provide free allocation to electricity produce in industrial CHP, as it is considered a BAT for energy efficiency in industry. |
b) the same share as in Phase 3 |
It is not so much a matter of budget allocated, but of policy uncertainty. |
a) yes |
All EU ETS revenues from auctioning to be returned exclusively to the industry in a way that supports the transition to a low GHG emission economy. This should include subsides for low GHG emission investments and funding of low GHG emission technology research. The EU ETS only will not be sufficient to improve energy efficiency and GHG emission reduction. The support of energy savings and GHG reduction investments will be a determinant factor of success of the EU ETS. Therefore, the development of new low-carbon technologies for industrial innovation should be as transversal as possible. |
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
Prevention of carbon leakage is a pre-requisite for innovation. As explained above, EU ETS auctioning revenues should be returned to the EU industry to support low GHG emission investments and research projects |
a) yes |
The pulp, paper and board manufacturing sector suffer from a lack of competitiveness partly due to high energy cost, high level of taxation and high direct and indirect GHG emission reduction cost relative to their competitors outside the EU. A global agreement (that could lead to comparable burdens for competing industrial installations around the world) would be the most effective way to address the risk of carbon leakage. In the absence of that, EU-wide harmonised measures addressing indirect costs should include both the rising of electricity costs due to energy-climate related policies (ETS + Renewables) and rising of wood raw material costs. Specifically on the latter, the ETS and renewables targets provide an incentive to burn wood instead of fossil fuels. Today even round wood suitable as raw material for forest industry is increasingly burnt across Europe. In some European countries the pulp wood prices have already increased and are expected to further increase. |
a) the present two groups should remain |
There is no need for a revision of the carbon leakage list. The pulp, paper & board manufacturing industry needs stability in the regulatory framework. |
a) the present criteria should remain |
The current criteria should remain. HOWEVER the “carbon costs” criteria should be expanded to include support schemes for Renewables in electricity (implicit carbon cost) and the cost of rising wood raw material cost due to ETS (see answer to Question 11). |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
See comment above (question 13) |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
b) longer (please specify) |
Stability is crucial for investments in Europe. Fiscal and legislative instability triggers insecurity of return on investment and should therefore be avoided. The validity of the carbon leakage list should then be extended to reflect typical investment cycles (10 to 15 years) and should remain unchanged until global climate agreement (which would guarantee equal competition conditions). |
a) the present approach of average of the 10% most efficient installations should remain |
Fiscal and legislative stability is important for investment and decision-making. Therefore, we advise not to revise the benchmark. Moreover, revising the benchmarks would greatly reduce the benefits that industrial installations should receive for their last energy-saving and GHG reduction investments, resulting in a loss of confidence and thus a decrease in investments. It should be reminded that the ETS in general, and the benchmarks in particular, should reward installations and sectors reducing GHG emissions. Revising benchmarks will only penalize the most virtuous sectors, rewarding the most carbon intensive. |
b) no |
Fiscal and legislative stability is important for investment and decision-making. Therefore, we advise not to revise the benchmark. Moreover, revising the benchmarks would greatly reduce the benefits that industrial installations should receive for their last energy-saving and GHG reduction investments, resulting in a loss of confidence and thus a decrease in investments. It should reminded that the ETS in general, and the benchmarks in particular, should reward installations and sectors reducing GHG emissions Revising benchmarks will only penalise the most virtuous sectors, rewarding the most carbon intensive. |
c) other (please specify) |
Three year average of relevant period could be OK, but there should be some flexibility in the reference years to take into consideration economic activities. Nevertheless, it should be kept the possibility to revise according to the state of the economy, crises, catastrophes etc. The allocation system should not constrain economic growth. |
a) no, there should be no deviations |
|
c) yes, in the form of additional free allocation |
Any system should be mandatory and harmonised for all the states. |
Important |
Most important |
Less important |
Least important |
Support for these stages is absolutely important and largely missing at EU level. However, it presupposes that all preceding R&D stages are adequately supported as well. |
c) from both |
Any support for innovation in industry should not come at the expenses of carbon leakage protection. Allowances for innovation will have to come on top of free allowances for industry. |
To mitigate climate change the EU should focus on promoting recovery and growth of industrial production in Europe, which is good for the environment and climate. Beside the high environmental standards set worldwide by European industries, the average CO2-emissions caused by electricity production in Europe are also low in global comparison. Hence, the more industry produces in Europe, the lower the global CO2-emissions. |
b) Trade association representing businesses |
CEPI - Confederation of European Paper Industries European Union Transparency Register nr. 72279144480-58 |
Mr. Nicola Rega Energy & Innovation Manager Avenue Louise 250, Box 80, B-1050 Brussels n.rega@cepi.org www.cepi.org - www.paperonline.org – www.paperforrecycling.eu – www.unfoldthefuture.eu Phone: (32 2) 627 49 11, Direct: (32 2) 627 49 18 Mobile: (32) 485 403 412 |
a) yes |
|
1) yes |
c) I don’t know |
The pulp, paper & board manufacturing industry, already invested significantly to reduce its GHG emissions. Although this industry is very varied in terms of manufacturing processes, features and uses, it can be safely said that major investments on actual available technologies have already been made across the sector. The potential for improvement with available technologies is very limited and it has to fit with market conditions for investment cycles. Forcing such investments makes little economic sense: they will only increase the competitive gap with international competitors. Technological breakthroughs are needed in order to further reduce GHG emission. This requires time and financial support (research and investment cycles). |
b) no |
Key is the long-term investment cycle. The high costs of energy and the related tax burden already act like an incentive for the pulp, paper and board manufacturing industry to reduce energy costs, thus reduce GHG emissions. Moreover, due to the energy price in Europe it is not a question of GHG reduction but a question of competitiveness. The EU ETS adds further costs that competitors outside the EU do not have. In addition, the continuous interventions to modify the regulatory framework create additional risks, thus costs, to industry. Overall, the EU ETS severely impairs our industry competitiveness. The short-term visibility provided by the EU ETS (rules set for single trading periods) does not give industry the long-term visibility needed to invest. |
a) yes |
Since the EU ETS was set up in 2005, the international economic context dramatically changed: the shale gas production in the USA offered a significant competitive edge to the American industry, the oil price increased dramatically, the debt crisis in Europe further increased the tax burden, the very low margins of the pulp, paper and board industry impaired its ability to invest, etc. The European countries suffer from a deficit of competitiveness on the international playing field. The EU ETS adds a substantial cost that is unmatched by industry in other parts of the world, thus negatively impacting on EU competitiveness. In a world of growing asymmetries in climate change policies, measures to support EU industry are a must. |
b) quite adequate |
The free allocation has been a shield for the competitiveness of the EU industry and helped maintain economic activity within EU borders. However, competitiveness is not secured over the short and medium term as the fast decrease of free allocation, the CSCF, the inadequate compensation for indirect costs, and the expected increase in carbon prices are a threat the EU industry faces in the future. Without a global agreement (that could lead to comparable burdens for competing industrial installations around the world), Europe will have to mitigate the impact of its policies for industries producing globally trading goods. Overall, mechanisms should be set up to help the EU industry improve its energy efficiency and reduce its GHG emissions. In addition, regarding the carbon leakage issue, the objective should be to attract more industrial activity while reducing the GHG emission and not only to avoid the decrease of industrial activity. |
b) it largely keeps the incentive |
There is no direct correlation between free allocation and the incentive to innovate to reduce GHG emissions. The GHG emissions still represents a significant energy-related cost for the pulp, paper and board industry which companies try to minimize through incremental innovation. Free allocation does not affect what just stated, as what matters is the opportunity cost. In addition, free allocation is used as collateral for raising finances to invest in GHG emission reductions. No free allocation would mean a lot less ability to access to capital to invest in CAPEX for GHG emissions reduction. As explained above, further incentive should come as funding investments and research aiming at innovative breakthroughs in low GHG emission production of energy-intensive goods. |
b) quite proportionate |
One of the main causes of administrative burden has been the continuous changes in ETS framework and implementing rules. This has caused uncertainty among industry. There is an urgent need for a more stable and consistent ETS policy. Specifically on implementation, the initial administrative burden is very high. Afterwards, it depends on Member States. We have registered constant changes, almost every year, in implementation of MRV rules, without these changes delivering any environmental benefits. Fines in place due to wrong entries are also disproportionately high, especially in view of constant changes in rules. |
b) a higher share than in 2013-20 |
There is only one overall EU allowance budget. The risk of carbon leakage due to EU energy-climate policies has to be prevented with additional credits available in the system, including the ones covering indirect costs for increased electricity prices. In fact, carbon leakage would mean failure of the EU ETS to contain global GHG emission. Thus, the avoidance of carbon leakage should be an absolute priority. Given the current economic context, a higher share of allowances is needed to ensure growth in Europe and prevent businesses from moving abroad. Looking at current rules, the linear factor and correction factor makes that even being carbon leakage installations are allocated bellow benchmarks values. Moreover, there is a need to reconsider the need to provide free allocation to electricity produce in industrial CHP, as it is considered a BAT for energy efficiency in industry. |
b) the same share as in Phase 3 |
It is not so much a matter of budget allocated, but of policy uncertainty. |
a) yes |
EU ETS revenues from auctioning to be returned exclusively the industry in a way that supports the transition to a low GHG emission economy. This should include subsides for low GHG emission investments and funding of low GHG emission technology research. The sole EU ETS only will not be sufficient to improve energy efficiency and GHG emission reduction. The support of energy savings and GHG reduction investments will be a determinant factor of success of the EU ETS. Therefore, the development of new low-carbon technologies for industrial innovation should be as transversal as possible. |
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
Prevention of carbon leakage is a pre-requisite for innovation. As explained above, EU ETS auctioning revenues should be returned to the EU industry to support low GHG emission investments and research projects. |
a) yes |
The pulp, paper and board manufacturing sector suffer from a lack of competitiveness partly due to high energy cost, high level of taxation and high direct and indirect GHG emission reduction cost relative to their competitors outside the EU. A global agreement (that could lead to comparable burdens for competing industrial installations around the world) would be the most effective way to address the risk of carbon leakage. In the absence of that, EU-wide harmonised measures addressing indirect costs should include both the rising of electricity costs due to energy-climate related policies (ETS + Renewables) and rising of wood raw material costs. Specifically on the latter, the ETS and renewables targets provide an incentive to burn wood instead of fossil fuels. Today even round wood suitable as raw material for forest industry is increasingly burnt across Europe. In some European countries the pulp wood prices have already increased and are expected to further increase. |
a) the present two groups should remain |
There is no need for a revision of the carbon leakage list. The pulp, paper & board manufacturing industry needs stability in the regulatory framework. |
a) the present criteria should remain |
The current criteria should remain. HOWEVER the “carbon costs” criteria should be expanded to include support schemes for Renewables in electricity (implicit carbon cost) and the cost of rising wood raw material cost due to ETS (see answer to Question 11). Move to NACE 3 level in assessing integrated sectors, such as the pulp and paper, should also be considered. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
See comment above (question 13) |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
b) longer (please specify) |
Stability is crucial for investments in Europe. Fiscal and legislative instability triggers insecurity of return on investment and should therefore be avoided. The validity of the carbon leakage list should then be extended to reflect typical investment cycles (10 to 15 years) and should remain unchanged until global climate agreement (which would guarantee equal competition conditions). |
a) the present approach of average of the 10% most efficient installations should remain |
Fiscal and legislative stability is important for investment and decision-making. Therefore, we advise not to revise the benchmarks, thus to keep the currently existing specific benchmark values. Moreover, revising the benchmarks would greatly reduce the benefits that industrial installations should receive for their last energy-saving and GHG reduction investments, resulting in a loss of confidence and thus a decrease in investments. It should be reminded that the ETS in general, and the benchmarks in particular, should reward installations and sectors reducing GHG emissions. Revising benchmarks will only penalise early movers and new investment made. |
b) no |
Fiscal and legislative stability is important for investment and decision-making. Therefore, we advise not to revise the benchmarks, thus to keep the currently existing specific benchmark values. Moreover, revising the benchmarks would greatly reduce the benefits that industrial installations should receive for their last energy-saving and GHG reduction investments, resulting in a loss of confidence and thus a decrease in investments. It should be reminded that the ETS in general, and the benchmarks in particular, should reward installations and sectors reducing GHG emissions. Revising benchmarks will only penalise early movers and new investment made. |
c) other (please specify) |
Three year average of relevant period could be OK, but there should be some flexibility in the reference years to take into consideration economic activities. Nevertheless, it should be kept the possibility to revise according to the state of the economy, crises, catastrophes etc. The allocation system should not constrain economic growth. |
a) no, there should be no deviations |
|
d) yes, in the form of financial compensation at EU-level |
Any system should be mandatory and harmonised for all the states. |
Less important |
Least important |
Most important |
Important |
Support for these stages is absolutely important and largely missing at EU level. However, it presupposes that all preceding R&D stages are adequately supported as well. |
c) from both |
Any support for innovation in industry should not come at the expenses of carbon leakage protection. Allowances for innovation will have to come on top of free allowances for industry. |
To mitigate climate change the EU should focus on promoting recovery and growth of industrial production in Europe, which is good for the environment and climate. Beside the high environmental standards set worldwide by European industries, the average CO2-emissions caused by electricity production in Europe are also low in global comparison. Hence, the more industry produces in Europe, the lower the global CO2-emissions. |
b) Trade association representing businesses |
Cerame-Unie |
17 Rue de la Montagne 1000 Brussels |
a) yes |
|
1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improvement |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. This would limit the list to sectors really exposed and would eliminate the risk of a carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
As explained above, all energy intensive sectors as defined in the Energy Taxation Directive should be considered as exposed to the carbon leakage risk. As an alternative, trade and carbon intensity criteria should be used considering the following elements. First, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS. Second, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of thresholds (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
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a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
b) Trade association representing businesses |
Chambre Syndicale des Verreries Mécaniques de France |
114 rue la Boétie 75008 Paris FRANCE 01.42.65.60.02 jacques.bordat@fedeverre.fr |
a) yes |
|
1) yes |
c) I don’t know |
The glass industry is making continuous improvement in energy efficiencies and process technologies to reduce CO2, energy consumption and environmental impacts. While further reductions in the glass industry are possible, what is important is the magnitude of this reduction. All official EU publications such as the “Sector Competitiveness Studies - Competitiveness of the Glass Sector - ENTR/06/054 - Final report, 14 October 2008” or more recently the Glass BREF and the BAT Conclusions show that no breakthrough technology is currently available to reduce CO2 emissions to the extent imposed by the energy and climate package 2030 (-43% for ETS sectors between 2005 and 2030). Emissions reductions cannot be repeated ad infinitum. There is a thermodynamic limit to the glass melting process which is an absolute limit, and that current technology is already approaching. However, process emissions cannot be eliminated, limiting therefore the reduction potential of the glass industries. |
b) no |
The main driver for energy efficiency improvements in the glass industry is the high share of energy costs within production costs. In fact, the glass industry has continuously improved energy efficiency over previous decades. Regulatory instruments and the EU ETS in particular, have only a marginal effect on energy efficiency improvements of glass melting activities, if any. Whilst there is no global ETS in place, the EU ETS is only a source of costs for glass industries (direct but also indirect CO2 costs linked to electricity), and therefore weakens the competitive position of European based glass industries vis-a-vis third country competitors. As such, it indirectly favors production reduction in the EU and rises in imports from non EU countries without carbon constraints into the EU. For these reasons, glass industries need to be fully protected against risks of carbon leakage. |
a) yes |
The EU glass industry faces higher costs for environmental protection, energy, labour and raw materials, than the majority of extra-EU competitors. In the absence of an international climate agreement and a level playing field between EU and extra EU competitors, the EU industry needs to be provided with measures to safeguard its competitiveness. Measures to avoid carbon leakage under the EU ETS are therefore essential. Measures should cover both the direct and indirect CO2 costs. Such measures under the EU ETS must be established in a way that ensures the ETS’ coherence with the EU’s ambition to revitalize European manufacturing activities, as proposed in the EC Communication on Industrial Renaissance. |
c) quite inadequate |
Free allocation has been key up to now to mitigate the negative impacts of a unilateral climate policy. However, the Cross Sectoral Correction Factor which is applied already from 2013 reduces the free allocation, even for the most GHG efficient installations, and will dramatically increase in the future, thus further reducing free allocation. This current system is unsustainable and should be changed in order to ensure that the most GHG efficient installations receive 100% of their allowance needs. |
a) it absolutely keeps the incentive |
Free allocation does not reduce the incentive to innovate; on the contrary, the majority of installations in the sector (about 95%) do not have enough allowances, which encourages industry to invest in the efficiency of its plants to avoid having to purchase a high level of allowances, which would render the sector uncompetitive. For the installations under the benchmark (about 5%), they can sell their allowances on the market, which is also an incentive to continue reducing emissions. The incentive is therefore present. Below, we also call for a periodic revision of the benchmarks (in exchange of the cancellation of the cross-sectoral factor), which also provides for a strong incentive to improve. Free allow. preserve investment capacity and offer industry the incentive to purchase less CO2 allow if they become more GHG efficient. However this last incentive would be better preserved if the CSCF was not forcing an unrealistic and arbitrary reduction of the number of free allow. |
b) quite proportionate |
Administrative burden is accepted, since it is necessary to maintain the free allocation system. However opportunities or improvement to this process should be considered. Conversely, the administration and calculation rules for new entrants are overly complex and can lead to under-allocation. They can therefore be seen as disproportionate and can be a disincentive to new investments |
d) there should be no limit to overall free allocation to industry |
The current system is unsustainable (from a competition point of view) because the cross sectoral correction factor continually reduces the free allocation given to industry, even for the most GHG efficient installations. Ideally, installations whose efficiency is equal or better than the (periodically reviewed) benchmark should receive 100% of free allocations to produce in the EU and so there should be no limit. In practice, this is likely to lead to a higher share in phase IV. An increased level of EU ambition in terms of GHG reduction would require enhanced measures against carbon leakage and therefore an increase in total free allocations. |
e) I don’t know |
Overall financing for technological innovation in manufacturing should be increased in the EU. However R & D should be funded via a mobilization of different sources of funding - including but not limited to - auctioning revenues. It should not come from the free entrants reserve or Free Allowances reserve. Allowances should be primarily used to ensure that the most GHG efficient installations get 100% of their needs to produce in the EU. Furthermore, financing for R&D and demonstration projects should be technology-neutral and not focused only on CCS or renewables. New technologies such as Carbon Capture and Use (CCU) and others should not be excluded. |
a) yes |
As stated above, industrial innovation, with a focus on the process and on new energy sources for industry, should be promoted. It should not be financed by shares of allowances reserved for free allocation or for new entrants, but rather from a mobilization of different sources, and not limited to auctioning revenues. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Industrial innovation should be promoted in a technology-neutral way. However this should not be done at the expense of free allocation which aims to provide effective support and protection against carbon leakage. Therefore it should be financed via other sources. This could include, among other sources, money from the auctioning revenues, as suggested in the ETS directive (Art 10.3). |
a) yes |
Unequitable carbon costs should not place EU industries at a competitive disadvantage with extra-EU competitors and this should be the ultimate objective pursued in order to achieve the EU’s ambition of 20% GDP realized by industrial activities in 2020. To that end, measures against carbon leakage are a pre-requisite but are not enough. An EU scheme for compensation of indirect costs due to higher electricity prices and some raw materials (e.g. soda ash, industrial gases, ..) should also be developed for Energy Intensive Industries. More generally, the EU needs to assess, and if needed reform, all its policies and in particular energy and environmental ones against the re-industrialisation objective. A longer term re-industrialisation objective for 2030 should be established. |
a) the present two groups should remain |
This binary model ensures that all sectors benefit from carbon leakage protection measures as soon as a risk is detected. This is essential to ensure that carbon leakage measures are effective and that protection is not granted too late, when industries are already in jeopardy |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
The competitiveness of energy-intensive industries is sensitive to energy and carbon costs, therefore a risk exists for all these industries. For the sake of simplicity and consistency in legislation, all energy-intensive industries, as defined in the Energy taxation directive, could be automatically placed on the carbon leakage list:"energy-intensive business" shall mean a business entity, (…) where either the purchases of energy products and electricity amount to at least 3,0 % of the production value or the national energy tax payable amounts to at least 0,5 % of the added value. In case ETS-specific criteria are maintained, they should continue being based on both the CO2 intensity and the trade intensity metrics. The CO2 cost metric should be made more relevant to analyze the impacts of carbon cost on sectors’ profitability. To that end, the CO2 cost over GVA criteria could be replaced by a CO2 cost over Gross Operating Surplus (GOS) criteria. |
b) other thresholds should be defined. Please specify below |
The competitiveness of energy-intensive industries is sensitive to energy and carbon costs, therefore a risk exists for all these industries. For the sake of simplicity and consistency in legislation, all energy-intensive industries, as defined in the Energy taxation directive, could be automatically placed on the carbon leakage list:"energy-intensive business" shall mean a business entity, (…) where either the purchases of energy products and electricity amount to at least 3,0 % of the production value or the national energy tax payable amounts to at least 0,5 % of the added value. In case ETS-specific criteria are maintained, they should continue being based on both the CO2 intensity and the trade intensity metrics. The CO2 cost metric should be made more relevant to analyze the impacts of carbon cost on sectors’ profitability. To that end, the CO2 cost over GVA criteria could be replaced by a CO2 cost over Gross Operating Surplus (GOS) criteria. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The current criteria under the quantitative assessment at NACE 3 or 4 level should be maintained and used as the first assessment option. When an assessment at NACE 3 or 4 level is not appropriate to identify the relevant industrial activities falling under the EU ETS, then a quantitative assessment at 6- or 8-digit should be carried as a second option. Finally, as a third option, a qualitative assessment must remain possible. Other parameters can be studied as part of qualitative assessments, such as methodology and evidences of investment leakage. |
d) in line with the duration of ETS Phase 4 |
As long as there are no equivalent GHG reduction measures taken by major trading partners, the list of sectors exposed to the risk of carbon leakage should remain valid. This is essential to provide predictability to industries faced with long investment cycles (typically > 15 years). |
a) the present approach of average of the 10% most efficient installations should remain |
Glass industries support ambitious benchmark levels, which reflect the technological capabilities of the sectors best performers using the best available and proven technologies in Europe. It must be kept in mind however that this approach also has limits. Indeed, benchmark curves do not always reflect a difference in terms of « best » (the least GHG emitters per tonne of glass) or « worst » GHG players, but a difference in terms of products produced, cullet availability, age of furnace, available fuels, etc. The 10% best GHG performers can therefore be regarded as extremely challenging, especially for plants producing a wider range of more sophisticated products with higher added-value (as this usually entails higher energy consumption). |
a) yes (please specify how often) |
It seems logical to revise the benchmarks from time to time to reflect GHG improvements over time. Revision cycles should be linked to ETS phases and remain unchanged over this period. Periodical revision of the benchmark should be based on the actual EU based installations. The periodic revision of benchmarks should be the sole instrument leading to a reduction of free allowances over time, as benchmarks reflect true possibilities of GHG improvements according to state-of-the-art technologies deployed in Europe. The periodic revision of benchmarks therefore justifies that the CSCF is abandoned. |
c) other (please specify) |
Ex-ante allocation can only lead to over-allocation in crisis times, and under-allocation when the economy is growing. A better approach is to design an « ex post » system, where real allocation is corrected according to the real production. |
a) no, there should be no deviations |
In principle, there shall be no deviation from the general harmonized allocation rules at the level of an individual installation as this could cause distortion of competition. Only in the case of very specific hardship, should deviations be envisaged for an entire sector after a careful assessment of the competitive effects of such deviations. |
d) yes, in the form of financial compensation at EU-level |
Rules for the compensation of indirect costs should be revised and need to be effective to reflect the real burden of CO2 included in electricity costs for industry. A differentiated compensation approach by Member States is not acceptable from a competitiveness point of view. A harmonized approach at EU level is therefore needed. The harmonized measure should take the form of financial compensation. Free allocation should be kept aside to ensure full relief for direct emissions (most GHG efficient installations should receive 100% of their needs). A compensation system should also be put in place to compensate for higher prices of some raw materials (e.g. soda ash) and industrial gases. |
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a) from the Member States' auction budgets |
Allowances funding low-carbon innovation support should be financed from the Member States’ auction revenues and from a mobilization of additional sources. However, this should not be financed at the expense of free allocation or the new entrants reserve which must be principally used for measures against risks of carbon leakage. |
Generally speaking, glass industries welcome the opportunity to express their views on carbon leakage measures post 2020 and appreciate that this discussion is held without further delay. It is however regrettable that industry is asked to comment on such measures whereas the rules for EU ETS Phase IV have not yet been fully decided. The glass industry wishes to reiterate that so long that there is no comparable ETS system (which means that similar costs are born by competitors) operating in most part of the world and in extra-EU countries with glass industries, EU based glass industries will need to receive full and effective protection against carbon leakage. The recent assessment carried by DG CLIMA on exposure to carbon leakage risks, i.e. the carbon leakage list of 2009 and its recent revision, shows that between 2009 and 2014, risks of carbon leakage has grown in most glass sectors. For these reasons, glass industries need effective protection moving forward. |
b) Trade association representing businesses |
Chemical Industries Association |
Nick Sturgeon, Energy Trade and Competitiveness Director, Kings Buildings, Smith Square, LONDON, SW1P 3JJ, UK 020 7963 6752 Sturgeonn@cia.org.uk |
a) yes |
|
1) yes |
b) no |
Proposed emissions reductions under EU ETS go beyond what the EU chemical sector can practically and realistically achieve. The flawed architecture of the EU ETS also means that free allocations of emissions allowances are below benchmark levels and reducing at a steeper rate than even the EU ETS emissions cap. So free allocation is less effective at addressing carbon leakage risks than intended. The EU chemical sector has already reduced its GHG emissions by 50% since 1990 and the roadmap for the sector by Ecofys suggests there is only potential to raise this to 60% by 2030. Yet under the linear reduction factor (LRF) the cap is already falling by 1.74% per year up to 2020 and it is proposed to fall by 2.2% per year between 2020-30. While free allocations are based on challenging top 10% benchmarks, the cross-sectoral correction factor (CSCF) threatens to further reduce allocations by more than 17% by 2020 and the proposed LRF will increase this shortfall (by up to 30% by 2030). |
b) no |
In principal we support the use of emissions trading as the core instrument for driving energy efficiency and achieving emissions reductions in the tradable sector on a least cost basis. However, when emissions trading is implemented unilaterally, there needs to be effective mechanisms for addressing the risk of carbon leakage. Unfortunately, the current proposals for EU ETS fail to uphold these principles as the Market Stability Reserve (MSR) is designed to make it a high cost scheme and the high LRF and CSCF makes free allocation less effective in addressing carbon leakage risks. |
a) yes |
The Council rightly considers industrial energy a key issue for industrial growth and competitiveness. Policy makers strive for delivering a functioning, competitive internal energy market by 2014 with affordable and reliable energy supply. But, the Commission’s “Energy prices and costs” report also shows Europe is losing competitiveness due to policy driven increases in energy costs and levies. Yet the EC 2030 Climate and Energy Communication proposes policies - notably unilateral climate targets and carbon market interventions - that will push up EU carbon and energy costs and substantially undermine EU chemical sector competitiveness: thereby inhibiting any industrial renaissance. Faced with these policies we can only support the Council’s request that the Commission should rapidly develop measures to prevent potential carbon leakage and call for long-term planning security for industrial investment in order to ensure the competitiveness of Europe's energy-intensive industries. |
b) quite adequate |
Free allocation can be very effective in addressing the risk of carbon leakage. However, in its current form, free allocation under EU ETS is flawed. This is because the high CSCF adds to costs and ‘frozen’ ex-ante allocation discourages growth and investment as undertakings have to purchase allowances if output increases but, perversely, rewards relocation of some production outside Europe. Instead, a “dynamic” system based on benchmarks and actual production should be introduced after 2020. The EU’s unilateral CSCF and the LRF should be abandoned to allow for the EU’s energy intensive undertakings (in sectors on the carbon leakage list) to receive 100% free allocation of allowances provided they achieve the benchmark level of efficiency. Free allocation should cover both direct and indirect emissions as member states’ compensation for impacts on power prices has been variable and inconsistent. There should be a reserve to ensure sufficient free allowances for industry. |
a) it absolutely keeps the incentive |
Undertakings that do not meet the allocation benchmarks will continue to be required to purchase the additional allowances (as is the case today) thereby creating a continued incentive to innovate to reduce emissions. |
b) quite proportionate |
The current system is quite proportionate. However the administrative burden of work on benchmarking provisions could be made more proportionate if, instead of a flawed, ex-ante allocation, the EU ETS adopted a “dynamic” allocation system that better encourages growth and innovation. |
d) there should be no limit to overall free allocation to industry |
There should be no limit because the LRF goes beyond the abatement potential of energy intensive industries and the architecture of the EU ETS is flawed. The architecture of the EU ETS is flawed because allocations are below benchmark levels and application of the CSCF means that free allocations of emissions allowances are reducing at an even steeper rate than the EU ETS emissions cap. This means free allocation will become increasingly less effective for addressing carbon leakage risks. There should be sufficient allowances available to allow full protection to work until 2030 at minimum, without reduction in the amount of free allowances (e.g. by CSCF). |
c) a lower share than in Phase 3 |
The priority should be to address carbon leakage risks from the current proposals for 2030 by ensuring that the EU’s energy intensive undertakings (in sectors on the carbon leakage list) receive 100% free allocation of benchmark allowances. We question the value of using NER 300 to demonstrate renewables as many member states are financing very large scale implementations. If there is to be support, it would be better to target research at improving the economics of renewable technologies before they are implemented. NER300 could be better-spent on demonstrating lower cost abatement opportunities such as energy efficiency measures in energy intensive industries. |
c) I don’t know |
The priority should be to address carbon leakage risks from the current proposals for 2030 by ensuring that the EU’s energy intensive undertakings (in sectors on the carbon leakage list) receive 100% free allocation of benchmarked allowances. However it is also appropriate to support innovation of low carbon technologies by industry where there may be lower cost abatement opportunities than there are, for example, for renewable electricity. Rather than do this through NER we would support the use of revenue from auctioning to finance innovation. Furthermore existing funding programmes do exist, which could be augmented, rather than creating new frameworks (e.g. Horizon 2020, 7th Framework, SET Programmes). |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The priority should be to address carbon leakage risks from the current proposals for 2030 by ensuring that the EU’s energy intensive undertakings (in sectors on the carbon leakage list) to receive 100% free allocation of allowances provided they achieve the benchmark level of efficiency. |
a) yes |
Free allocation should cover both direct and indirect emissions as member states’ compensation for impacts on power prices has, to date, been variable and inconsistent. |
a) the present two groups should remain |
As the Council rightly considers, the cost of energy in industrial production is a key issue for industrial growth and competitiveness. But, at the same time, the Commission’s “Energy prices and costs” report shows how Europe is losing competitiveness due to policy driven increases in energy costs and levies. The Commission should therefore resist calls to reduce the carbon leakage list as this will only push up EU carbon and energy costs, reducing industrial competitiveness and hindering economic recovery and growth in the EU. |
a) the present criteria should remain |
As the Council rightly considers, the cost of energy in industrial production is a key issue for industrial growth and competitiveness. But, at the same time, the Commission’s “Energy prices and costs” report shows how Europe is losing competitiveness due to policy driven increases in energy costs and levies. The Commission should therefore resist calls to reduce the carbon leakage list as this will only push up EU carbon and energy costs, reducing industrial competitiveness and hindering economic recovery and growth in the EU. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
As the Council rightly considers, the cost of energy in industrial production is a key issue for industrial growth and competitiveness. But, at the same time, the Commission’s “Energy prices and costs” report shows how Europe is losing competitiveness due to policy driven increases in energy costs and levies. The Commission should therefore resist calls to reduce the carbon leakage list as this will only push up EU carbon and energy costs, reducing industrial competitiveness and hindering economic recovery and growth in the EU. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
It is critical that the qualitative criteria are retained as the main carbon and trade intensity thresholds use historical data and cannot identify impending carbon leakage risks such as the start-up of export capacity competing production locations. |
d) in line with the duration of ETS Phase 4 |
Companies need a predictable policy framework to plan their businesses. Shorter review periods would increase uncertainty and put growth and investment at risk. |
c) the approach should be less stringent (please specify) |
As the intention is to fully protect a sector then the weighted average performance should be used as a benchmark and not the top 10%. Furthermore the Commission should resist calls to make benchmarks more stringent than top 10% as this will only push up EU carbon and energy costs. |
a) yes (please specify how often) |
It is right that benchmarks should be revised periodically to ensure they take account of technical developments. However, in view of the length of investment cycles any changes should be graduated over a long period. More frequent and significant changes will reduce the attractiveness of the EU as a production location. |
c) other (please specify) |
In its current form, free allocation under EU ETS is flawed. This is because the high CSCF adds to costs and ‘frozen’ ex-ante allocation discourages growth and investment as undertakings have to purchase allowances if output increases but, perversely, rewards relocation of some production outside Europe. Instead, a “dynamic” system based on benchmarks and actual production should be introduced after 2020. The EU’s unilateral CSCF and the LRF should be abandoned to allow for the EU’s energy intensive undertakings (in sectors on the carbon leakage list) to receive 100% free allocation of allowances provided they achieve the benchmark level of efficiency. Free allocation should cover both direct and indirect emissions as member states’ compensation for impacts on power prices has been variable and inconsistent. There should be a reserve to ensure sufficient free allowances for industry. |
a) no, there should be no deviations |
Allocations should be harmonised on an EU-wide basis to ensure equity and a level playing field within the EU. |
c) yes, in the form of additional free allocation |
Free allocation should cover both direct and indirect emissions as member state’ compensation for impacts on power prices has been variable. |
Important |
Most important |
Less important |
Least important |
If there is any financial support, it should be focused at the conceptual and front-end stages of the process i.e. R&D focussed on breakthrough science and technology innovations. Support should not attempt to pick specific technology “winners”, which instead more effectively happens through commercial utilisation of science and technology under free and competitive market conditions. The closer that support is provided to the final commercialization stage the more likely it is that specific technology solutions, i.e. “winners”, will be picked. |
a) from the Member States' auction budgets |
This would be preferable to using the NER300 as the priority should be to address carbon leakage risks from the current proposals for 2030 by ensuring that the EU’s energy intensive undertakings (in sectors on the carbon leakage list) receive 100% free allocation of benchmark allowances. |
|
b) Trade association representing businesses |
CIRFS; European Man-made Fibres Association Registered 5691104733-95 CIRFS: European Man-made Fibres Association, is the industry’s representative in Europe. The European man-made fibres industry is the second-largest producer of man-made fibres in the world, and a global leader in innovation, quality and sustainable production methods according national and European legislation. CIRFS has about 40 members, representing 85% of the European MMF industry. |
Bernard Defraye CIRFS: European Man-made Fibres Association Avenue E. Van Nieuwenhuyse 6 B-1160 Brussels Telephone +32 2 676 7468 email def@cirfs.org |
a) yes |
|
1) yes |
a) yes |
|
b) no |
CIRFS members are exposed to carbon leakage based on the trade effect. This is the consequence of the global and competitive market the man-made fibres industry is operating in. This also implies that the man- made fibres industry is working hard, since many years, to save on energy and to increase the energy efficiency of its production processes in order to stay competitive. No additional financial burden (ETS, although partly compensating) is needed. |
a) yes |
see also answer to Q2 CIRFS members are exposed to carbon leakage based on the trade effect. This is the consequence of the global and competitive market the man-made fibres industry is operating in. This also implies that the man- made fibres industry is working hard, since many years, to save on energy and to increase the energy efficiency of its production processes in order to stay competitive. Please remind that the compensation for CL is not 100%, only for heat, and not for electricity if the Member State does not compensate. The compensation should be 100%. Even then the EU industry is faced with highest energy prices, and will have to work hard on energy efficiency to stay competitive. |
b) quite adequate |
But the free allocation should be 100%. See Q2 and Q3. This question and many other questions are only related to one aspect of competitiveness, in this case ETS and CL provisions, but the whole package of environmental measures (e.g. REACh, IED, etc.) and its consequences should be considered to get an exact picture of the effects on the competitiveness of EU industry. |
a) it absolutely keeps the incentive |
see previous questions |
c) quite exaggerated |
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d) there should be no limit to overall free allocation to industry |
|
e) I don’t know |
CIRFS hopes it is value for money |
a) yes |
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d) I don’t know |
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c) I don’t know |
Structural measures should be taken so that energy in EU is available at a global competitive level |
e) I don’t know |
when meeting the trade and/or cost criteria compensation should be given, independent of the number of lists. |
a) the present criteria should remain |
|
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
b) longer (please specify) |
Investments in the MMF industry have a much longer horizon than 5 years. Changes in ETS and the CL-status within 5 years have an impact; raised uncertainty, reduced predictability and lower transparency within the industry. Instability is killing for investment. |
a) the present approach of average of the 10% most efficient installations should remain |
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c) I don’t know |
|
d) I don’t know |
|
b) yes, there should be deviations with higher allowances for installations facing specific hardships |
|
c) yes, in the form of additional free allocation |
The split for free compensation between heat and electricity is purely artificial. Why compensate via 2 completely different compensation systems? |
Most important |
Less important |
Important |
Least important |
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a) from the Member States' auction budgets |
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b) Trade association representing businesses |
COFALEC: Confédération des fabricants de levure de l'UE (EU Yeast Industry) Eu transparency register = Confé20818184 |
COFALEC 14 rue de Turbigo F-75001 Paris Guichard@cofalec.com +33 1 45 08 54 82 |
a) yes |
|
1) yes |
c) I don’t know |
|
b) no |
The importance is not to have less emission inside the EU, but to have a global reduction of CO2 emission world-wide. |
a) yes |
Energy is a key factor in any industrial process. Some major changes are taking place currently (reduction Nuclear power capacity in the EU, Shell gazes development in North America), and a special attention have to be made to maintain the completion of EU industry which is facing world wide competition. |
a) very adequate |
the free allocations for carbon leakage sectors is a good instrument, because it is connected to the price market of CO2. During high CO2 prices period, carbon leakage industry receive more incentive, during low prices period, industry receive less. Also, the CO2 quota is now a very well known "object" and it is easy to explain the difference between ETS sectors under carbon-leakage or not. |
b) it largely keeps the incentive |
Our members knows that the carbon leakage list depends of a political decision, so industry knows that the global trend toward CO2 emissions exists, and can easily estimate the gap between being on the carbon leakage list and not being on the list. As a consequence, Industry continue to try to reduce the CO2 emissions, which is also a demand of industry customers. |
a) absolutely proportionate |
Keeping the EU industry competitive means keeping jobs in the EU. In this period of high unemployment and strong political movement against the EU (see EU parliament election results), maintaining jobs in the EU should be the number one objectives of Member states and Commissions. Any measure which can maintain the competiveness of the EU industry should be implemented. The excuse of "administrative burden" is in our view not appropriate to reduce a tool which is efficient. |
b) a higher share than in 2013-20 |
carbon leakage allowances are in theory proportional to the industry exports. If the goal of EU Commission is to maintain the competiveness of the EU industry, in theory exports should increase, so the free allowances should also increase. |
e) I don’t know |
As a EU industrial sector, our objective is to maintain our competiveness on exports on the world market. Carbon capture is a good objective but ahs no link with our industry. |
c) I don’t know |
|
d) I don’t know |
|
a) yes |
It may be possible to have some special tax system or support scheme for investment done in energy intensive sectors, which allows industry to investment in energy saving or new technology in a contra-cycle movement, fore example by converting future CO2 allowance (not received yet) into an investment on energy saving. |
a) the present two groups should remain |
the list gives some visibility to the EU industry. However a change should be done to allow for listing of sectors to a definition lower than PRODCOM8. Also a better coordination with Eurostat should be done, to avoid changes in the PRODCOM classification during a period. |
d) only the intensity of trade with third countries should be maintained |
For the yeast industry, the main criteria is world competition. The GVA is not easy to estimate, and should be compared with the GVA of world competitors, which is usually impossible to do. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
a 30% threshold for trade intensity is adequate. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The carbon leakage list is based on NACE or PRODCOM8. These classifications sometimes mixed some very different products, which different market structures. Also, some data extracted from public sources (eurostat) are not accurate enough (Industry usually do not sue the Eurostat data, so no corrections have ever been asked to change incorrect Eurostat data). It is compulsory to have a qualitative assessment to confirm the status of the sectors. |
d) in line with the duration of ETS Phase 4 |
The possibility for sectors to enter the list during phase 4 should be maintain. |
a) the present approach of average of the 10% most efficient installations should remain |
for clarity, the same rules should be maintained. |
b) no |
|
d) I don’t know |
The baseline should be known as soon as possible to inform the Industry. |
a) no, there should be no deviations |
the ETS is linked to the CO2 market which is a unified market. A pillar of the EU treaties is the common market, ETS regulation should respect this principle |
c) yes, in the form of additional free allocation |
as mentioned in a question earlier, free quota is the right tool for compensation. |
Most important |
Important |
Less important |
I don't know |
|
b) from free allocation |
free allocation is the right instrument for ETS policy |
|
b) Trade association representing businesses |
Comité Européen des Fabricants de Sucre |
Avenue de Tervuren 182 – B-1150 Brussels Telephone: +32 2 774 51 03 anna.papagrigoraki@cefs.org |
a) yes |
|
1) yes |
b) no |
There are physical limits & constraints (thermodynamics, agriculture…) hence investments in research and innovations for developing new technologies for GHG reduction are needed so as not to compromise production. With regards to sugar production, high reduction of GHG emissions has been achieved over the latest 20 years. The further reduction potential has to be seen in context with fuel costs. After 2017 EU sugar production will be in severe competition with sugar production in third countries having access to energy sources such as e.g bagasse for cane sugar production. This makes it imperative to optimize EU sugar production on energy costs and not on minimization of GHG emissions to allow the sector to survive. |
b) no |
ETS, since being the theoretically most efficient system for reducing emissions of industry, represents added costs only to the EU industry, decreasing de facto its competitiveness. Moreover, becoming more “carbon efficient” does not necessarily mean becoming more “energy efficient” . |
a) yes |
These measures must not be transitional but stable during the period until a level playing field of climate policy costs will be achieved. Moreover there is need for a re-assessment of the 2050 target to be achievable by not losing the majority of the EU industrial production from restructuring of the industry. |
b) quite adequate |
Free allocation is a mandatory tool for sectors with structural higher energy/ CO2 costs compared to production in third countries. It is one of the necessary tools to address carbon leakage but should also be completed with other relevant tools to encompass all effects of carbon costs such as indirect emissions and low carbon price effects. |
a) it absolutely keeps the incentive |
The free allocations are based on very ambitious benchmarks which per se maintain the incentive to carry out research and development studies and invest in innovative technologies for emissions reduction. |
c) quite exaggerated |
|
d) there should be no limit to overall free allocation to industry |
The overall reduction aim has to be checked if achievable. Free allocation has to be given in the amount necessary to avoid carbon leakage while preventing job loss. Since free allocation is the main instrument to avoid carbon leakage, its share should be sufficient for this purpose. An efficient producer in the EU must not have any competitiveness disadvantage compared to competitors outside the EU (energy price is already weighing heavily at EU industry disadvantage!). |
d) there should be no such innovation support post-2020 |
|
a) yes |
Instead the scheme should be expanded to Carbon Capture and Reuse, eg to produce new products like hydrocarbons/biomass from the CO2 instead of consuming oil based carbon. |
c) other types of funding (please specify) |
|
a) yes |
Additional measures must include free allocation for indirect emissions, based on actual production (dynamic allocation) rather than historical production and no cross-sectoral correction factor for sectors exposed to carbon leakage. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
There is no need for a carbon leakage list, all CHP installation with heat management should be treated as exposed. The whole value chain is concerned by carbon leakage. Therefore, the absence of list would simplify the process since today almost 95% of the industrial sectors are included anyway. Moreover it would reinforce the legislative predictability of the system, which is important for securing investments in the European union. |
a) the present criteria should remain |
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a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
b) longer (please specify) |
At least for the expected duration of phase 4 since industry needs legislative predictability in line with the average heavy industrial investment cycle that may reach several decades. Otherwise it will hinder investments in GHG reduction, energy efficiency and innovative technologies with long payback time. |
c) the approach should be less stringent (please specify) |
There should be no cross sectoral correction factor that circumvents the levels of the benchmarks by reducing the allocation below. Going below the benchmark values also does not make sense technically. |
b) no |
Legislative predictability is very important to keep industry investing in the EU. Moreover early movers would be discouraged to invest since it would contribute to decrease their benchmark and it would make them lose their return on investment. |
c) other (please specify) |
Frozen ex ante allocation does prevent growth of the industry. A dynamic system with a rolling basis should be the system of choice to accompany the economic situation and to allow the industry to adapt to beet processing campaigns of longer duration. Moreover according to the report published by Ecofys (2014) dynamic allocation is suitable for the existing 52 product benchmarks covering around 75% of industrial emissions. However sectors eligible for free allocation that are not currently covered by a product benchmark could propose a verified product benchmark. Another option would be to create installation-specific product benchmarks, by relating free allocation currently based on fall-back benchmarks to corresponding activity levels. This would be suitable for the sugar industry due to the increasing duration of beet processing campaigns. |
a) no, there should be no deviations |
Harmonised rules must be kept in order to avoid any case of competition distortion. |
c) yes, in the form of additional free allocation |
Free allocations for indirect emissions will avoid the current situation of diverging national approaches leading to competition distortion. |
Least important |
Important |
Less important |
I don't know |
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e) I don't know |
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b) Trade association representing businesses |
Committee of PET Manufacturers in Europe (CPME) |
CPME aisbl Rue Théodore de Cuyper 100 1200 Brussels, Belgium +44 7770 51 33 65 info@cpme-pet.org |
a) yes |
|
1) yes |
a) yes |
The EU continues to open its borders to free trade. Only if the competitive environment is fair can European manufacturing sectors invest in more efficient energy sources which will result in reduction of carbon emissions. The answer to the question therefore is only if European manufacturing has equal and competitive access to energy can reductions be made whilst output increases |
b) no |
ETS does not contribute to more cost effective energy. The innovation in energy is driven by the competitive market. Now that other regions have access to “shale gas” it can be seen that suddenly those regions become more energy efficient. ETS is only achieving a focus on carbon emission reduction but does not address energy competitiveness |
a) yes |
The fact that the EU has to enshrine compensation within the ETS program to stop “carbon leakage” identifies ETS as a penalty for European production. Only if the ETS process or equivalent is unilaterally applied globally can it be fair. Therefore if Europe continues on its crusade to save the planet it must not kill its own industrial base (which is already world class in energy conservation) and allow it to be disadvantaged by cheaper imports based on energy that comes from wasteful sources |
b) quite adequate |
It has been our industry’s experience that the European Commission has been impotent to address the inequality of the program. Yes, free allowances give benefits, however the sector of Plastics in primary form (NACE 2016) has examples of disparity caused by political decisions. The process must be seen to be totally fair and not driven by the calendar |
e) I don’t know |
There is no accountability for the application of the incentive. The allowances can be used to help a company survive a very competitive market. The allowance therefore is not being used as investment to cut carbon emissions. So one has to assume the ETS process is not achieving investment in energy efficiency or clean technology but only helping industry survive by making it capable of competing against cheaper imports |
b) quite proportionate |
Whichever system the EU chooses it will require proper attention from companies. The present system requires allocation of man hours and the services of consultants to claim and administer the allocation system |
d) there should be no limit to overall free allocation to industry |
There should be no limit to the free allocation; rather, the allocation should be predicated on the actions of other economic players in the context of the UNFCCC negotiations. If the EU is still under competitive threat due to inaction of others, then Industry should be fully supported |
e) I don’t know |
Support levels should be dependent on other players outside of the EU, and related to ongoing technological developments in the EU. For example, is CCS the correct or appropriate technology for Europe? |
a) yes |
The risks for a single company can be very high. Whilst it is accepted that the rewards may be high the rewards may equally, be very low & dependent on the ability of the EU to implement the technology. Consider the replacement cost of the EU’s manufacturing units that are currently supported by free allocation. The industry is not capable of funding changes using new technology in the short period of time being discussed within the ETS rules. Therefore it is likely that the EU industry will suffer severe damage, unless there is some form of EU replacement strategy implemented. Consider typical Manufacturing plant life = 20-30 years. Assume EU Manufacturing plant replaced at 1-5%/year New technology invented and fully implementable by 2025 Full EU replacement no earlier than 2045, and assumes all plans are ready for replacement beginning 2025 and this will not be the case |
d) I don’t know |
Innovation should not be on the back of a tax on certain manufacturing sectors. Therefore option b should never be considered. Any funds from this process should be used to maintain the competitiveness of existing manufacture vs other economic players in the context of the UNFCCC negotiations The whole of the EU population will benefit from low carbon technologies and so the funding must be from typical EU and National government schemes and/or by voluntary investment, cf the opportunity to make a monetary contribution to “carbon reduction” when booking flights. The actual funding requirement should drive the most appropriate funding process |
c) I don’t know |
The answer to this question is predicated on other economic players in the context of the UNFCCC negotiations. If they comply then no additional measure would be needed, if not……………..? To be helpful to EU industries the EU could consider benchmarking industries outside of the EU |
a) the present two groups should remain |
It is important to recognise that there will be exposed sectors that will become “no longer exposed” due to adoption of innovation. Equally there will be sectors that are currently not exposed that will “become exposed”. The system must be flexible enough to support either of the above cases quickly and efficiently and on a rolling, piecemeal basis (as it is today). A budget reduction per se is not acceptable. Manufacturing, and the effect of the behaviour of other economic players, in the context of the UNFCCC negotiations on manufacturing, should be the driver for the budget. It is imperative we do not allow EU manufacturing to be placed at a competitive disadvantage. In principle there has to be a division somehow, but are the two sides just looking “black or white”, could a league table approach be adapted providing penalties for not bringing improvements |
a) the present criteria should remain |
The present criteria should remain but the process to administer this should be thoroughly examined and revised. EU Competitiveness is dependent on robust support systems. Situations change and therefore the review process should be open and honest |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The present parameters seem to suit the current manufacturing environment; however this should not preclude changes to any parameter if appropriate. Any change must reflect the behaviour of other economic players in the context of the UNFCCC negotiations. The maintenance of EU Manufacturing Competiveness must always be the main driver |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
For manufacturing that is on the edge of the current thresholds, it is important to include other qualitative measures and employ them in the protection of EU Competitiveness vs the behaviour of other economic players in the context of the UNFCCC negotiations. However the “discretion” element in answer a) is not appropriate. It must be “compulsory” to consider all parameters and any refusal to accept other qualitative measures must be fully justifiable and defensible in any EU appeal process. The lack of suitable review timetables requires consideration. Industry cycles and the global economic environment change very quickly |
c) shorter (please specify) |
The list must be flexible enough to be added to, or have sectors removed, on a continuous basis. Missing a deadline fixed by a third party can cause major financial problems for industry and is totally unnecessary. The process should be made flexible enough to cope with daily additions or deletions. Business cycles change dramatically and new economies and regions come to prey on the mature European market as a dumping ground due to our demographics. Businesses can die within a period of a 5 year cycle. Plus using a timeframe to decide if a sector passes or not is unfair. If it is accepted that an industry has a carbon leakage problem, and the industry can exhibit suitable behaviour for carbon reduction innovation, then it should not suffer due to a time-framed process |
c) the approach should be less stringent (please specify) |
The 10% target assumes that manufacturing technologies within a sector are broadly the same. This may not be the case, technologies may be protected by patent (puts others at a disadvantage) and reinvestment costs for the sector may be very high. The interval % should be appropriate for the sector and set by agreement with the Commission and the manufacturing sector (either directly with companies or with Associations) |
a) yes (please specify how often) |
See comment to question 17. The time interval is very dependent on the reinvestment ability of the sector – consider reinvestment costs can be ‘00s of millions of euros. Therefore the time interval for revision should be set by agreement with the Commission and the manufacturing sector (either directly with companies or with Associations). This is the nature of the business cycle and innovation |
c) other (please specify) |
The most appropriate production data used to calculate allocations in Phase 4 is dependent on the technology employed and should be set by agreement with the Commission and the manufacturing sector (either directly with companies or with Associations). Communication with the industry sector is important to fully understand the sector |
d) both b) and c) |
There should be no real winners or losers in this process. However both b) and c) should be protected in line with the behaviour of other economic players in the context of the UNFCCC negotiations. Ie the system should be fair and transparent for all |
d) yes, in the form of financial compensation at EU-level |
In the current process some States provide compensation others do not. Also the compensation levels vary state to state. This can lead to unfairness across the EU with some members of a sector receiving excess compensation vs other members of the sector in other states = extra state aid? However an EU wide compensation system should not be harmonised but must fairly reflect any disadvantages caused by any third parties. According to the mission of the EU this has to be the case |
Least important |
Less important |
Most important |
Important |
The above table will not allow a column to be chosen twice during the exercise! I have reported this to 'Malin.simu@ec.europa.eu' but have received an out of office notice. No other comments |
d) other |
Innovation should not be on the back of a tax on manufacturing sectors. Therefore options a, b & c, should never be considered. Any excess funds from this process should be used to maintain the competitiveness of existing manufacture vs other economic players in the context of the UNFCCC negotiations The whole of the EU population will benefit from low carbon innovation and so the funding must be from typical EU and National government schemes and by voluntary investment. The actual funding requirement should drive the most appropriate funding process. If the program is to succeed the EU has to fund |
The success of the ETS program can only happen if industry sees it as a positive initiative that does not penalise European operations. Incentives to develop technology to bring about lower carbon emissions must bring benefits both in cost effectiveness and future growth. If downstream customers such as retailers and end users are driven by lowest price only, then imports will continue to increase especially in commodities. Is it possible to tax imported products that are known to utilise high carbon emitting industries? Europe has developed the control of chemicals for the benefit of the public and environment in REACH. Is it possible to tax importers who are sourcing materials from inefficient sources? |
b) Trade association representing businesses |
Confederación Española de Organizaciones Empresariales (CEOE) |
C/Diego de León, 50 28006 Madrid Spain +34 91 566 34 55 lgallego@ceoe.es ID number: 02963738854-41 |
a) yes |
1) yes |
b) no |
Los márgenes de reducción de emisiones en la industria son muy pequeños. Ya se han venido realizando esfuerzos de reducción importantes y sin cambios tecnológicos relevantes no serán posibles reducciones adicionales. Para poder alcanzar los cambios tecnológicos mencionados sería necesario disponer de apoyos y líneas de financiación en I+D+i para la industria, de cara a conseguir una viabilidad económica. A corto y medio plazo sólo serían posibles limitadas reducciones mediante la implantación de medidas de eficiencia energética. |
b) no |
Las mejoras en eficiencia asociadas al CO2 son mínimas, lo que viene demostrado por el limitado número de proyectos que se han certificado para la obtención de créditos de reducción dentro de la propia UE. El actual diseño del ETS, donde no se valora la eficiencia energética en las industrias y únicamente se centra en el CO2 directo, termina penalizando a las instalaciones más eficientes, porque ni siquiera les garantiza una asignación gratuita del 100%, limitando aún más su capacidad de competir. |
a) yes |
En cualquier caso es preciso aclarar a que se refiere con “special (transitional) measures”. Es necesario poner de manifiesto, que países que vienen considerándose “Países en Desarrollo” y que hablan de responsabilidad histórica, como China, y cuyas emisiones representan el 29% de las emisiones mundiales, ya han alcanzado unas emisiones per cápita iguales a la media de la UE y han incrementado sus emisiones nacionales un 290% desde 1990. Por tanto deben ponerse en marcha políticas equivalentes de reducción de emisiones y a pesar de los compromisos que se adquieran mantener las medidas para sectores y subsectores en riesgo de fuga de carbono, no sólo en cuanto a su asignación gratuita sino también en relación a la compensación de costes indirectos. |
a) very adequate |
En estos momentos existe un riesgo elevado de fuga de carbono (deslocalización, al fin y al cabo) que se ha incrementado por los bajos precios de la energía en otros países que, como EE.UU., no están ni han estado nunca sometidos a ningún tipo de compromiso de reducción de emisiones. Dicho país únicamente ha reducido sus emisiones un 4% sus emisiones de gases de efecto invernadero desde 1990 y sus emisiones per cápita más que duplican a las de la media de la UE. |
b) it largely keeps the incentive |
Desde luego que mantiene el incentivo, destacaría dos razones: • La reducción de emisiones impacta directa y positivamente en las cuentas de resultados de las empresas, al reducir los consumos energéticos. • Con un sistema de “cap and trade” como es el EU ETS, uno de los objetivos de las instalaciones es reducir sus emisiones para poder vender en el mercado los derechos sobrantes. Este es uno de los objetivos e incentivos de un sistema de “cap and trade”. • La asignación gratuita sirve para proteger a la industria del riesgo de deslocalización al tiempo que mantiene intacto el incentivo para la reducción de emisiones. |
c) quite exaggerated |
Las cargas administrativas asociadas a EU ETS, son absolutamente desproporcionadas, especialmente para las instalaciones de bajas emisiones, ya que en la práctica no tienen ninguna reducción de las obligaciones. Algunas mejoras podrían establecerse para reducir la carga administrativa en este tipo de instalaciones, que además son las de menor tamaño. Probablemente, la Comisión debe tomar las plantillas más específicas para cada sector en lugar de que aplique la misma a todos ya que en la mayoría de los casos al final está vacía en un 98%. Además no se deben confundir los requisitos para la asignación con los de la consideración de fuga de carbono. |
d) there should be no limit to overall free allocation to industry |
Actualmente el factor lineal del 1,74%, y el posteriormente aplicado factor de corrección uniforme intersectorial ha dejado a muchas instalaciones en riesgo de fuga de carbono (y que de acuerdo con la Directiva 2009/26/CE deberían recibir asignación gratuita 100% de acuerdo con su distancia a su benchmark sectorial) con una disponibilidad de asignación gratuita de alrededor del 50% de sus necesidades para producir, por lo tanto, los sectores o subsectores en riesgo de fuga de carbono deben tener garantizada la asignación gratuita para sus necesidades de producción. Excepto en igualdad de condiciones de competencia internacional la asignación gratuita deberá ser mantenida. |
e) I don’t know |
NER 300 ha sido no utilizado en su totalidad debido a que la mayor parte de la industria europea no puede permitirse los precios para que el CCS se lleve a cabo. Estos precios harían que la mayoría de las industrias de gran consumo energético europeo no fuesen competitivas a escala global. A menos que se produzca un cambio en el marco del ETS a escala global, este problema seguirá estando presente. Por desgracia, el sistema tal cual está establecido actualmente no es apoyado por otros países con emisiones importantes a nivel mundial. |
a) yes |
Es vital que exista apoyo específico para la investigación y desarrollo industrial, de otro modo no será posible disponer de tecnología que permita reducir las emisiones de CO2. Muchos de los sectores industriales afectados por ETS han desarrollado su propia Hoja de Ruta 2050 hacia una economía baja en carbono, en la que se definen las líneas estratégicas de investigación que permitirían avanzar en el desarrollo de tecnología baja en carbono. Sin olvidar que el ETS debe cambiar radicalmente para que sea atractivo en su implantación para los terceros países. En la actualidad, no hay ningún incentivo en este sentido para que cualquier empresa de un país tercero participe. Además se debería mejorar la dotación presupuestaria del Programa Horizonte 2020 y el SET Plan. |
c) other types of funding (please specify) |
Las medidas de apoyo financiero para tecnologías innovadoras deberían, en todo caso, garantizar la neutralidad tecnológica. Además, todas las fuentes energéticas deberían estar sujetas a las mismas condiciones de mercado. Además, se debería mejorar la dotación de los vigentes Programa Horizonte 2020 y SET Plan. |
a) yes |
Es necesario compensar costes indirectos(CI), pero es alarmante la diferencia presupuestaria entre EEMM, que genera desventaja competitiva de instalaciones industriales españolas respecto a sus homólogas europeas. Ej: compensaciones a precios eléctricos y de CO2 actuales en la mayoría de los EEMM que las han aprobado son 3–5€/MWh mientras que en España son 0,03-0,05€/MWh (100 veces inferior). Y las necesidades de las industrias españolas para estas ayudas es superior a 100Mill€, según estimaciones ofrecidas por los sectores afectados. Esta desventaja competitiva se ha comunicado varias veces al gobierno pero, con la crisis en que nos encontramos, no nos han dado una solución al problema. Es decir, nuestras industrias compiten en un entorno europeo con precios energéticos más altos que la media y se suma la dificultad de compensar los CI a un nivel adecuado a sus necesidades. Esto produce un marco de diferencias competitivas por factores NO productivos ajeno al control de las empresas. |
a) the present two groups should remain |
La asignación gratuita para sectores en riesgo de deslocalización es uno de los requisitos mínimos necesarios para conservar la competitividad de la gran mayoría de la industria española. Dada la vulnerabilidad de las industrias consideradas en riesgo significativo de fuga de carbono, la situación económica española, las desventajas competitivas que se pueden dar con otras industrias europeas y las condiciones de competencia internacional en el marco de políticas de cambio climático y ambientales más exigentes, en comparación con el resto del mundo, hace que las industrias españolas precisen de un marco regulatorio estable donde no se haga peligrar su condición de sector o subsector expuesto a riesgo de fuga de carbono. |
a) the present criteria should remain |
|
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
En un criterio muy importante ya que no siempre los datos para los umbrales que se contemplan reflejan la realidad de los sectores y no demuestran su riesgo de deslocalización. |
d) in line with the duration of ETS Phase 4 |
Las decisiones de inversión de una empresa dependen en gran medida de la disposición de un entorno predecible y estable. Cualquier herramienta, y de cara a reducir incertidumbres entre los actores involucrados y poder planificar nuevas inversiones, debe ser estable en la forma y en el tiempo, es decir no estar sujeta a modificaciones o cambios en sus reglas. |
c) the approach should be less stringent (please specify) |
El actual enfoque es acertado, lo que se debería revisar a la luz de los datos de emisiones verificadas y variaciones de niveles de actividad de que se va a disponer dentro del periodo 2013-2020. Es decir, si efectivamente los benchmarks establecidos para cada producto, están bien ajustados al 10% de las mejores instalaciones, y en caso de que no lo estén ajustar aquellos que lo requieran. Otra opción podría ser un enfoque menos exigente siempre y cuando se eliminase el cap industrial. |
b) no |
En línea con la respuesta anterior, se podrían revisar, pero no en base al estado del arte de la tecnología, sino en base a la realidad de las instalaciones, que es como se definieron. Además de depender del grado de accesibilidad a las nuevas posibilidades técnicas, o si se están comercializando, deberá tenerse en cuenta el grado de amortización de las tecnologías que dispongan y de las posibilidades de inversión de cada instalación. Además, y como ya se ha citado anteriormente, dada la configuración actual del ETS en el que las instalaciones más eficientes son penalizadas, la conveniencia de la revisión plantea serias dudas. En cualquier caso la mejora tecnológica y sus costes asociados, deberían ser en el ámbito europeo. De cualquier modo, en caso de realizarse una revisión, debería de ser para el periodo siguiente y nunca en medio de un periodo, ya que si así fuera generaría incertidumbre en la industria. |
c) other (please specify) |
Si es necesario, sí, pero cualquier previsión deberá tener en cuenta las situaciones económicas pasadas, presentes y futuras, para poder realizar la mejor aproximación posible, sobre todo de cara a la futura recuperación económica española y de la UE. En este sentido podría ser razonable una adaptación de las opciones que menciona Ecofys en su informe sobre asignación dinámica, recurriendo a una asignación expost basada en un benchmarking que le aplique la producción anual. |
e) I don’t know |
Dado que esta pregunta puede dar lugar a diferentes interpretaciones, si es necesario mencionar, que dejando a un lado la necesidad de mantener la asignación gratuita para los sectores y subsectores expuestos a riesgo de fuga de carbono y la necesidad de compensar los costes indirectos, el esquema está perfectamente definido, y no debería haber excepciones, por ejemplo, del tipo de ayudas de estado (hasta cierto punto encubiertas) a instalaciones concretas por parte de un EEMM. |
d) yes, in the form of financial compensation at EU-level |
Los mecanismos de protección contra el riesgo de fuga de carbono deberían integrar, además de la asignación gratuita, una compensación de los costes indirectos. La percepción de las compensaciones tiene que ser armonizada a nivel de la UE, para que no haya desventajas competitivas intracomunitarias ni distorsiones de mercados. |
Important |
Most important |
Less important |
I don't know |
Es importante el apoyo a lo largo de toda la cadena del proceso de innovación y sobre todo es muy importante eliminar la brecha existente entre las dos últimas etapas. Sin embargo no se puede otorgar una ayuda de estado para una determinada instalación, justificándolo como un apoyo a una de las etapas de esta cadena. |
c) from both |
Aunque no deberían quedar limitados exclusivamente a estas dos opciones.También debería ser financiada con instrumentos ya existentes como el Programa Horizonte 2020 o el SET Plan. |
Es de vital importancia mantener las medidas para evitar la deslocalización y compensar los costes indirectos, mientras que no exista un acuerdo jurídicamente vinculante y global que obligue a un esfuerzo de reducción comparable a todos los países. Además insistir, en que los continuos cambios que viene sufriendo el actual esquema, no conlleva más que a incertidumbres y consecuentes deslocalizaciones. |
b) Trade association representing businesses |
Confederation of Paper Industries (UK) |
Rivenhall Road Swindon SN5 7BD UK sfreeman@paper.org.uk 0044 1837 861771 |
a) yes |
|
1) yes |
c) I don’t know |
Substantial reductions in the release of GHG have already been achieved by the sector – in the UK,GHG emissions are already 42% lower per tonne of production (1990 vs 2012, as audited by the UK Government under the Climate Change Agreement) and further improvements have already been delivered, both through increased use of biomass fuel as well as substantial investment in new plant and incremental improvement to existing plant. The potential for further improvements with available technologies is technically limited, as well as being impacted by investment cycles and market conditions. Increased generic energy costs is already acting as a driver for further improvements; forcing such investments will only increase the competitive gap with international competitors. Paper making remains intrinsically energy intensive. The sector has already highlighted the need for technological breakthroughs through its 2050 Roadmap, highlighting the need for both time and financial support. |
b) no |
No. In a sector with long investment cycles, then additional climate policy related costs (not applied to competitors outside the EU) only serve to make European industry less competitive. The high costs of energy and the related tax burden are already a driver for energy intensive industry to reduce energy costs and GHG emissions. With European energy costs already relatively higher than in competitor locations, it is not a question of GHG reduction but a question of competitiveness. The EU ETS adds further costs that competitors outside the EU do not have. In addition, the continuous interventions to modify the regulatory framework create additional risks, thus costs, to industry. Overall, the EU ETS impairs industry competitiveness. The short-term visibility provided by EU ETS (single trading period rules) does not give industry the long-term visibility needed to invest. In addition energy policy differences between MS's is causing competitive distortions within the EU. |
a) yes |
The industrial operating environment has changed substantially since EU ETS was set up in 2005, with many of these changes increasing the need for support measures. Shale gas production in the USA offers a significant competitive edge to American industry; the oil price has increased dramatically; the debt crisis in Europe has further increased the tax burden; as well as the very low margins of the pulp, paper and board industry impairing the ability to invest – these issues serving to make Europe less competitive. The European countries suffer from a deficit of competitiveness on the international playing field. In addition other countries have not taken forward climate change policies at the speed expected. In a world of growing asymmetries in climate change policies, measures to support EU industry remain critical. |
b) quite adequate |
Free allocation has been a reasonable protection for the competitiveness of the EU industry and helped maintain economic activity within EU borders – the principles of cap and trade are sound. This protection is increasingly being reduced – less free allocation to most sites from the benchmarking process; the application of the cross sector reduction factor inadequate compensation for indirect costs; and the expected increase in carbon prices are all a threat to the EU competitive position. Without any global agreement (leading to comparable burdens for competing industrial installations), Europe will have to mitigate the impact of its policies for industries producing globally traded goods. Mechanisms should be set up to help the EU industry improve its energy efficiency and reduce its GHG emissions. It makes no sense to drive industry from Europe and then simply reimport manufactured goods where emissions are offshored. Total reductions are critical - not just within the EU. |
a) it absolutely keeps the incentive |
The cap and trade principle together with free allocation retains the incentive to reduce emissions. Energy remains a significant cost for the pulp, paper and board industry which companies try to minimize through incremental improvement and innovation in manufacturing processes. Additionally free allocation can be used as collateral for raising finances to invest in GHG emission reductions. The removal of free allocation would reduce access to capital to invest in CAPEX. As well as the installation specific issues, support is required for R&D innovations to deliver breakthroughs in low GHG emission production of energy- intensive goods. Also it needs to be stressed that BM's are set by the 10% most efficient sites meaning the great majority of installations do not receive sufficient allocation to cover their emissions - a real issue for older sites already short of capital better used for investment than covering regulatory costs. |
c) quite exaggerated |
In general the administrative burden to account for small amounts of emissions is disproportionate to their size – on occasions this over-administration brings the scheme into ridicule.The definition of combustion, in particular, should be refocused to avoid trivial fuel usage. Added to this is the continuous changes in ETS framework and implementing rules causing uncertainty among industry. There is an urgent need for a more stable and consistent ETS policy. We have seen constant changes, almost every year, in implementation of the MRV rules, without these changes delivering any environmental benefits. Fines in place due to wrong entries are also disproportionately high, especially in view of constant changes in rules. |
d) there should be no limit to overall free allocation to industry |
As much as is required - the risk of carbon leakage due to EU energy-climate policies has to be prevented otherwise the policy is meaningless. The linear factor and correction factor mean that even installations at risk of carbon leakage are allocated below benchmarks values. There is an urgent need to reconsider the need to provide free allocation to electricity produced in industrial CHP, as it is considered to be BAT for energy efficiency in industry. |
b) the same share as in Phase 3 |
Same share as in Phase III. |
a) yes |
Yes. EU ETS revenues from auctioning should be used to support a transition to a low GHG emission economy and not retained for general revenue by Member States. This should include subsides for low GHG emission investments and funding of low GHG emission technology research. |
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
It should be funded under a system similar to NER300 with a wider role to cover greenhouse gases reduction technologies in industry. Prevention of carbon leakage is a pre-requisite for innovation. EU ETS auctioning revenues should be returned to the EU industry to support low GHG emission investments and research projects. |
a) yes |
The pulp & paper sector suffers from a lack of competitiveness partly due to high energy costs, high taxation, high regulatory burdens (such as the BREF) and high direct and indirect GHG emission reduction cost relative to competitors outside the EU. A genuine global agreement (leading to comparable burdens for competing installations around the world) would be the effective way to address the risk of carbon leakage. It cannot be assumed others will follow a European lead. With n oglobal agreement, EU-wide harmonised measures addressing indirect costs should include both the rising of electricity costs due to energy- climate related policies (ETS + Renewables) and the increasing cost of wood raw material costs. Specifically, ETS and renewables targets provide an incentive to burn wood instead of fossil fuels; fiber suitable for the forest product industry is increasingly being burnt across Europe with pulp wood prices increasing as a result. |
a) the present two groups should remain |
The present two groups should remain and the debate over carbon leakage status only provides and unstable regulatory framework. However the current long list contains sectors that are not and will never be in EU ETS and theses should be removed from the carbon leakage list. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
No criteria is ideal, so GVA seems as good a measure as any. HOWEVER the “carbon costs” criteria should be expanded to include support schemes for Renewables in electricity (implicit carbon cost) and the cost of rising wood raw material cost due to ETS (see above). A move to NACE 3 level in assessing integrated sectors, such as the pulp and paper, should also be considered. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The present threshold should be maintained. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Yes, it is important to maintain a certain level of discretion in the system for justified cases, but this should be managed at Commission level to avoid different approached by different Member States. |
b) longer (please specify) |
Longer. Stability is crucial for investments in Europe. Fiscal and legislative instability triggers insecurity of return on investment and should therefore be avoided. The validity of the carbon leakage list should then be extended to reflect typical investment cycles (at least 10 to 15 years) and should remain unchanged until global climate agreement (which would guarantee equal competition conditions). As a fallback the agreed list should last for the full period of each Phase. |
a) the present approach of average of the 10% most efficient installations should remain |
The present approach of average of the 10% most efficient installations seems reasonable in allowing for best practice and encouraging greater efficiency in other installations, so the existing benchmarks should generally be retained, unless it is agreed with sectors that there are errors in particular benchmark definitions. However making wholesale changing the benchmarks would greatly reduce the benefits that industrial installations receive for their energy-saving and GHG reduction investments, resulting in a loss of confidence and thus a potential decrease in investments. ETS in general, and the benchmarks in particular, should reward installations and sectors reducing GHG emissions. Revising benchmarks will only penalise early movers and new investments made under the existing rules. |
b) no |
No. Fiscal and legislative stability is important for investment and decision-making. Therefore, we advise not to revise the benchmarks, thus to keep the currently existing specific benchmark values. Moreover, revising the benchmarks would greatly reduce the benefits that industrial installations should receive for their latest energy-saving and GHG reduction investments, resulting in a loss of confidence and thus a decrease in investments. It should be a principle that the ETS in general, and the benchmarks in particular, should reward installations and sectors reducing GHG emissions. Revising benchmarks will only penalise early movers and new investment made. As a minimum there should be transitional periods for those using the old benchmarks when making existing investments. |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
Three year average of relevant period could work, but there should be some flexibility in the reference years to take into consideration economic activities. The possibility to revise the baseline methodology according to the state of the economy, crises, catastrophes etc. should be retained. The allocation system should not constrain economic growth that would simply be relocated outside the EU. |
a) no, there should be no deviations |
|
d) yes, in the form of financial compensation at EU-level |
|
Less important |
Least important |
Most important |
Important |
Support for all stages of R&D and the delivery of new technology is critical. |
c) from both |
|
The fundamental purpose of EU ETS must remain the delivery of emissions reduction at least cost; a low market price for allowances does not automatically mean the system is not working, but rather the lowest cost emissions reduction is working through the cap and trade market system. EU ETS should not be a system to set a pre-determined carbon price to drive low carbon investment primarily in the power generation sector. Nor is EU ETS a system to raise taxation for Governments to spend elsewhere. The EU should focus on promoting recovery and growth of industrial production in Europe, with high environmental standards and low levels of carbon emissions delivered both by installations and through power grids. |
b) Trade association representing businesses |
Confederation of the Finnish Industries EK, Register ID: 1274604847-34 |
Kati Ruohomäki (kati.ruohomaki@ek.fi) tel. +358 9 4202 2562, PO Box 30, FIN-00131 Helsinki, Finland |
a) yes |
1) yes |
a) yes |
Increase in energy efficiency and renewable energy reduces GHG-emissions also in coming years and post-2020. New innovations will spring up for instance in the area of process technology, energy efficiency and renewable energy. But it has to take into account, what are the costs of these new solutions and will industry be profitable enough to find financing for R&D and investments. |
a) yes |
ETS sectors it should be the only regulatory driver, also to improve energy efficiency. |
a) yes |
Measures against carbon leakage are needed: free allocation and full compensation for indirect costs. |
a) very adequate |
The free allocation has been a fairy good tool to help EU industry in the unfair carbon cost situation in the international market. However, free allocation has to be improved at least for the next ETS phase: the carbon leakage sector is far away from 100 % free allocation (unrealistic benchmarks, other free allocation rules, the cross-sectoral correction factor). |
a) it absolutely keeps the incentive |
Allowance has a value even if it has been given free. It is incentive to reduce emissions and sell part of the allowances. |
b) quite proportionate |
Administrative burden is quite proportionate, when you compare it to the benefit of free allocation. But it is one additional cost more, that competitors outside the EU do not have. Problematic is also the time consumed to reporting in the very thin organizations today. The human resource is away from other work for example the emissions reduction actions. |
b) a higher share than in 2013-20 |
Taking account the realistic benchmaking EU industry which is at the risk of carbon leakage should have full free allocation. No c-factor (no industrial cap) shoud be use aymore post 2020. |
b) the same share as in Phase 3 |
|
a) yes |
|
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
|
a) yes |
EU wide ETS compensation scheme is needed for indirect cost (electricity). Free allocation has to be improved. Also, other indirect costs like rising wood raw material prices should study more. A global agreement (that could lead to comparable burdens for competing industrial installations around the world) would be the most effective way to prevent the risk of carbon leakage. |
a) the present two groups should remain |
It might be too complex to handle two different carbon leakage lists with different criteria. Actually, all industry is influence by the the risk of carbon leakage, because there are dependencies between companies and sectors in the value chains. |
a) the present criteria should remain |
|
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
b) longer (please specify) |
The revision of carbon leakage list creates pointless uncertainty and demands administrative and sectoral resources needed elsewhere. New candidates can be accepted, but otherwise the list should remain unchanged until sufficient global climate agreement. |
a) the present approach of average of the 10% most efficient installations should remain |
|
b) no |
All rules including benchmarks should remain unchanged until global agreement. Fiscal and legislative stability is important for investment and decision-making. |
c) other (please specify) |
It is better to have several baseline period options for companies. The present used baseline periods should be maintained and the 2016 - 2018 period should be added as an alternative. It is important to have enough alternatives so that companies will have possibility to pick a sufficient operation period and avoid unusual / unfavorable production periods. |
a) no, there should be no deviations |
|
d) yes, in the form of financial compensation at EU-level |
|
Least important |
Less important |
Most important |
Important |
There is usually national or EU wide R&D financing available for small-scale protopypes and conceptional stage. |
a) from the Member States' auction budgets |
Support for innovation in industry should not come at the expenses of carbon leakage protection. Allowances for innovation will have to come on top of free allowances for industry. |
EU industry is the most efficient globally. It is a real climate act to increase industrial production in Europe. |
b) Trade association representing businesses |
COPACEL, the trade association representing French companies producing pulp, paper and board |
Sylvain Le Net (COPACEL - 23 rue d’Aumale - 75009 PARIS ; +33 1 53 89 24 53 ; +33 6 28 06 94 55 ; sylvain.lenet@copacel.fr) |
a) yes |
|
1) yes |
b) no |
The EU industry, especially the French pulp, paper & board manufacturing industry, already invested significantly to reduce its GHG emissions. The potential for improvement with today’s best available technologies is very limited and makes little economic sense. Technological breakthroughs are needed in order to further reduce GHG emission. This requires time and financial support (research and investment cycles). |
b) no |
The high costs of energy and the related tax burden already act like an incentive for the pulp, paper and board manufacturing industry to improve energy efficiency, and thus reduce the GHG. The EU ETS adds further cost that their competitors outside the EU do not support. In addition, the continuous interventions to modify the regulatory framework create additional risks and costs, to the industry. To conclude, the EU ETS severely impairs our industry competitiveness. |
a) yes |
Since the EU ETS was set up in 2005, the international economic context dramatically changed: the shale gas production in the USA offered a significant competitive edge to the American industry, the oil price increased dramatically, the debt crisis in Europe further increased the tax burden, the very low profit margins of the pulp, paper and board industry severely impaired its ability to invest, etc. The European countries suffer from a dire deficit of competitiveness on the international playing field. This explains the inability of the EU to recover from the economic slump. The current economic policies have a major impact, including the EU ETS which represents a negative factor. In a world of growing asymmetries regarding climate change policies, measures to support EU industry are a must. |
b) quite adequate |
Free allocation has been a shield for the competitiveness of the EU industry and helped maintain economic activity within EU borders. However, it did not prevent investment leakage. Competitiveness is not secured over the short and medium term as the fast decrease of free allocation is a threat the EU industry faces in the future. Free allocation is a necessary condition and not sufficient to avoid carbon leakage: support mechanisms should be set up to help the EU industry improve its energy efficiency and reduce its GHG emissions. In addition, regarding the carbon leakage issue, the objective should be to attract more industrial activity while reducing the GHG emission and not only to avoid the decrease of industrial activity. Hence the EU ETS would become a worldwide incentive to produce energy-intensive goods with a low GHG impact. |
a) it absolutely keeps the incentive |
The free allocation does not decrease the incentive to innovate to reduce GHG emissions. The GHG emissions still represents a significant cost for the pulp, paper and board industry which companies try to minimize. Hence the EU ETS being a major concern. In addition, free allocation is a counterpart to the investments dedicated to reducing GHG emission. No free allocation would mean a lot less ability to invest in GHG emissions reduction. As explained above, further incentive should come as funding investments and research aiming at low GHG emission production of energy-intensive goods. |
b) quite proportionate |
One of the main causes of administrative burden has been the continuous changes in ETS framework and implementing rules. This has caused uncertainty within the industrial sector. There is an urgent need for a more stable and consistent ETS policy. The French pulp, paper & board manufacturing industry needs stability in the regulatory framework. |
b) a higher share than in 2013-20 |
Carbon leakage and even investment leakage should be considered failure of the EU ETS to contain global GHG emission. Thus, the avoidance of carbon leakage should be an absolute priority. Given the current economic context, a higher share of allowances is needed to prevent businesses from moving abroad. Furthermore, as previously stated, the EU industry, in particular the French companies producing pulp, paper and board, have made significant investments to reduce their GHG emissions over the past years. Investing in the best available technologies would not bring a drastic improvement. Breakthrough technologies are needed. The EU Commission should consider GHG reduction potential with best available technologies before choosing to strengthen the incentive to cut GHG emission. |
b) the same share as in Phase 3 |
It is not so much a matter of budget allocated, but of policy uncertainty. |
c) I don’t know |
The French pulp, paper & board manufacturing industry is asking for all EU ETS revenues from auctioning to be returned exclusively the industry in a way that supports the transition to a low GHG emission economy. This should include subsides for low GHG emission investments and funding of low GHG emission technology research. The EU ETS only will not be sufficient to improve energy efficiency and GHG emission reduction. The support of energy savings and GHG reduction investments will be a determinant factor of success of the EU ETS. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
As explained above, EU ETS auctioning revenues should be returned exclusively to the EU industry to support low GHG emission investments and research projects. |
a) yes |
Energy intensive sectors, in particular the pulp, paper and board manufacturing sector suffer from a lack of competitiveness partly due to high energy cost, high level of taxation and high GHG emission cost relative to their competitors outside the EU. A global agreement on carbon emissions would be the most effective way to address the risk of carbon leakage. In the absence of that, EU-wide measures addressing costs should include both the rising of electricity costs due to energy-climate related policies (ETS + Renewables) and rising of wood raw material costs. Specifically on the latter, the ETS and renewables targets provide an incentive to burn wood instead of fossil fuels. It has strongly increased demand of wood for energy use. As result, there is growing pressure for higher price of pulp wood and at some European countries the pulp wood prices have increased. |
a) the present two groups should remain |
There is no need for a revision of the carbon leakage list. The French pulp, paper & board manufacturing industry needs stability in the regulatory framework. |
a) the present criteria should remain |
|
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
b) longer (please specify) |
Fiscal and legislative instability triggers insecurity of return on investment and should therefore be avoided. The validity of the carbon leakage list should then be extended to reflect typical investment cycles (10 to 15 years). |
a) the present approach of average of the 10% most efficient installations should remain |
It should take into account other parameters as, for example, the installation capacity. |
b) no |
Fiscal and legislative stability is important for investment and decision-making. Therefore, we advise not to revise the benchmark. Moreover, revising the benchmarks would greatly reduce the benefits that industrial installations should receive for their last energy-saving and GHG reduction investments, resulting in a loss of confidence and thus a decrease in investments. |
c) other (please specify) |
Three year average of relevant period could be OK, but there should be some flexibility in the reference years to take into consideration economic activities. Nevertheless, it should be kept the possibility to revise according to the state of the economy, crises, catastrophes etc. The allocation system should not constrain economic growth. |
a) no, there should be no deviations |
|
d) yes, in the form of financial compensation at EU-level |
|
Least important |
Less important |
Important |
Most important |
|
a) from the Member States' auction budgets |
|
To mitigate climate change the EU should focus on promoting industrial production in Europe, which is good for the environment and climate. The average CO2-emissions caused by electricity production in Europe are low in global comparison. Hence, the more industry produces in Europe, the lower the global CO2-emissions. |
b) Trade association representing businesses |
Czech Lime Association |
K Cementarne 1261, Prague 5, Czech Republic svvapno@svvapno.cz |
a) yes |
|
1) yes |
b) no |
Around 70% of the total CO2 emissions generated in lime production are "process emissions": they come from our raw material, limestone. These process emissions cannot be avoided without changing the quality of the final lime product which is however essential to serve specific applications. Currently, the most energy efficient kiln is near the thermodynamic minimum required for the chemical reaction needed for producing lime. The heat of the reaction for typical quicklime quality is 3.03 GJ/tonne, and the average fuel use 4.25. The energy consumption of the best available lime kiln (a Parallel Flow Regenerative Kiln, PFRK) is between 3.2 and 4.2 GJ/tonne. This type of kiln is already the most widely spread kiln technology today. However, one should keep in mind that horizontal rotary kilns (less energy efficient) provide a certain quality of lime and permit to optimize the extracted limestone due to their ability to treat the different sizes of stones. |
b) no |
The EU ETS will only remain the best solution for reducing CO2 emissions as long as the GHG reduction target is set at a level which is both technically and economically feasible. The current economic crisis and the further shrinking of the demand for lime products makes that there is at the moment a lot of “idle” production capacity in the EU. These installations are completely amortized which makes production in these installations cheaper than in a new one. A higher carbon price would not be a solution, as it would only draw money away from producers without enabling them to make an investment. When assessing the potential further ETS amendment in a sector, it is necessary to take account of the lifespan and replacement rate of kilns. Most of the time, investments costs always assume an investment in a new capacity (replacing the old capacity before its end of life). However, for the lime sector, kilns receive big maintenance periodically. |
a) yes |
Carbon Leakage will remain a big concern after 2020 in the absence of an international agreement putting forward a similar CO2 burden. EuLA believes that all energy intensive industries should be protected against carbon leakage, and that any increased level of ambition of Europe towards 2030 should lead to increased and not decreased protection against carbon leakage. Furthermore, the EU ETS is NOT addressing the following concerns: - The GHG reduction deficit (shortage of free allowances even for the installations with the best GHG performance. - Energy costs represent on average 40% of the lime industry’s manufacturing costs. Having access to energy at a reasonable cost is an essential condition for operating in the EU and for maintaining lime's competitiveness. - Further adequate incentives for low carbon investments is needed, with auctioning revenues being targeted for low carbon investment toward the industry |
b) quite adequate |
The current carbon leakage mitigation measures do not take into account of: The importance of CO2 embodied in imports A unilateral reduction of CO2 emissions in Europe will not help fighting against climate change if a subsequent rise of imports from third countries is created. Carbon Trust, amongst others, demonstrated that the reduction in production-related CO2 is largely compensated by CO2 embodied in imports. The cumulative burden of the EU framework Several other EU legislations have an impact on the EU's industry competitiveness (renewables, energy efficiency). The Commission should ensure an integrated approach with no overlap. Energy costs Energy costs represent on average 40% of the lime industry’s manufacturing costs. Like for any energy intensive industry, having access to energy at a reasonable cost is an essential condition for operating in the EU and for maintaining its competitiveness. |
b) it largely keeps the incentive |
It is important to remind that the Commission has calculated product specific benchmarks based on the average GHG emissions of the 10% best performers. A comparison of these benchmark values with the minimum values that are technically feasible shows that the remaining potential in some sectors, like lime, is actually quite low. The current best available and most energy-efficient kilns (the Parallel Flow Regenerative Kiln, PFRK) is close to the thermodynamic minimum required for the chemical reaction needed for producing lime. In other words, no further breakthrough technologies in energy efficiency are expected. The drive towards the most energy efficient solutions can easily be explained by the fact that energy costs represent on average around 40% of the lime sector’s production costs. Outside the deployment of a commercially and technically feasible Carbon Capture and Storage solution, there is little margin for further CO2 abatement in the lime sector. |
c) quite exaggerated |
Lime is the most impacted sector by the EU ETS. The production of 1 tonne of lime generates 1 to 1.6 tonne of CO2. This means that the EU ETS has a strong impact on the sector, up to 35% of impact of the CO2 costs on Gross Value Added (Hourcade et al, 2008). Therefore, the full impact of carbon costs would have serious consequences in terms of carbon leakage for the lime industry. While the lime industry advocates in favor of less red tape and less administrative burden, it recognizes the importance of the free allocation for maintaining a competitive industry in the EU. |
d) there should be no limit to overall free allocation to industry |
There is still a need today for an international climate agreement that would bring a level playing field to EU manufacturing companies. In the absence of such agreement, and considering that several countries in the EU neighborhood are not following the EU’s climate leadership, there should be no limit to the overall free allocations to the industry. Furthermore, EuLA believes that all energy intensive industries that are truly at risk of carbon leakage should be protected against carbon leakage, and that any increased level of ambition of Europe towards 2030 should lead to increased and not decreased protection against carbon leakage. The most GHG Efficient installations should receive 100% of their needs for free. The industry cap should be adjusted so that the CSCF and linear reduction factor do not reduce the free allocations. |
a) a substantially higher share than in Phase 3 |
The current state of efforts regarding the development of CCS (including the NER 300 program) will not reach the ambition to develop, by 2020, a commercially and technically available solution for the capture and storage of carbon. EuLA believes that further R&D is necessary for CCS, but that it should be funded via a mobilization of different sources including auctioning revenues, not through the new entrants' reserve. The New Entrant Reserve should be reserved to new entrants and the expected growth of the EU industry. In 2012 TNO calculated for EuLA the costs of capturing CO2 at different kinds of lime kilns. For the state-of-the-art solvent (MEA) costs to capture CO2 were €94 per ton of avoided CO2. The cost to capture CO2 would more than double the production costs of around €60/ton lime. Currently, lime plants are typically located right next to the deposit, not clustered in large industrial agglomerations. Transport costs can add significantly to the capture costs. |
a) yes |
The auctioning revenues should be used to encourage low carbon investments. As a general principle, revenues should go back to industry to enable investments in low carbon solutions. Part of the revenues could for example be used to provide cheaper loans for low carbon investments in installations falling under the EU ETS. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The auctioning revenues should be used to encourage low carbon investments. As a general principle, revenues should go back to industry to enable investments in low carbon solutions. Part of the revenues could for example be used to provide cheaper loans for low carbon investments in installations falling under the EU ETS. |
a) yes |
EuLA strongly favors a level playing field within the EU and outside Europe. This is why EuLA believes that the EU should maintain its efforts to achieve an internationally accepted and legally-binding agreement proportionate to the burden in the EU. In the absence of such agreement, the EU should safeguard the competitiveness of the EU industry with any appropriate measure. EuLA has serious doubts that the current legal framework will ensure a level playing field beyond 2020. |
a) the present two groups should remain |
EuLA believes that no further complexity and calculations should be added to an already complex scheme. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
1. Share of carbon costs in the GVA should be maintained 2. Trade intensity should take especially into account the trade with EU's neighborhood In an internal survey realized by the lime sector (NERA " Energy and transport cost comparison of the EU lime industry to 10 non-EU regions"), it has been established that the threat for lime producers mainly come from the EU neighbor countries such as Russia, Maghreb and Middle east. 3. Energy / climate requirements in Free Trade Agreements should be taken into account “Energy and climate” clauses should be part of any Free Trade Agreement, especially if the trading partner in question has not assumed any carbon reduction commitments. 4. Fuel mix price should be taken into account Finally, EuLA recommends that the EU defines an affordable and available “fuel mix” for 2030, assesses its accessibility and compares its costs with the costs of the fuel mix used by the main EU competitors. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
It is important to point out that the revision of NACE code list (v2) implied that the assessment of the carbon leakage criteria for the lime sector is now done at a new disaggregation level, which includes not only lime but also plasters and aggregates. EuLA believe that this assessment should be done at the appropriate level of disaggregation, since that the industrial activities that are included in the NACE v2 code for lime do not share the same fundamentals (in terms of energy intensity and carbon intensity for instance). |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
EuLA believes that it is important to maintain a certain level of discretion in the system for justified cases. This concerns both the qualitative criteria and the possibility to conduct the assessment at the appropriate level of disaggregation (Prodcom 8). |
b) longer (please specify) |
The time validity of the list of sectors exposed to carbon leakage should take into account the investment cycles of the industry. It is also necessary to take account of the lifespan and replacement rate of kilns. Most of the time, investments costs always assume an investment in a new capacity (replacing the old capacity before its end of life). However, for the lime sector, kilns receive big maintenance periodically. It is therefore important to ensure that the investments made now will not become "stranded assets" in the future due to an unexpected change in the carbon leakage list. Furthermore, any trade intensity assessment for the carbon leakage list should take into account the impact of trade with EU neighbouring countries. |
a) the present approach of average of the 10% most efficient installations should remain |
|
b) no |
The benchmark exercise created an important workload on both the industry and the administration, and also triggered some issues regarding sensitive information. EuLA believes that any update should only been undertaken when sufficient evidence exist of technological progress. It is important to underline that the technological state of the art is not representative of what can be achieved in practice. Lime characteristics are so vast that multiple uses can be done from the same material. It is also highly dependent of the stone quality from the quarry. Any update in the benchmarks should only take into account innovations that have been proved to be commercially viable and that have been implemented on site. These benchmarks should further take into account each sectors characteristics into account, such as the existence of several end-products, the thermal energy efficiency of the sector, and its process CO2 emissions. |
c) other (please specify) |
In the case of the current ex-ante system, the reference year should be adapted, and the baseline should be a longer period without offering a choice between different periods, and not known in advance. However EuLA believes that free allocation should reflect economic reality per installation based on the most recent years and should not be frozen by historic production. In this regards, EuLA suggest to the European Commission to start working on the development of a dynamic system that could replace the current system, under the condition that no correction factor (CSCF) should be applied in addition to a dynamic system. Also, such system should take into account the administrative burden, the robustness of the control of the declared production, and the confidentiality of commercially sensitive information. |
a) no, there should be no deviations |
|
d) yes, in the form of financial compensation at EU-level |
EuLA defends a Full off-setting of CO2 costs pass through in electricity prices with a harmonised approach in all EU Member States. |
Less important |
Least important |
Important |
Most important |
|
a) from the Member States' auction budgets |
|
|
b) Trade association representing businesses |
Dansk Energi / Danish Energy Association |
Dansk Energi Rosenørns Allé 9 1970 Frederiksberg Att: Anders Espensen Telephone +45 22750477 mail: aes@danskenergi.dk / info@danskenergi.dk |
a) yes |
|
1) yes |
a) yes |
In our view there is still a significant unexploited potential for energy savings in the European industry. Many of the low hanging fruits that is presently not exploited is probably due to the lack of a significant price signal from the current ETS. Besides that we believe that early action in bringing down CO2-emissions will result in a long term effect on European industries' competitiveness compared with other less ambitious regions of the World. |
a) yes |
In theory a carbon Price makes fossil fuels relatively more expensive, thereby creating an incentive to Invest in cleaner energy Technologies. On the other hand, the current Price of 5-7 euro per tonne CO2 is not really sending a solid long term signal of the ambition of the European Union in regards to climate changes. At the same time the European industry have received an abundant amount of freely allocated quotas in the period 2008-2013, which leaves Little incentive to become more energy efficient. In order to create a strnger incentive to become more energy efficient the Price needs to go up. |
a) yes |
As long as there is no international agreement on carbon reductions we believe it is only fair to compensate industry, but only energy intensive industries. The current carbon leakage list uses 30 Euro, which in our opinion includes sectors on the list, that is not in reality exposed to a risk of carbon leakage. A continuous overallocation of industry sectors will lead to a low Price of certificates and an unfair reallocation of profits to industries. |
b) quite adequate |
Free allocation is by no means a bad way of compensating industries exposed of Carbon Leakage. It is merely the amount of allowances that are allocated for free and the amount of sectors on the list, that gives the problems to the system. |
b) it largely keeps the incentive |
With a higher Price on allowances and no significant overallocation of industries, the incentive of reducing emissions will not be affected significantly. |
e) I don’t know |
|
a) a lower share than in 2013-20 |
Especially if the Price continues to be low. In case the Price is affected positively by other measures, a constant share is preferable. |
b) the same share as in Phase 3 |
|
a) yes |
As it is today no compensation is given for indirect costs from electro intensive energy use. It could be investigated whether there is a possibility to support electricity use, which is becoming greener all over Europe, via a new support scheme. |
d) I don’t know |
|
a) yes |
As mentioned in question 9, we believe that indirect costs from electricity use should be able to be compensated. When revising the carbon leakage list, it should be real carbon prices that determines whether a sector is exposed to the risk of carbon leakage. At the same time one should consider the rapid evolution of carbon markets around the World. |
a) the present two groups should remain |
It is important to keep the system as simple as possible, but at the same time it is important to evaluate the true risk (i.e. focus on real carbon prices) in order to sort out any industries that are currently on the list only due to the fact that the reference Price is 30 euro. |
a) the present criteria should remain |
Although the reference Price should be made more realistic. When revising the carbon leakage list, One could also consider trade intensity with third countries with/without a emission trading systems. |
c) I don’t know |
|
c) I don’t know |
|
a) five years |
Five years is an appropriate length for most industries to adjust their production systems. As we have seen with the ETS a lot of Things can happen in a short period of time. Therefore there is a need for revising the industries on the list, at the same time respecting planning Horizons in the industry. |
a) the present approach of average of the 10% most efficient installations should remain |
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c) I don’t know |
|
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
Or at least a period closer to 2020. |
a) no, there should be no deviations |
|
d) yes, in the form of financial compensation at EU-level |
In order to align the compensation rules between energy sources this is of most importance to the Danish Energy Association. At the same time such a scheme could help preventing all sorts of distorting national support schemes. |
Important |
Less important |
Most important |
Least important |
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d) other |
From a reserve like the market stability reserve. |
|
b) Trade association representing businesses |
EAA - European Aluminium Association AISBL |
Sandro Starita Director Environment, Health and Safety European Aluminium Association AISBL Avenue de Broqueville, 12 BE – 1150 Brussels – Belgium Tel : +32 2 775 63 61 Mobile : +32 494 52 59 04 Fax: +32 2 779 05 31 Email : starita@eaa.be Website: www.alueurope.eu |
a) yes |
|
1) yes |
a) yes |
The ETS incentivised the emission reduction per unit of output in existing facilities through operational improvement alone, but further investments are required to upgrade existing capacity or for new plants. Emission trading targets are limiting the ability to invest by reducing the operational margins, in particular for electro-intensive industries. The latter are mostly price takers in global markets, and the cost increase cannot be reflected in higher product selling prices. Electricity cost is a main localisation factor, and investments in Europe are unlikely since electricity cost is higher here due to the extra costs deriving from climate and energy policies. As demonstrated by the Cumulative Cost Assessment for the aluminium industry (2013), the impact of regulation is a major factor in the cost differential between EU and other regions, and the overall impact on price-cost margins has jeopardised our industry's ability to compete internationally. |
b) no |
Innovation and energy efficiency are key drivers/incentives for our sector’s competitiveness. The aluminium industry strongly supports innovation programmes, but these need to be coupled with a proactive industrial policy and adequate compensation to avoid an uneven global playing field. The primary aluminium industry in Europe has more than halved its GHG emissions since 1997, but increasing operational costs due to EU ETS have reduced the capacity for investments in energy efficiency. In order to invest, electro-intensive industries require certainty of full compensation for the extra costs related to European climate policy until a level playing field is restored through a global climate agreement. Reduced output from energy intensive industries may at an aggregate level falsely be interpreted as improvements in energy efficiency. Such effects don't correspond to an improved competitive position, but to carbon leakage to other areas, with severe consequences on the whole valu |
a) yes |
In some energy intensive industries, product prices are set in global markets. Until a significantly larger share of competitors is influenced by similar increases in energy cost, there is a need for such accompanying measures. The dramatic drop in production of aluminium in Europe, despite a growing demand for aluminium products in all key European markets (Automotive, transport, aerospace, construction, packaging, consumer durables), demonstrates the need for support. Such measures are transitional in the sense that they can be phased out when an international agreement is in place, provided that it creates a global level playing field for relevant industries. |
b) quite adequate |
Full compensation for both direct and indirect costs, linked to actual output and realistic benchmarks, is a sine qua non condition for addressing the risk of carbon – and investments - leakage. Without adequate compensation for the most exposed industries, entire segments of the sector’s value chain would keep experiencing closures or curtailment plans. Other competing regions have identified aluminium as a strategic material and heavily invested in developments plans. The closures and drop in production affecting from the aluminium industry in Europe since 2008 is exposing Europe to a strong dependency. |
a) it absolutely keeps the incentive |
Full compensation for direct and indirect costs is absolutely necessary for the competitive position of Europe as a localisation of energy intensive industries. Compensation, based on realistic benchmarks, should be linked to actual output in order to provide an incentive for growth and to allow production flexibility through business cycles. Free allocation based on historical values doesn't comply with these objectives. Insufficient compensation reduces the operational margins and the incentive to keep the production equipment in good operational conditions and to invest in new and more efficient technology. Allocation of allowances will not reduce the environmental incentive for the recipient. On the contrary, full compensation for direct and indirect effects of ETS through allocation is a precondition for investment in new capacity in Europe. |
b) quite proportionate |
The administrative burden is not insignificant, but proportionate in the sense that no better solutions to solve carbon (and investment) leakage have been designed. Harmonized approach in the different countries could be targeted. |
d) there should be no limit to overall free allocation to industry |
The retention of our industry in Europe offers the biggest potential – not only in terms of economic growth and jobs’ creation – but also in terms of emissions’ reduction at global level, especially for energy-intensive sectors. The most exposed industries have to be protected from unfair international competition until fair conditions are restored by an international climate agreement. Without a comprehensive international agreement including harmonised rules and similar cost, the cost of carbon leakage mitigation will be more or less stable, whereas the number of allowances to cover this cost will gradually diminish. This is a cost that is directly attributable to emission trading and should therefore be covered by the ETS system itself. |
d) there should be no such innovation support post-2020 |
The aluminium industry is a strong supporter of innovation programs, but these cannot replace a proactive industrial policy agenda nor the adequate compensation measures that are needed to avoid an uneven global playing field”. Income from the sale of emission allowances should primarily be used to the mitigation of undesirable effects of emission trading. Once appropriate mitigation has been achieved, the remaining income should be used to fund low-carbon innovation, but not in the same way as until now. Most of the funds have been geared so far towards CO2 free power generation. It is now of paramount importance to support the energy-intensive industry in its shift towards CO2 free processes. As the Aluminium Low Carbon Roadmap indicates, the aluminium industry needs support for these investments, and these investments are possible only with the adequate predictability and therefore the adequate mitigation tools. |
b) no |
The aluminium industry is a strong supporter of innovation programs. Income from the sale of emission allowances should primarily be used to the mitigation of undesirable effects of emission trading. Innovation support should mainly be generated from other EU funding programs or Member States’ general budgets and not from auction income. Once appropriate mitigation has been achieved, the remaining income should be used to fund low-carbon innovation but not in the same way as until now (see question 8). |
c) other types of funding (please specify) |
The aluminium industry is a strong supporter of innovation programs. Income from the sale of emission allowances should primarily be used to the mitigation of undesirable effects of emission trading. Once appropriate mitigation has been achieved, the remaining income should be used to fund low-carbon innovation but not in the same way as until now (see question 8). Innovation support must also be generated from other EU funding programs such as the European Innovation Partnership on Raw materials, Public-Private Partnerships, or Member States’ general budgets and not from auction income. |
a) yes |
The use of free allowances will also have to be extended to cover indirect effects through increased electricity prices. With significantly higher EUA prices, the pre¬sent solution for indirect costs based on State Aid will: - be insufficient for long term survival of these industries in Europe, - not create the predictability needed for investments, and, as well, - create significant distur¬bances in the internal market for energy intensive products. Effective carbon leakage prevention will also require exemption from extra costs related to other elements of climate policy like support to development of renew¬able electricity generation and extra grid costs related to transmission and balan¬cing of electricity from renewable sources. |
b) more carbon leakage categories should be defined |
Electro-intensive industries that are globally priced are the most exposed to carbon (and investment) leakage and need full compensation for extra costs embedded in electricity prices. EUA costs are passed on into electricity prices through the marginal cost of the marginal sources of electricity, and for these industries, electricity related costs make up a high share of total cost. Other trading systems, like the Australian one, foresee more than one category of industries receiving different degrees of compensation. A similar approach has been used on the occasion of the European Commission’s Energy and Environment State Aid Guidelines review. Specific criteria i.e.: electro-intensity, global price-setting mechanism could be used to further differentiate and address the real impact of ETS direct and indirect costs. |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
A single carbon leakage list (with several categories) should be estab¬lished. The list should be based on the combined effect of direct cost (emission allowances) and indirect costs (increases in electricity costs due to climate policy). The following set of criteria should be established: 1. The exposure to global competition (e.g.: London Metal Exchange) 2. The exposure to total EUA cost impact If both criteria are met simultaneously, specific attention should be set on the sectors matching those criteria. |
b) other thresholds should be defined. Please specify below |
The levels of the thresholds should be based on a proper ana¬lysis of the proposed new set of categories and criteria (see response to Q12 and Q13). |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
While EAA supports simple metrics linked to clearly defined thresholds, the consideration of "qualitative criteria" could be considered if this would lead to cost efficient measures e.g.: exemptions for economic activities such as "recycling" from the costs related to the Climate policies (e.g.: ETS, RES) based on the actual contribution to EU "circular economy" and resource efficiency goals. |
d) in line with the duration of ETS Phase 4 |
Predictability is key for industrial planning and certainty. |
a) the present approach of average of the 10% most efficient installations should remain |
|
a) yes (please specify how often) |
Benchmarks and carbon leakage lists should be revised simultaneously (i.e. for each ETS trading period). |
c) other (please specify) |
EAA supports the use of output based allocation linked to realistic benchmarks. For each industry, the baseline will then be set by the realistic benchmark. Indirect emissions should also be set based on realistic bench¬marks and actual output. The compensation will be linked to a sum of two bench-marks, one derived from emissions and one derived from electricity consumption. |
a) no, there should be no deviations |
|
c) yes, in the form of additional free allocation |
Compensation within the EU ETS scheme should be extended to fully cover indirect effects through increased electricity prices. With significantly higher EUA prices, the pre¬sent solution for indirect costs based on State Aid will be insufficient for long term survival of these industries in Europe and, as well, create today a significant distortion in the EU internal market. The cost of any compensation measures will be propor¬tionate to the EUA price, thus correspon-ding to the value of free allowances. Compensation could be provided as free allowances or as a sum of money propor¬tio¬nate to a given number of allowances from another source of finance. Indirect compensation is vital for electro-intensive industries, especially when these indirect costs are higher than directs. |
Important |
Least important |
Most important |
Less important |
Despite the ranking provided above, it should be noted that innovation projects can be very different, hence on a case by case basis there can be significant differences also in the stages at which support is more relevant. |
d) other |
Income from the sale of emission allowances should primarily be used to the mitigation of undesirable effects of emission trading. Innovation support must also come out of other EU innovation and R&D programs or the Member States general budgets, and not only from auction income. Once appropriate mitigation has been achieved, the remaining income should be used to fund low-carbon innovation. While most of the funds have been geared so far towards CO2 free power generation, it is now of paramount importance to support the industry from all potential sources in its shift towards low-carbon processes. |
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b) Trade association representing businesses |
Economic Chamber of Non-Ferrous Metals and Industry |
ul. Graniczna 29/611 40-017 Katowice Poland tel. +48 32 2042024 e-mail: biuro@igmnir.pl |
a) yes |
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1) yes |
b) no |
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b) no |
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a) yes |
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b) quite adequate |
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b) it largely keeps the incentive |
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b) quite proportionate |
|
d) there should be no limit to overall free allocation to industry |
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b) the same share as in Phase 3 |
|
a) yes |
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b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
|
a) yes |
In order to ensure competitiveness, the transitional measures should be provided to aid the industry and those that are successful should remain a fixed part of the system. |
b) more carbon leakage categories should be defined |
It should take into account the variation in exposure to carbon leakage, in particular taking into account the full inclusion of energy-intensive sectors, and within this sectors to take account of the special protection for those sectors where product prices are set globally (eg.LME), which does not allow for the transfer of additional costs of CO2 to the customers (recipients). |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
1.The exposure to global competition 2.The exposure to EUA costs 3.If both criteria are not simultanously at a high threshod, the unit is in the most exposed category of the carbon leakage; the unit will be in the less exposed category of the list if one or both of the criteria only meets a lower treshold. |
b) other thresholds should be defined. Please specify below |
They should be based on proper analysis of the proposed new set of categories and criteria (seeQ12&Q13). |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
d) in line with the duration of ETS Phase 4 |
|
c) the approach should be less stringent (please specify) |
In the 4th phase of the system, realistic and technically define benchmarks should be considered and where this is not possible to maintain a reserve method. |
a) yes (please specify how often) |
Benchmarks should be valid during an entire EU ETS phase. |
c) other (please specify) |
In the Phase 4 of the system, the actual production should be taken into account, so that the limiting production was not a way of lowering emissions. Integrating the systems of compensation for indirect emissions at the same level as for the direct emissions. An important step in limiting carbon leakage would be th exclude the process emissions from the EU ETS. |
a) no, there should be no deviations |
There should not be deviations connected with the short-term financial conditions of industries. But it may be a need to apply specific solutions for industries where it is possible to establish sectorial benchmarks. |
c) yes, in the form of additional free allocation |
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Important |
Least important |
Most important |
Less important |
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a) from the Member States' auction budgets |
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b) Trade association representing businesses |
essenscia |
Els Brouwers, +32496593627 ebrouwers@essenscia.be |
a) yes |
|
1) yes |
a) yes |
A lot of efforts have already been made by the industry to reduce its GHG emissions the last decades. Energy prices have been a continuous incentive for improvement of efficiency and competitiveness. This lowering of energy use per ton produced will continue within the limits of what is economically feasible as far as the policy framework allows industry to produce and grow in EU. The power and the means to innovate are inherently linked with the production apparatus. Restrictions on production and growth and an unattractive investment framework will hinder the necessary innovation steps to further reduce. EU should aim at improving its climate policy by providing a positive and stable investment climate and through stimulating innovation in order to attract investments in new, more efficient and cleaner installations. An absolute target on GHG emissions for manufacturing industry caps the future production levels and kills investment signal and potential for innovation in EU. |
b) no |
The current ETS design with its unilateral, absolute cap on GHG is limiting industrial growth potential. The EU emission cap for the ETS-sector is now proposed at 43% absolute emission reduction level in 2030 compared to 2005, which requires a decrease in the yearly available emission rights of -2.2% per year, leading to an even more stringent cap in the period 2020-2030 and increasing CO2-prices on top of the energy price differences industry has to face in EU vs other region. The cost burden for industry, already 3 times higher in the EU vs. US, will further diverge with the US and other regions, deteriorating the EU industry cost position, if no EU industrial supporting policy is being decided on at the same level of ambition as the climate policy. Additionally, the system is fundamentally changed by backloading or a market stability reserve, no longer respecting the fundamental principle of ETS to reduce emissions at the lowest costs but steering at an intended price level. |
a) yes |
As stated in Q24,sufficient carbon leakage(CL) protection without additional reduction factors is necessary.Allocation should be based on actual production levels and realistic benchmarks.The allocation supply reserve(ASR) should also be sufficient to make the industrial renaissance possible and guarantee sustainable production in EU without additional costs on top of energy price differences.If an ASR based on economic cycles would not be sufficient for an unexpected prosperous EU economy growth,additional credits must supplement the missing part to provide for guaranteed license to operate in EU.International credits to complement to a positive investment climate for industry in EU,allows climate change abatement beyond the EU borders in the absence of a global agreement with equal burden on manufacturing industry.This would create the appetite to invest in EU and provide for the innovative technologies of tomorrow needed to create a low carbon economy that is also an economy. |
b) quite adequate |
Most adequate policy is a global climate change agreement with equal conditions and burdens to comparable installations. If not the case, carbon protection is needed to maintain innovative power in EU. Within the scope of ETS, free allocation of allowances for sectors facing CL is a good tool, but currently not sufficient. Subject to correction factors reducing the allocation below economical and technical potentials, the system is not sufficiently protecting against CL. ETS compensation should contain realistic benchmarks for direct and indirect emissions. Free allocation can be an adequate instrument if based on criteria consistent with all relevant cost burdens due to the climate policy (such as RES, energy mix, grid costs, etc) and on endproduct tradability. Free allocation should be combined with clear measures for CL protection and prevention, as well as for the compensation of climate cost in electricity. In addition, climate policy should focus more on stimulating innovation. |
b) it largely keeps the incentive |
Free allocation in principle does not impact the overall supply / demand balance of allowances and therefore does not influence the carbon price. The incentive to reduce is generated by the carbon price, the energy price differences and the drive to be competitive vis à vis competitors. This incentive is also inevitably linked to the benchmarks. Free allocation based on benchmarks (BM) is the tool to prevent CL, influencing the relative cost position vis à vis other regions. These principles should not be confused. At a certain point, price differences between regions that cannot be bridged e.g. by too high energy prices or benchmarks are not in reach, will lead to investment leakage in the first place and CL eventually. |
b) quite proportionate |
The administrative burden could be simplified by applying actual production. The requested data reporting is already quite extensive: monitoring and reporting data, follow-up of differences between historic and actual data,… Additionally, the problems for cessation, closures and new entrants should be solved. |
d) there should be no limit to overall free allocation to industry |
There should be sufficient reserve for allocation to make the industrial renaissance possible. If Europe wants to be frontrunner in innovative solutions for a low carbon economy, it will have to prove, in first instance, that it is able to keep its economy. Innovation is inherently linked to production. Production in Europe is by far the most carbon controlled in the world. Therefore EU has, in the light of minimizing emissions of manufacturing industry on global scale, every interest to maximize production in Europe. Hence, to provide for a positive investment climate, it has to give a license to operate for sustainable production under the form of guaranteed free allocation and in line with actual production for every existing and new installation. |
d) there should be no such innovation support post-2020 |
Innovation support is necessary in order to achieve higher reductions of greenhouse gas emissions. However, focus should be on the development of most promising technologies in a cost efficient way. CCS can be part of the most promising technologies but should be evaluated in line with other technologies based on its cost competitiveness. |
a) yes |
Key in the transition to a global low-carbon and competitive economy will be the investment in innovation, leading to cost competitive technologies that will drive improvements in energy efficiency and emissions reductions not only in Europe, but also in other regions and that positively contribute to EU’s economy with net added value and international competitive position. The following principles apply on government support: Government funded R&D focused on basic technology breakthroughs at a pre-commercial stage is appropriate when central coordination is likely to help advance substantial national economic benefits. Governments should not attempt to pick winner or losers. Government funded demonstration projects should focus on key barriers to technology commercialization (vs creation of potential markets). A free market environment, supported by stable and predictable laws and regulations should encourage efficient investments in R&D. |
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
The funding support from the NER300 programme should be allocated to the most cost efficient technology developments. CCS can be part of the most promising technologies but should be evaluated based on its cost competitiveness in line with other technologies such as CCU, electricity storage, energy efficiency in industry, and so on. On the other hand, auction revenues should go back to the industry, ensuring enough means are available for investments in production capacity and innovation. Therefore, innovation support should not counteract CL protection measures. Innovation centers are closely linked with production and therefore we both need measures to keep production cluster in Europa and promote research and development. |
a) yes |
• Additional measures should be taken to lower energy prices and reduce the price gap with other regions, such as the US. • If a global level playing field with equal burdens is not reached by 2020, EU should revise the its current approach with unilateral and absolute reduction targets, aiming at high prices and absolute reduction at any cost in EU towards innovation and cost reduction targets, aiming at providing low cost solutions that will be applied in EU and beyond. Only those solutions will genuinely contribute to a low carbon future with global impact. • To achieve further emission reductions cost-efficiently, the effort sharing between ETS and non-ETS sectors should be in line with the findings of the impact assessment for the Energy Efficiency Directive: accordingly, the remaining economic potential is much larger in other sectors (building, power, transport) than in industry. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
The CL list is lacking an assessment of the value chain effects. Sub-sectors that are not directly impacted but are inherently linked, up- or downstream with exposed sectors are not necessarily on the list. If the CL list is kept as such, both quantitative and qualitative assessments are necessary due to their complementarity. |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
It has little sense to base CL exposure on the past. It should be based on future trends and prices. On top the precautionary principle should be applied, as the EC is doing in other fields. The current calculation of exposure does not reflect the real climate policy cost impact on industry as it does not take into account all cost components resulting from climate and energy policies, and energy mix consequences.Indeed, their impact on industry is much higher than judged in the ETS exposure status and will probably further increase. Indirect costs, such as the surcharges on electricity due to RES and linked grid costs, are not taken into account.It is essential that all carbon costs and cost increasing effects of the energy mix related to the climate and energy policy are reflected in the assessment.On top, product tradability plays an important role in the risks for CL and should be taken into account.Data sources used for assessment should also be sufficiently reliable and detailed. |
c) I don’t know |
Other thresholds should be defined in order to assess exposure status correctly, including value chain effects and product tradability (at product level as well as at the level of the endproduct). The thresholds should comply with the precautionary principle. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The CL list is lacking an assessment of the value chain effects. Sub-sectors that are not directly impacted but are inherently linked, up- or downstream with exposed sectors are not necessarily on the list. The quantitative assessment of potential CL is backward looking and narrow. It is important that qualitative assessments are done where relevant (including the impact of CL position of upstream sectors on downstream sectors, (im)possibility of cost pass-through, product tradability). The complementary qualitative analysis can add the necessary value chain aspect and be more forward looking. |
d) in line with the duration of ETS Phase 4 |
Political stability is a key parameter in defining the investment climate. Measures to avoid CL should not lead to more investment leakages by their instability. Also for the manufacturing industry, long term investments need long term stability, as it is the case for current renewable energies support schemes (15 to 20 years). It is therefore important that the criteria for the identification of sectors and sub-sectors exposed to CL are well defined and take into account all relevant factors, as stated in questions 13 and 15. The frequency of revision should reflect the speed of political decisions on global carbon policies, since this is the only criterion that would nullify the need for CL protection. |
c) the approach should be less stringent (please specify) |
The already too stringent top 10% benchmarks will be even more stringent with the cross-sectoral correction factor and with the linear reduction factor, bringing the benchmarks below the level needed to maintain the output for many sectors and in some cases even below thermodynamic minima, which shows the unrealistic design of the current ETS. Benchmarks should be revised in order to provide for an effective protection against CL at forward looking higher carbon prices, taking into account all cost burdens induced by climate and energy policies. |
b) no |
It is important to link BM to technologically and economically feasible EU performance level. BM must thus be defined bottom-up, from real performance levels. The actual BM with reduction factors are bringing them beyond the state of the art, pulling away means from the industry for emission reducing investments. Constant updating of the BM kills the carbon signal for investment. If investments in emissions reductions lead constantly to less CL protection, the appetite to invest will diminish and the return on CO2 for investments will not be calculated in during business plan development. As the chemical industry is a capital intensive sector, installations have long investment cycles. Thus existing installations have different levels of performance, with limited room for technological improvements. Revised BM would affect both existing and new installations. In contrast, subsidies for renewable energy sources are only corrected for technological improvements for new installations. |
c) other (please specify) |
Ex-ante historical allocation risks unwanted effects compared to actual production allocation. Dynamic allocation mechanisms should be based on actual production levels, in addition to removing the CSCF and LRF. This way, over- and under-allocation to the most efficient producers would also be avoided. In contrast, the current ex-ante allocation is adding costs to the production of efficient plants thereby discouraging growth and perversely rewarding relocation to outside Europe. |
a) no, there should be no deviations |
There should be no deviations to ensure common rules for the establishment of a level playing field. |
c) yes, in the form of additional free allocation |
The climate cost in electricity should be compensated similarly as direct emissions costs (realistic benchmarks, actual production, no reduction or intensity factors, ...). In order to set a stable political climate, a unified compensation scheme for climate cost in electricity throughout Europe could reduce the administrative burden for the member states and the political uncertainties for the industry. Level of compensations should be in line with direct emissions costs (realistic benchmarks, actual production levels, no reduction or intensity factors, etc.). If a sector is to be fully ‘protected’ being on the CL list, then it should also receive full compensation for the indirect emission costs. Currently, only energy intensive industries are being compensated. Additionally, no correction factor should be applied on benchmarks for indirect emission costs compensation. |
Less important |
Important |
Most important |
Least important |
The development of new technologies follows a pre-defined path (conception to commercialization) where different types and levels of support are needed. It is important to adequately define the appropriateness of each type of aid. Support is necessary at each stage in order to overcome the market barriers and failures specific to each stage. The most important market barriers and failures of the large-scale pilot implementation stage should be overcome. Equally important are the three other stages. |
a) from the Member States' auction budgets |
Auction revenues should go back to industry, ensuring enough means for investments in innovation. There should be no competition between CL protection and innovation support. Both are crucial for the successful implementation of the climate and energy policy. |
Emission reduction targets should not be achieved through carbon or investment leakage, as has been the case during the previous period. This does not prove that a low carbon economy is indeed possible, but just creates a ‘green’, industry-less Europe, pretending to be low carbon, without being an economy and importing the carbon emitted elsewhere via the products that were produced and contributed to added value of other regions. We need a reform of ETS that allows the EU industry to grow in a carbon efficient and innovative way, instead of moving to other regions without carbon policies. Therefore, sufficient CL protection without additional reduction factors is necessary. |
b) Trade association representing businesses |
ESTA - European Steel Tube Association - Register ID: 52986552165-55 |
ESTA 79 BIS Rue Marcel Dassault F-92100 Boulogne Billancourt France Tel +33 1 46315640 e-mail: esta.pm@orange.fr |
a) yes |
1) yes |
a) yes |
With investments reduction can be achieved in some companies however those investments are to be made in a sector which overcapacity is well known and will reduce the competitiveness of the industry compared with third countries competitors. Our sector is trade intensive with both exports and imports of large quantities: competitiveness is of the essence. Other factor are the existing technolgies with the relevant costs. |
a) yes |
There is a need worldwide to be more energy efficient and Europe has taken the lead. The present regulation presenting targets but taking care of the energy intensive industries is a good signal. However on the long term it will all depend on the measures taken at a global level and if all producers will encounter the same costs. The situation will also be different from sector to sector depending on the objectives and the way they are applied as well as the economic situation of the sector. The risk of carbon leakage is particularly strong for energy intensive industry and care should be taken to keep the competitiveness of those industries. |
a) yes |
Yes definitely, to implement measures without taking into consideration that we are acting in an international world where global trade is increasing year after year would be self destroying. Companies need to remain competitive or the production will move to third countries not applying the same regulations. Those transitional measures should remain in place as long as there is no international agreement. |
b) quite adequate |
Free allocation is a well thought policy instrument specially for companies exposed to international trade trying to keep the competitiveness of the industry. However free allocation should be better adapted to the real need by sectors so that extra costs can be limited. The reduction factor will play a large role in the future competitiveness of the EU industry if there is no international agreement and should be rediscussed depending on the outcome of the Paris COP. The possibility to have a real 100% free allocation should remain in place without manipulation of the price of the CO2 certicate or a correction factor or the implementation of a reserve |
a) it absolutely keeps the incentive |
Innovation is one of the factors enabling to be competitive at the international level but on the other side it requires funds for research and development. Without free allocation and due to the EU economic situation there would be very limited availibilty for innovation in view of reducing emissions |
b) quite proportionate |
Benchmarking was limited to certain sectors |
d) there should be no limit to overall free allocation to industry |
To avoid Carbon leakage is the aim of the regulation. Carbon leakage is not only invetsment made abroad instead of in the EU but also reduction of activity or closure of plants in the EU due to loss of competitiveness. There should be no limit of budget in such circumstances. |
b) the same share as in Phase 3 |
Large scale projects aiming at innovation will always be disputed over their possible results and future developments. However they are necessary for a breakthrough technology. Public funding is needed for such researches. The question is if other innovation alternatives are candidate? |
c) I don’t know |
It should be only dealt on a case by case basis after proper evaluation |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The most efficient way is that the revenus of auctioning should be redirected to the industry either through financing new dedicated scheme or through the compensation for indirect emission. |
a) yes |
free allocation sheme based on full compensation without correction factor is the basis free allocation for indirect emission should be considered energy price distorsion among EU companies and with third countries should be better coordinated |
a) the present two groups should remain |
the criteria defined to belong to the sectors at risk of carbon leakage are as all criteria subject to discussion but the flexibility which has been shown by the Commission in applying them gives sufficient arguments that the two groups exists |
a) the present criteria should remain |
Both criteria are the main factors for possible carbon leakage and should remain in place. The rules should not change every 5 years for the sake of predictability and transparency |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
For the same reasons as in question 13 |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The main criteria should be the quantitative criteria, however over simplification can be detrimental to limited specific cases and a certain flexibility should remain. |
d) in line with the duration of ETS Phase 4 |
We aim at predictability and transparency. The decision process is already quite long in the EU and brings it share of unceratinty. To have shorter period than the regulation is additionnally burdensome for the industry |
d) I don’t know |
The point is less the benchmark value than all additional restrictions: cross sectoral correction factor, linear reduction factor, waste gas consideration which render a benchmark nearly void. |
b) no |
Investments are not made for 5 or 10 years but longer, consequently there is no need to revise benchmark |
c) other (please specify) |
I would not fix now the period to be looked at for the production level but for sure there is a need for consideration of adapting the reference. |
a) no, there should be no deviations |
Distorsion of competition would be main danger should deviations be accepted. |
c) yes, in the form of additional free allocation |
As the present regulation for compensation is left to each member states a distorton of competition has surged. The way to harmonize the system at the EU level could be an additional free allocation at the EU level. |
Least important |
Important |
Most important |
Less important |
It is also very much a case by case basis. |
a) from the Member States' auction budgets |
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b) Trade association representing businesses |
ETRMA, the EU Tyre and Rubber Manufacturers' Association |
Avenue des Arts 2 box 12, B-1210 Brussels (Belgium) tel (general): + 32-2-218.49.40 f.cinaralp@etrma.org |
a) yes |
|
1) yes |
a) yes |
The tyre industry is currently reducing its direct GHG emissions, and will continue to do so. This reduction is due to a combination of factors: 1. Initiatives related to energy efficiency (although improvements in terms of energy efficiency are not unlimited) 2. The availability and diffusion on the market of ever more efficient (production and energy consumption related) technologies 3. The presence of incentives to support R&D, and the creation of energy-friendly solutions to business needs Nevertheless, efforts are limited by the difficulty to access decarbonised energies at competitive prices. |
c) I don’t know |
Our industry is becoming more energy efficient but the contribution of ETS to this trend is hard to assess. The ETS is not the only tool to drive energy efficiency. The notion that competitiveness is boosted by command and control measures does not fit with the rationale behind technological innovation and the improvement of performance. A system that would reward R&D and the training of people on energy efficiency activities would help industry to invest the resources otherwise allocated to paying for CO2 emissions allowances. CO2 costs (ETS system) and R&D investments can currently be in opposition when it comes to allocating a limited budget. Therefore, we believe regulators, in their assessment of what ETSs phase IV should look like, should recognise the fragility of certain industrial sectors at risk of being exposed to carbon leakage and divert CO2 costs into new R&D investments. Such an approach would have a greater impact on the competitiveness of the EU industry. |
a) yes |
ETS costs for the tyre sector are primarily related to indirect CO2 emissions associated with electricity (54%) and steam consumption (9%) and to a minor extent to direct CO2 emissions (37%). Consequently, free allowances cover less than half of the ETS costs faced by the tyre sector. In a sector exposed to increasing trade intensity, it is of paramount importance that EU authorities keep on providing appropriate counter-measures limiting the impact of unilateral constraints imposed by the ETS system in Europe. This at the level of the ETS system requires: 1. Free allocation of emission allowances up to 100% of the needs, granted based on technically & economically feasible benchmarks 2. A full offsetting of the CO2 indirect costs that power suppliers pass through the tyre industry through the energy bill. |
b) quite adequate |
Keeping the principle of 100% free allocation for sectors exposed to C.L. is essential. C.L. counter-measures are particularly important to preserve the international competitiveness of the EU tyre industry and to prevent the relocation of production, and as a result, greenhouse gas emissions, from Europe to other regions with lower, or no, carbon costs. This is particularly the case since the EU tyre industry is increasingly exposed to imports from jurisdictions without comparable ETS schemes. The current system must nevertheless be reformed in order to address key issues to which C.L. sectors are still exposed to: - free allowances do not cover all emissions. An ETS cost is always present and it may use financial resources which could otherwise be directed at energy efficiency related R&D projects - free allocation based on benchmarking analysis is not flexible enough to respond to a real market behaviour characterized by fluctuation in production and energy sourcing policies |
b) it largely keeps the incentive |
- The current free allocation system is only able to partially address the issue of sectors exposed to Carbon Leakage. Innovation is the result of multiple synergies. Free allowances allocation plays a role, (a very influential one), but as do other factors, for example, legal certainty about energy policies at EU, national & local levels, promotion of cooperation with academic partners for R&D projects, availability of financing systems to support pilot project or innovative solutions, ... - Additional incentives are needed for certain energy efficiency investments, for example process improvements, with low Return on Investment. |
b) quite proportionate |
As long as benchmarking provisions based on heat are applied, the burden to industry is quite proportionate to ensure free allocation |
d) there should be no limit to overall free allocation to industry |
As long as the sector is considered as exposed to Carbon Leakage, it would make limited sense to decrease its free allowances of CO2. Therefore, the allowance budget should cover the totality of the emissions from the C.L. sectors. |
e) I don’t know |
We believe the European Commission should be less prescriptive, and more open, with regard to which technologies it chooses to finance under the NER300 programme. |
a) yes |
As mentioned above, energy efficiency measures need real support from framework policies at several decision levels (EU, then national and local), as well as financing solutions to support important investments at single or multiple sites level, to reward sectors demonstrating actual reduction of GHG emissions by acting on the taxation/financial levies. The revenues generated by the ETS should then be reallocated to innovation in decarbonised energy, but without reducing the amount of free allowances already allocated for carbon leakage provisions. |
c) other types of funding (please specify) |
A direct re-investment of the budget dedicated to GHG emission reductions in R&D activities could be envisaged at site level. This would cut the administrative burden of allowances trading and enhance the effectiveness of the re-investment. The same system used for CO2 allowances quantification (third party verification) could be used to ensure the real investment of an equivalent amount of money into energy efficiency activities/new technology implementation. For example, when an industry needs to purchase additional allowances, it could divert the budget to be allocated for buying extra allowances toward activities aimed at increasing energy efficiency, which would be verified by third-party audits. |
a) yes |
We understand the question as applying to both energy intensive sectors and sectors exposed to CL because of their trade intensity. Further to the points reported in our answer to Question 4, sectors exposed to the risk of Carbon Leakage are in many cases also paying ETS costs within their electricity bill, and these costs are not only significant, but often larger than the direct cost of paying for carbon allowances. Hence, a full offsetting of the CO2 indirect costs that power suppliers pass through the tyre industry through the energy bill is requested. Managing this compensation should take place at EU level, to ensure consistency between national measures. |
a) the present two groups should remain |
The idea of classifying the extent to which sectors are exposed to Carbon Leakage (high risk / medium / low risk), although attractive at first sight, would mean that sectors exposed to Carbon Leakage would receive differentiated levels of free allowances. The tyre industry considers a simple pass/fail approach based on objective criteria including “trade intensity” as most appropriate and fair. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
- All present criteria should be maintained. Trade intensive industrial sectors are the most at threat from the distortion of competition due to high CO2 costs in the EU vs. low or non-existent compliance costs in other regions. It is therefore vital to retain or even to strengthen the “trade intensity” criteria - Profit margins should be added to the list of quantitative criteria to be considered when assessing the exposure to carbon leakage. The particularity of a sector that has little profit margin over product sales has to be considered. In this case, the capability to "internalize" the ETS costs is largely defined by the market structure in which products manufactured in the EU compete with those made in other regions of the world. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Simple metrics and objective criteria allow for increased certainty about whether a sector is on the carbon leakage list, or not |
b) longer (please specify) |
The longer the list’s validity, the higher the certainty of the financial conditions under which companies will operate. This would help planning and investing in long-term projects related to energy consumption and efficiency. Nevertheless, a sector which was not considered as being exposed to Carbon Leakage at the time of assessment, should be able to demonstrate that it fulfils the Carbon Leakage criteria as a result to changes in market circumstances. |
d) I don’t know |
The tyre industry uses a “heat benchmark” instead of a product benchmark, hence the question does not apply to us. |
a) yes (please specify how often) |
As far as the heat benchmark is concerned, considering usual investments time-frames and technology lifespans (e.g. boilers), we think an opportune timing for the revision of heat benchmarks would be 15 years. |
d) I don’t know |
This question needs further consideration. The response given will largely depend on future discussions about ETS allocation systems (for ex. Dynamic allocation). |
e) I don’t know |
It is difficult to answer this question without further clarification about what the concepts of “specific hardships” & “favourable circumstances” refer to. |
c) yes, in the form of additional free allocation |
Compensation in the form of additional free allowances would increase the consistency of the overall management of GHG emissions (compensation of direct & indirect costs to sectors exposed to a risk of Carbon Leaching). A financial compensation only would not fully incentivise the sourcing of renewable energy. |
Important |
Most important |
Less important |
Least important |
N.B. There seems to be a technical issue in ticking the boxes. Our answer: "I don't know" for all 4 stages of the innovation process. It is our understanding that this question is more relevant for energy generators than for energy users. Our interest, as energy users, is for the innovation process to deliver greater access to decarbonised energy at low cost. |
c) from both |
As long as the sourcing from free allocation does not reduce the level of free allowances already allocated to Carbon Leakage exposed sectors, then both a) & b) options are worth further investigation. |
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b) Trade association representing businesses |
EURIMA (European Insulation Manufacturers Association) Eurima is the European Insulation Manufacturers Association and represents the interests of all major mineral wool producers throughout Europe. Eurima members manufacture a wide range of mineral wool products for the thermal and acoustic insulation and fire protection of domestic and commercial buildings and industrial facilities. |
Avenue Louise 375, Box 4, B-1050 Brussels, Belgium +32 2 626 20 90 alain.herssens@eurima.org andoni.hidalgo@eurima.org jan.tebos@eurima.org |
a) yes |
|
1) yes |
a) yes |
The reduction of greenhouse gas emissions is closely linked to increased energy efficiency. Studies have shown that there is still a significant potential for cost-effective reduction of energy use in industry (“Climate protection with rapid payback”, Ecofys, 2012). The potential for savings through industrial insulation is large: Energy: 620 PJ / CO2: 49 Mt. The total cost-effective savings potential amounts to about 480 PJ and 37 Mt CO2 per year for industry or more than 4% of total industry fuel consumption and emissions. In fossil fuel-fired power generation the cost-effective potential was found to amount to 140 PJ and 12 Mt per year.Nevertheless, some challenges remain, mainly related to financing and fragmentation of abatement projects. By addressing these challenges, industry will be able to further reduce greenhouse gas emissions. The increasing price of energy makes investments in energy efficiency more cost-efficient, therefore contributing to further GHG emission reduction. |
b) no |
EU-ETS in its current format is sub-optimal and does not provide the stable investment climate to incentivise investments in low-carbon, low-energy technology, in all sectors covered. The challenge for the EU is to build an overall EU Climate and Energy policy that is coherent, consistent and mutually re-enforcing in which the individual parts are designed and focused in such a way as to generate the highest cost-efficient return on investment. EU-ETS is an instrument to address one of the building blocks of EU Climate and Energy Policy: GHG emission reductions (especially in the power sector). We believe that this instrument needs a more sector specific approach (focusing on the power sector), while allowing the full deployment of other measures to better address overall Climate & Energy objectives (e.g. allowing energy efficiency in Europe to reach its enormous potential). This would simplify the system, avoid overlaps and provide more investment security and competitiveness. |
a) yes |
As long as there is no international, widely implemented system creating a level playing field. |
e) I don’t know |
Many ETS systems are emerging throughout the world, each coping with carbon leakage concerns in its own way. The best way to provide EU industry with the required certainties is yet to be found. The system to be implemented should provide certainties up until 2030 at least. In some sectors, other policy instruments to achieve CO2 reductions are better suited, like those directly targeted at stimulating energy efficiency improvements via e.g. the Energy Efficiency Directive. |
e) I don’t know |
While the need for innovation is clear to meet the deep CO2 reduction targets and to increase energy efficiency, it has to be noted that existing technology can already provide enormous energy and CO2 savings. At the same time, hurdles that prevent industry to take cost-effective abatement measures already now should be addressed. Currently, innovation is not favoured by uncertainties in the current free allocation system, such as the cross-sectoral correction factor, the NER, and uncertainties related to allocation for capacity extensions. In order to provide incentives for innovation, the ETS system would have to be aligned with other policies and measures where investment efforts are focused in the most cost-effective areas. A long term security on leakage exposure (more than 5 years) is required to make long term decisions on investments. The uncertainty has a negative effect on investment decisions, (including innovation, growth and job creation). |
b) quite proportionate |
Considerable effort is required to fulfill the initial administrative requirements, but once assessed relatively small effort is needed to update the data. |
f) I don’t know |
The formulation of this question makes it difficult to choose for one of the options. A lot depends on whether carbon leakage protection is meant to be a real strategic competitiveness instrument or just a defensive protection device. The allowance budget should be directed to those areas which have the largest effect on EU competitiveness. The building sector has one of the most cost-effective potentials for CO2 reduction and energy savings. As mentioned, the objective should be to optimise EU-ETS as one of the instruments within the overall EU Climate and Energy policy framework, and not to organise the Energy and Climate Policy Framework to fit EU-ETS. Therefore, the budgets available from the allocations should be used to serve the overall objectives. |
c) a lower share than in Phase 3 |
CCS is a secondary solution and not yet a proven technology. It is not addressing the issue and solving GHG emissions in a sustainable way. The funding destined to NER300 should instead preferably be assigned to projects with the highest benefit in CO2 reduction and energy savings, while using existing and proven technology, such as e.g. building renovation programmes. Focussing entirely on CCS and renewable energy is ignoring the enormous potential for improvement of energy efficiency in the building sector. |
a) yes |
The implementation of low carbon/low energy technology like building insulation has the highest cost efficient potential for CO2 emission reduction / energy savings, and needs a robust financial support scheme as leverage. The “recycling” of EU-ETS funds into those areas of highest return for the overall Climate & Energy policy objectives is fundamental. |
c) other types of funding (please specify) |
The instruments should be designed to facilitate the achievement of the overall climate and energy objectives. This means a combination of funding systems aimed at improving energy efficiency and lowering energy demand should be put in place within EU-ETS and beyond. |
a) yes |
Taxation on imports could be further studied, as an alternative for sectors who are submitted to alternative schemes (see comments on question 24). |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
All industrial installations are exposed in a direct or indirect manner. However, the ETS system provides real incentives for reduction of emissions in the power sector. The other sectors should use more suitable instruments available in the EU Climate and Energy policy (such as encouraging investment in energy saving), thus reducing the need for CL-protection. We could also imagine the creation of a specific CL category for the industry manufacturing products with a net positive GHG impact, which would get 100% free allowances. For instance, for each tonne of CO2 emitted in manufacturing mineral wool, around 200 tonnes are saved during the product’s lifetime. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
Trade intensity should be kept as a criterion, but there should be an additional criterion allowing credit for “facilitating” industries (i.e. industries manufacturing products with an overall positive carbon footprint - saving more energy and greenhouse gas emissions in the use phase than used in the manufacturing phase). In addition, we believe that it would be convenient to establish an assessment system based on economic markets, rather than on statistical definitions. |
c) I don’t know |
More transparency would be needed regarding the rationale behind the thresholds. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The criteria should be re-assessed as there are criteria linked to low-carbon “facilitating”-industries (see response to question 13) which must be reflected in the system. |
d) in line with the duration of ETS Phase 4 |
A future tailor-made ETS system should recognise that industry investments are made for 20 – 30 years and require a stable regulation and predictable return on investment. The yearly costs for CO2 allowances have an impact on investment decisions. A leakage list valid for 8 years is therefore highly recommended. The timeframe for the list of carbon leakage should be the same as ETS phase duration. |
a) the present approach of average of the 10% most efficient installations should remain |
|
a) yes (please specify how often) |
The review of the benchmark should be aligned with the EU ETS Phases. |
d) I don’t know |
The actual production level can be used, if confidentiality can be ensured. Alternatively, production data could be based on a running average of the last available 3 production years. |
e) I don’t know |
|
d) yes, in the form of financial compensation at EU-level |
This is particularly relevant when electricity is included in the calculation of the benchmark. |
Less important |
Most important |
I don't know |
Least important |
The majority of the potential CO2 savings can be achieved by existing technologies like insulation. |
e) I don't know |
|
The first objective is to develop a coherent, consistent and mutually reinforcing EU Climate & Energy policy framework to deliver sustainable growth and competitiveness. As the EU-ETS is an instrument for one of the building blocks, discussions on EU-ETS post 2020 can only make sense when this framework, the long-term vision and the international context are known. One key recommendation is to set the CO2 target on the basis of the energy efficiency target (not the other way around). For example, a research from Ecofys showed that a 40% energy efficiency target and a 30% RES target would lead to a 45%-54% CO2 target. Under such long-term and holistic approach, it makes sense to modulate policy instruments according to the specificity of each sector, in order to unlock investments in the best manner. In this context, it would make sense to limit the scope of the ETS to the power sector and to put in place alternative ways to ensure a higher uptake of energy efficiency in industries. |
b) Trade association representing businesses |
Euro Chlor - the European Federation representing the chlor-alkali industry. Euro Chlor is an affiliate of Cefic - EU Register ID Number 64879142323-90 |
Euro Chlor Alistair Steel - Executive Director Avenue E. van Niewenhuyse 4, Bte 2 B-1160 Brussels Belgium Phone: 32-2-676-7350 Fax: 32-2-676-7241 e-mail: ast@cefic.be |
a) yes |
|
1) yes |
a) yes |
In principle yes but the the investment required to achieve this is a complex issue requiring an analysis of investment risk based on competitiveness factors. Regulatory uncertainty is a key risk as is the effect of European energy costs on competitiveness. |
b) no |
For electro-chemical processes like the chlor-alkali industry, direct carbon dioxide emissions are close to zero. The burden of emission costs are experienced in the purchase price of electricity from the generators which contain ETS costs. The chlor-alkali industry has no control over the fuel mix of the electricity generators only over the technology WE use, the efficiency of which is driven by other factors. The use of state of the art technology is being introduced due to factors not related to ETS. The same will be true of other manufacturing industries. |
a) yes |
The EU climate policy measures should not indiscriminately put EU manufacturing at a disadvantage compared to its international competitors. Therefore EU should have measures in place to compensate for the additional cost burden both for direct and indirect emitters. |
b) quite adequate |
Free allocation is an adequate instrument to address the risk of carbon leakage if used correctly. Free allowances are a better measure than state aid to ensure lack of distortion in compensation across the EU. |
b) it largely keeps the incentive |
For industry generally it largely keeps the incentive because industry is always desirous of using state of the art technology. Free allocation ensures that investment cash is not diverted to emission costs. For the chlor-alkali industry there is no effect as explained in question 2. |
e) I don’t know |
We have no remark to make on this question as our industry does not receive free allocation of emission certificates. |
d) there should be no limit to overall free allocation to industry |
In the absence of global action, EU industry should not be unilaterally burdened with limits and constraints. The share of allowances dedicated to free allocation, based on benchmarks, should be sufficient to avoid carbon leakage. To ensure a level playing field indirect emitters should also be included in the scheme. |
d) there should be no such innovation support post-2020 |
Research and development in various technologies is crucial for the EU decarbonisation path towards 2050. Focus should be on the development of the most promising technologies in a cost efficient way. However, support and funding for these technologies should not depend on the auctioning income which varies with the carbon price. |
c) I don’t know |
Some technologies to meet the 2050 targets are not yet available or invented. Investment in innovation, leading to cost competitive technologies will drive improvements in energy efficiency and emissions reductions not only in Europe but also in other regions that positively contribute to EU’s economy with net added value and international competitive position. All ETS auctioning revenues should stay in industry to assist the decarbonisation of European industry without impairing its international competitiveness. Auctioning revenues not needed for free allocation should be used to pursue an active industrial policy (i.e. through a large breakthrough technology programme for innovation in energy intensive industry). However, such support must not cannibalise the free allocation volumes and carbon leakage provisions and policy-makers should refrain from raising the costs of decabornisation policies in order to increase revenues that would otherwise be needed to addressing those costs |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Any income from auctioning should be recycled to industry. |
a) yes |
To enhance the equal treatment and regulatory certainty for electro-intensive industries, free allowances should be awarded to compensate for carbon costs contained in electricity prices. |
a) the present two groups should remain |
The current 2 categories are adequate. |
a) the present criteria should remain |
The present system provides adequate inclusion of affected industries. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The current system provides adequate inclusion of affected industries. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The following parameters are proposed for a forward looking qualitative assessment: 1. Costs related to climate change policy along the value chain should be taken into account 2. In cases where an upstream sector is removed from the carbon leakage list then the implications for a downstream user should be taken into account 3. The inability to pass through locally imposed costs to sectors whose product prices are determined internationally should be taken into account. |
d) in line with the duration of ETS Phase 4 |
|
c) the approach should be less stringent (please specify) |
For the chlor-alkali industry a benchmark set according to the weighted average of plants operating the most efficient available technology is appropriate. The average should be taken so as not to disadvantage those operators who are still operating undepreciated assets. |
b) no |
It is sufficiently stringent if the benchmark is set to the average of the most efficient technology in a sector. |
c) other (please specify) |
Actual production data from the year prior to the claim period should be used. |
e) I don’t know |
We offer no remark on this question. |
c) yes, in the form of additional free allocation |
Direct and indirect emissions both are equally harmful for energy-intensive industries.. Today, the treatment of indirect (electricity) emissions is based on an incomplete and in some cases inherently unstable system for financial compensation, based on historical figures and dependend on the availability of national budget and political decisions. The incompleteness regards the sectors covered, the reduction factors and the absence of this compensation in many Member States. A more solid and predictable alternative is needed. But member states and the EU should be aware, that higher budgets will be needed for compensation of indirect costs, especially in scenarios with increasing carbon prices. Care must be taken that carbon leakage can still be avoided. Otherwise the EU will lose those industries which provide the innovation and economic strength needed to achieve a low carbon future which truly is a global model. |
Important |
Most important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
All auction revenues should be recycled back to industry. |
No |
b) Trade association representing businesses |
EUROALLIAGES is the European association representing ferro-alloys and silicon producers (23 companies, operating 50 plants in 14 countries, representing 95% of the sector in Europe). Its members supply the most efficient and economical way of introducing alloying elements into iron and steel melts in order to produce the required steel grades. It also provides the electronic, chemical and solar industries with essential base materials for their products. All processes are energy-intensive. |
Iva Ganev Manager European Energy Policies EUROALLIAGES Avenue de Broqueville 12 - 1150 Brussels, Belgium Tel.: +32 2 775 63 08 E-mail : ganev@euroalliages.be |
a) yes |
|
1) yes |
b) no |
In the ferro-alloys and silicon sector, the abatement potential is very limited. The production process goes along with incompressible emissions. The European ferro-alloys and silicon industry has been an early mover and the thermodynamic limits for CO2 emissions have almost been reached. Beyond these limits, process emissions cannot be further reduced with the state-of-the-art technologies. EUROALLIAGES provided DG CLIMA with calculations on stoichiometry in April 2010 and is available to present scientific evidence again. Besides, the last digits are the most expensive to reach and the global competitiveness of the European ferro-alloys and silicon sector will be even more under pressure. Innovation is most certainly a key to further abatement and the industry needs support in this direction, especially with the high cost that goes along with it. However, for the design of EU policy, EUROALLIAGES does not see as realistic an approach relying on potential breakthrough technologies. |
a) yes |
EUROALLIAGES supports the EU ETS, however the system needs improvements. To contribute to industry’s competitiveness, the economic incentive for carbon efficiency must not increase the unilateral cost burden and the risk of carbon leakage. Today, the incentive is distorted by the ex-ante allocation. The current ETS design does not adequately protect against carbon leakage because reduction factors reduce free allocation, the carbon leakage status of industry is uncertain and the ex-ante principle undermines growth and efficiency. Energy efficiency is a natural path for an energy-intensive sector like ours and it is being exploited where economically viable. It however requires big investments which are partly hindered by the EU ETS: in the case of heat recovery, the potential free emission allowances attached to the heat are transferred to the utilities which purchase the recovered energy while the financial effort lies in the industrial plants. |
a) yes |
As long as the ambitious European climate policy is not mirrored by equivalent international efforts, creating a real level playing field, the EU needs to ensure that the unilateral cost burden on EU industry is minimised. This is important not only from an economic viewpoint but also with an environmental consideration: the EU emission reduction targets should not be achieved through production relocation. The international efforts must not only be comparable; the cost for the industry must be the same in the main competing regions. Although ETS-like systems are emerging elsewhere, they are far from the EU ambitions and they generally offer a higher level of protection of industrial competitiveness. Until a real level playing field is reached, European industry needs not only transitional provisions, but also a stable framework which allows investments. |
b) quite adequate |
The tool is adequate but implementation flaws reduce its effectiveness. The principle should be that free allocation allows positive stimulation for good performers and enables bad performers to improve. Today, the allocation calculated based on best performers is decreased through correction factors. The decrease of 1.74%/year is higher than the usual rate of carbon efficiency improvements which makes the allocation not adapted to the reality of best available technologies. Besides, the compensation for indirect emissions is restricted and uncertain. Moreover, the allocation rules must be revised to also prevent carbon leakage at higher CO2-prices. The system especially needs fundamental revision if the EU remains isolated with its ambitious climate policy. In the medium- to long-term, an ambitious climate policy and the necessary effective protection against carbon leakage cannot rely only on a transitional measure such as free allocation. |
b) it largely keeps the incentive |
The incentive to reduce emissions is provided by the carbon price and the best performers principle. The benchmark principle gives carbon-efficient producers an economic advantage compared to less carbon-efficient ones. In other words, the incentive to make efficiency improvement investments is only strengthened by the cost difference achievable through an investment. However, this incentive is distorted in the current EU ETS design through the use of historical production data. Free allocation should be based on actual production instead. It must also be remembered that producers in the sectors exposed to a high risk of carbon leakage cannot pass through their carbon costs into product prices. |
c) quite exaggerated |
The red tape could be avoided by the introduction of an alternative free allocation mechanism, based on actual production (instead of historical). It would not only reduce the administrative burden, but also help avoid investment leakage. |
d) there should be no limit to overall free allocation to industry |
Free allocation to industry should exist as long as necessary and at a sufficient level to avoid carbon leakage. The calculation should be based on realistic performances taking into account available technologies. A good European performer should have no disadvantage compared to its competitors in other parts of the world. It must not be forgotten that global competitiveness and carbon leakage are intrinsically linked. |
e) I don’t know |
Renewable energies are already supported by separate national schemes, so the ETS funds should not play a role in this area anymore. CCS can be a useful tool to decarbonise the power sector and also the industry. In addition, CCU is also a concept which deserves attention. R&D in these technologies is necessary, but it should be independent from the auctioning incomes. It is impossible to answer on the level of support: the NER support volume cannot be fixed upfront since it is related to the carbon price. |
a) yes |
There is an inconsistency between the EU emission reduction targets and the abatement potential of the ferro-alloys and silicon sector. The technologies which would be required to achieve the EU targets are not available today. Therefore the R&D and innovation must be further supported. However, the balance must be carefully drawn and this support should not be made at the expense of competitiveness; it should come on top of free allocation with regard to carbon leakage. A possibility for a support scheme is also to allocate additional free allowances. |
c) other types of funding (please specify) |
A fund for industrial innovation is clearly needed. It should be set up at EU level, because going to national level only means scaling down and fragmenting innovation. Earmarking part of the auctioning revenues does not seem to be a good solution. It means collecting money from the companies and then giving some back to part of them (usually the best lobbyists). The funds should be left in the companies to be invested in innovation. It should not be forgotten that in the vast majority of cases innovation takes place in the private sector. However additional support is still needed from EU level. |
a) yes |
Compensation for indirect emissions must also be covered at EU level through additional free allocation. For the ferro-alloys and silicon sector, which is energy-intensive, this is of crucial importance. Carbon leakage is very much due to energy costs; therefore there should be action to alleviate the rise in energy prices and the costs for industry. The cap for industry under the EU ETS must not be absolute but take into account the (realistic) abatement potential. It must also be subject to equivalent commitments at global level. With regard to free allocation, the principle should be to base it on actual production and not on historical data, which would improve the system (please see above). |
a) the present two groups should remain |
Ferro-alloys and silicon are globally priced and are price takers; hence the European producers are faced with competitors who do not abide by the same rules. As long as there is no operational global binding climate agreement with equal commitments, the carbon leakage risk will subsist for European industry. Therefore the list and the measures must be kept. In principle, all energy-intensive industries should be on the list. Value chains need to stay in Europe and no sector should be replaced by imports. Once an industry has left Europe, it does not come back. Investment leakage, which is currently undeniably occurring, should be better reflected in the list and the measures. It represents the first step to carbon leakage. The carbon leakage list should also cover indirect emissions, which represent an important cost for European industry and a crucial one for energy-intensive industries. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
Both current criteria should remain into place since they both clearly reflect the risk of carbon leakage, but they need to be strengthened with essential new elements: - a carbon costs comparison Europe vs. other major industrial regions (CO2, RES, grid and back-up costs); - the use of the marginal power plants for the indirect carbon cost; - an auctioning factor that is not too sharp; - the impact of value chain effects; - a forward-looking carbon price. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The current criteria and the thresholds are well designed to reflect the risk of carbon leakage. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The following parameters are proposed for a forward-looking qualitative assessment: - All costs related to climate change policy along the value chain, in particular upstream costs, should be taken into account; - The value chain analysis should also consider the implication for downstream sectors if an upstream sector is removed from the carbon leakage list; - The inability to pass through locally imposed costs for sectors whose product prices are determined globally should be taken into account. |
b) longer (please specify) |
Investment decisions require a longer planning period that what is currently offered within the EU ETS. Uncertainty and lack of predictability are elements that drive investments out of Europe. Planning stability should be ensured as long as there is no functional binding global climate agreement with equivalent commitments. Predictability with regard to carbon leakage should be ensured at least for the duration of EU ETS Phase 4. |
c) the approach should be less stringent (please specify) |
The stringency of the benchmarks should be related to comparisons at global level. The level of the benchmarks should be designed to provide an effective resistance to carbon leakage at forward-looking higher carbon prices in the longer term future. Benchmarks should be set at weighted average with a realistic annual carbon efficiency improvement rate. This has been the approach of other ETS-like systems emerging around the globe, which have certainly learned from the mistakes of the first ETS adopted by the EU. As far as the ferro-alloys and silicon sectors are concerned, they are covered by fall-back approaches. A global comparison would allow the elaboration of a benchmark which will help take into account essential characteristics of this industry instead of making it subject to discretionary calculations. |
b) no |
A revision of the benchmarks would harm the predictability necessary to investments (see answer to question 16). Only the commercialisation of a breakthrough technology changing the face of a sector would justify such a revision in the coming years. Until a binding global climate agreement with equivalent commitments is made functional, changing this parameter of protection against carbon leakage would be counter-productive. The ferro-alloys and silicon sectors, which are subject to fall-back approaches, are looking forward to the adoption of a global climate agreement at the abovementioned conditions, which would allow the elaboration of a benchmark and help take into account essential characteristics of this industry. |
c) other (please specify) |
Actual production data should be used to determine the allocation (see answers to questions 5 and 6). Free allocation should reflect economic reality of the plant. |
a) no, there should be no deviations |
|
c) yes, in the form of additional free allocation |
Direct and indirect emissions must be treated in parallel since they both harm installations covered by the EU ETS. Indirect emissions are a perverse effect of a policy element not designed to impact European industry. Power producers are price-makers and European industry does not have any power to alleviate this effect. Today, the treatment of indirect emissions is based on an intrinsically unstable system for financial compensation (depending on available budget, political decisions, decided on a yearly basis). It should derive from a more solid and predictable system, at EU level, through additional free allocation and without undue reduction factors. Only at these conditions will European industry be effectively protected against carbon leakage. |
Less important |
Most important |
Important |
Least important |
|
a) from the Member States' auction budgets |
|
The entry into function of a binding global climate agreement which entails equal commitments from all parties is of major importance for the European system of protection against carbon leakage. As long as there is no joint action, unilateral increases of European emission reduction targets will harm more and more European industry. Therefore the protection against carbon leakage granted at European level must be in line with the European level of ambition. |
b) Trade association representing businesses |
EUROCHAMBRES - The Association of European Chambers of Commerce and Industry |
Address: Avenue des Arts 19 A/D, B-1000 Brussels Contact person: Mr Michael Steurer, Advisor EU Affairs, +32(0)2 282 08 77, steurer@eurochambres.eu |
c) not relevant |
Chambers of Commerce serve the interests of every sector of European business, including those sectors which fall under the scope of the ETS. |
1) yes |
c) I don’t know |
As the answer to this question can neither be a clear “yes” nor a clear “no”, the reply options provided above are not adequate. Generally, there are further potentials to reduce CO2 emissions of the EU industry via the ETS. However, whether this potential can be realised without reducing the industrial production highly depends on the way the future EU climate policy (and in particular the ETS) will be designed. The 40% CO2 reduction target proposed by the EC in January 2014 is extremely ambitious and poses a potential threat to the EU as industrial location. In order to increase the limited potential for further CO2 reductions without reducing the industrial production output, the market-based characteristics of the ETS must fully remain in place along with sufficient, robust and long-term protective measures against carbon leakage. Only under these conditions the two equally important objectives of increasing the industrial prod. while decreasing CO2 emissions can be achieved. |
b) no |
As stated in the ETS directive 2008/87/EC the scheme’s first and foremost aim is to “promote reductions of GHG emissions in a cost-effective and economically efficient manner.” Becoming more efficient and consequently, more competitive, can be a positive side effect. However, the level of competitiveness and success of European products on the global market depends to a large extent on global climate change ambitions. Third countries will only be interested in energy efficient products “made in Europe” if they are required to meet specific GHG emissions targets themselves. As long as climate protection measures are not implemented globally, increased ETS-related costs will undermine the EU’s competitiveness. Therefore, the post 2020 carbon leakage measures must be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 requires an increased and not a decreased protection against carbon leakage. |
a) yes |
Globally, the gap between the EU and growth front runner countries is still widening. Against the background of an increasingly tense international business environment, differing degrees of climate protection efforts result in competitive disadvantages for EU businesses. Many CO2 and energy-intensive businesses are facing difficult times on the global market. In comparison to the US, average EU electricity prices for industry are more than 50% higher. For natural gas EU industries have to pay more than three times as much. In both cases, the gap is widening. The IEA anticipates that by 2035 the EU’s share of global exports of energy-intensive goods could decrease by 10 %-points. Scientific studies show that domestic emissions in the EU decrease, while emissions linked to consumption in EU increase. This can neither be the aim of EU's climate policy nor be accepted as side effect. Thus, protection measures for energy and CO2-intensive sectors must be strengthened in the future. |
a) very adequate |
In order not to further weaken the competitiveness of CO2-intensive sectors, the basic principles of the current policy instruments (free/increased allocation for sectors on the carbon leakage list) must not be questioned. Free allocation is the best instrument to date to address carbon leakage risk for certain industrial sectors. This is absolutely necessary to ensure the competitiveness of EU industry. |
a) it absolutely keeps the incentive |
As free allocation is carried out on the basis of ambitious benchmarks, businesses are required to fully exploit their low-carbon potentials. If industry can rely on sufficient free allocation for an adequate period of time, investment decisions will trigger improvements in a long term run. Moreover, competitiveness aspects will unequivocally continue to remain a strong driver for energy-efficiency and low-carbon investments. |
c) quite exaggerated |
The implementation of the benchmarks through national implementation measures requires significant resources from the industry and the competent authorities. However, not having free allocation would have dramatic consequences for the sectors most exposed to CL. The cost impact (for the companies and the society due to the costs deriving from lost market shares and possible plant closures) would in any case be much higher than the admin.burden. A main reason for admin.burden has been the continuous changes in the ETS-framework and implementing rules which has caused uncertainty among industry. We have to prevent constant changes in MRV rules that do not deliver any environmental benefits. In general, benchmarks have to be feasible (i.e. achievable in a cost-effective way). The EU should take a practical and pragmatic approach to benchmark-based allocation in collaboration with stakeholders and should provide incentives to reduce GHG intensity via technology neutrality. |
d) there should be no limit to overall free allocation to industry |
So far, the EU has clearly played the leading role in global climate action. However, none of the key international players have yet been sufficiently impressed by the EU commitments to follow suit. As long as the international imbalance of CO2 costs remains, a guaranteed 100% allocation for free emissions certificates is needed. Sectors at risk of carbon leakage that produce CO2 efficiently should receive 100% of their required certificates for free, without subsequent reductions. Since free allocation is the main instrument to avoid carbon leakage, its share should be sufficient. Post 2020 carbon leakage measures have to be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 requires increased and not decreased protection against carbon leakage. An efficient producer in the EU should not have competitiveness disadvantages compared to its competitors in third countries. Therefore, free allocation should not be subject to any reductions. |
a) a substantially higher share than in Phase 3 |
A higher share of the post-2020 allowance budget should be dedicated to general research, development and innovation (R&D&I) support. However, it must be made unequivocally clear that any financial support for R&D&I must be generated form auction revenues and must not replace free allocation. Auction revenues should be earmarked for the development of various low-carbon production technologies, without favouring certain technologies. |
a) yes |
Earmarking auction revenues for industrial innovation should become obligatory for all Member States. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
100% of auction revenues should be reinvested to the benefit of businesses in all Member States (e.g. support industrial low carbon projects). This should be a legally binding requirement for every single member state. |
a) yes |
In several EU countries, energy and emission-intensive industries contribute significantly to the reduction of greenhouse gas emissions: Not only due to their participation in the EU-ETS but also by paying taxes or surcharges for the development of renewable energies. For as long as other countries do not commit to equally ambitious climate protection regulations, member states should have the possibility to exempt energy intensive industries from such taxes and surcharges in order to secure their competitiveness and reduce the risk of carbon leakage. Also, energy intensive businesses should be provided with offsetting for the pass-through of CO2 costs in electricity prices by either financial compensation or free allocation. |
e) I don’t know |
Sectors which are currently not on the carbon leakage list should, in justified cases, also be treated as exposed. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
The two presented criteria should be complemented by: § Indirect costs (higher energy prices due to CO2-costs being passed down to industry) § Export and import competition § Profitability of a sector (However, in this context, the entrepreneurial data security has to be kept in mind. The mere technical feasibility of reducing emissions does not mean that these improvements are affordable. The key issue is the potential to cost-effectively reduce emissions. Once this potential has been exploited, profit margins are even more under pressure.) See also response to question 15 |
c) I don’t know |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
For some sectors, statistical data does not fully capture the reality of their exposure to leakage. This is often due to boundary issues or linked to the complexity of the sector and its market (e.g. technological limits of the sector). Therefore, the option to have a qualitative assessment should be kept. |
b) longer (please specify) |
In order to guarantee long-term investment security, carbon leakage status must not be reviewed every five years, but instead remain unchanged until other economic areas draw level in terms of CO2 costs for industries. |
d) I don’t know |
The benchmark of the 10% best performing installations is used only to calculate the preliminary free allocation, while the final free allocation is affected also by the cross sectoral reduction factor. Rules on free allocation should be adjusted so that the best performing installations get 100% free allocation without any reduction. |
a) yes (please specify how often) |
The benchmarks should reflect the technological state of the art HOWEVER, in order not to harm the long-term planning certainty of businesses the technological state of the art should not be updated within a trading period. |
c) other (please specify) |
The production data used to determine the allocation should be as up-to-date as possible. EUROCHAMBERS calls on the Commission to apply a dynamic approached based on real production levels or a rolling average of production levels over closer years (e.g. n-1, n-2). |
e) I don’t know |
|
e) I don’t know |
|
Most important |
Least important |
Important |
Less important |
In general, all stages of the innovation process are important and should be supported. However, especially SMEs need additional support to turn their innovative ideas into a product on the market. Small scale projects can help them access new markets through innovation. |
a) from the Member States' auction budgets |
The allowances funding low-carbon innovation support should derive from member states’ auction budgets. However, other public and private funding sources should also be considered. |
So far, the ETS has been a relatively well-functioning working instrument, generally showing that CO2-reduction can be achieved in a cost-efficient way. However, the EU should focus on a stable long-term perspective for climate action. What our businesses need most is planning certainty, confidence in the EU as business location and a level playing field with global competitors. Though the EU can act as pace-setter, it cannot shoulder climate protection alone, as less than 10% of the GHG emitted worldwide each year come from within the European Union. Thus, the EU has to put every effort into the conclusion of an intl. agreement by 2015. However, until such a binding agreement including all major emitters will enter into force, our CO2 & energy intensive businesses must not be subject to any new burdens. Moreover, the EU must not only concentrate on mitigation but also on adaptation measures, which (unlike mitigation efforts) lead to concrete and economically quantifiable results. |
b) Trade association representing businesses |
EUROFER (European Steel Association) Register ID: 93038071152-83 |
Danny Croon (D.Croon@eurofer.be) +32 2 738 79 45 Avenue de Cortenbergh 172 B-1000 Brussels |
a) yes |
1) yes |
b) no |
Following the request of EU Commission most energy intensive sectors developed their own low-carbon industrial roadmaps. Most of those roadmaps show only small incremental GHG emission reductions possible between now and 2030. Furthermore, most of the sectors will need the development, piloting and demonstration of potential breakthrough technologies to meet long term goals of around -80%. These technologies, if ever developed, would only come in play after 2030. According to the BCG/VDEh study “steel’s contribution to a low-carbon Europe 2050”, the steel sector can only reach 15% reduction until 2050, under economically realistic circumstances.
This is particularly true for the steel sector. As demonstrated in the Steel Roadmap 2050, technologies able to decrease the sector’s emissions in line with the EU objective for 2030 are either uncompetitive because relying on expensive reducing agents (pre-reduction of iron) or involving Carbon Capture and Storage. |
b) no |
First of all, being exposed to fierce competition from third countries in the EU market and in the export market, the EU steel sector is not able to pass on direct and indirect CO2 costs on prices. Therefore, CO2 costs can potentially damage the operating margins and thus, reduce financial means available for investment. Secondly, investments in energy efficiency make the industry more competitive only if the return on investment is positive i.e. the savings exceeds the investment costs. With the ETS, investments are made only if their cost is offset by the avoided carbon costs. As such, the ETS doesn’t make the industry more competitive as ETS-driven energy efficiency measures are there only to compensate a cost that wouldn’t be there without the ETS. |
a) yes |
The EU steel industry delivers goods that are globally traded. Steel is a globally traded commodity and steel companies are competing on lobal markets. From the global crude steel output of 1,607 Mio t, China comes first with around 779 Mio t followed by the EU-28, with the EU-28 being the first steel importing region in the world and the third in term of exports. This shows that the EU steel sector faces fierce competition from third countries not only on the domestic market but also on a global one; EUROFER is therefore convinced that a comprehensive and legally binding international climate deal with equally ambitious commitments for all major economies is the best way to address climate change whilst solving distortion of competition issues due to asymmetric carbon constraints. In the absence of an international climate agreement providing level playing field special measures are needed to support EU industry covered by the EU ETS to address the competitiveness issue and avoid carbon leakage. |
b) quite adequate |
As shown in the Ecorys ‘Carbon leakage evidence project’ - fact sheet for steel, one of the main reasons why no evidence of leakage could be found in the first two trading periods is the effectiveness of the protection provided by free allocation. Free allocation is the best instrument to date to address carbon leakage risk for certain industrial sectors. Sectors at risk of carbon leakage shall be provided with 100% free allocation at the level of the most efficient installations, based on achievable benchmarks and without any correction factor. Equally they shall be provided with full off-setting of CO2 cost-pass through in electricity prices in all member states by either financial compensation, free allocation, or the electricity market shall be re-designed in a way that it prevents any carbon price pass-through in electricity prices, or a combination of these. |
b) it largely keeps the incentive |
With a free allocation based on achievable benchmarks companies in the tail of the benchmarks have an incentive to catch up more quickly to the benchmark due to the level of carbon related costs. Companies in the lead are incentivised to innovate to perform even better.
On the contrary, a higher level of auctioning for sectors exposed to leakage (as induced by the Cross Sectoral Correction Factor) decreases the profit margins and the financial ability to invest. This is particularly true in these periods of restricted access to capital. |
b) quite proportionate |
The implementation of the benchmarks through the NIMs requires significant resources, both from the industry as well as from the competent authorities. However, not having free allocation would have dramatic consequences for the sectors most exposed to carbon leakage. The cost impact (for the companies as well as for the society because of the costs deriving from lost market shares and possibly plant closures) would in any case be much higher than the administrative burden. |
d) there should be no limit to overall free allocation to industry |
To safeguard EU industries’ global competitiveness in absence of a comprehensive international agreement on climate change establishing a global level playing field for industry, sectors at risk of carbon leakage need to be provided with 100% free allocation at the level of the most efficient installations, based on achievable benchmarks and no correction factor.
A bottom-up approach is needed for cap setting. The cap should be flexible so as to be in line with what is technically and economically feasible in terms of CO2 reduction potential.
The steel sector would be open for discussion for a periodical review of the benchmarks in order to take into consideration technological development. In the absence of major technological change able to decrease the sector’s emissions, a flat rate of free allocation must be guaranteed. Furthermore, in order to protect sectors at risk of leakage due to indirect CO2 costs, it should be considered to fully offset CO2 costs passed through in electricity prices e.g. by means of free allowances. This would require a larger access to the allowance budget. |
e) I don’t know |
Funding of low carbon innovation must be consistent with the level of ambition of the objectives. Therefore support should be extended to the industry (see next point). Funding should come from earmarking of the revenues from the EU ETS, in particular for mitigation at source and financing of related infrastructures. |
a) yes |
This should cover all carbon abatement measures, provided that there will be no additional burden for the industry. |
c) other types of funding (please specify) |
Adequate funding should be provided by a well-balanced mix of funding sources, within and outside the EU ETS. |
a) yes |
Sectors at risk of carbon leakage shall be provided with 100% free allocation at the level of the most efficient installations, based on achievable benchmarks and no correction factor. Equally they shall be provided with full off-setting of CO2 cost-pass through in electricity prices in all member states by either financial compensation, free allocation, or the electricity market shall be re-designed in a way that it prevents any carbon price pass-through in electricity prices, or a combination of these. |
e) I don’t know |
It is important that the sectors most exposed to carbon leakage should get a flat rate of 100% free allowances, based on technically and economically achievable benchmarks. |
g) I don’t know |
A genuine reform of the EU ETS with an improved carbon leakage support must take effect post-2020. The steel industry would be open for discussion on measures, such as improving the carbon leakage criteria, if assurance is provided towards the energy intensive industries for safeguarding their global competitiveness until a comprehensive international agreement on climate change has established a global level playing field for industry (100% true free allowances and full offsetting of CO2 cost-pass through in electricity prices). |
c) I don’t know |
see answer to question 13 |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
For some sectors, statistical data doesn’t fully capture the reality of their exposure to leakage. This is often due to boundary issues or linked to the complexity of the sector and its market (e.g. existence of substitutes). There, the option to have a qualitative assessment should be kept. |
d) in line with the duration of ETS Phase 4 |
This is important for business predictability. There should also be the possibility to add sectors to the leakage list during the trading period, if a change of conditions justifies it. |
a) the present approach of average of the 10% most efficient installations should remain |
Only with a fair and realistic benchmark the goal of the 10% best performers is ambitious enough to lead the EU-ETS on an economical way to success. The benchmarks need to reflect real technical and economical possibilities to produce and to sell the product on the relevant markets taking international trade into account. However, in a sector with a relative low number of installations, abatement of carbon by an individual installation affects the benchmark substantially. Any adaptation of benchmarks for 2021 onwards should be considered only if the best performers of sectors at risk of carbon leakage receive true 100% free allocation and full off-set of CO2 costs pass-through in electricity prices in a harmonized way in all Member States. |
a) yes (please specify how often) |
A periodical review of the benchmarks once per commitment period should be made, so as to reflect technological progress and uptake of new and proven technologies in the EU. This should be done by assessing the benchmarks through an analysis of the CO2 performance of the EU industry and not be based on best available techniques (BAT), because BAT feasibility depends to a large extent on local conditions . |
c) other (please specify) |
Allocation should be based on real production levels or a rolling average of production levels over closer years (e.g. n-1, n-2). |
a) no, there should be no deviations |
Distortion of competition within the single market shall be avoided. |
c) yes, in the form of additional free allocation |
Full off-setting of CO2 cost-pass through in electricity prices should be provided in an harmonized way in all member states by either free allocation, financial compensation, or the electricity market shall be re-designed in a way that it prevents any carbon price pass-through in electricity prices, or a combination of these.
EUROFER believes that, albeit very challenging, compensation through free allocation would provide the most effective and less distortive means to address indirect CO2 costs compensation. |
Important |
Less important |
Most important |
Less important |
d) other |
The allowances funding low-carbon innovation support should come from MS’s auction budgets. Other public and private funding sources should also be considered. |
European Commission impact assessments should be improved to make them less politically biased and more fact based as basis for decision making. Realistic outcomes for the steel industry of the immense shortage and costs from the 2030 energy and climate plan were kept out of the EC impact assessment, while all data were known. There are many ways how to improve this.
The European Commission needs to provide a signal asap in the shape of the actual policy measures that it intends to keep European industry, which is the basis of many value chains, innovation, jobs and prosperity. |
b) Trade association representing businesses |
EUROGAS |
NOEL REGAN AVENUE DE CORTENBERGH 172 - 1000 BRUSSELS - BELGIUM +32 2 894 48 07 noel.regan@eurogas.org |
b) no |
|
1) yes |
a) yes |
We think that industry can further reduce greenhouse gas emissions towards 2020 and beyond. The question of whether this reduces industrial production in the EU depends on several factors including: the contribution towards greenhouse gas reductions from the EU's trading partners, the adequacy of revised carbon leakage measures and the level of support available for research, development and innovation. |
a) yes |
The EU ETS is the best possible tool for EU industry to become more energy efficient, as it is a market based mechanism, which promotes the most cost-efficient solution. It is also technology neutral, thereby allowing all available low-carbon options to compete to provide the best possible outcome. |
a) yes |
As long as the EU's international trading partners do not make equivalent efforts to reduce greenhouse gas emissions, carbon leakage remains an important issue and direct as well as indirect additional costs to companies exposed to global competition should be addressed. The goal for the EU should be an international agreement whereby the EU's trading partners make such an equivalent effort, meaning such measures will no longer be needed. |
b) quite adequate |
While "quite adequate" has been ticked in response to this question, the extent of the adequacy will depend on the design of the detailed methodology. The application of free allowances should be made on the basis of evidence provided by the sectors concerned. Furthermore, the application of free allocations should be used as a short to medium-term tool, while international trading partners do not make equivalent efforts. The objective for the EU should be an international agreement which makes carbon leakage measures unnecessary. |
e) I don’t know |
As stated earlier, the need for carbon leakage measures and hence free allocations is recognised. However, free allowances, by their very nature, do compromise the signal for innovation. At the same time, the strength of the signal that remains is very dependent on the method of allocation and in particular the methodology used for deriving the benchmark for the allocation of free allowances. Furthermore, the strength of this signal will depend on the length of the free allocation period, amongst other things. |
e) I don’t know |
|
f) I don’t know |
The share dedicated to industry should be made on the basis of evidence provided by the sectors concerned in respect of those sectors where the EU's international trading partners do not make equivalent efforts. |
b) the same share as in Phase 3 |
This question has been selected with the case of CCS specifically in mind. Evidence suggests that for its current stage of development, a substantially higher share of public funding and greater public acceptance are required. Therefore, the direct competition with renewables under NER300 should be reduced and additional funding instruments for low-carbon investments be considered (see Q9&10) in order to assist CCS in achieving maturity. In the long run, the ETS should be seen as the long-term support for low-carbon technologies which are considered mature. |
a) yes |
Consideration should be given to the recycling of auction revenues in support of low-carbon investment, including in CCS, bio-methane and power to gas technologies. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
See Answer to Question 9 |
a) yes |
The focus should be on designing a free allocation methodology which deals adequately with carbon leakage caused by additional costs that companies exposed to global competition do not incur outside the EU. In the case of indirect costs, further additional schemes should only be used where there is clear evidence of their necessity and should be limited to these cases. Any measures should avoid complexity and not undermine the ETS. |
e) I don’t know |
|
g) I don’t know |
|
c) I don’t know |
|
c) I don’t know |
|
a) five years |
This has been answered '5 years', as on the one hand this period offers some stability to support industry invest in new low-carbon technology, but on the other hand, does not overly restrict Europe in making progress on international agreements (i.e. carbon leakage measures can be changed if international partners make greater commitments). It is also recommended that carbon leakage lists are published in good time ahead of their implementation, to improve the ability of participants to plan for the future. |
d) I don’t know |
|
c) I don’t know |
The nature of a benchmark is that it reflects a desired performance level. However, when comparing various industrial plants as part of a benchmarking exercise, the age of a plant amongst other things should be taken into account. |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
Further consideration might be warranted to ensure that this does not mean investments are delayed until the start of each trading period. |
a) no, there should be no deviations |
Deviations should be avoided to prevent distortion of the EU carbon market. Negative consequences of such deviations would affect all ETS sectors. |
e) I don’t know |
Regardless of the chosen approach, any measures should only be used where there is clear evidence of their necessity and should be limited to these cases. Any measures should avoid complexity and not undermine the ETS. |
Important |
Less important |
Most important |
Least important |
We have answered the above with respect to the development of CCS. A different answer is likely to apply for different technologies. Mature technologies should not be supported regardless of whether they are commercially feasible or not. Existing national support schemes should be phased out for all mature technologies, but without retroactive effect. |
c) from both |
Consideration can be given to the recycling of auction revenues in ETS sectors and revenues from equivalent measures in non ETS sectors in support of low-carbon investment. Consideration should also be given to funds being provided from outside of the ETS scheme. |
|
b) Trade association representing businesses |
Eurogypsum-The European Plaster and Plasterboard Industry |
Christine Marlet Rue de la presse 4 1000 Bruxelles |
a) yes |
|
1) yes |
a) yes |
However we have very limited capacity to significantly reduce our emissions without breakthrough technologies as evidenced by the flat nature of the benchmark curve for the European Gypsum Industry. The European Union should support innovation through financial incentives to promote breakthrough technologies for significant carbon emissions reduction. |
b) no |
Due to high energy costs, the European Gypsum Industry has historically already implemented energy efficiency measures; thereby reducing CO2 emissions (refer to the European gypsum Industry benchmark curve). For the time being, further abatement techniques and/or renewable energy (biomass, biogas, etc) are not sufficiently cost-effective to be used widely in our plants. |
a) yes |
The existing ETS schemes in third countries are not equivalent to the EU ETS scheme. In China, for example, there is significant uncertainty over the long-term price signal as a result of the current trading schemes being pilots. The gap between EU and non EU countries thus remains until third Countries commit to equivalent regimes with long-term objectives set down in legislation. |
a) very adequate |
Increased free allocation for carbon leakage sectors is an adequate policy instrument as long as it does not create competitive distortions for competing products that are not covered by carbon leakage status. |
a) it absolutely keeps the incentive |
It helps to ensure that revenue is available for investment into innovation and emissions reductions. |
c) quite exaggerated |
The administrative burden is disproportionate when you consider the rules for new entrants and when you consider the administrative burden related to capacity changes (increases or decreases). In addition, these rules are not simple to follow and apply. |
f) I don’t know |
|
d) there should be no such innovation support post-2020 |
The EU ETS system is not the best way to finance CCS and innovation can be financed via other tools. |
a) yes |
|
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
|
a) yes |
If there is no global agreement on CO2 emissions, we need to consider the competitiveness of EU industry. We need greater equity between EU and Non EU ambition on emissions reductions and also on burden sharing of the costs associated with these reductions. |
a) the present two groups should remain |
The carbon leakage status is necessary to avoid distortion of competition between competing construction products falling under the scope of the EU ETS. Therefore the qualitative assessment should be maintained. The future ETS should maintain fair competition between products inside the internal market. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
There is a need to maintain the qualitative criteria in order to avoid competitive distortions between competing sectors captured under the EUETS (refer to question 15). |
c) I don’t know |
If thresholds are changed, then at least the energy intensive industries should receive carbon leakage protection moreover so if energy prices are high in comparison with non EU coutnries. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
In particular, the qualitative criteria are necessary to avoid distortion of competition between products in the construction sector which fall under the EU ETS. |
a) five years |
With the additional possibility of adding new sectors once per year, providing they can demonstrate that they meet the necessary requirements. |
a) the present approach of average of the 10% most efficient installations should remain |
|
b) no |
The benchmark curve should be kept as it is for the gypsum industry because it remains representative. The nature of the curve demonstrates that many installations have already implemented the best available techniques for CO2 abatement. |
a) no, the same baseline period chosen for allocation in Phase 3 should be maintained also for post 2020 (Phase 4) allocation |
Due to a very significant and protracted recession - particularly in the construction sector, an updated baseline would not be appropriate or representative. |
a) no, there should be no deviations |
Deviations could lead to potential internal market distortions between products in the construction sector. This approach also lacks consistency, transparency and predictability. |
e) I don’t know |
The European Gypsum Industry does not receive compensation for indirect costs resulting from the ETS. |
Important |
Less important |
Most important |
Least important |
|
a) from the Member States' auction budgets |
Utilising Member State auction budgets ensures that the revenue generated from Companies and installations is recycled back into the innovation and incentivisation of carbon abatement techniques and technologies. The market exists to achieve emissions reductions at the lowest cost and this approach is consistent with that principle. |
|
b) Trade association representing businesses |
EUROMETAUX, European Association of Metals |
Mr. Jernej VERNIK Eurometaux Energy and Climate Change Policy 12, Avenue de Broqueville B-1150 Brussels Email: vernik@eurometaux.be Tel : +32 2 775 63 12 Mobile : + 32 470 100 236 Website: www.eurometaux.eu |
a) yes |
1) yes |
b) no |
UNLESS: *Extra cost due to climate policy is sufficiently compensated. Shrinking margins reduces options to invest in energy eff. and will lead to closures of capacity.Currently, a key CL prevention mech, compensation for ETS ind. costs,exists only in few MS establishing meaningful schemes *We have a stable, predictable and investment friendly env. in EU. NFM industries are price takers in global markets;cost raise is not reflected in higher product selling prices. Electricity cost is a main localization factor and investments in EU are unlikely since elect. cost is higher, due to cost linked to climate policy *Conditions are put in place to ensure that EU industry can remain globally competitive to continue investing in innovation along its entire value chain. * Sector specific reduction potentials and tech. availability are properly addressed. *Clear political commitment, that EU climate policy,including targets,will be reviewed if by 2020 no global level playing field is achieved. |
b) no |
Energy intensive industry has an innate incentive to become more energy efficient due to high share of energy cost, independently of the extra cost related to ETS. In these industries, however, the EU ETS may reduce the ability to become more energy efficient. Improvements will require investments, either in upgrading of existing capacity or in new plants. Extra cost due to climate policy is however insufficiently compen¬sated and will reduce the margins of the industry. Shrinking margins lead to reduced energy efficiency investments. Investment in more energy efficient technology in energy intensive industry requires that: 1.The industry is guaranteed full compensation for the extra costs related to European climate policy until a level playing field is restored through a comprehensive global climate agreement. 2.New capacity created through the project also gets full compensation. |
a) yes |
In most energy intensive industries, product prices are set in global markets. Until a significantly larger share of competitors is influenced by similar increases in energy cost, there is a need for such measures. Otherwise such industries will disappear from Europe. |
b) quite adequate |
Compensation for direct and indirect costs, linked to actual output and realistic benchmarks, would be a very adequate measure to address the risk of carbon leakage (predictability and effectiveness is ensured in the long term for both, direct and indirect costs). The current implementation faults however lead to a reduced effectiveness of the policy instrument. |
a) it absolutely keeps the incentive |
Full compensation for direct and indirect costs is absolutely necessary for the competitive position of Europe as a localization of energy intensive industries. Compensation should be linked to actual output in order to provide an incentive for growth and to allow production flexibility through business cycles. Realistic benchmarks are necessary for full compensation to new capacity and for the preservation of the undistorted environmental incentive. Expressed differently, allocation of free allowances will not reduce the environmental incentive for the recipient. On the contrary, full compensation for direct and indirect effects of ETS through allocation or otherwise is a precondition for investment in new capacity in Europe. |
b) quite proportionate |
The administrative burden is not insignificant, but proportionate in the sense that no better solutions to solve the carbon leakage issue have been proposed. Harmonized approach in the different countries could be targeted. |
d) there should be no limit to overall free allocation to industry |
Measures against carbon leakage have to set the marginal costs of mitigation on level playing field. Without a comprehensive international agreement giving the global competitors of European industry a similar cost element related to emissions and electricity consumption, the cost of carbon leakage mitigation will be more or less stable, whereas the number of allowances to cover this cost will gradually diminish. This is a cost that is directly linked to emission trading and should be covered by the ETS system itself before any money is taken out of the system. If in the future, there is an inadequate number of allowances available to cover the need for carbon leakage mitigation, compensation could be provided as a sum of money proportionate to a given number of allowances from another source of finance. |
d) there should be no such innovation support post-2020 |
Financing of CCS should not be a priority for the allowance budget. It is illogical to reserve a given share of the budget for this purpose: When the EUA prices are low the need for support is high and vice versa. Furthermore, the lack of stability in the EUA market creates a high project risk and high financing cost. This adds the project cost and the need for support. |
b) no |
ETS should be focused on emission trading and mitigating the effects of such trading. Income from the sale of emission allowances should primarily be used to the mitigation of undesirable effects of emission trading. Innovation support should mainly come out of MS general budgets and not from auction income. |
c) other types of funding (please specify) |
ETS should be focused on emission trading and mitigating the effects of such trading. Income from the sale of emission allowances should primarily be used to the mitigation of undesirable effects of emission trading. Innovation support should mainly come out of MS general budgets and not from auction income. |
a) yes |
The use of free allowances will also have to be extended to cover indirect effects through increased electricity prices. With significantly higher EUA prices, the present solution for indirect costs based on State Aid will: - be insufficient for long term survival of these industries in Europe, -not create the predictability needed for investments, and, as well, - create significant disturbances in the internal market for energy intensive products. Effective carbon leakage prevention will also require exemption from extra costs related to other elements of climate policy like support to development of renew¬able electricity generation and extra grid costs related to transmission and balancing of electricity from renewable sources. |
b) more carbon leakage categories should be defined |
Non-ferrous metals industries are particularly exposed to carbon leakage and need full compensation of extra cost until a significant share of competitors is influenced by similar cost increases. EUA costs are passed on into electricity prices through the marginal cost of the marginal sources of electricity, and for these industries, electricity related cost make up a high share of total cost. Most non-ferrous metals products have a high value compared to their weight, and may be moved between markets at a cost that is small compared to their value. They are thus globally priced with only a minimal price differentiation between markets. Different categories of carbon leakage exposure may have the opportunity to design a more suitable instrument against carbon leakage due to direct and indirect cost of carbon. At a glance different categories with respect to the exposure to global competition and to EUA costs may be outlined. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
A single carbon leakage list (with several categories) should be established. The list should be based on the combined effect of direct cost (emission allowances) and indirect costs (increases in electricity costs due to climate policy). The following set of criteria should be established: 1. The exposure to global competition. 2. The exposure to total EUA cost impact 3. The unit is in the most exposed category of the carbon leakage list if both criteria are met being simultaneously at a high threshold. If one or both of the criteria only meets a lower threshold, the unit will be in the less exposed category of the list. Additionally, the criteria may be met by qualitative indicators in case a sector does not fulfill the quantitative threshold given. The intensity of trade with third countries is a weak proxy to competitive exposure, and should not be used in this context. |
b) other thresholds should be defined. Please specify below |
The levels of the thresholds should be based on proper ana¬lysis of the proposed new set of categories and criteria (see response to Q12 and Q13). |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The risk of carbon leakage is not fully measurable by metric criteria. A set of qualitative indicators may help to select the sectors at risk in an adequate and suitable manner. For example, the global pricing system for non-ferrous metals imply a very high exposure to local cost increases like direct and indirect costs of carbon. Especially the figures for the trade intensity and the cost of carbon cannot mirror the extraordinary high exposure of the non-ferrous metal industry. |
d) in line with the duration of ETS Phase 4 |
Predictability is the key to incentive efficiency. There is reason to believe that the set of criteria described above will establish robust and stable lists. |
a) the present approach of average of the 10% most efficient installations should remain |
We support the approach of a 10 % benchmark. However, currently, not even the most efficient 10% of the industry receive full compensation. In the fallback industries this is even less and it should be avoided to increase these reductions further. |
a) yes (please specify how often) |
YES, but only IF: 1. First, any revision of benchmarks directly affects free allocation. If necessary, revision should only take place at the starting point of each trading period. Single or even revolving revisions during periods will cause uncertainty and will hamper long term investments in carbon efficiency. 2. Secondly, the technological state of the art is hard to define. Research findings could not easily and automatically transformed in high scale production plants. Investments cycles make things more complicated. 3. The 10 percent best performing plants in Europe should be restored as indicator for the technological state of the art. |
c) other (please specify) |
The main advice to be found in the literature is to use output based allocation linked to realistic benchmarks. For each industry, the baseline will then be set by the realistic benchmark. Indirect emission should also be set by realistic benchmarks and actual output.. The compensation will be linked to a sum of two benchmarks, one derived from emissions and one derived from electricity consumption. |
a) no, there should be no deviations |
There should be no deviations linked to the short-term financial conditions of industries. There might however be a need to find special solutions for industries where it is impossible to establish sectorial benchmarks. |
c) yes, in the form of additional free allocation |
Compensation inside the EU ETS should be extended to cover indirect effects through increased electricity prices. With significantly higher EUA prices, the present solution for indirect costs based on State Aid will be insufficient for long term survival of these industries in Europe and, as well, create significant disturbances in the internal market. The cost of any compensation measures will be proportionate to the EUA price, thus corresponding to the value of free allowances. Compensation could be provided as free allowances or as a sum of money proportionate to a given number of allowances from another source of finance. |
Important |
Least important |
Most important |
Less important |
|
d) other |
ETS should be focused on emission trading and mitigating the undesirable effects of such trading. Innovation support should mainly come out of MS general budgets and not from auction income. Income from the sale of emission allowances should primarily be used to the mitigation of undesirable effects of emission trading. Innovation support should mainly come out of MS general budgets and not from auction income. |
|
b) Trade association representing businesses |
Euromines, the European Association of Mining Industries, Metal Ores & Industrial Minerals (See more at: http://www.euromines.org/) Euromines is registered in the Transparency Register under the ID number 62722978644-95. |
Corina Hebestreit Avenue de Broqueville 12 B-1150 Brussels BELGIUM hebestreit@euromines.be Tel: +32 2 775 63 31 |
a) yes |
1) yes |
b) no |
There is no one size fits all answer. On the contrary, a sectorial approach should prevail. While some sectors/subsectors might still have some margins to further reduce GHG, others don't because of physical constraints. This is the case for industrial activities whose emissions cannot be prevented or reduced without reducing the production simply because they are process emissions arising from the chemical transformation of the raw materials needed to produce the end-product. A good example is magnesia production where most of the emissions arise from decarbonatation. Magnesia continues to be produced in Europe and has a high economic importance which justified the inclusion of magnesite in the new list of critical raw materials. In addition, EU's 2020 objective should be to increase industrial production (and not simply to avoid its reduction) in order to "reach as much as 20% share of GDP for manufacturing by 2020", as called upon in the COM "For a European Industrial Renaissanc |
b) no |
The EU ETS was not initially designed to foster energy-efficiency, though the latter can be one of the tools enabling to reduce GHG which is EU ETS' primary objective. For example, in the mining industry, one way to reduce GHG emissions is to switch, when technically feasible, energy sources - for example from coal & gas to gas only. Though this will lower GHG emissions, this may not result in energy efficiency gains as the use of natural gas or of any other energy source might require a similar or a higher amount of energy for the process at stake. Secondly, when it comes to energy efficiency, other instruments, in particular financial incentives or the use of BAT, are more effective to achieve that goal. Last but not least, regardless of any EU scheme, companies have an intrinsic interest in being energy efficient as (i) energy accounts for a substantial share of their costs and (ii) energy prices are comparatively higher today in Europe. |
a) yes |
Competitive disadvantages EU industries are facing are real & take the form of comparatively higher production costs (including energy), highly-regulated and ever-evolving EU/national regulatory framework and sometimes untackled unfair trade practices. Thus support measures for EU ETS industries are a must to avoid carbon leakage (CL) as long as a similar scheme ensuring a level playing is not implemented at global level. Dropping them would amount to abandon EU’s 2020 reindustrialisation objective. New types of support measures need to be implemented. A 1st one might be to earmark EU ETS generated revenues for investments in more efficient technologies and make them available to all industrial sectors. A 2nd type of measures must be designed for sectors, such as magnesia production, facing process emissions which cannot be reduced. Exempting them from the EU ETS while focusing on the implementation of BATs under the IED would be much more effective to foster sustainable production |
a) very adequate |
Free allocation has proved to be an efficient policy instrument to ensure, in the framework of climate policy, a level playing field at international level and mitigate the risk of carbon leakage. So far, there is no better mechanism than free allocation to address the CL risk. It is therefore essential (i) to preserve free allocation without reducing its scope as in the current foreseen terms and conditions as long as international competitors are not facing a similar cost burden and (ii) guarantee a stable CL mechanism over long periods of time so as to respect legal certainty. |
a) it absolutely keeps the incentive |
The use of benchmarks of emissions performance based on which allowances are allocated for free absolutely preserves the incentive to innovate. Sectors, such as the mining industry, that cannot pass on costs to consumers are inherently interested in making investments to reduce emissions. Expenses saved thanks to free allocation enable companies active in the mining sector to invest more in innovation, otherwise spent to buy allowances. |
c) quite exaggerated |
The administrative burden ensuing from the implementation of the EU ETS (initial application, monitoring and reporting schemes, comparatively high compliance burden with the 'de minimis' rule for installations having 2 CL statuses) represents a significant red-tape for companies. As usual, it is much more difficult for SMEs to handle this burden due to more limited resources as well as for small industrial sub-sectors. A major mining iron ore producer whose activity is covered by a small NACE code (0710) reports that in his particular case, the internal company cost related to EU ETS (compliance and information gathering to ensure a fair treatment) is in the range of 1 million € annually. Administrative burden linked to EU ETS must also be put in perspective with the burden ensuing from other EU/national ever-increasing/changing regulatory requirements which oblige companies to devote more resources to activities other than their core business. |
d) there should be no limit to overall free allocation to industry |
This is a strong and unanimous request from all Euromines' Members: "there should be no limit to overall free allocation to industry" that is at risk of CL as long as a global agreement imposing similar obligations on Europe's industrial competitors is not reached and implemented at international level. Such a measure ('no limit to overall free allocation") is needed to preserve EU's industry competitiveness. In that respect, it is important to stress that climate change is a global matter which requires coordinated efforts at global level. Of global GHG emissions, the EU represents less than 10% and its share is decreasing. Europe must rethink its strategy for attracting the other global major economies into a comparable binding scheme and draw the consequences at European level in order to ensure that, as long as such a scheme is not in place, the relevant measures are taken to guarantee a level playing field between European producers and their international competitors. |
b) the same share as in Phase 3 |
CCS can become a key technology enabling to reduce GHG emissions. It can gain from technologies and expertise developed by the mining industry. However, CCS is not so far mature enough to be in the short term a 'silver bullet' process. Therefore, Euromines believes that, though adequate support for CCS should continue to be available, it is equally if not more important to ensure that funding opportunities are also made available to companies across the value chain for other type of technologies able to reduce GHG emissions "in a cost-effective and economically efficient manner", which is one of the key objective of EU ETS. Post-2020 allowances that support innovations should not impact on the amount of free allocations. |
a) yes |
The scope of NER 300 is rather limited and does not directly benefit to all industrial sectors covered by EU ETS. This must be corrected. Revenues generated by EU ETS must be earmarked for investments made in Europe in new cost-efficient & low-carbon technologies. They should be made available for example, via a dedicated fund, to all stakeholders across the value chain covered by the EU ETS. However, in parallel of new funding opportunities for low-carbon technologies, the EU must implement an ambitious industrial policy to remedy structural deficiencies and boost investments in industrial activities. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Euromines is ready to support a new dedicated scheme at the conditions that: (i) revenues generated by the EU ETS are made available to all sectors/companies covered by the EU ETS (ii) financial support is granted to cost-effective and economically efficient technologies able to reduce GHG emissions (iii) the level of funding of such a scheme is never used as a pretext to distort the nature of the EU ETS, which is a market-based instrument. |
a) yes |
Various measures are needed: 1/ EU ETS must ensure a stable legal framework as industry needs predictability to invest. Proposals contradicting that objective must be ruled out. 2/ Free allocation for sectors at risk of CL should continue as long as a scheme similar to the EU ETS is not implemented at global level. 3/ The EC shall not set aside beforehand any option to bring EU trade partners to commit to an international climate agreement or to draw the consequences of a potential refusal to commit to it. 4/ Compensation measures must be flexible enough to enable industrial growth. In practice, free certificates must be granted when installations, fulfilling the relevant conditions, increase their production. 5/ A better solution is needed to tackle indirect carbon costs. State aids’ measures are insufficient as discrepancies between MS exist. It is of utmost importance to improve: -the coordination between EU&National policies impacting indirect costs. -their financial compensation |
b) more carbon leakage categories should be defined |
The distinction between sectors which are not deemed to be at risk of CL and sectors that are not makes sense. However, a sub-distinction deserves to be defined within the former for sectors, such as the mining industry, that are price-takers and cannot pass on indirect costs to consumers because they compete at global level. Beside free allocation, those sectors need to obtain full compensation for indirect CO2 costs. From a more general standpoint, it is likely also that more categories might require CL status in the future as long as non-EU competitors do not have to comply with a similar cost burden. |
a) the present criteria should remain |
It is important to keep both the share of carbon costs in the GVA as well as the trade intensity as relevant criteria. With respect to the carbon cost/GVA criterion, proposal c) (the share of 'carbon costs' in the GVA should be maintained, but carbon costs should be taken into account to the extent that they can't be recuperated in product prices) should be further explored at the condition that both the trade intensity and qualitative assessment (see Q.15) are kept. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The qualitative assessment must be kept as it enables to include sectors at significant risk of CL which would otherwise fail to qualify under the sole quantitative criteria for various reasons such as the fact that NACE codes – primarily used for statistical purposes – do not accurately reflect the cost structure of the industry. |
d) in line with the duration of ETS Phase 4 |
This would improve legal certainty and consistency. |
a) the present approach of average of the 10% most efficient installations should remain |
Though Euromines supports proposal a), it would be appropriate to remedy to inconsistencies of the current system. For example, for small sectors for which there are less than 10 installations in Europe, no benchmark is derived and the fall-back option is less favorable. This rule indirectly discriminates against the relevant companies active in that sector, which are subject to a less favorable treatment. Europe's major iron ore producer is facing such a situation. To overcome such discrepancy, benchmarks for small sectors only could be global. |
b) no |
No, because that will add further legal uncertainty. This negative reply is all the more true for sectors covered by directive based on which Best Available Techniques (BAT) are set, such as the Mining Waste Directive or the Industrial Emissions Directive. Those are the right instruments under which BAT and emerging techniques should be discussed and agreed. To preserve legal certainty, benchmarks should be valid during an entire EU ETS phase. |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
As a matter of principle, data used to determine allocations for a given period must be up to date. This therefore tends to support taking the period 2016-2018 as a basis to determine phase 4 allocations. However, it is equally important to bear in mind that historic levels, even very recent, tell little about future prospects. Therefore, the method to be used for phase 4 allocations should provide for sufficient flexibility so as to allow, if production increases during this period, to grant consequently more allowances, so as to avoid in practice placing a ceiling on investment in new industrial activities. |
b) yes, there should be deviations with higher allowances for installations facing specific hardships |
Deviations should remain exceptional but not be ruled out prima facie. Deviations can indeed be necessary where specific hardships faced by installations are partly the consequence of the EU ETS related costs. In addition, Euromines believes that: - simplified EU ETS must be considered for SMEs; - fit-for-purpose solutions, in particular their exemption from the EU ETS, must be found for sectors, such as magnesia production, facing process emissions which cannot be reduced. Focusing on the implementation of BAT via the IED process would be a much more effective driver to further foster sustainable production of activities with process emissions. |
d) yes, in the form of financial compensation at EU-level |
Compensation solely based on state aids creates distortion as compensation measures vary from one Member States to another. As a result, similar indirect costs are compensated differently across Europe. Such discrimination must be tackled. Measures, independent from MS financial capacity, need to be taken to fully compensate CO2 price in energy prices. We therefore tend to support the principle of compensation at EU level, either in the form of financial compensation (d) or in the form of additional free allocation (d). An impact assessment might help determining the most adequate options to compensate indirect costs at EU level. |
Less important |
Least important |
Most important |
Important |
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a) from the Member States' auction budgets |
Revenues from Member States auctioning must be earmarked at EU level for investments made in Europe in new cost-efficient & low-carbon technologies. They should be made available to all stakeholders across the value chain covered by the EU ETS. |
Euromines welcomes the early opportunity offered to stakeholders to comment on options for the post 2020 CL framework. The mining industry would like to stress the need for the EU to opt for an integrated (and not only sectorial) approach to prevent CL as this risk is amplified by many other parameters: - energy prices much higher in Europe than the ones of our main competitors; - the lack of a predictable legal framework in the EU as many, sometimes overlapping, regulatory instruments applicable to industrial activities are under a constant revision process; - The need to remedy the qualitatively weak competitiveness proofing made in impact assessments and to effectively implement in the future recommendations the statement recalled in the recent Council Conclusions according to which: "Industrial competitiveness concerns should be systematically mainstreamed across all EU policy areas and be part of impact assessments in view of getting a stronger industrial base for our economy." |
b) Trade association representing businesses |
EUROPEAN BUSINESS AVIATION ASSOCIATION |
AVENUE DE TERVUREN 13A 1040 BRUXELLES BELGIQUE info@ebaa.org 02 766 00 70 |
a) yes |
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1) yes |
a) yes |
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a) yes |
As business aviation, we have set our own objectives of CO2 reduction as an industry. We have committed to specific targets that will be achieved through advances in four areas : technology, infrasctructure and operational improvements, alternative fuels, and market-based measures. We are committed to the EU ETS as well, but only as part of our wider environmental strategy. |
a) yes |
THe EU can better help aircraft manufacturers to equip with new technologies. |
d) very inadequate |
Business Aviation operators, because of the payload to overall weight ratio limitations inherent in small aircraft, will typically not qualify for more than 3-7% of their allocation free of charge. As a consequence, they are forced to buy the bulk of their permits either over-the-counter or through auction. On top of that, the administrative burden to obtain the free permits does not make it worth it to apply for them. |
e) I don’t know |
Business Aviation operators, because of the payload to overall weight ratio limitations inherent in small aircraft, will typically not qualify for more than 3-7% of their allocation free of charge. As a consequence, they are forced to buy the bulk of their permits either over-the-counter or through auction. On top of that, the administrative burden to obtain the free permits does not make it worth it to apply for them. |
d) absolutely exaggerated |
See Question 4 and 5 for justification |
b) a higher share than in 2013-20 |
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a) a substantially higher share than in Phase 3 |
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a) yes |
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b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
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a) yes |
We believe that the ETS can only be justified if it brings a real and effective environmental benefit without a disproportionate administrative and monetary burden. This is why we proposed simplifications to the MRV so that compliance costs do not exceed the price of credits to be bought. |
e) I don’t know |
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g) I don’t know |
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c) I don’t know |
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c) I don’t know |
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a) five years |
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d) I don’t know |
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c) I don’t know |
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d) I don’t know |
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b) yes, there should be deviations with higher allowances for installations facing specific hardships |
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d) yes, in the form of financial compensation at EU-level |
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Important |
Most important |
Less important |
Least important |
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a) from the Member States' auction budgets |
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Business aviation operators have issues buying allowances and do not get enough free allowance. Business aviation represents only a fractions of emissions within the ETS, due to its very advance technology. However, the administrative complexity of the ETS make compliance costs very high for small operators. We invite you to explore the newly published PWC study on ETS Aviation small emitters that presents crucial ideas for simplifications. |
b) Trade association representing businesses |
European Carbon & Graphite Association (ECGA) ECGA is an industry association representing the interests of the European carbon and graphite industry which provides products that are an integral part of our daily life and play a vitally important role in the economy. The production of the material and the further processing steps to the end products provide in Europe up to 40.000 direct and indirect jobs, since it is a supplier to base industries. |
European Carbon and Graphite Association asbl Corina Hebestreit Avenue de Broqueville 12 B-1150 Brussels BELGIUM hebestreit@euromines.be Tel: +32 2 7756320 |
a) yes |
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1) yes |
b) no |
One size fits all reality and solutions do not exist. For the carbon and graphite industry, GHG emissions have been reduced. Substantial improvements over the last few years enabled to achieve an even more sustainable production. As a result, potential for further emissions reductions are smaller. In addition, the objective should not be to avoid "reducing industrial production" but rather to implement consistent policies enabling to increase industrial production. It would be otherwise impossible to re- industrialize Europe and "reach as much as 20% share of GDP for manufacturing by 2020", as called upon by the European Commission's (EC) communication "For a European Industrial Renaissance". |
b) no |
The negative answer is embedded in the objectives of the EU ETS which is neither to increase energy-efficiency nor to increase competitiveness. It is important to stress that energy-intensive industries, such as the carbon & graphite, have an intrinsic incentive to always be more energy/resource efficient as this among other things reduce their costs and improve their corporate social responsibility. |
a) yes |
Nearly ten years after its implementation, the EU ETS remains by far the world’s largest and single scheme as Europe’s biggest trade partners have not implemented a comparable mandatory framework of such a scale. At the same time, the European carbon & graphite is facing a fierce and sometimes unfair competition from third countries competitors which are subject to less stricter standards. The EU industry needs support measures, including "special measures", to enable competing on a level playing field with non-EU competitors. Such measures are even more needed as long as an international climate agreement, imposing a similar cost burden on Europe's main trade partners, has not been agreed and enforced at global level. |
a) very adequate |
So far, there is no better policy instrument than free allocation to ensure, in the framework of climate policy, a level playing field and mitigate the risk of carbon leakage. It is therefore essential (i) to preserve free allocation without reducing its scope or intensity and (ii) guarantee a stable CL mechanism over long periods of time as legal certainty is key for industrial investments. It is also of utmost importance to fully compensate indirect carbon costs borne by industries, such as the carbon&graphite industry, which compete at international level and cannot pass on energy costs to customers. |
a) it absolutely keeps the incentive |
Benchmarking fully preserves the incentive to innovate. ECGA is in favour of a fully and realistic benchmark based system enabling not only to preserve current levels of production but also to increase them without being penalised. |
c) quite exaggerated |
The carbon&graphite industry, though being crucial in the value chain for quite a number of industrial sectors, is a comparatively small sector. Costs incurred to demonstrate that it is continuously meeting the criteria to obtain adequate compensation measures are substantial. The cost-burden is worsen by the fact that for historical statistical reasons, the carbon&graphite production is spread over more than one NACE Code, which makes the assessment (data collection, calculation) even more burdensome and costly. On the top of it, it is crucial to take into consideration the cumulative burdens stemming from other EU instruments (IED, REACH, etc.). Taken together, legal uncertainty and administrative burdens imposed on the carbon&graphite industry are disproportionately high and a major hurdle to its sustainable growth in Europe. This is the reason why we urge the EC to look at regulatory burdens from a more horizontal perspective and implement a true 'smart regulation' policy. |
b) a higher share than in 2013-20 |
As long as no climate agreement is reached and implemented at global level to impose similar carbon prices' requirements, adequate measures should be dedicated to carbon leakage & competitiveness purposes. More financial capacity will certainly be needed should Europe be determined to implement a target-oriented policy "for a European industrial renaissance", called upon in a recent Commission's communication. |
b) the same share as in Phase 3 |
For the time being, CCS has not proved to be a mature enough technology to make a difference and reduce GHG emissions. Financial support might be needed to improve this situation and must cease when CCS or renewable energy technologies are mature enough to avoid distorting the market. However, it is even more important that revenues generated from the EU ETS contribute to funding opportunities available to companies across the value chain for other type of technologies able to reduce GHG emissions "in a cost-effective and economically efficient manner", which is one of the key objective of EU ETS. |
a) yes |
The scope of NER 300 is rather limited and does not directly benefit to all industrial sectors covered by EU ETS. This must be corrected. Revenues generated by EU ETS must be earmarked for investments made in Europe in new cost-efficient & low-carbon technologies. They should be made available for example, via a fund, to all stakeholders across the value chain covered by the EU ETS. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
ECGA is ready to support a new dedicated scheme at the conditions that: (i) revenues generated by the EU ETS are made available to all sectors/companies covered by the EU ETS (ii) financial support is granted to cost-effective and economically efficient technologies able to reduce GHG emissions, at the beginning of their development, to avoid subsidizing mature technologies and distort market conditions. (iii) the level of funding of such a scheme is never used as a pretext to distort the nature of the EU ETS, which is a market-based instrument. |
a) yes |
Free allocation only covers direct costs arising from CO2 pricing. Indirect costs are currently not adequately compensated. This represents an additional competitive disadvantage for industrial sectors, such as the carbon & graphite, which compete at international level and cannot pass on energy costs to customers without losing market shares. It is therefore of utmost importance to ensure that EU ETS indirect costs are fully compensated via carbon leakage measures. |
b) more carbon leakage categories should be defined |
The distinction between sectors which are not deemed to be at risk of CL and sectors makes sense. However, a sub-distinction deserves to be done within the former for sectors, such as the European Carbon & Graphite Industry, which cannot pass on indirect costs to consumers because they compete at global level. Beside free allocation, those sectors need to obtain full compensation for indirect CO2 costs. From a more general point of view, it is likely that more categories might require CL status in the future as long as non-EU competitors do not have to comply with a similar cost burden. |
a) the present criteria should remain |
It is important to keep both the share of carbon costs in the GVA as well as the trade intensity as relevant criteria. With respect to the carbon cost/GVA criterion, proposal c) (the share of 'carbon costs' in the GVA should be maintained, but 'carbon costs' should be taken into account to the extent that they can't be recuperated in product prices) deserves to be further explored at the condition that both the trade intensity and qualitative assessment (see Q.15) are kept. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The qualitative assessment must be kept as it enables to include sectors at significant risk of CL which would otherwise fail to qualify under the sole quantitative criteria for various reasons such as the fact that NACE codes – primarily used for statistical purposes – do not accurately reflect the cost structure of the industry. This is the situation that the carbon&graphite is regrettably facing as its activities are spread over more than one NACE code. Solutions must be explored by the EC in coordination with relevant stakeholders to find solutions ensuring that sub-sectors objectively meeting CL criteria do consequently get compensation measures. |
d) in line with the duration of ETS Phase 4 |
Provided the procedure leading to the definition of future CL lists is fair, transparent and guarantees concerned stakeholders' participation, aligning the validity of the list with the duration of ETS Phase 4 would contribute to improve legal certainty and consistency. |
a) the present approach of average of the 10% most efficient installations should remain |
|
b) no |
This would add on legal uncertainty. For sectors subject to the industrial emissions directive (IED), such as carbon & graphite, the process leading to the definition of Best Available Techniques and emerging techniques is much more appropriate than revising benchmarks for that purpose. |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
As a matter of principle, data used to determine allocations for a given period must be up to date. This therefore tends to support taking the period 2016-2018 as a basis to determine phase 4 allocations. However, it is equally important to bear in mind that historic levels, even very recent, tell little about future prospects. Therefore, the method to be used for phase 4 allocations should provide for sufficient flexibility so as to allow, should production increase during this period, to grant consequently more free allowances, so as to avoid in practice placing a ceiling on investment in new industrial activities. |
b) yes, there should be deviations with higher allowances for installations facing specific hardships |
This is all the more necessary where specific hardships faced by installations are partly the consequence of the EU ETS related costs. In addition, ECGA believes that: - simplified EU ETS must be considered for SMEs; - sectors facing process emissions which cannot be reduced must benefit from specific measures, including EU ETS exemption. Focusing on the implementation of BAT via the IED process would be a much more effective driver to further foster sustainable production of activities with process emissions. |
d) yes, in the form of financial compensation at EU-level |
Compensation solely based on state aids creates distortion as compensation measures vary from one Member States to another. As a result, similar indirect costs are compensated differently across Europe. Such a discrimination must be tackled and we therefore tend to support the principle of compensation at EU level, either in the form of financial compensation (c) or in the form of additional free allocation (d). An impact assessment would help determining the most adequate option to compensate indirect costs at EU level. |
Most important |
I don't know |
Important |
Less important |
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a) from the Member States' auction budgets |
The very purpose of free allocation, which is to prevent carbon leakage, must be preserved. Therefore, free allocation should not be used for supporting innovation. Funds for supporting innovation across the value chain must come from other sources, in particular from auctioning. |
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b) Trade association representing businesses |
European Chemical Industry Council (Cefic) |
European Chemical Industry Council (Cefic) Avenue E. van Nieuwenhuyse 4, Bte 2 B-1160 Brussels Belgium Phone: 32-2-676-7397 E-mail: pbo@cefic.be |
a) yes |
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1) yes |
b) no |
Most "low hanging fruits have been harvested, meaning that most of the technological efficiency options have been realised. Further reductions would require significant investment and growth in Europe and global participation to GHG reductions for a level playing field, in some cases also technology breakthroughs. |
b) no |
ETS is a factor for decisions on investment and efficiency improvement. However, ETS is not needed, nor does it serve to improve competitiveness. It rather adds to EU-specific policy costs and potentially weakens competitiveness. |
a) yes |
EU climate policy must not add costs for efficient manufacturers: 100% free allocation and full compensation of indirect costs are the solution. Allocation should be dynamic according to recent porduction output in order to avoid over- and underallocation and to avoid rewarding relocation. |
b) quite adequate |
Free allocation is the best tool to avoid carbon leakage, if it shields efficient producers from any additional unilateral climate policy costs. |
a) it absolutely keeps the incentive |
It keeps resources in companies, e.g. for innovation and investment. |
b) quite proportionate |
Administrative burden could be simplified. Dynamic allocation would not lead to additional burden since reporting on manufacturing output is already done anyway. |
d) there should be no limit to overall free allocation to industry |
I.e. in the absence of equitable global action, EU industry must not be unilaterally burdened with limits and constraints. The incentive to improve efficiency performance is given due to benchmark-based free allocation already. |
b) the same share as in Phase 3 |
It is seen as unlikely that national governments will free resources from auctioning revenues due to budgetary challenges. |
b) no |
ETS revenues should be directed back to industry, rather than being used for other purposes. A specific support scheme would not be necessary: As long as industry has full carbon leakage protection that should keep the necessary funds to invest. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The Directive already suggests that 50% of revenues by member states should be earmarked for such purposes. |
a) yes |
In addition, compensation for indirect emission costs (carbon cost contained in electricity costs) are needed. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Manufacturing of e.g. basic building blocks or of ingredients etc. may not directly qualify under too narrow parameters. However, i.e. in a continued unlevel climate policy playing field, these building blocks remain essential for maintaining end production and employment of entire value chains that depend on thriving European supply manufacturing. Accordingly, a simplified carbon leakage regime would reduce administrative burden and be more effective. |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
Sectors and companies subject to the EU ETS should be protected against carbon leakage. Instead of covering >12.000 installations, the EU ETS should focus on bigger emitters e.g. covering 90% of emissions with only some 15% of the installations currently under ETS. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
If not all manufacturing ETS sectors are being listed, the present parameters should be maintained. It is important that i.e. sectors operationg in global markets are exposed to a high risk of CL. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Some sectors are exposed to the risk of carbon leakage although they may not at first glance the quantitative criteria. This can be due to abatement potential, market characteristics, or profit margins. Sectors with complex manufacturing systems and diverse, interrelated value chains, it is justified and essential to apply qualitative criteria for their exposure assessment. |
d) in line with the duration of ETS Phase 4 |
The validity should be in line with the duration of phase 4 (minimum). |
c) the approach should be less stringent (please specify) |
The benchmark could be less stringent (e.g. rather the weighted average). In any case, the application of a linear reduction factor brings allocation below the level needed to maintain the output for many sectors. This gives a negative signal to industry, i.e. adds costs also for most efficient producers, disencourages investment and growth in Europe. |
b) no |
Benchmarks do not describe the 'state of the art' but describe the level of performance of a plant population in a sector. Revising benchmarks to make them more stringent would remove the relative pioneer advantage of early movers and discourage performance improvements. Updating is the enemy of innovation. |
c) other (please specify) |
Current 'frozen' ex-ante allocation is adding costs on the production of efficient plants thereby discouraging growth and perversely rewarding relocation to outside Europe. This needs to be changed through dynamic allocation based on recent production output. This way, over- and underallocation to most efficient producers can be avoided. |
a) no, there should be no deviations |
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c) yes, in the form of additional free allocation |
Through harmonised indirect allocation, diversity of national approaches can be overcome. |
Least important |
Less important |
Important |
I don't know |
The most difficult stage is usually to initiate and run a successful large scale pilot. |
a) from the Member States' auction budgets |
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Carbon leakage (CL) protection through an improved ETS can be simple, predictable and effective. We believe the dynamic allocation proposal made by the Netherlands would indeed be a good starting point. This can be timely enabled through first introducing an allocation reserve for efficient industry growth: when introducing MSR. This allocation reserve would provide the signal allowing efficient producers to grow after 2020. MSR must not be introduced without also addressing indirect carbon costs from industrial power consumption. These must be compensated based on benchmarks and compensation should apply EU wide. We are convinced Europe should encourage, not discourage efficient growth. Investors need predictability that free allowances would be available for high performance growth in Europe. In any case, allowances from such a reserve would only become available in case of production and growth. Following the same dynamic allocation logic, allowances would go back in the reserve. |
b) Trade association representing businesses |
European Domestic Glass |
Paola Di Discordia Regulatory Affairs Manager EDG-ESGA Tel : + 32 2 538 44 49 Mobile : + 32 471 25 67 69 Email : pdidiscordia@edg-esga.eu Avenue Louise 89 / 5 B-1050 Brussels |
a) yes |
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1) yes |
c) I don’t know |
The glass industry is making continuous improvement in energy efficiencies and process technologies to reduce CO2, energy consumption and environmental impacts. While further reductions in the glass industry are possible, what is important is the magnitude of this reduction. All official EU publications such as the “Sector Competitiveness Studies - Competitiveness of the Glass Sector - ENTR/06/054 - Final report, 14 October 2008” or more recently the Glass BREF and the BAT Conclusions show that no breakthrough technology is currently available to reduce CO2 emissions to the extent imposed by the energy and climate package 2030 (-43% for ETS sectors between 2005 and 2030). Emissions reductions cannot be repeated ad infinitum. There is a thermodynamic limit to the glass melting process which is an absolute limit, and that current technology is already approaching. However, process emissions cannot be eliminated, limiting therefore the reduction potential of the glass industries. |
b) no |
The main driver for energy efficiency improvements in the glass industry is the high share of energy costs within production costs. In fact, the glass industry has continuously improved energy efficiency over previous decades. Regulatory instruments and the EU ETS in particular, have only a marginal effect on energy efficiency improvements of glass melting activities, if any. Whilst there is no global ETS in place, the EU ETS is only a source of costs for glass industries (direct but also indirect CO2 costs linked to electricity), and therefore weakens the competitive position of European based glass industries vis-a-vis third country competitors. As such, it indirectly favors production reduction in the EU and rises in imports from non EU countries without carbon constraints into the EU. For these reasons, glass industries need to be fully protected against risks of carbon leakage. |
a) yes |
The EU glass industry faces higher costs for environmental protection, energy, labour and raw materials, than the majority of extra-EU competitors. In the absence of an international climate agreement and a level playing field between EU and extra EU competitors, the EU industry needs to be provided with measures to safeguard its competitiveness. Measures to avoid carbon leakage under the EU ETS are therefore essential. Measures should cover both the direct and indirect CO2 costs. Such measures under the EU ETS must be established in a way that ensures the ETS’ coherence with the EU’s ambition to revitalize European manufacturing activities, as proposed in the EC Communication on Industrial Renaissance. |
c) quite inadequate |
Free allocation has been key up to now to mitigate the negative impacts of a unilateral climate policy. However, the Cross Sectoral Correction Factor which is applied already from 2013 reduces the free allocation, even for the most GHG efficient installations, and will dramatically increase in the future, thus further reducing free allocation. This current system is unsustainable and should be changed in order to ensure that the most GHG efficient installations receive 100% of their allowance needs. |
a) it absolutely keeps the incentive |
Free allocation does not reduce the incentive to innovate; on the contrary, the majority of installations in the sector (about 95%) do not have enough allowances, which encourages industry to invest in the efficiency of its plants to avoid having to purchase a high level of allowances, which would render the sector uncompetitive. For the installations under the benchmark (about 5%), they can sell their allowances on the market, which is also an incentive to continue reducing emissions. The incentive is therefore present. Below, we also call for a periodic revision of the benchmarks (in exchange of the cancellation of the cross-sectoral factor), which also provides for a strong incentive to improve. Free allow. preserve investment capacity and offer industry the incentive to purchase less CO2 allow if they become more GHG efficient. However this last incentive would be better preserved if the CSCF was not forcing an unrealistic and arbitrary reduction of the number of free allow. |
b) quite proportionate |
Administrative burden is accepted, since it is necessary to maintain the free allocation system. However opportunities or improvement to this process should be considered. Conversely, the administration and calculation rules for new entrants are overly complex and can lead to under-allocation. They can therefore be seen as disproportionate and can be a disincentive to new investments |
d) there should be no limit to overall free allocation to industry |
The current system is unsustainable (from a competition point of view) because the cross sectoral correction factor continually reduces the free allocation given to industry, even for the most GHG efficient installations. Ideally, installations whose efficiency is equal or better than the (periodically reviewed) benchmark should receive 100% of free allocations to produce in the EU and so there should be no limit. In practice, this is likely to lead to a higher share in phase IV. An increased level of EU ambition in terms of GHG reduction would require enhanced measures against carbon leakage and therefore an increase in total free allocations. |
e) I don’t know |
Overall financing for technological innovation in manufacturing should be increased in the EU. However R & D should be funded via a mobilization of different sources of funding - including but not limited to - auctioning revenues. It should not come from the free entrants reserve or Free Allowances reserve. Allowances should be primarily used to ensure that the most GHG efficient installations get 100% of their needs to produce in the EU. Furthermore, financing for R&D and demonstration projects should be technology-neutral and not focused only on CCS or renewables. New technologies such as Carbon Capture and Use (CCU) and others should not be excluded. |
a) yes |
As stated above, industrial innovation, with a focus on the process and on new energy sources for industry, should be promoted. It should not be financed by shares of allowances reserved for free allocation or for new entrants, but rather from a mobilization of different sources, and not limited to auctioning revenues. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Industrial innovation should be promoted in a technology-neutral way. However this should not be done at the expense of free allocation which aims to provide effective support and protection against carbon leakage. Therefore it should be financed via other sources. This could include, among other sources, money from the auctioning revenues, as suggested in the ETS directive (Art 10.3). |
a) yes |
Unequitable carbon costs should not place EU industries at a competitive disadvantage with extra-EU competitors and this should be the ultimate objective pursued in order to achieve the EU’s ambition of 20% GDP realized by industrial activities in 2020. To that end, measures against carbon leakage are a pre-requisite but are not enough. An EU scheme for compensation of indirect costs due to higher electricity prices and some raw materials (e.g. soda ash, industrial gases, ..) should also be developed for Energy Intensive Industries. More generally, the EU needs to assess, and if needed reform, all its policies and in particular energy and environmental ones against the re-industrialisation objective. A longer term re-industrialisation objective for 2030 should be established. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
This binary model ensures that all sectors benefit from carbon leakage protection measures as soon as a risk is detected. This is essential to ensure that carbon leakage measures are effective and that protection is not granted too late, when industries are already in jeopardy. |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
The competitiveness of energy-intensive industries is sensitive to energy and carbon costs, therefore a risk exists for all these industries. For the sake of simplicity and consistency in legislation, all energy-intensive industries, as defined in the Energy taxation directive, could be automatically placed on the carbon leakage list:"energy-intensive business" shall mean a business entity, (…) where either the purchases of energy products and electricity amount to at least 3,0 % of the production value or the national energy tax payable amounts to at least 0,5 % of the added value. In case ETS-specific criteria are maintained, they should continue being based on both the CO2 intensity and the trade intensity metrics. The CO2 cost metric should be made more relevant to analyze the impacts of carbon cost on sectors’ profitability. To that end, the CO2 cost over GVA criteria could be replaced by a CO2 cost over Gross Operating Surplus (GOS) criteria. Question 14: |
b) other thresholds should be defined. Please specify below |
The competitiveness of energy-intensive industries is sensitive to energy and carbon costs, therefore a risk exists for all these industries. For the sake of simplicity and consistency in legislation, all energy-intensive industries, as defined in the Energy taxation directive, could be automatically placed on the carbon leakage list:"energy-intensive business" shall mean a business entity, (…) where either the purchases of energy products and electricity amount to at least 3,0 % of the production value or the national energy tax payable amounts to at least 0,5 % of the added value. In case ETS-specific criteria are maintained, they should continue being based on both the CO2 intensity and the trade intensity metrics. The CO2 cost metric should be made more relevant to analyze the impacts of carbon cost on sectors’ profitability. To that end, the CO2 cost over GVA criteria could be replaced by a CO2 cost over Gross Operating Surplus (GOS) criteria. Question 15: |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The current criteria under the quantitative assessment at NACE 3 or 4 level should be maintained and used as the first assessment option. When an assessment at NACE 3 or 4 level is not appropriate to identify the relevant industrial activities falling under the EU ETS, then a quantitative assessment at 6- or 8-digit should be carried as a second option. Finally, as a third option, a qualitative assessment must remain possible. Other parameters can be studied as part of qualitative assessments, such as methodology and evidences of investment leakage. |
d) in line with the duration of ETS Phase 4 |
As long as there are no equivalent GHG reduction measures taken by major trading partners, the list of sectors exposed to the risk of carbon leakage should remain valid. This is essential to provide predictability to industries faced with long investment cycles (typically > 15 years). |
a) the present approach of average of the 10% most efficient installations should remain |
Glass industries support ambitious benchmark levels, which reflect the technological capabilities of the sectors best performers using the best available and proven technologies in Europe. It must be kept in mind however that this approach also has limits. Indeed, benchmark curves do not always reflect a difference in terms of « best » (the least GHG emitters per tonne of glass) or « worst » GHG players, but a difference in terms of products produced, cullet availability, age of furnace, available fuels, etc. The 10% best GHG performers can therefore be regarded as extremely challenging, especially for plants producing a wider range of more sophisticated products with higher added-value (as this usually entails higher energy consumption). |
a) yes (please specify how often) |
It seems logical to revise the benchmarks from time to time to reflect GHG improvements over time. Revision cycles should be linked to ETS phases and remain unchanged over this period. Periodical revision of the benchmark should be based on the actual EU based installations. The periodic revision of benchmarks should be the sole instrument leading to a reduction of free allowances over time, as benchmarks reflect true possibilities of GHG improvements according to state-of-the-art technologies deployed in Europe. The periodic revision of benchmarks therefore justifies that the CSCF is abandoned. |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
Ex-ante allocation can only lead to over-allocation in crisis times, and under-allocation when the economy is growing. A better approach is to design an « ex post » system, where real allocation is corrected according to the real production. |
a) no, there should be no deviations |
In principle, there shall be no deviation from the general harmonized allocation rules at the level of an individual installation as this could cause distortion of competition. Only in the case of very specific hardship, should deviations be envisaged for an entire sector after a careful assessment of the competitive effects of such deviations. |
d) yes, in the form of financial compensation at EU-level |
Rules for the compensation of indirect costs should be revised and need to be effective to reflect the real burden of CO2 included in electricity costs for industry. A differentiated compensation approach by Member States is not acceptable from a competitiveness point of view. A harmonized approach at EU level is therefore needed. The harmonized measure should take the form of financial compensation. Free allocation should be kept aside to ensure full relief for direct emissions (most GHG efficient installations should receive 100% of their needs). A compensation system should also be put in place to compensate for higher prices of some raw materials (e.g. soda ash) and industrial gases. |
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a) from the Member States' auction budgets |
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Generally speaking, glass industries welcome the opportunity to express their views on carbon leakage measures post 2020 and appreciate that this discussion is held without further delay. It is however regrettable that industry is asked to comment on such measures whereas the rules for EU ETS Phase IV have not yet been fully decided. The glass industry wishes to reiterate that so long that there is no comparable ETS system (which means that similar costs are born by competitors) operating in most part of the world and in extra-EU countries with glass industries, EU based glass industries will need to receive full and effective protection against carbon leakage. The recent assessment carried by DG CLIMA on exposure to carbon leakage risks, i.e. the carbon leakage list of 2009 and its recent revision, shows that between 2009 and 2014, risks of carbon leakage has grown in most glass sectors. For these reasons, glass industries need effective protection moving forward. |
b) Trade association representing businesses |
European Industrial Gases Association AISBL EIGA members manufacture Industrial Gases including Hydrogen and Syngas (which are included in the scope of EUETS, from Phase III) and Oxygen, Nitrogen and Argon, which are not in the scope of EUETS, but are indirect emitters, and form an essential part of the supply chain for Carbon-Leakage exposed sectors such as Steel and Chemicals |
Philip Brickell, General Secretary Avenue des Art 3-5, 1210 Brussels. Tel: 02 209 60 35. Email: p.brickell@eiga.eu Transparency Register ID Number 04077716126-17 |
a) yes |
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1) yes |
a) yes |
IG Sector is approaching technological limits (especially for H2 production based on reforming technologies). EIGA could foresee further incremental improvements assuming (i) a context of economic growth and therefore investment in Europe, (ii) a reform of the EU ETS (flexibility - dynamic allocation model-, no C-factor, reform of the compensation mechanism for indirect costs), and (iii) a stable and predictable regulatory landscape (at National and EU levels) to encourage long-term investment. By extending the use of outsourcing, specialist solution providers can continue to develop energy efficient solutions which may not be possible if outsourcing is penalised with respect to insourced activities. |
b) no |
ETS is a trading scheme to reduce emissions at the lowest cost. In some cases energy efficiency could reduce emissions but in other cases, e.g. carbon capture, a reduction of emissions entails a decrease of energy efficiency. Industrial competitiveness is driven by operating and capital costs. Greater efficiency can only improve competitiveness if the cost of achieving that efficiency can be economically justified. However a well-designed emissions trading scheme (e.g. dynamic allocation model ensuring 100% free allowances for industry at the level of the benchmark) can help ensure that the increase in efficiency can be achieved without damaging competitiveness. |
a) yes |
Much of European industry – and especially those parts of it falling under EUETS – competes with industries in regions that are advantaged with respect to energy and/or labour costs, e.g. Middle East, USA, China. Unilateral and unmitigated application of EUETS to such in Europe damages their competitiveness. The negative impact of the ETS on competitiveness can be mitigated by 100% free direct and indirect allocation according to realistic benchmarks; this must be the recommended solution. |
b) quite adequate |
Free allocation addresses the issue of direct emissions from EU industry. It does not help with the cost penalties associated with indirect emissions. The solution to address the risk of carbon leakage is to extend free allocation to indirect emissions. Correctly configured, free allocation also provides the reassurance that outsourcing of industrial production can be treated equally with insourced production. |
a) it absolutely keeps the incentive |
The marginal cost benefit obtained from reducing emissions is the driver for making investments in emissions reductions. Free allocation protects resources for innovation. If free allocation is granted for direct and indirect emissions, the enterprise will maximize its ability to invest in innovation to reduce emissions. |
b) quite proportionate |
The administrative burden of the benchmark free allocation process is quite proportionate: it was a heavy process at the beginning but now that it has been implemented and integrated to the industry processes we could capitalize on this investment. Further improvements would be welcomed, e.g. introduction of dynamic allocation, which would remove the challenge of managing capacity increase / decrease mechanism, new entrants vs incumbents. |
d) there should be no limit to overall free allocation to industry |
Industry should receive 100% free allowance allocation at benchmark level for direct and indirect emissions based on actual production instead of historical production level, until the enforcement of a future international agreement. The motivation must be efficiency of production, rather than total volume of emissions, or emitters will simply relocate. |
b) the same share as in Phase 3 |
NER 300 has been the only tool for funding European projects and should be continued with the same share in phase 3. |
a) yes |
NER300 should be extended beyond CCS and renewables. The Industrial Gas Industry has always been involved in industrial innovation programs providing low-carbon technologies for industry such as cryo-technology, oxy-combustion and carbon-capture, which could be financed from such schemes. |
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
See our answer to question 9. In addition, further mechanisms coming from the Member States for support should be examined, e.g. revenues from auctions. |
a) yes |
Free allocation and EU-level innovation are only one element of the picture. Carbon leakage protection should be considered in a broader ETS reform and additional measures should be taken to reinforce European competitiveness: - Carbon leakage protection should include climate cost of both direct and indirect emissions. - Benchmark should be based on actual production levels and take into account all relevant costs (RES surcharges, environmental and energy taxation). - An allocation supply reserve should be sufficient to allow for industrial growth. - Compensation on indirect emissions should be included in the ETS free allocation mechanism and not in separate state aid guidelines. An equal treatment of direct and indirect emissions (benchmark method and same list of exposed sectors) will avoid competition distortion between Member states as well as between technologies. - Take measures to lower energy price and reduce the price gap with other regions (as the US) |
a) the present two groups should remain |
The present 2 groups should remain in order to avoid additional uncertainty regarding arbitrary criteria defining new groups. The current quantitative and qualitative assessments on sector and subsector should be maintained. |
a) the present criteria should remain |
The present criteria should remain in order to preserve predictability and avoid changing the whole spectrum after each period. However the cost impact should be comprehensive of all the climate policy costs (direct and indirect emission costs, RES surcharges, and environmental taxes). |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The present threshold should be maintained, in particular the 30% on energy intensity. The latter allows to exempt correctly the few highly energy intensive sectors. If a modification on the threshold has to be done the new mechanism should be equal to the criteria set up in the EEAG for the exemptions of RES surcharges. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
It is important to maintain a certain level of discretion in the system, in particular for sectors and subsectors belonging to the supply chain in order to maintain the competitiveness of the production chain. |
b) longer (please specify) |
The operating life of new industrial investments is 15-20 years. Certainly should be provided for the longest period possible in order to prevent carbon leakage arising from decisions not to reinvest in new or replacement capacity. The same approach should be taken for other environmental and energy policies that have an impact on competitiveness. |
a) the present approach of average of the 10% most efficient installations should remain |
The present approach based on the average of the most efficient installations should remain but without the cross-sectoral correction factor (C-factor). This would give a challenging but realistic target for industrial sectors. The C-factor is devoid of technical significance and produces absurd consequences: a de facto benchmark tending to zero. |
b) no |
An ETS mechanism based on benchmarks in combination with C-factor is effectively bringing benchmarks to a level beyond the technological state of art. Therefore benchmarks should not be revised; revision downwards whenever a step forward was made would reduce the incentive to take that step forward. |
c) other (please specify) |
Historical allocation mechanism has a detrimental effect on growth and efficiency; in particular it leads to the use of production level as an adjustment factor. ETS should allow dynamic allocation mechanism based on actual production levels with no C-factor. An allocation supply reserve should be created to allow industrial growth. |
a) no, there should be no deviations |
Deviations would create competitive distortions |
c) yes, in the form of additional free allocation |
Indirect emission costs in electricity should be compensated in the same way as direct emission costs (electricity benchmark, actual production, similar criteria of exemption) in the form of additional free allocation in order to set a stable and harmonized EU compensation scheme avoiding competition distortion between Member states and technological distortion between fuel/heat and electricity. |
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a) from the Member States' auction budgets |
The allowances funding low carbon innovation support should come from Member States’ auctions as it was initially envisioned. Article 10.3 of the ETS Directive should be modified in order to oblige Member State to use auctioning revenues to fund low-carbon technologies. |
No further issues |
b) Trade association representing businesses |
European Lime Association - EuLA AiSBL EU Transparency Register N° 780146710855-91 EuLA, the European Lime Association, provides sector-based representation for the European lime industry, and provides to its members technical, scientific and administrative support on non-commercial issues. EuLA represents 95% of the European Lime production (non-captive) 21 national associations 100 companies 210 production sites 600 lime kilns 11000 employees (direct) 2,5 billion Euro contribution to EU GDP |
European Lime Association - EuLA AiSBL c/o IMA-Europe AiSBL Rue des Deux Eglises 26 box 2, B-1000 Brussels (Belgium) Switchboard: +32 (0)2 210 44 10 - Direct: +32 (0)2 210 44 14 - Fax: +32 (0)2 210 44 29 |
a) yes |
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1) yes |
b) no |
Around 70% of the total CO2 emissions generated in lime production are "process emissions": they come from our raw material, limestone. These process emissions cannot be avoided without changing the quality of the final lime product which is however essential to serve specific applications. Currently, the most energy efficient kiln is near the thermodynamic minimum required for the chemical reaction needed for producing lime. The heat of the reaction for typical quicklime quality is 3.03 GJ/tonne, and the average fuel use 4.25. The energy consumption of the best available lime kiln (a Parallel Flow Regenerative Kiln, PFRK) is between 3.2 and 4.2 GJ/tonne. This type of kiln is already the most widely spread kiln technology today. However, one should keep in mind that horizontal rotary kilns (less energy efficient) provide a certain quality of lime and permit to optimize the extracted limestone due to their ability to treat the different sizes of stones. |
b) no |
The EU ETS will only remain the best solution for reducing CO2 emissions as long as the GHG reduction target is set at a level which is both technically and economically feasible. The current economic crisis and the further shrinking of the demand for lime products makes that there is at the moment a lot of “idle” production capacity in the EU. These installations are completely amortized which makes production in these installations cheaper than in a new one. A higher carbon price would not be a solution, as it would only draw money away from producers without enabling them to make an investment. When assessing the potential further ETS amendment in a sector, it is necessary to take account of the lifespan and replacement rate of kilns. Most of the time, investments costs always assume an investment in a new capacity (replacing the old capacity before its end of life). However, for the lime sector, kilns receive big maintenance periodically. |
a) yes |
Carbon Leakage will remain a big concern after 2020 in the absence of an international agreement putting forward a similar CO2 burden. EuLA believes that all energy intensive industries should be protected against carbon leakage, and that any increased level of ambition of Europe towards 2030 should lead to increased and not decreased protection against carbon leakage. However, the EU ETS is NOT addressing the following concerns: - The GHG reduction deficit (shortage of free allowances even for the installations with the best GHG performance. - Energy costs represent on average 40% of the lime industry’s manufacturing costs. Having access to energy at a reasonable cost is an essential condition for operating in the EU and for maintaining lime's competitiveness. - Further adequate incentives for low carbon investments is needed, with auctioning revenues being targeted for low carbon investment toward the industry |
b) quite adequate |
However, the current carbon leakage mitigation measures do not take into account of: - The importance of CO2 embodied in imports A unilateral reduction of CO2 emissions in Europe will not help fighting against climate change if a subsequent rise of imports from third countries is created. Carbon Trust, amongst others, demonstrated that the reduction in production-related CO2 is largely compensated by CO2 embodied in imports. - The cumulative burden of the EU framework Several other EU legislations have an impact on the EU's industry competitiveness (renewables, energy efficiency). The Commission should ensure an integrated approach with no overlap. - Energy costs Energy costs represent on average 40% of the lime industry’s manufacturing costs. Like for any energy intensive industry, having access to energy at a reasonable cost is an essential condition for operating in the EU and for maintaining its competitiveness. |
b) it largely keeps the incentive |
It is important to remind that the Commission has calculated product specific benchmarks based on the average GHG emissions of the 10% best performers. A comparison of these benchmark values with the minimum values that are technically feasible shows that the remaining potential in some sectors, like lime, is actually quite low. The current best available and most energy-efficient kilns (the Parallel Flow Regenerative Kiln, PFRK) is close to the thermodynamic minimum required for the chemical reaction needed for producing lime. In other words, no further breakthrough technologies in energy efficiency are expected. The drive towards the most energy efficient solutions can easily be explained by the fact that energy costs represent on average around 40% of the lime sector’s production costs. Outside the deployment of a commercially and technically feasible Carbon Capture and Storage solution, there is little margin for further CO2 abatement in the lime sector. |
c) quite exaggerated |
Lime is the most impacted sector by the EU ETS. The production of 1 tonne of lime generates 1 to 1.6 tonne of CO2. This means that the EU ETS has a strong impact on the sector, up to 35% of impact of the CO2 costs on Gross Value Added (Hourcade et al, 2008). Therefore, the full impact of carbon costs would have serious consequences in terms of carbon leakage for the lime industry. While the lime industry advocates in favor of less red tape and less administrative burden, it recognizes the importance of the free allocation for maintaining a competitive industry in the EU. |
d) there should be no limit to overall free allocation to industry |
There is still a need today for an international climate agreement that would bring a level playing field to EU manufacturing companies. In the absence of such agreement, and considering that several countries in the EU neighborhood are not following the EU’s climate leadership, there should be no limit to the overall free allocations to the industry. Furthermore, EuLA believes that all energy intensive industries that are truly at risk of carbon leakage should be protected against carbon leakage, and that any increased level of ambition of Europe towards 2030 should lead to increased and not decreased protection against carbon leakage. The most GHG Efficient installations should receive 100% of their needs for free. The industry cap should be adjusted so that the CSCF and linear reduction factor do not reduce the free allocations. |
a) a substantially higher share than in Phase 3 |
The current state of efforts regarding the development of CCS (including the NER 300 program) will not reach the ambition to develop, by 2020, a commercially and technically available solution for the capture and storage of carbon. EuLA believes that further R&D is necessary for CCS, but that it should be funded via a mobilization of different sources including auctioning revenues, not through the new entrants' reserve. The New Entrant Reserve should be reserved to new entrants and the expected growth of the EU industry. In 2012 TNO calculated for EuLA the costs of capturing CO2 at different kinds of lime kilns. For the state-of-the-art solvent (MEA) costs to capture CO2 were €94 per ton of avoided CO2. The cost to capture CO2 would more than double the production costs of around €60/ton lime. Currently, lime plants are typically located right next to the deposit, not clustered in large industrial agglomerations. Transport costs can add significantly to the capture costs. |
a) yes |
The auctioning revenues should be used to encourage low carbon investments. As a general principle, revenues should go back to industry to enable investments in low carbon solutions. Part of the revenues could for example be used to provide cheaper loans for low carbon investments in installations falling under the EU ETS. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The auctioning revenues should be used to encourage low carbon investments. As a general principle, revenues should go back to industry to enable investments in low carbon solutions. Part of the revenues could for example be used to provide cheaper loans for low carbon investments in installations falling under the EU ETS. |
a) yes |
EuLA strongly favors a level playing field within the EU and outside Europe. This is why EuLA believes that the EU should maintain its efforts to achieve an internationally accepted and legally-binding agreement proportionate to the burden in the EU. In the absence of such agreement, the EU should safeguard the competitiveness of the EU industry with any appropriate measure. EuLA has serious doubts that the current legal framework will ensure a level playing field beyond 2020. |
a) the present two groups should remain |
EuLA believes that no further complexity and calculations should be added to an already complex scheme. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
1. Share of carbon costs in the GVA should be maintained 2. Trade intensity should take especially into account the trade with EU's neighborhood In an internal survey realized by the lime sector (NERA " Energy and transport cost comparison of the EU lime industry to 10 non-EU regions"), it has been established that the threat for lime producers mainly come from the EU neighbor countries such as Russia, Maghreb and Middle east. 3. Energy / climate requirements in Free Trade Agreements should be taken into account “Energy and climate” clauses should be part of any Free Trade Agreement, especially if the trading partner in question has not assumed any carbon reduction commitments. 4. Fuel mix price should be taken into account Finally, EuLA recommends that the EU defines an affordable and available “fuel mix” for 2030, assesses its accessibility and compares its costs with the costs of the fuel mix used by the main EU competitors. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
It is important to point out that the revision of NACE code list (v2) implied that the assessment of the carbon leakage criteria for the lime sector is now done at a new disaggregation level, which includes not only lime but also plasters and aggregates. EuLA believe that this assessment should be done at the appropriate level of disaggregation, since that the industrial activities that are included in the NACE v2 code for lime do not share the same fundamentals (in terms of energy intensity and carbon intensity for instance). |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
EuLA believes that it is important to maintain a certain level of discretion in the system for justified cases. This concerns both the qualitative criteria and the possibility to conduct the assessment at the appropriate level of disaggregation (Prodcom 8). |
b) longer (please specify) |
The time validity of the list of sectors exposed to carbon leakage should take into account the investment cycles of the industry. It is also necessary to take account of the lifespan and replacement rate of kilns. Most of the time, investments costs always assume an investment in a new capacity (replacing the old capacity before its end of life). However, for the lime sector, kilns receive big maintenance periodically. It is therefore important to ensure that the investments made now will not become "stranded assets" in the future due to an unexpected change in the carbon leakage list. Furthermore, any trade intensity assessment for the carbon leakage list should take into account the impact of trade with EU neighbouring countries. |
a) the present approach of average of the 10% most efficient installations should remain |
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b) no |
The benchmark exercise created an important workload on both the industry and the administration, and also triggered some issues regarding sensitive information. EuLA believes that any update should only been undertaken when sufficient evidence exist of technological progress. It is important to underline that the technological state of the art is not representative of what can be achieved in practice. Lime characteristics are so vast that multiple uses can be done from the same material. It is also highly dependent of the stone quality from the quarry. Any update in the benchmarks should only take into account innovations that have been proved to be commercially viable and that have been implemented on site. These benchmarks should further take into account each sectors characteristics into account, such as the existence of several end-products, the thermal energy efficiency of the sector, and its process CO2 emissions. |
c) other (please specify) |
In the case of the current ex-ante system, the reference year should be adapted, and the baseline should be a longer period without offering a choice between different periods, and not known in advance. However EuLA believes that free allocation should reflect economic reality per installation based on the most recent years and should not be frozen by historic production. In this regards, EuLA suggest to the European Commission to start working on the development of a dynamic system that could replace the current system, under the condition that no correction factor (CSCF) should be applied in addition to a dynamic system. Also, such system should take into account the administrative burden, the robustness of the control of the declared production, and the confidentiality of commercially sensitive information. |
a) no, there should be no deviations |
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d) yes, in the form of financial compensation at EU-level |
EuLA defends a Full off-setting of CO2 costs pass through in electricity prices with a harmonised approach in all EU Member States. |
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a) from the Member States' auction budgets |
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b) Trade association representing businesses |
European Organization of the Sawmill Industry aisbl |
Kimmo Jarvinen Rue Montoyer 131 1000 Brussels kimmo.jarvinen@eos-oes.eu +32492697998 |
a) yes |
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1) yes |
a) yes |
By today several high tech innovations have reduced the per unit emissions of most common technologies used to provide necessary societal services like transportation, energy etc.. but the total increase in consumption has resulted a continuous increase in total emissions. This means that it is not enough to concentrate on developing the existing products and their production technologies but we have to make more fundamental changes in the way we produce the basic products and societal services we need. One simple way is to substitute the existing products (of which the manufacturing causes the greenhouse gases) with new products having clearly lower environmental load. |
b) no |
At the moment the EU ETS possible impact is greatly diluted with the carbon leakage list allowing the polluting industries o continue their operation without having to try to chance their basic operating mode and raw material base. |
b) no |
See my reply above |
c) quite inadequate |
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d) it absolutely compromises the incentive |
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b) quite proportionate |
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e) there should be no free allocation post-2020 |
If there are allowances, they should be based on the industry proven track record to reduce the emissions, not on the cost of emissions. |
a) a substantially higher share than in Phase 3 |
Developing new technologies is the only way forward in the emission reduction, as long as these incentives do not interfere with the commercial operations in the marketplace (which is the case right now). |
a) yes |
See my reply above |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
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a) yes |
Concentrate efforts on EU Trade negotiations on this issue. In case EU initiatives are not generally adopted and accepted do not impose them solely on the EU markets but instead impose extra tariffs for imported goods which do not comply with our measures to fight the climate change. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
See my reply earlier |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
The only criteria should be the industry carbon emissions and their proven track record to reduce them. |
b) other thresholds should be defined. Please specify below |
See above |
b) no, all criteria should be based on simple metrics and linked to clearly defined thresholds |
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c) shorter (please specify) |
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c) the approach should be less stringent (please specify) |
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a) yes (please specify how often) |
Every three years, but the main criteria should be the prove reduction of emissions. The ones that have been able to reduce their unit emissions should be rewarded. |
d) I don’t know |
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a) no, there should be no deviations |
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b) no, and there is no need for financial compensation by Member States, either |
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e) I don't know |
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In order to have some real results we need much faster operating mode in the EU, it can be clearly seen that the present organizational model is not bringing real tangible results. The results are mostly attributable to the overall economical activity. |
b) Trade association representing businesses |
European Panel Federation (EPF) |
Rue Montoyer 24 Box 24 1000 Brussels T 32 2 556 25 89 www.europanels.org info@europanels.org |
a) yes |
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1) yes |
b) no |
In the case of the Wood-Based Panel sector, all large capital investments to reduce emissions will have been made by 2020. The Wood-Based Panel producers have already made large investments in reducing their direct emissions, resulting in a decline of fossil fuel-based CO2 emissions of around 80%. Further potential to reduce emissions cost-effectively is limited and the EU-ETS will not incentivise this. As the ability to make further significant emission savings will be extremely limited, the EU-ETS will increasingly act as a tax without realistic opportunities for mitigation. |
b) no |
Profit margins of the EU’s Wood-Based Panels producers are eroding since several years, and especially since the introduction of the EU RES policy. The Wood-Based Panel sector is squeezed between increasing costs of production and inability to pass these rising costs to customers. On the one hand, other industries are heavily incentivised to use any woody biomass in order to reduce their ETS allowance requirements, leading to increasing cost and decreasing availability of wood materials. On the other hand, the bargaining power of the Wood-Based Panel sector is limited. Consolidation of companies downstream, in the furniture and DIY sectors, has resulted in large conglomerates that have the power to bargain for low prices. Upstream in the value chain, the chemical companies (resins/adhesives) are also in the position to dictate prices. Consequently, the profit margins of the WBP industry are low and the ability to make further significant emission savings will be extremely limited. |
a) yes |
Costs of energy in countries without an ambitious climate policy will be significantly lower compared to the EU. The EU industry can only compete if these differences in costs are mitigated, either through an effective free allocation scheme or a carbon levy on imported goods. |
c) quite inadequate |
The eligibility criteria should be improved to reflect ‘economic markets’ in the selection of sectors benefitting from free allocation. For the time being, eligibility criteria do not reflect the wide variation of power generation at Member States’ level. |
b) it largely keeps the incentive |
Yes, free allocation keeps the incentive to innovate for reducing emissions. Incremental reductions, however, become increasingly difficult once all the important investments have been made which will be the case by 2020 for the Wood-Based Panel sector. |
b) quite proportionate |
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b) a higher share than in 2013-20 |
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c) a lower share than in Phase 3 |
The NER300 programme hasn’t been fully implemented because of the huge cost of CCS projects. However, the EU has another important tool already working that hasn’t been used yet: Harvested Wood Products. A share of the post-2020 allowance budget should be dedicated to this tool. It is necessary not only to look on the energy side to reduce emissions, but also to consider the positive effect of using biomass for material purpose. A material and energy system to use biomass has to be developed to reduce the CO2 emissions. |
a) yes |
A specific support scheme should be dedicated to Harvested Wood Products, refering to COM (2012) 93, Decision of the EP and of the Council on accounting rules and action plans on greenhouse gas emissions and removals resulting from activities related to land use, land use change and forestry, and Decision 529/2013/EU. In that last publication the EU Parliament and the Commission consider: (1) The increased sustainable use of harvested wood products can substantially limit emissions into and enhance removals of greenhouse gases from the atmosphere. (15) The accounting rules should ensure that Member States accurately reflect in accounts the changes in the harvested wood products pool when they take place, to provide incentives for the use of harvested wood products with long life cycles. |
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
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a) yes |
There is a need for strong incentives for re-industrialisation in the EU. |
b) more carbon leakage categories should be defined |
More carbon leakage categories should be defined to reflect the great diversity of sectors, their respective energy-intensity, main source of energy, the efforts they have already made in this area, their bargaining power, etc. |
c) the share of 'carbon costs' in the GVA should be maintained, but 'carbon costs' should be taken into account to the extent that they can't be recuperated in product prices |
The Wood-Based Panel sector is squeezed between increasing costs of production and inability to pass these rising costs to customers. These facts shall be taken into account in the calculation. |
b) other thresholds should be defined. Please specify below |
Capacity to pass increasing carbon cost vs. decrease in output |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
It is important to keep some discretion to consider situations which cannot be properly reflected into criteria calculation. |
a) five years |
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d) I don’t know |
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b) no |
State of the art in energy efficiency might in some sectors result in poorer environmental emission abatement. There is a risk of unintended consequences. |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
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e) I don’t know |
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a) no, the present approach should be maintained, i.e. that Member States can provide such compensation based on state aid guidelines |
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b) Trade association representing businesses |
European Salt Producers' Association (EuSalt) |
Avenue de l'Yser 4 1040 Brussels Belgium +32 2 737 10 90 info@eusalt.com |
a) yes |
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1) yes |
a) yes |
Lowering industry carbon emissions while sustaining production levels to meet our needs is possible. Industry performance and competitiveness in a globalised economy depend on innovation and energy efficiency. Investments in less polluting technologies are key to such an objective. Therefore, we need to ensure a comprehensive and predictable legislative framework that allows for such investments to take place and deliver. |
c) I don’t know |
The principles underlying the EU ETS cannot be opposed and are valuable. The effectiveness of the system, however, in meeting the energy efficiency objective is still to be proved. The expected positive impact on competitiveness wasn't assessed as yet for several reasons. First, ETS indirect impacts primarily resulted in increased electricity prices, thus increasing production costs in most sectors. This trend is foreseen to maintain itself as electricity is to represent a growing share in the EU energy mix, as per the 2050 Roadmap to a Low-Carbon Economy. Second, non-coordinated national climate and energy policies (and non-harmonised support to renewable energy depending on the Member states) further aggravates the situation in certain countries (for instance, Germany). Thirdly and beside ETS, other resource- and energy-related measures put additional constraints on industrial activities, including mineral extraction. It is essential to have an integrated approach at EU level. |
a) yes |
It is essential to maintain a level playing field at global level as far as possible, so as to allow for the EU industry to adapt. Transitional measures should be foreseen to that aim. |
a) very adequate |
Free allocation provides for a favourable transitional framework for sectors at risk of carbon leakage to adapt to climate change efforts, without harming their competitiveness on the global market. |
b) it largely keeps the incentive |
Free allocation maintains the incentive to innovate insofar as it is limited in time and as long as no other policy measure counteracts its impact. Free allocations should be conceived as both preservation and incentive. Sectors should receive free allocation throughout the transitional phase (whether from a technology to another, or from a system to another). However, R&D and innovation capacities are not necessarily equally advanced in all sectors. For some, intense efforts in R&D are required and will bear fruits on the longer term. For this reason, a sector-by-sector assessment is important. Also, coordinated and integrated policies are essential. |
b) quite proportionate |
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c) a constant share as in 2013-20 |
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e) I don’t know |
The salt industry welcomes EU support to innovative, low-carbon emitting technologies that would help achieve the 2030 targets. The main concern as for CCS is that this technology is still at the stage of pilot projects and isn't available at large scale, yet. It will therefore not contribute to emission reduction efforts before mid-2020 at the earliest. Besides, the use of CCS to "clean" fossil fuel energy will result in increased costs of the latter, given the energy and infrastructure required to isolate, transport and store CO2. There exists more cost-effective ways to reduce CO2 and improve energy efficiency. Those options might take place at (sub-)sector level and could be supported through similar financial mechanism than NER300 at EU level. |
a) yes |
CCS is not viable at the moment, but is still a project. Therefore, basing high expectations on this technology in view of the very short deadline of 2030 and the high costs it requires, seems unrealistic. There exists more cost-effective ways to reduce CO2 and improve energy efficiency on the medium term. Those options might take place at (sub-)sector level and could be supported by similar financial mechanism than NER300 at EU level. |
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
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a) yes |
First and foremost, we need clear, well-coordinated EU policies. Climate, energy, resource, and industry policies need to be integrated so as to ensure a consistent and workable legislative framework that will support the EU's efforts to lead global climate actions, while maintaining its economic activity and competitiveness. |
a) the present two groups should remain |
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c) the share of 'carbon costs' in the GVA should be maintained, but 'carbon costs' should be taken into account to the extent that they can't be recuperated in product prices |
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a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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d) in line with the duration of ETS Phase 4 |
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c) the approach should be less stringent (please specify) |
If we take into account the development of lower-carbon technologies in the coming years, as the EU ETS aims to foster, then the efficiency of the 10% of the most efficient installations is likely to increase. While this trend would be a positive outcome, we need to consider the diversity of EU industry. Progress in terms of energy efficiency might not affect all sectors equally and at the same pace, due to sector- and technology-specifics. In that case, a broader spectrum than the 10% most efficient installations would allow for flexibility. |
c) I don’t know |
The concept of 'technological state of the art' is difficult to grasp. The European industry is very diverse. Considering a 'technological state of the art' would be tantamount to assuming that all sectors use comparable or similar technologies, which is far from being the case. Such an approach would need to be sector-specific, which would then involve various benchmarks according to (groups of) sectors identified. |
c) other (please specify) |
The baseline period would need to be updated so as to take into account potential progresses made in terms of energy efficiency and CO2 emission reduction. However, it is difficult to predict the economic conjuncture in advance and define which years should serve as the basis for data collection. |
d) both b) and c) |
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d) yes, in the form of financial compensation at EU-level |
Indirect costs related to the ETS are a serious issue for it increased energy prices for the whole European industry. This led to a competitive disadvantage at global level. Furthermore, responding to the incentive provided by the ETS, some businesses have engaged on the desired tracks and invested in low-carbon technologies. However, the latter often run on electricity, which prices are on the rise. Consequently, the prospected savings with regard to carbon taxation were quasi annihilated by ETS indirect costs. This was the case in the salt industry in France, for instance. The different approaches used to determine the carbon leakage and the financial compensation lists of sectors resulted in sanctioning those companies. This dysfunction must be addressed. |
I don't know |
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c) from both |
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The salt industry would like to reiterate that climate, energy and industry policies need to be integrated in order to establish a workable framework that will serve EU 2030 targets. In a like manner, we need to ensure a minimum coordination between Member States policies so as to avoid any distortion on the Single Market. |
b) Trade association representing businesses |
European Wind Energy Association (EWEA) |
EWEA - European Wind Energy Association asbl/vzw Rue d'Arlon 80 | B-1040 Brussels Tel: +32 2 213 18 11 Fax: +32 2 213 18 90 Email: ewea@ewea.org Web: http://www.ewea.org |
b) no |
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1) yes |
a) yes |
The EU has since 1990 shown that combining economic growth and emissions reductions is possible. The wind energy industry is contributing to GHG emissions reductions in the power sector. In 2012, wind energy avoided 156 MtCO2 emissions in the EU. Europe can continue on the emissions reduction path while encouraging economic growth. EU Member States can increase their competitive edge, by promoting technologies in which Europe excels and needs to keep global leadership, such as onshore and offshore wind, other renewable power technologies and energy efficiency. The EU wind industry has a positive balance of trade with net exports estimated at over €3bn in 2012 according to EC data. Moreover, EU-based companies hold 55% of global patent applications in wind energy technologies, double the economy-wide average. Further reducing GHG emissions by 2020 and beyond, by investing in the wind power sector, will increase provide industrial growth and export opportunities for the EU. |
a) yes |
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c) I don’t know |
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c) quite inadequate |
The instrument of free allocation to industry has been used to avoid carbon leakage. However, there is little factual evidence that this risk is real, as industries have not moved their production to non-EU countries on emissions grounds. A study for the EC concluded that between 2005 and 2012, no businesses in Europe relocated production to regions without greenhouse-gas emission curbs. Carbon leakage measures can only be justified when the competitiveness of certain EU industries covered by the ETS is at risk. As this risk has been overstated, carbon leakage measures have resulted in free over allocation to certain industries. These surplus allowances that are not used for compliance are sold by industry and thereby add to the existing surplus that undermines the carbon price. |
d) it absolutely compromises the incentive |
If Europe wants to succeed in limiting its GHG emissions and wants to attract investments in renewable technologies, it needs to make sure that decarbonisation takes place throughout the whole economy. This requires a structurally sound ETS which is able to create a robust carbon price that can drive investments in clean production processes and renewable energy. This implies that carbon leakage as a policy instruments needs to be adjusted in a way that does not weaken the ETS by over allocating free allowances. |
e) I don’t know |
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f) I don’t know |
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a) a substantially higher share than in Phase 3 |
Since 2007, renewables have represented 51% of power capacity additions in the EU and reached 72% of all new capacity additions in 2013. During 2013, 35GW of new power generating capacity was added in the EU. The most installed technology was wind (32%), followed by PV (31%). Renewables will generate at least 20% of EU’s energy by 2020 and continue growing to 2030. Wind energy will be the key technology delivering green electricity and is expected to grow from 117GW today to 192 GW in 2020. Given the success of the 1st NER300 programme, it should definitely continue with substantially increased budget. The NER300 extends the EU funding scope to the RES technologies which are not yet commercially available, but sufficiently mature to be ready for demonstration at pre- commercial scale with high replicability potential, and therefore offer significant prospects for cost-effective CO2 reduction both in the European Union and globally. |
b) no |
NER300 is the only EU dedicated support scheme for innovative RES and CCS deployment projects representing only 2% of total ETS phase 3 allowances. Given its importance and success in a very short time it is crucial to continue this programme with substantially increased funding. Other industries already benefit from: - Allowances for CO2 emissions; - Under the State Aid Guidelines, heavy industries can be exempted by up to 85% from their obligation to contribute to RES deployment; - Some member States intend to demand compensations for indirect ETS related costs for their industries. Although measures to address carbon leakage can be justified to ensure the competitiveness of European industries covered by the ETS, they also result in over allocation of allowances, undermining the efficiency of the system and reducing the effictiveness of the NER300 programme. |
c) other types of funding (please specify) |
Energy intensive industries are already supported by 3 types of funding programmes. Additional support by extending the scope of the NER300 system will undermine innovation in RES and CCS. |
c) I don’t know |
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e) I don’t know |
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g) I don’t know |
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c) I don’t know |
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c) I don’t know |
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e) I don’t know |
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d) I don’t know |
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c) I don’t know |
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d) I don’t know |
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e) I don’t know |
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e) I don’t know |
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e) I don't know |
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Given its demonstrated success, the wind sector is calling for the renewal of NER300 or a similar financing instrument for the demonstration of innovative renewables before 2020. NER300 is unique as it addresses the “Valley of Death” of financing: it plugs the gap between Horizon 2020, which lacks the scale needed for energy demonstration/pilot projects, and revenue support instruments such as Member States’ RES support schemes, which do not address the risks of early- stage technologies. Investing in wind energy will deliver a real return on investment in terms of green growth, job creation and a world-leading industry. While Member States should maintain the freedom to allocate ETS revenues to specific projects, revenues should continue to be earmarked for climate-related projects, including demonstration/deployment projects for wind technology. Moreover, future NER300 attribution criteria should take into account the ambition levels of Member States’ renewable energy growth pa |
b) Trade association representing businesses |
EXCA European Expanded Clay Association asbl |
Karin Gäbel Secretary General Boulevard du Souverain 68 B-1170 Brussels BELGIUM info@exca.eu Phone: +32 2 790 42 04 Fax: +32 2 790 42 05 |
a) yes |
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1) yes |
a) yes |
Yes, but the technical potential as demonstrated in many industry roadmaps is limited especially compared to the proposed 43 % reduction in 2030 compared with 2005 levels. |
a) yes |
EXCA supports the EU ETS as a true market based instrument to in a cost-effective way promote reductions. The EU ETS has significant impact on the expanded clay industry which remains exposed to significant risk of carbon leakage. In the absence of a true global level playing field, a system of free allocation at the level of the most carbon-efficient installations for exposed sectors and sub-sectors that allows for recovery and growth is required. This combines the need for ensuring industrial competiveness and incentivising emission reductions. |
a) yes |
As long as no true global level playing field is achieved, especially with the proposed steeper reduction of the EU ETS cap after 2020 continued and improved measures are needed to effectively prevent carbon leakage. |
a) very adequate |
However, the present system does not adequately prevent carbon leakage. In addition, the proposed increase in liner reduction factor after 2020, calls for an improved system. With stringent benchmarks combined with a cross-sectoral correction factor, also the most carbon efficient installations have to buy allowances. This does not prevent carbon leakage. To adequately prevent carbon leakage, sectors and subsectors at risk must receive free allowances at the level of the most carbon-efficient installations. The level of free allocation must allow for industrial recovery and growth. |
a) it absolutely keeps the incentive |
Free allocation based on realistic yet ambitious carbon-intensity benchmarks provides incentives for emission reduction. The benchmark gives carbon-efficient installations an economic advantage compared to less carbon-efficient installations. Thus, providing incentive for installations operating above the benchmark to close the gap with their more efficient competitors as much as possible. The carbon price provides the incentive for carbon-efficient as well as less carbon efficient installations to reduce emissions as the most carbon-efficient installations can sell allowances and less carbon-efficient installations need to buy less allowances. |
b) quite proportionate |
The rules for plant rationalisation, recovery and growth within existing capacity, capacity extension and new entrants are too complex with a too high administrative burden. |
d) there should be no limit to overall free allocation to industry |
Free allocation at the level of benchmarks have been introduced and designed to prevent carbon leakage. With ambitious carbon-intensity benchmarks combined with the current industry cap and with the proposed increase in reduction, even the most carbon efficient installations will get far from what they need. To effectively prevent carbon leakage, free allocation at the level of the benchmark is needed. No reduction factor shall be applied to the amount of free allocation calculated based on the benchmarks (i.e. bottom up approach). To ensure that the EU ETS cap is not exceeded, any reduction factor shall be applied to the amount of allowances to be auctioned. |
d) there should be no such innovation support post-2020 |
All allowances available to existing as well as new entrants shall be allocated for free to exposed sectors and subsectors to prevent carbon leakage. NER is a reserve that shall be used for new entrants. Not used reserves shall be used for recovery and growth in existing installations. |
a) yes |
The proposed EU ETS 2030 target and the 2050 objective is beyond the technical potential in manufacturing industry as demonstrated in industrial roadmaps. To achieve the proposed targets breakthrough technologies are needed, and support schemes for industrial innovation are needed. Crucial is that the support is not limited to big sectors, big companies or certain technologies. It should be accessible to all sizes of enterprises in all sectors and subsectors. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Different sources for funding shall be explored, combined and mobilised including but not limited to a certain % of the auctioning revenues. |
a) yes |
In addition to an improved system with free allocation at the level of the benchmarks that allows for recovery and growth, an EU harmonised system for full off-setting of the indirect cost is needed to effectively prevent carbon leakage. |
a) the present two groups should remain |
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a) the present criteria should remain |
Carbon leakage occurs when the production cost, including the CO2 cost, in Europe is higher than the production cost outside Europe plus cost of transportation. Historical data on emissions, GVA and trade volumes are not the most relevant indicators of carbon leakage. However, for reasons of predictably and simplicity the present criteria should remain. The risk of carbon leakage shall be assessed at relevant level of disaggregation. For assessment at a more detailed level, the assessment shall build on the methodology developed and used establishing the 1st and 2nd lists. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
When defining the present thresholds for the share of carbon cost per GVA a defined price of CO2 was used (30 €). Obviously the same price shall be used, and was used in making the assessment according to the criteria. If another CO2 price is more appropriate, the same CO2 price shall be used to set the threshold and when making the assessment. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Carbon leakage occurs when the production cost, including the CO2 cost, in Europe is higher than the production cost outside Europe plus transportation cost. The possibility to complement the quantitative assessment based on historical data, with a qualitative assessment shall be maintained. The existing 3 quantitative criteria shall be kept and the qualitative assessment must be a comprehensive assessment combining the different criteria, and not done in a step by step way. |
d) in line with the duration of ETS Phase 4 |
The expanded clay industry, like all energy intensive and capital intensive industries, needs legal stability and predictability to make new investments in Europe. A carbon leakage list should be valid for the whole length of a trading period, to ensure legal stability and predictability. The possibility to every year add sectors or subsector to the list shall be maintained. |
a) the present approach of average of the 10% most efficient installations should remain |
Free allocation based on benchmarks are designed to prevent carbon leakage. To fulfil this the benchmark must be realistic and achievable. The benchmark must be based on representative installations. Only the installations where the measures for best performance are well known and generally applicable and available for the industry as a whole and for full capacity utilisation, shall be included in defining the 10% best performers. For small sectors and sub-sectors with few installations the present fall back approach shall be maintained as an alternative. |
a) yes (please specify how often) |
Benchmarks should be reviewed periodically to reflect technological progress and uptake of new technology in Europe. |
c) other (please specify) |
Industries in Europe need to recover and grow. Ideally, the free allocation should be based on actual production volumes. However, if this is not feasible, as recent as possible historical data can be used in combination with simple mechanisms for increase or decrease in production. The present system corrects for partial cessation, but not for recovery and growth within existing capacity. The rules for plant rationalisation and capacity increase are complex and there are different and complex rules for new entrants compared with the rules for existing installations. |
a) no, there should be no deviations |
When general and harmonised allocation rules that are predicable and that sufficiently and effectively prevent carbon leakage are in place, there should be no need for deviations. |
d) yes, in the form of financial compensation at EU-level |
The current approach through state aid rules is not adequate. Full and harmonised compensation for indirect cost at EU level is needed to avoid carbon leakage, e.g. through the use of auctioning revenues. |
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a) from the Member States' auction budgets |
Free allocation based on benchmarks have been introduced and designed to prevent carbon leakage. To effectively prevent carbon leakage, the most efficient installations must receive full free allocation, i.e. no reduction factor shall be applied to the amount of free allocation calculated based on the benchmarks (i.e. bottom up approach). Allowances funding low-carbon innovation support shall not come from the free allocation budge. Allowances from Member States’ auction budges shall be used in combination with other sources that should be explored and mobilised. |
European industries need to recover and grow. The European expanded clay industry, like other capital intensive industries with long investment cycles, need legal stability, certainty and predictability to make new investments in Europe. We need a post 2020 framework that fully integrates climate, energy and industrial policies. The proposed burden sharing between EU ETS and non-EU ETS sectors suggest a proportionally higher reduction for energy intensive industries compared to e.g. the transport and housing sectors. The burden must be shared based on the reduction potential. We need a genuine reform of the EU ETS that allows for recover and growth and with a maintained and improved carbon leakage support. The Market Stability Reserve proposal shall only be discussed in combination with an improved carbon leakage system. Under the right conditions, the European expanded clay industry will continue to deliver its fair share of the reduction. |
b) Trade association representing businesses |
FEDERACCIAI - Federation of the Italian Steel Companies - Register ID 83425058760-88 |
bruxelles@federacciai.it + 32 2 231 0285 - Rue Belliard 205/7 - 1040 Brussels (Belgium) |
a) yes |
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1) yes |
b) no |
For most energy intensive sectors only small incremental CO2 emission reductions are concretely possible by 2030, as clearly shown in their own low-carbon roadmaps. The Steel Roadmap 2050, developed by Eurofer, assesses the technical potential of existing or projected technologies as well as the economic viability of the retained options, and concludes that only 10% reduction of specific CO2 emissions is achievable between 2010 and 2030 When it comes to meet long term goals, the development and piloting of breakthrough technologies for the steel sector, if ever developed, would only come in play after 2030. As demonstrated in the Steel Roadmap 2050 technologies able to drastically decrease CO2 emissions in the steel sector might prove either uneconomical, thus harming its competitiveness on the global markets, or involving Carbon Capture and Storage. |
b) no |
EU steel industry and in particular Italian steel industry, in the last decades have achieved very high performance in energy efficiency and further improvements in this field are challenging. Investments in energy efficiency will make the industry more competitive only if the return on investment is positive. As CO2 direct and indirect costs cannot be passed on to prices due to the strong competition from third countries both in the EU and in the export markets, the ETS can potentially damage the steel sectors profitability, seriously limiting over time the availability of financial means for investments. |
a) yes |
Steel is a globally traded commodity and the EU steel companies are competing on global markets. The EU-28 being the first steel importing region in the world and the third in term of exports, the EU steel sector faces fierce competition from third countries not only on the domestic market but also on a global level. A comprehensive, equally obliging and legally binding international climate agreement is the only way to address climate change whilst solving distortion of competition issues due to asymmetric carbon constraints. Today, such an international agreement, particularly one which would match the European ETS, is farer away than ever before. In the absence of an international climate agreement providing level playing field, special measures are needed to support EU industry covered by the EU ETS to address the competitiveness issue. The current measures to tackle carbon leakage are not enough and should be improved and strengthen. |
b) quite adequate |
Free allocation for direct emissions is the best instrument to date to address carbon leakage risk for certain industrial sectors and should be kept and enhanced. But it is of equal importance to handle the indirect effects occurring from the pass-through of carbon costs into the electricity price, through a harmonised EU approach based on either financial compensation or free allocation for indirect emissions. It has to be underlined that the current ETS directive, as it stands now, is making progressively ineffective the instrument of free allocation: due to the cross sectoral correction factor the total number of free allowances for industry have been cut already by 5.8% in 2013 and will continue to be cut in every year up to and beyond 2020. To achieve an effective protection against carbon leakage sectors exposed shall be provided instead with 100% free allocation at the level of the most efficient installations, based on achievable benchmarks and without any correction factor. |
b) it largely keeps the incentive |
If free allocation are associated to achievable benchmarks, set at the real best performances found in a sector, companies in the tail of the benchmarks have an incentive to catch up more quickly to the benchmark due to the level of carbon related costs. Companies in the lead are incentivised to innovate to perform even better. On the contrary, the need to purchase allowances at higher costs for sectors exposed to leakage (as induced by the Cross Sectoral Correction Factor) decreases the profit margins and the financial ability to invest. This is particularly true in these periods of restricted access to capital. |
b) quite proportionate |
The implementation of the benchmarks through the NIMs requires significant resources, both from the industry as well as from the competent authorities. However, not having free allocation would have dramatic consequences for the sectors most exposed to carbon leakage. The cost impact (for the companies as well as for the society because of the costs deriving from lost market shares and possibly plant closures) would in any case be much higher than the administrative burden. At the same time we believe that other ETS requirements could be simplified both for competent authorities and industry (monitoring plan and authorization management, new entrants and closures, etc.) |
d) there should be no limit to overall free allocation to industry |
Industries within a sector exposed to carbon leakage need to be provided with 100% free allocation at the level of the most efficient installations, based on achievable benchmarks and no correction factor. Furthermore the allocation of free allowances only for direct emission is unable to tackle Carbon Leakage in those sectors that suffer for indirect CO2 cost passed through in electricity prices. Therefore, either an harmonised financial compensation is put in place at UE level (replacing the current state aid measure that are optional for Member States) or additional free allowances should be allocated to industry to take fully into account also indirect emissions. To align the amount of free allocation with the cap, the repartition of the ETS cap between a manufacturing cap and a power cap should become flexible and the correction factor should be removed to allow full free allocation to the level of a sectorial benchmark, reflecting what is technically and economically feasible. |
e) I don’t know |
This kind of support support should cover all carbon abatement measures (not only CCS and renewables) provided that there will be no additional burden for the industry. |
a) yes |
This should cover all carbon abatement measures (not only CCS and renewables) provided that there will be no additional burden for the industry. |
c) other types of funding (please specify) |
Adequate funding should be provided by a well-balanced mix of funding sources, within and outside the EU ETS. |
a) yes |
In those sectors which suffer from indirect CO2 cost passed through in electricity prices, free allowances allocated only for direct emission are unable to address the risk of Carbon Leakage. Full and EU-wide compensation for indirect cots must be also ensured. The current framework only sets maximum, voluntary compensation levels allowed through state aid guidelines, thus generating differences in the EU within a same sector. It is therefore necessary to set mandatory EU compensation measures to achieve full offsetting of indirect costs in all Member States, through a harmonised EU approach based on either financial compensation or free allocation for indirect emissions. An allocation based on benchmarks built on both direct and indirect emissions might be a suitable solution. |
a) the present two groups should remain |
It is essential that the sectors most exposed to carbon leakage should get a flat rate of 100% free allowances. |
g) I don’t know |
The present criteria should basically remain to ensure continuity. With the aim to safeguard and strengthen the global competitiveness of the European energy intensive industries, targeted improvements of the criteria might be considered. |
c) I don’t know |
See answer n.13 |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
For some sectors or specific sub-sectors, quantitative data reported in statistics (with a certain degree of aggregation or disaggregation) are inadequate to reflect the exposure to leakage, by a simple association with a threshold Therefore the possibility to have an additional qualitative assessment should be kept. |
d) in line with the duration of ETS Phase 4 |
Like in the current phase, there should be the possibility to add sectors to the leakage list during the trading period, if a new and deeper assessment, qualitative or quantitative, justifies it. |
a) the present approach of average of the 10% most efficient installations should remain |
The benchmarks need to reflect real technical and economical possibilities and have to be built bottom up, starting from real data and not from literature or theoretical basis. The current benchmark for “hot metal” and “coke” have been erroneously set below technically achievable levels, because they don't take fully into account the waste gases recovery for energy production. If the benchmark value is derived correctly, the approach of average of the 10% most efficient installations is a good way to reflect what it is achievable in a sector and it keeps the right incentive for companies to reach the best performance in a cost-effective way. In a sector with a relative low number of installations some attention should be paid when one single installation will affect substantially the benchmark value, to verify if local condition or type of production are representative of the whole sector. |
a) yes (please specify how often) |
A periodical review of the benchmarks period should be made, so as to reflect technological progress and uptake of new and proven technologies in the EU. To avoid an excessive administrative burden this review should be done no more than once per commitment period. Benchmarks have to be built bottom up starting from real data and not from literature or theoretical basis. |
c) other (please specify) |
Allocation should be based on real production levels or a rolling average of production levels over closer years. |
a) no, there should be no deviations |
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c) yes, in the form of additional free allocation |
The current framework only sets maximum, voluntary compensation levels allowed through state aid guidelines, thus generating differences in the EU within a same sector. It is therefore necessary to set mandatory EU compensation measures to achieve full offsetting of indirect costs in all Member States, through a harmonised EU approach. Full off-setting of CO2 cost-pass through in electricity prices should be provided in an harmonized way in all member states in the form or free allocation (by using benchmark covering both direct and indirect emissions) or in the form of mandatory financial compensation at UE level. |
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e) I don't know |
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b) Trade association representing businesses |
Fédération de l'industrie du verre |
Boulevard de la Plaine, 5 – Pleinlaan 5 1050 Bruxelles – 1050 Brussel T | + 32/(0)2/542-61-20 F | + 32/(0)2/542-61-21 @ | info@vgi-fiv.be W | www.vgi-fiv.be |
a) yes |
|
1) yes |
c) I don’t know |
The glass industry is making continuous improvement in energy efficiencies and process technologies to reduce CO2, energy consumption and environmental impacts. While further reductions in the glass industry are possible, what is important is the magnitude of this reduction. All official EU publications such as the “Sector Competitiveness Studies - Competitiveness of the Glass Sector - ENTR/06/054 - Final report, 14 October 2008” or more recently the Glass BREF and the BAT Conclusions show that no breakthrough technology is currently available to reduce CO2 emissions to the extent imposed by the energy and climate package 2030 (-43% for ETS sectors between 2005 and 2030). Emissions reductions cannot be repeated ad infinitum. There is a thermodynamic limit to the glass melting process which is an absolute limit, and that current technology is already approaching. However, process emissions cannot be eliminated, limiting therefore the reduction potential of the glass industries. |
b) no |
The main driver for energy efficiency improvements in the glass industry is the high share of energy costs within production costs. In fact, the glass industry has continuously improved energy efficiency over previous decades. Regulatory instruments and the EU ETS in particular, have only a marginal effect on energy efficiency improvements of glass melting activities, if any. Whilst there is no global ETS in place, the EU ETS is only a source of costs for glass industries (direct but also indirect CO2 costs linked to electricity), and therefore weakens the competitive position of European based glass industries vis-a-vis third country competitors. As such, it indirectly favors production reduction in the EU and rises in imports from non EU countries without carbon constraints into the EU. For these reasons, glass industries need to be fully protected against risks of carbon leakage. |
a) yes |
The EU glass industry faces higher costs for environmental protection, energy, labour and raw materials, than the majority of extra-EU competitors. In the absence of an international climate agreement and a level playing field between EU and extra EU competitors, the EU industry needs to be provided with measures to safeguard its competitiveness. Measures to avoid carbon leakage under the EU ETS are therefore essential. Measures should cover both the direct and indirect CO2 costs. Such measures under the EU ETS must be established in a way that ensures the ETS’ coherence with the EU’s ambition to revitalize European manufacturing activities, as proposed in the EC Communication on Industrial Renaissance. |
c) quite inadequate |
Free allocation has been key up to now to mitigate the negative impacts of a unilateral climate policy. However, the Cross Sectoral Correction Factor which is applied already from 2013 reduces the free allocation, even for the most GHG efficient installations, and will dramatically increase in the future, thus further reducing free allocation. This current system is unsustainable and should be changed in order to ensure that the most GHG efficient installations receive 100% of their allowance needs. |
a) it absolutely keeps the incentive |
Free allocation does not reduce the incentive to innovate; on the contrary, the majority of installations in the sector (about 95%) do not have enough allowances, which encourages industry to invest in the efficiency of its plants to avoid having to purchase a high level of allowances, which would render the sector uncompetitive. For the installations under the benchmark (about 5%), they can sell their allowances on the market, which is also an incentive to continue reducing emissions. The incentive is therefore present. Below, we also call for a periodic revision of the benchmarks (in exchange of the cancellation of the cross-sectoral factor), which also provides for a strong incentive to improve. Free allow. preserve investment capacity and offer industry the incentive to purchase less CO2 allow if they become more GHG efficient. However this last incentive would be better preserved if the CSCF was not forcing an unrealistic and arbitrary reduction of the number of free allow. |
b) quite proportionate |
Administrative burden is accepted, since it is necessary to maintain the free allocation system. However opportunities or improvement to this process should be considered. Conversely, the administration and calculation rules for new entrants are overly complex and can lead to under-allocation. They can therefore be seen as disproportionate and can be a disincentive to new investments. |
d) there should be no limit to overall free allocation to industry |
The current system is unsustainable (from a competition point of view) because the cross sectoral correction factor continually reduces the free allocation given to industry, even for the most GHG efficient installations. Ideally, installations whose efficiency is equal or better than the (periodically reviewed) benchmark should receive 100% of free allocations to produce in the EU and so there should be no limit. In practice, this is likely to lead to a higher share in phase IV. An increased level of EU ambition in terms of GHG reduction would require enhanced measures against carbon leakage and therefore an increase in total free allocations. |
e) I don’t know |
Overall financing for technological innovation in manufacturing should be increased in the EU. However R & D should be funded via a mobilization of different sources of funding - including but not limited to - auctioning revenues. It should not come from the free entrants reserve or Free Allowances reserve. Allowances should be primarily used to ensure that the most GHG efficient installations get 100% of their needs to produce in the EU. Furthermore, financing for R&D and demonstration projects should be technology-neutral and not focused only on CCS or renewables. New technologies such as Carbon Capture and Use (CCU) and others should not be excluded. |
a) yes |
As stated above, industrial innovation, with a focus on the process and on new energy sources for industry, should be promoted. It should not be financed by shares of allowances reserved for free allocation or for new entrants, but rather from a mobilization of different sources, and not limited to auctioning revenues. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Industrial innovation should be promoted in a technology-neutral way. However this should not be done at the expense of free allocation which aims to provide effective support and protection against carbon leakage. Therefore it should be financed via other sources. This could include, among other sources, money from the auctioning revenues, as suggested in the ETS directive (Art 10.3). |
a) yes |
Unequitable carbon costs should not place EU industries at a competitive disadvantage with extra-EU competitors and this should be the ultimate objective pursued in order to achieve the EU’s ambition of 20% GDP realized by industrial activities in 2020. To that end, measures against carbon leakage are a pre-requisite but are not enough. An EU scheme for compensation of indirect costs due to higher electricity prices and some raw materials (e.g. soda ash, industrial gases, ..) should also be developed for Energy Intensive Industries. More generally, the EU needs to assess, and if needed reform, all its policies and in particular energy and environmental ones against the re-industrialisation objective. A longer term re-industrialisation objective for 2030 should be established. |
a) the present two groups should remain |
This binary model ensures that all sectors benefit from carbon leakage protection measures as soon as a risk is detected. This is essential to ensure that carbon leakage measures are effective and that protection is not granted too late, when industries are already in jeopardy. |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
The competitiveness of energy-intensive industries is sensitive to energy and carbon costs, therefore a risk exists for all these industries. For the sake of simplicity and consistency in legislation, all energy-intensive industries, as defined in the Energy taxation directive, could be automatically placed on the carbon leakage list:"energy-intensive business" shall mean a business entity, (…) where either the purchases of energy products and electricity amount to at least 3,0 % of the production value or the national energy tax payable amounts to at least 0,5 % of the added value. In case ETS-specific criteria are maintained, they should continue being based on both the CO2 intensity and the trade intensity metrics. The CO2 cost metric should be made more relevant to analyze the impacts of carbon cost on sectors’ profitability. To that end, the CO2 cost over GVA criteria could be replaced by a CO2 cost over Gross Operating Surplus (GOS) criteria. |
b) other thresholds should be defined. Please specify below |
The competitiveness of energy-intensive industries is sensitive to energy and carbon costs, therefore a risk exists for all these industries. For the sake of simplicity and consistency in legislation, all energy-intensive industries, as defined in the Energy taxation directive, could be automatically placed on the carbon leakage list:"energy-intensive business" shall mean a business entity, (…) where either the purchases of energy products and electricity amount to at least 3,0 % of the production value or the national energy tax payable amounts to at least 0,5 % of the added value. In case ETS-specific criteria are maintained, they should continue being based on both the CO2 intensity and the trade intensity metrics. The CO2 cost metric should be made more relevant to analyze the impacts of carbon cost on sectors’ profitability. To that end, the CO2 cost over GVA criteria could be replaced by a CO2 cost over Gross Operating Surplus (GOS) criteria. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The current criteria under the quantitative assessment at NACE 3 or 4 level should be maintained and used as the first assessment option. When an assessment at NACE 3 or 4 level is not appropriate to identify the relevant industrial activities falling under the EU ETS, then a quantitative assessment at 6- or 8-digit should be carried as a second option. Finally, as a third option, a qualitative assessment must remain possible. Other parameters can be studied as part of qualitative assessments, such as methodology and evidences of investment leakage. |
d) in line with the duration of ETS Phase 4 |
As long as there are no equivalent GHG reduction measures taken by major trading partners, the list of sectors exposed to the risk of carbon leakage should remain valid. This is essential to provide predictability to industries faced with long investment cycles (typically > 15 years). |
a) the present approach of average of the 10% most efficient installations should remain |
Glass industries support ambitious benchmark levels, which reflect the technological capabilities of the sectors best performers using the best available and proven technologies in Europe. It must be kept in mind however that this approach also has limits. Indeed, benchmark curves do not always reflect a difference in terms of « best » (the least GHG emitters per tonne of glass) or « worst » GHG players, but a difference in terms of products produced, cullet availability, age of furnace, available fuels, etc. The 10% best GHG performers can therefore be regarded as extremely challenging, especially for plants producing a wider range of more sophisticated products with higher added-value (as this usually entails higher energy consumption). |
a) yes (please specify how often) |
It seems logical to revise the benchmarks from time to time to reflect GHG improvements over time. Revision cycles should be linked to ETS phases and remain unchanged over this period. Periodical revision of the benchmark should be based on the actual EU based installations. The periodic revision of benchmarks should be the sole instrument leading to a reduction of free allowances over time, as benchmarks reflect true possibilities of GHG improvements according to state-of-the-art technologies deployed in Europe. The periodic revision of benchmarks therefore justifies that the CSCF is abandoned. |
c) other (please specify) |
Ex-ante allocation can only lead to over-allocation in crisis times, and under-allocation when the economy is growing. A better approach is to design an « ex post » system, where real allocation is corrected according to the real production. |
a) no, there should be no deviations |
In principle, there shall be no deviation from the general harmonized allocation rules at the level of an individual installation as this could cause distortion of competition. Only in the case of very specific hardship, should deviations be envisaged for an entire sector after a careful assessment of the competitive effects of such deviations. |
d) yes, in the form of financial compensation at EU-level |
Rules for the compensation of indirect costs should be revised and need to be effective to reflect the real burden of CO2 included in electricity costs for industry. A differentiated compensation approach by Member States is not acceptable from a competitiveness point of view. A harmonized approach at EU level is therefore needed. The harmonized measure should take the form of financial compensation. Free allocation should be kept aside to ensure full relief for direct emissions (most GHG efficient installations should receive 100% of their needs). A compensation system should also be put in place to compensate for higher prices of some raw materials (e.g. soda ash) and industrial gases. |
Important |
Less important |
Most important |
Least important |
|
a) from the Member States' auction budgets |
Allowances funding low-carbon innovation support should be financed from the Member States’ auction revenues and from a mobilization of additional sources. However, this should not be financed at the expense of free allocation or the new entrants reserve which must be principally used for measures against risks of carbon leakage |
Generally speaking, glass industries welcome the opportunity to express their views on carbon leakage measures post 2020 and appreciate that this discussion is held without further delay. It is however regrettable that industry is asked to comment on such measures whereas the rules for EU ETS Phase IV have not yet been fully decided. The glass industry wishes to reiterate that so long that there is no comparable ETS system (which means that similar costs are born by competitors) operating in most part of the world and in extra-EU countries with glass industries, EU based glass industries will need to receive full and effective protection against carbon leakage. The recent assessment carried by DG CLIMA on exposure to carbon leakage risks, i.e. the carbon leakage list of 2009 and its recent revision, shows that between 2009 and 2014, risks of carbon leakage has grown in most glass sectors. For these reasons, glass industries need effective protection moving forward. |
b) Trade association representing businesses |
Fédération des Chambres Syndicales des Industries du Verre |
114 rue la Boétie 75008 Paris FRANCE tel : +33 (0)1 42 65 60 02 email : <contact@fedeverre.fr> |
a) yes |
|
1) yes |
c) I don’t know |
The glass industry is making continuous improvement in energy efficiencies and process technologies to reduce CO2, energy consumption and environmental impacts. While further reductions in the glass industry are possible, what is important is the magnitude of this reduction. All official EU publications such as the “Sector Competitiveness Studies - Competitiveness of the Glass Sector - ENTR/06/054 - Final report, 14 October 2008” or more recently the Glass BREF and the BAT Conclusions show that no breakthrough technology is currently available to reduce CO2 emissions to the extent imposed by the energy and climate package 2030 (-43% for ETS sectors between 2005 and 2030). Emissions reductions cannot be repeated ad infinitum. There is a thermodynamic limit to the glass melting process which is an absolute limit, and that current technology is already approaching. However, process emissions cannot be eliminated, limiting therefore the reduction potential of the glass industries. |
b) no |
The main driver for energy efficiency improvements in the glass industry is the high share of energy costs within production costs. In fact, the glass industry has continuously improved energy efficiency over previous decades. Regulatory instruments and the EU ETS in particular, have only a marginal effect on energy efficiency improvements of glass melting activities, if any. Whilst there is no global ETS in place, the EU ETS is only a source of costs for glass industries (direct but also indirect CO2 costs linked to electricity), and therefore weakens the competitive position of European based glass industries vis-a-vis third country competitors. As such, it indirectly favors production reduction in the EU and rises in imports from non EU countries without carbon constraints into the EU. For these reasons, glass industries need to be fully protected against risks of carbon leakage. |
a) yes |
The EU glass industry faces higher costs for environmental protection, energy, labour and raw materials, than the majority of extra-EU competitors. In the absence of an international climate agreement and a level playing field between EU and extra EU competitors, the EU industry needs to be provided with measures to safeguard its competitiveness. Measures to avoid carbon leakage under the EU ETS are therefore essential. Measures should cover both the direct and indirect CO2 costs. Such measures under the EU ETS must be established in a way that ensures the ETS’ coherence with the EU’s ambition to revitalize European manufacturing activities, as proposed in the EC Communication on Industrial Renaissance. |
c) quite inadequate |
Free allocation has been key up to now to mitigate the negative impacts of a unilateral climate policy. However, the Cross Sectoral Correction Factor which is applied already from 2013 reduces the free allocation, even for the most GHG efficient installations, and will dramatically increase in the future, thus further reducing free allocation. This current system is unsustainable and should be changed in order to ensure that the most GHG efficient installations receive 100% of their allowance needs. |
a) it absolutely keeps the incentive |
Free allocation does not reduce the incentive to innovate; on the contrary, the majority of installations in the sector (about 95%) do not have enough allowances, which encourages industry to invest in the efficiency of its plants to avoid having to purchase a high level of allowances, which would render the sector uncompetitive. For the installations under the benchmark (about 5%), they can sell their allowances on the market, which is also an incentive to continue reducing emissions. The incentive is therefore present. Below, we also call for a periodic revision of the benchmarks (in exchange of the cancellation of the cross-sectoral factor), which also provides for a strong incentive to improve. Free allow. preserve investment capacity and offer industry the incentive to purchase less CO2 allow if they become more GHG efficient. However this last incentive would be better preserved if the CSCF was not forcing an unrealistic and arbitrary reduction of the number of free allow. |
b) quite proportionate |
Administrative burden is accepted, since it is necessary to maintain the free allocation system. However opportunities or improvement to this process should be considered. Conversely, the administration and calculation rules for new entrants are overly complex and can lead to under-allocation. They can therefore be seen as disproportionate and can be a disincentive to new investments. |
d) there should be no limit to overall free allocation to industry |
The current system is unsustainable (from a competition point of view) because the cross sectoral correction factor continually reduces the free allocation given to industry, even for the most GHG efficient installations. Ideally, installations whose efficiency is equal or better than the (periodically reviewed) benchmark should receive 100% of free allocations to produce in the EU and so there should be no limit. In practice, this is likely to lead to a higher share in phase IV. An increased level of EU ambition in terms of GHG reduction would require enhanced measures against carbon leakage and therefore an increase in total free allocations. |
e) I don’t know |
Overall financing for technological innovation in manufacturing should be increased in the EU. However R & D should be funded via a mobilization of different sources of funding - including but not limited to - auctioning revenues. It should not come from the free entrants reserve or Free Allowances reserve. Allowances should be primarily used to ensure that the most GHG efficient installations get 100% of their needs to produce in the EU. Furthermore, financing for R&D and demonstration projects should be technology-neutral and not focused only on CCS or renewables. New technologies such as Carbon Capture and Use (CCU) and others should not be excluded. |
a) yes |
As stated above, industrial innovation, with a focus on the process and on new energy sources for industry, should be promoted. It should not be financed by shares of allowances reserved for free allocation or for new entrants, but rather from a mobilization of different sources, and not limited to auctioning revenues. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Industrial innovation should be promoted in a technology-neutral way. However this should not be done at the expense of free allocation which aims to provide effective support and protection against carbon leakage. Therefore it should be financed via other sources. This could include, among other sources, money from the auctioning revenues, as suggested in the ETS directive (Art 10.3). |
a) yes |
Unequitable carbon costs should not place EU industries at a competitive disadvantage with extra-EU competitors and this should be the ultimate objective pursued in order to achieve the EU’s ambition of 20% GDP realized by industrial activities in 2020. To that end, measures against carbon leakage are a pre-requisite but are not enough. An EU scheme for compensation of indirect costs due to higher electricity prices and some raw materials (e.g. soda ash, industrial gases, ..) should also be developed for Energy Intensive Industries. More generally, the EU needs to assess, and if needed reform, all its policies and in particular energy and environmental ones against the re-industrialisation objective. A longer term re-industrialisation objective for 2030 should be established. |
a) the present two groups should remain |
This binary model ensures that all sectors benefit from carbon leakage protection measures as soon as a risk is detected. This is essential to ensure that carbon leakage measures are effective and that protection is not granted too late, when industries are already in jeopardy. |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
The competitiveness of energy-intensive industries is sensitive to energy and carbon costs, therefore a risk exists for all these industries. For the sake of simplicity and consistency in legislation, all energy-intensive industries, as defined in the Energy taxation directive, could be automatically placed on the carbon leakage list:"energy-intensive business" shall mean a business entity, (…) where either the purchases of energy products and electricity amount to at least 3,0 % of the production value or the national energy tax payable amounts to at least 0,5 % of the added value. In case ETS-specific criteria are maintained, they should continue being based on both the CO2 intensity and the trade intensity metrics. The CO2 cost metric should be made more relevant to analyze the impacts of carbon cost on sectors’ profitability. To that end, the CO2 cost over GVA criteria could be replaced by a CO2 cost over Gross Operating Surplus (GOS) criteria. |
b) other thresholds should be defined. Please specify below |
The competitiveness of energy-intensive industries is sensitive to energy and carbon costs, therefore a risk exists for all these industries. For the sake of simplicity and consistency in legislation, all energy-intensive industries, as defined in the Energy taxation directive, could be automatically placed on the carbon leakage list:"energy-intensive business" shall mean a business entity, (…) where either the purchases of energy products and electricity amount to at least 3,0 % of the production value or the national energy tax payable amounts to at least 0,5 % of the added value. In case ETS-specific criteria are maintained, they should continue being based on both the CO2 intensity and the trade intensity metrics. The CO2 cost metric should be made more relevant to analyze the impacts of carbon cost on sectors’ profitability. To that end, the CO2 cost over GVA criteria could be replaced by a CO2 cost over Gross Operating Surplus (GOS) criteria. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The current criteria under the quantitative assessment at NACE 3 or 4 level should be maintained and used as the first assessment option. When an assessment at NACE 3 or 4 level is not appropriate to identify the relevant industrial activities falling under the EU ETS, then a quantitative assessment at 6- or 8-digit should be carried as a second option. Finally, as a third option, a qualitative assessment must remain possible. Other parameters can be studied as part of qualitative assessments, such as methodology and evidences of investment leakage. |
d) in line with the duration of ETS Phase 4 |
As long as there are no equivalent GHG reduction measures taken by major trading partners, the list of sectors exposed to the risk of carbon leakage should remain valid. This is essential to provide predictability to industries faced with long investment cycles (typically > 15 years). |
a) the present approach of average of the 10% most efficient installations should remain |
Glass industries support ambitious benchmark levels, which reflect the technological capabilities of the sectors best performers using the best available and proven technologies in Europe. It must be kept in mind however that this approach also has limits. Indeed, benchmark curves do not always reflect a difference in terms of « best » (the least GHG emitters per tonne of glass) or « worst » GHG players, but a difference in terms of products produced, cullet availability, age of furnace, available fuels, etc. The 10% best GHG performers can therefore be regarded as extremely challenging, especially for plants producing a wider range of more sophisticated products with higher added-value (as this usually entails higher energy consumption). |
a) yes (please specify how often) |
It seems logical to revise the benchmarks from time to time to reflect GHG improvements over time. Revision cycles should be linked to ETS phases and remain unchanged over this period. Periodical revision of the benchmark should be based on the actual EU based installations. The periodic revision of benchmarks should be the sole instrument leading to a reduction of free allowances over time, as benchmarks reflect true possibilities of GHG improvements according to state-of-the-art technologies deployed in Europe. The periodic revision of benchmarks therefore justifies that the CSCF is abandoned. |
c) other (please specify) |
Ex-ante allocation can only lead to over-allocation in crisis times, and under-allocation when the economy is growing. A better approach is to design an « ex post » system, where real allocation is corrected according to the real production. |
a) no, there should be no deviations |
In principle, there shall be no deviation from the general harmonized allocation rules at the level of an individual installation as this could cause distortion of competition. Only in the case of very specific hardship, should deviations be envisaged for an entire sector after a careful assessment of the competitive effects of such deviations. |
d) yes, in the form of financial compensation at EU-level |
Rules for the compensation of indirect costs should be revised and need to be effective to reflect the real burden of CO2 included in electricity costs for industry. A differentiated compensation approach by Member States is not acceptable from a competitiveness point of view. A harmonized approach at EU level is therefore needed. The harmonized measure should take the form of financial compensation. Free allocation should be kept aside to ensure full relief for direct emissions (most GHG efficient installations should receive 100% of their needs). A compensation system should also be put in place to compensate for higher prices of some raw materials (e.g. soda ash) and industrial gases. |
Important |
Less important |
Most important |
Least important |
|
a) from the Member States' auction budgets |
Allowances funding low-carbon innovation support should be financed from the Member States’ auction revenues and from a mobilization of additional sources. However, this should not be financed at the expense of free allocation or the new entrants reserve which must be principally used for measures against risks of carbon leakage. |
Generally speaking, glass industries welcome the opportunity to express their views on carbon leakage measures post 2020 and appreciate that this discussion is held without further delay. It is however regrettable that industry is asked to comment on such measures whereas the rules for EU ETS Phase IV have not yet been fully decided. The glass industry wishes to reiterate that so long that there is no comparable ETS system (which means that similar costs are born by competitors) operating in most part of the world and in extra-EU countries with glass industries, EU based glass industries will need to receive full and effective protection against carbon leakage. The recent assessment carried by DG CLIMA on exposure to carbon leakage risks, i.e. the carbon leakage list of 2009 and its recent revision, shows that between 2009 and 2014, risks of carbon leakage has grown in most glass sectors. For these reasons, glass industries need effective protection moving forward. |
b) Trade association representing businesses |
FEDERCHIMICA (Federation of Chemical Industry in Italy) |
GIUSEPPE ASTARITA FEDERCHIMICA Via Giovanni da Procida 11 20149 Milano (Italy) Phone: 39 02 34565357 Fax: 39 02 34565329 E-mail: g.astarita@federchimica.it |
a) yes |
1) yes |
b) no |
Most "low hanging fruits" have been harvested, meaning that most of the technological efficiency options have been realized. Further reductions would require significant investment and growth in Europe. |
b) no |
ETS is a factor for decisions on investment and effiiency improvement. However, ETS is not needed, nor does it serve to improve competitiveness. It rather adds to the EU-specific policy costs and potentialy weakens competitiveness. |
a) yes |
EU climate policy must not add costs to efficient EU manufacturers: 100% free direct and indirect allocation according to realistic benchmarks are the solution. Allocation should be dynamic according to recent production output in order to avoid over and under allocation and to avoid rewarding relocation. |
b) quite adequate |
Free allocation is the best tool to avoid carbon leakage, if it shields efficient producers from any additional climate policy costs. |
a) it absolutely keeps the incentive |
Free allocation keeps resources in company, e.g. to innovate. Incentive to reduce emissions does not depend on the quantity of free allocation; it is given by the possibility to sell allowances from reduced emissions, whatever the origin of owned allowances. |
b) quite proportionate |
Administrative burden could be simplified. Dynamic allocation would not lead to additional burden since reporting on manufacturing output is already done anyway. |
d) there should be no limit to overall free allocation to industry |
I.e. in the absence of equitable global action. EU industry must not be unilaterally burdened with limits and constraints. The incentive to improve efficiency performance is given due to benchmark-based free allocation already. |
b) the same share as in Phase 3 |
It is seen as unlikely that Member States will free resources from auctioning revenues due to national budgetary challenges. |
b) no |
All ETS revenues should be directed back to industry, rather than being used for other purposes. A specific support scheme would not be necessary. However, a support scheme outside ETS could help research and technology activities (e.g. in fields like biofuels) |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The Directive alreadt suggests to spend 50% of revenues by member states to be earmarked for such purposes. |
a) yes |
In addition, free allocation for indirect emissions in ETS scope (carbon cost contained in electricity costs) is needed. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Manufacturing of e.g. basic building blocks or of ingredients etc. may not directly qualify under too strict parameters. However, - i.e. in a continued unlevel climate policy playing field - these building blocks remain essential for maintaining end production and employment of entire value chains that depend on thriving European supply manufacturing. Accordingly, a simplified carbon leakage list would reduce administrative burden and be more effective. |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
If sectors or companies are subject to ETS, they should be protected against carbon leakage. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
If not all manufacturing ETS sectors are listed, the present parameters should be maintained. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Some sectors are exposed to the risk of carbon leakage although they nay not at first glance comply with the quantitative criteria. This can be due to abatement potential, market characteristics, or profit margins. For sectors with complex manufacturing systems and diverse interrelated value chains, it is justified and essential to apply qualitative criteria for their exposure assessment. |
d) in line with the duration of ETS Phase 4 |
The validity should be in line with the duration of phase 4 (minimum). |
c) the approach should be less stringent (please specify) |
The benchmark could be less stringent (e.g. rather the weighted average). In any case, the application of a linear reduction factor brings allocation below the level needed to maintain the output for many sectors. This gives a negative signal to industry, i.e. adds costs also for most efficient producers, discourages investment and growth in Europe. |
b) no |
Benchmark levels do not describe the "state of the art" but describe the level of performance of a plant population in a sector. Revising benchmarks to make them more stringent would remove the relative pioneer advantage of early movers and discourage performance improvements. |
c) other (please specify) |
Current "frozen" ex-ante allocation is adding costs on the production of efficient plants thereby discouraging growth and perversely rewarding relocation to outside Europe. This needs to be changed through dynamic allocation base on recent production output. This way, over and under-allocation to most efficient producers can be avoided. |
a) no, there should be no deviations |
|
c) yes, in the form of additional free allocation |
Through harmonized indirect allocation, diversity of national approaches can be overcome. |
Important |
Least important |
Most important |
Less important |
The most difficult stage is usually to initiate and run a successful large scale pilot. |
a) from the Member States' auction budgets |
|
- Compensation: there are different ways to implement it, but they should be effective in terms of competitiveness protection (also intra EU. - Technical potential for reduction not necessarily economically feasible or consistent with competitiveness issues vs extra EU. - We would like to point out our position about the relationship between free allocation and incentives to reduce GHG emissions. Incentives in reducing GHG emissions are unrelated to the amount of free allocation, and so also to benchmark level; the incentive is simply the possibility of selling unused allowances, regardless of their origin. A high level of available free allowances reduces the costs of compliance, with no influence on the incentive to reduce emissions. For the same reason the statement that “a less stringent benchmark would reduce the incentive to reduce emissions” is unfounded. |
b) Trade association representing businesses |
FederlegnoArredo trade association representing italian furniture, wood-working and wood based panel industries. transparency register ID number: 30579503232-50 |
FederlegnoArredo, Foro Buonaparte 65, 20121 Milano Omar Degoli omar.degoli@federlegno.it 00390280604386 |
a) yes |
|
1) yes |
b) no |
At least in the case of Wood-Based Panel sector, all the large capital investments will have been made by 2020 . The Wood-Based Panel producers have already made large investments in reducing their direct emissions, resulting in a decline of fossil fuel-based CO2 emissions of around 80%. Further potential to reduce emissions cost-effectively is limited and the EU-ETS will not incentivise this. As the ability to make further significant emission savings will be extremely limited, the EU-ETS will increasingly act as a tax without realistic opportunities for mitigation. |
b) no |
The Wood-Based Panel sector is squeezed between increasing costs of production and inability to pass these rising costs to customers. On the one hand, other industries are heavily incentivised to use any woody biomass in order to reduce their ETS allowance requirements, leading to increasing cost and decreasing availability of wood materials. So ETS is affecting the whole sector of wood based panel production. Moreover, the bargaining power of the Wood-Based Panel sector is limited. Consolidation of companies downstream, in the furniture and DIY sectors, has resulted in large conglomerates that have the power to bargain for low prices. Upstream in the value chain, the chemical companies (resins/adhesives) are also in the position to dictate prices. Consequently, the profit margins of the Wood-Based Panel industry are low and the ability to make further significant emission savings will be extremely limited |
a) yes |
Costs of energy in countries without an ambitious climate policy with be significantly lower compared to the EU. The EU industry can only compete if these differences in costs are mitigated, either through an effective free allocation scheme or a carbon levy on imported goods”. |
b) quite adequate |
The eligibility criteria should be improved to reflect ‘economic markets’ in the selection of sectors benefitting from free allocation.. |
b) it largely keeps the incentive |
Free allocation keeps the incentive to innovate for reducing emissions. Incremental reductions, however, become increasingly difficult once all the important investments have been made |
b) quite proportionate |
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b) a higher share than in 2013-20 |
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c) a lower share than in Phase 3 |
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c) I don’t know |
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d) I don’t know |
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a) yes |
There is a need for at least some EU policies coherency and strong incentives for re-industrialisation in the EU. |
b) more carbon leakage categories should be defined |
More carbon leakage categories should be defined to reflect the great diversity of sectors, their respective energy-intensity, main source of energy, the efforts they have already made in this area, their bargaining power, etc. |
c) the share of 'carbon costs' in the GVA should be maintained, but 'carbon costs' should be taken into account to the extent that they can't be recuperated in product prices |
The Wood-Based Panel sector is squeezed between increasing costs of production and inability to pass these rising costs to customers. These facts shall be taken into account in the calculation. |
b) other thresholds should be defined. Please specify below |
Capacity to pass increasing carbon cost vs. decrease in output |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
It is very important to keep some discretion to consider situations which cannot be properly reflected into criteria calculation. |
a) five years |
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d) I don’t know |
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b) no |
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b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
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e) I don’t know |
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a) no, the present approach should be maintained, i.e. that Member States can provide such compensation based on state aid guidelines |
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Least important |
Less important |
Important |
I don't know |
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e) I don't know |
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b) Trade association representing businesses |
Fertilizers Europe (trade association for the European fertilizer industry, representing ammonia, nitric acid, and mineral fertilizer production) |
Address: Avenue E. Van Nieuwenhuyse 4-6, B-1160 Brussels. Belgium
Telephone: +32 2 675 35 50
Email: main@fertilizerseurope.com |
a) yes |
1) yes |
a) yes |
For the EU industry in general it will be possible to continue reducing GHG emissions, however, it should be noted that the easiest efforts have already been done. This means that the reduction rate will be lower than before and will require higher investments. Carbon capture and storage can certainly reduce GHG emissions, but it is far from a commercial implementation.
When it comes to the EU fertilizer industry, GHG reductions by end of pipe, as for example the N2O abatement have been implemented in many plants already. This resulted in an overall reduction by more than 80% in the N2O emissions since 2004. It is expected that all fertilizer companies based in EU will have implemented N2O abatement in the coming years.
Further reduction of GHG emissions via energy efficiency is more difficult and will require the construction of new plants with the newest technology. In the case of ammonia production, even the most energy efficient production will always result in the release of CO2 due to the chemical reaction taking place, i.e. natural gas (CH4) delivers H2 for the NH3 production and is thus the feedstock: 3 CH4 + 6 H2O + 4 N2 --> 8NH3 + 3 CO2 The unavoidable process GHG release from feedstock in ammonia production should therefore be excluded from ETS. Ammonia producers should only be penalized on energy related emissions. Given the poor competitive position of Europe due to high energy costs, this type of investments are not likely to happen in Europe. |
b) no |
EU ETS motivates the industry to become more energy efficient. The EU ammonia industry is already the most efficient in the world. However, the extra ETS costs do not increase the competitiveness of the European industry, if the cost becomes excessive (cost of implementing and operating new technology and/or cost of CO2 allowances) compared to the cost for industries operating in countries with less ambitious climate policy. High EU ETS costs may lead to closure of European industries and carbon leakage. |
a) yes |
Special measures (100 % free allocations according to achievable benchmarks without correction factors) must be provided to EU industries that are exposed to carbon leakage. This allocation should be based on actual production (instead of historical production). This support must exist as long as international agreements are not reached and the European industry is facing stricter regulations than others. |
a) very adequate |
Free allocation is the best tool available under ETS to avoid carbon leakage. Free allocation should be regulated in such a way that it fully protects industries exposed to carbon leakage, especially energy intensive industries, from higher climate costs compared to industries located in other parts of the world with less strict climate regulation. |
a) it absolutely keeps the incentive |
‘Free allocation’ should be 100% free for the best performer Today this is not the case due to too tight benchmarks, CSCF and ex ante allocation system. Even if the best performers get 100% free allocation fFor the large majority of ETS production sites the system will be a driver for innovation of more efficient technology and use of renewables. |
b) quite proportionate |
Allocation on actual production levels will not lead to an additional administrative burden since reporting on manufacturing output is already done anyway. |
d) there should be no limit to overall free allocation to industry |
Energy intensive industries should have an unlimited free allocation based on actual production and achievable benhmarks without correction factor to compensate for differences in climate policies of countries with less ambitious targets than EU. The EU industry must not be unilaterally burdened with limits and constraints. The incentive to continue improving energy efficiency is guaranteed by a benchmark-based allocation. |
a) a substantially higher share than in Phase 3 |
Cost efficient, reliable and publically acceptable carbon capture and storage is essential for reaching the long term emission reduction targets. |
a) yes |
It is highly surprising that such a support scheme has not yet been established, since the challenge of climate change is of major importance. However, such a scheme should not be a large administrative burden and cover the project development phase rather than the operational stag (see answer to question 22). |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
ETS revenues should be directed back to the industry to continue promoting research and project helping to reduce GHG emissions. |
a) yes |
In addition:
- compensation of indirect carbon costs associated with the consumption of electricity
- development of an energy pricing system which is competitive with the energy pricing in other parts of the world |
b) more carbon leakage categories should be defined |
Sectors that are severely exposed to the risk of carbon leakage, should be placed in a separate category and given preferential treatment. |
a) the present criteria should remain |
The present criteria include the use of a specific carbon price to calculate the share of carbon costs in their GVA. The carbon price must be kept at the current level; otherwise it will be unclear if an industry will be compensated for the carbon costs in the future. This uncertainty will negatively influence investment and maintenance costs. The system should also be modified such as “process emissions” should be exempted from ETS. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
d) in line with the duration of ETS Phase 4 |
The validity should be long to come to a consistent and predictable policy for the industry sectors. A review of the carbon leakage list together with the review of the ETS is therefore a logical choice. |
c) the approach should be less stringent (please specify) |
In a less stringent system the benchmarks should be based on the weighted average and not on the top 10%. If the present approach (10%) is decided, the benchmark levels should remain unchanged at the present levels. Moreover, the combination of the 10% benchmark and the application of a CSCF or linear reduction factor results in unrealistic low free allocations. For the ammonia industry even the best performing plant will not receive enough free allocation to compensate for the unavoidable feedstock related emission and they will face additional costs. These costs can only be avoided by reduction of the production (to max.49%) and import of the product from outside the EU, which is carbon leakage. This is fully undesired for the company, the environment and the EU economy. |
b) no |
Benchmarks should describe the level of performance of the industry and not the state of the art (which for many industry sectors will never materialize in Europe given the fact that the state of the art technology can only be implemented in new plants.) The competitive environment in Europe (energy costs, climate cost, changing climate legislation every 8-10 years) is prohibitive for multibillion investments with long payback times. Revising benchmark would also punish the early adaptors of innovations and will stop them innovating again. |
c) other (please specify) |
Historical production data should not be used. Instead, production data for the year of concern should be the basis for issuing allowances. |
a) no, there should be no deviations |
There should be no deviations as long as (1) industries severely exposed to the risk of carbon leakage are placed in a special category with preferential treatment, (2) the benchmarks remain at the present levels, and (3) actual production data is used for calculating allowances. |
d) yes, in the form of financial compensation at EU-level |
A harmonised EU-wide compensation scheme avoids discrepancies between Member States and ensures equal competition between EU industries. The indirect costs are invoice in euros (as integral part of the electricity invoice) and not in emission rights. Therefore the compensations should also be given in euros. |
Important |
Less important |
Most important |
Least important |
a) from the Member States' auction budgets |
Climate change is a global challenge of utmost importance to address today through technology developments. It seems unwise to limit the funding only from auction budgets and free allocations. The challenge demands a special EU R&D technology agenda.
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b) Trade association representing businesses |
FEVE - The European Container Glass Federation |
Avenue Louise 89/4 1050 Bruxelles f.rivet@feve.org |
a) yes |
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1) yes |
c) I don’t know |
The glass industry is making continuous improvement to reduce CO2. While further reductions in the glass industry are possible, what is important is the magnitude of this reduction. All official EU publications show that no breakthrough technology is currently available to reduce CO2 emissions to the extent imposed by the energy and climate package 2030 (-43% for ETS sectors). There is a thermodynamic limit to the glass melting process. Moreover, further reductions will strongly depend upon external factors such as cullet availability and new energy sources. Investments in energy efficiency have also limits related to financial aspects (cash-flow limitations, productive investments vs energy efficient investments, payback period, etc). Finally, process emissions cannot be eliminated, limiting therefore the reduction potential of the glass industries. The high ambition level of the package, applied unilaterally in the EU, is likely to increase the risk of carbon leakage. |
b) no |
The main driver for energy efficiency improvements in the glass industry is the high share of energy costs within production costs. In fact, the glass industry has continuously improved energy efficiency over previous decades. Regulatory instruments and the EU ETS in particular, have only a marginal effect on energy efficiency improvements of glass melting activities, if any. Whilst there is no global ETS in place, the EU ETS is only a source of costs for glass industries (direct but also indirect CO2 costs linked to electricity), and therefore weakens the competitive position of European based glass industries vis-a-vis third country competitors. As such, it indirectly favors production reduction in the EU and rises in imports from non EU countries without carbon constraints into the EU. For these reasons, glass industries need to be fully protected against risks of carbon leakage. |
a) yes |
The EU glass industry faces higher costs for environmental protection, energy, labour and raw materials, than the majority of extra-EU competitors. In the absence of an international climate agreement and a level playing field between EU and extra EU competitors, the EU industry needs to be provided with measures to safeguard its competitiveness. Measures to avoid carbon leakage under the EU ETS are therefore essential. Measures should cover both the direct and indirect CO2 costs. Such measures under the EU ETS must be established in a way that ensures the ETS’ coherence with the EU’s ambition to revitalize European manufacturing activities, as proposed in the EC Communication on Industrial Renaissance. |
b) quite adequate |
Free allocation has been key up to now to mitigate the negative impacts of a unilateral climate policy. However, the Cross Sectoral Correction Factor which is applied already from 2013 reduces the free allocation, even for the most GHG efficient installations, and will dramatically increase in the future, thus further reducing free allocation. This current system is unsustainable and should be changed in order to ensure that the most GHG efficient installations receive 100% of their allowance needs. |
a) it absolutely keeps the incentive |
Free allocation does not reduce the incentive to innovate; on the contrary, the majority of installations in the sector (about 95%) do not have enough allowances, which encourages industry to invest in the efficiency of its plants. For the installations under the benchmark (about 5%), they can sell their allowances on the market, which is also an incentive to continue reducing emissions. The incentive is therefore present. Below, we also call for a periodic revision of the benchmarks (in exchange of the cancellation of the cross-sectoral factor), which also provides for a strong incentive to improve. In addition, free allowances preserve investment capacity. Free allowances offer industry the incentive to purchase less CO2 allowances if they become more GHG efficient. However this last incentive would be better preserved if the CSCF was not forcing an unrealistic and arbitrary reduction of the number of free allowances even for producers who are the most GHG efficient in the sector. |
b) quite proportionate |
Administrative burden is accepted, since it is necessary to maintain the free allocation system. However opportunities or improvement to this process should be considered. Conversely, the administration and calculation rules for new entrants are overly complex and can lead to under-allocation. They can therefore be seen as disproportionate and can be a disincentive to new investments. |
d) there should be no limit to overall free allocation to industry |
The current system is unsustainable (from a competition point of view) because the cross sectoral correction factor continually reduces the free allocation given to industry, even for the most GHG efficient installations. Ideally, installations whose efficiency is equal or better than the (periodically reviewed) benchmark should receive 100% of free allocations to produce in the EU and so there should be no limit. In practice, this is likely to lead to a higher share in phase IV. An increased level of EU ambition in terms of GHG reduction would require enhanced measures against carbon leakage and therefore an increase in total free allocations. |
e) I don’t know |
Overall financing for technological innovation (and not only connected with CO2 reductions) in manufacturing should be increased in the EU. However R & D should be funded via a mobilization of different sources of funding - including but not limited to - auctioning revenues. It should not come from the free entrants reserve or Free Allowances reserve. Allowances should be primarily used to ensure that the most GHG efficient installations get 100% of their needs to produce in the EU. Furthermore, financing for R&D and demonstration projects should be technology-neutral and not focused only on CCS or renewables. New technologies such as Carbon Capture and Use (CCU) and others should not be excluded. |
a) yes |
As stated above, industrial innovation, with a focus on the process and on new energy sources for industry, should be promoted. It should not be financed by shares of allowances reserved for free allocation or for new entrants, but rather from a mobilization of different sources, and not limited to auctioning revenues. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Industrial innovation should be promoted in a technology-neutral way. However this should not be done at the expense of free allocation which aims to provide effective support and protection against carbon leakage. Therefore it should be financed via other sources. This could include, among other sources, money from the auctioning revenues, as suggested in the ETS directive (Art 10.3). |
a) yes |
Unequitable carbon costs should not place EU industries at a competitive disadvantage with extra-EU competitors and this should be the ultimate objective pursued in order to achieve the EU’s ambition of 20% GDP realized by industrial activities in 2020. To that end, measures against carbon leakage are a pre-requisite but are not enough. An EU scheme for compensation of indirect costs due to higher electricity prices and some raw materials (e.g. soda ash, industrial gases, ..) should also be developed for Energy Intensive Industries. More generally, the EU needs to assess, and if needed reform, all its policies and in particular energy and environmental ones against the re-industrialisation objective. A longer term re-industrialisation objective for 2030 should be established. |
a) the present two groups should remain |
This binary model ensures that all sectors benefit from carbon leakage protection measures as soon as a risk is detected. This is essential to ensure that carbon leakage measures are effective and that protection is not granted too late, when industries are already in jeopardy. |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
The competitiveness of energy-intensive industries is sensitive to energy and carbon costs, therefore a risk exists for all these industries. For the sake of simplicity and consistency in legislation, all energy-intensive industries, as defined in Art 17 (1) a of the Energy taxation directive 2003/96/EC could be automatically placed on the carbon leakage list, i.e. An "energy-intensive business" shall mean a business entity, (…) where either the purchases of energy products and electricity amount to at least 3,0 % of the production value or the national energy tax payable amounts to at least 0,5 % of the added value. In case ETS-specific criteria are maintained, they should continue being based on both the CO2 intensity and the trade intensity metrics. The CO2 cost metric should be made more relevant to analyze the impacts of carbon cost on sectors’ profitability by replacing GVA by Gross Operating Surplus (GOS). |
b) other thresholds should be defined. Please specify below |
The competitiveness of energy-intensive industries is sensitive to energy and carbon costs, therefore a risk exists for all these industries. For the sake of simplicity and consistency in legislation, all energy-intensive industries, as defined in Art 17 (1) a of the Energy taxation directive 2003/96/EC could be automatically placed on the carbon leakage list, i.e. An "energy-intensive business" shall mean a business entity, (…) where either the purchases of energy products and electricity amount to at least 3,0 % of the production value or the national energy tax payable amounts to at least 0,5 % of the added value. In case ETS-specific criteria are maintained, thresholds must be maintained at their current levels even if the denominator of the carbon cost criteria is changed to Gross Operating Surplus. Raising thresholds would send a damaging signal to EU industries, meaning that fixing a cap to free allowances is more important than safeguarding industrial competitiveness . |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The current criteria under the quantitative assessment at NACE 3 or 4 level should be maintained and used as the first assessment option. When an assessment at NACE 3 or 4 level is not appropriate to identify the relevant industrial activities falling under the EU ETS, then a quantitative assessment at 6- or 8-digit should be carried as a second option. Finally, as a third option, a qualitative assessment must remain possible. Other parameters can be studied as part of qualitative assessments, such as methodology and evidences of investment leakage. |
d) in line with the duration of ETS Phase 4 |
As long as there are no equivalent GHG reduction measures taken by major trading partners, the list of sectors exposed to the risk of carbon leakage should remain valid. This is essential to provide predictability to industries faced with long investment cycles (typically > 15 years). |
c) the approach should be less stringent (please specify) |
Glass industries support ambitious benchmark levels, which reflect the technological capabilities of the sectors best performers using the best available and proven technologies in Europe. It must be kept in mind however that this approach also has limits. Indeed, benchmark curves do not always reflect a difference in terms of « best » (the least GHG emitters per tonne of glass) or « worst » GHG players, but a difference in terms of products produced, cullet availability, age of furnace, available fuels, etc. The 10% best GHG performers can therefore be regarded as extremely challenging, especially for plants producing a wider range of more sophisticated products with higher added-value (as this usually entails higher energy consumption). |
a) yes (please specify how often) |
It seems logical to revise the benchmarks from time to time to reflect GHG improvements over time. Revision cycles should be linked to ETS phases and remain unchanged over this period. Periodical revision of the benchmark should be based on the actual EU based installations. The periodic revision of benchmarks should be the sole instrument leading to a reduction of free allowances over time, as benchmarks reflect true possibilities of GHG improvements according to state-of-the-art technologies deployed in Europe. The periodic revision of benchmarks therefore justifies that the CSCF is abandoned. |
c) other (please specify) |
Ex-ante allocation can only lead to over-allocation in crisis times, and under-allocation when the economy is growing. A better approach is to design an « ex post » system, where real allocation is corrected according to the real production. |
a) no, there should be no deviations |
In principle, there shall be no deviation from the general harmonized allocation rules at the level of an individual installation as this could cause distortion of competition. Only in the case of very specific hardship, should deviations be envisaged for an entire sector after a careful assessment of the competitive effects of such deviations. |
d) yes, in the form of financial compensation at EU-level |
Rules for the compensation of indirect costs should be revised and need to be effective to reflect the real burden of CO2 included in electricity costs for industry. A differentiated compensation approach by Member States is not acceptable from a competitiveness point of view. A harmonized approach at EU level is therefore needed. The harmonized measure should take the form of financial compensation. Free allocation should be kept aside to ensure full relief for direct emissions (most GHG efficient installations should receive 100% of their needs). A compensation system should also be put in place to compensate for higher prices of some raw materials (e.g. soda ash) and industrial gases. |
Important |
Less important |
Most important |
Least important |
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a) from the Member States' auction budgets |
Allowances funding low-carbon innovation support should be financed from the Member States’ auction revenues and from a mobilization of additional sources. However, this should not be financed at the expense of free allocation or the new entrants reserve which must be principally used for measures against risks of carbon leakage. |
It is regrettable that industry is asked to comment on such measures whereas the rules for EU ETS Phase IV have not yet been fully decided. The glass industry wishes to reiterate that so long that there is no comparable ETS system (which means that similar costs are born by competitors) operating in most part of the world and in extra-EU countries with glass industries, EU based glass industries will need to receive full and effective protection against carbon leakage. The recent assessment carried by DG CLIMA on exposure to carbon leakage risks, i.e. the carbon leakage list of 2009 and its recent revision, shows that between 2009 and 2014, risks of carbon leakage has grown in most glass sectors. For these reasons, glass industries need effective protection moving forward. This should translate in more free allocation considering the increase in the EU’s GHG reduction target. |
b) Trade association representing businesses |
FFTB (Fédération Française des Tuiles et Briques) |
17, rue Letellier 75015 Paris France tel : +331 44 37 07 22 b.martinet@fftb.org |
a) yes |
|
1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improvement |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. This would limit the list to sectors really exposed and would eliminate the risk of a carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
As explained above, all energy intensive sectors as defined in the Energy Taxation Directive should be considered as exposed to the carbon leakage risk. As an alternative, trade and carbon intensity criteria should be used considering the following elements. First, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS. Second, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
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a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
b) Trade association representing businesses |
Finnish Energy Industries |
Finnish Energy Industries Brussels office Avenue de Cortenbergh 172 (2nd floor) 1000 Bruxelles, Belgium Tel. +358 9 172 85 301 EC Register ID number 68861821910-84 |
a) yes |
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1) yes |
a) yes |
Implementation of further measures might be possible without reducing production. For example energy efficiency measures including further process optimisation and fuel switch to natural gas and biomass in some industries. Emission reduction measures in the EU have so far been far from cost optimal. Failure to prioritise affordable measures has put remarkable stress on the economy and is risking industrial growth in the future. Cost efficient action through a carbon price signal can further reduce emissions without loss of growth. There are of course options for further reduction in emissions of greenhouse gases. However – this a question of profitability for the industry – further reduction of GHG-emissions has to be profitable investments. The level of increased energy efficiency depends on energy prices and higher energy prices is key for industry competitiveness. |
a) yes |
A price on carbon makes fossil energy more expensive hence creating a direct incentive to reduce the use of fossil energy, but also indirectly through a higher price of electricity. However, there are barriers to implementing energy efficiency which are not related to the price of EUA. These non-market barriers hampering the EU ETS as an efficiency driver include distortion of fuel prices with national policies, overlapping fiscal policies, attitude problems, information gaps and misplaced or contradictory incentives. In principle ETS will give incentives for all users of energy within ETS-system to be more energy efficient. However – as mentioned under question 1 – we need to differentiate between industries where energy is a large share of production cost and small share of production cost. For those with a large share of the production cost and which are in global competition – the indirect effect of ETS on the electricity cost may make the industries incompetitive. |
a) yes |
In order to reduce emissions, the price on carbon needs to increase substantially and it will be difficult for energy intensive industries to cope with this price level. Here, the indirect effect via the electricity price is of significant importance, especially for countries with suboptimal support schemes for industry in countries with a low share of fossil based electricity generation. Yes EU should provide special transitional measures – until global competitors have similar regulations. |
b) quite adequate |
Free allocation is a good measure to alleviate the impact of direct cost of allowances to the industry. However, it will not help the case of electricity consuming industries. Industries with remarkable electricity input in their process and a risk for carbon leakage should, in addition to free allowances, receive compensation for the increased electricity cost. |
b) it largely keeps the incentive |
The economic incentive does not depend on the way the allowances have been received, but on the alternative cost for abatement or no abatement. The obligation to surrender emission allowances each year imposes a cost on ETS-companies. The use of free allowances has an alternative cost as you can choose between surrender the allowance or selling it at the same time as reducing your own emissions. So in principle, the incentive to reduce emissions is still there even though the allowances are allocated for free. |
c) quite exaggerated |
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c) a constant share as in 2013-20 |
This question concerns the distribution of the burden of cost to achieve the climate target. There cannot be a limitless free allocation, since this would erode the EU-ETS totally. However a constant and a lower share would impose decreasing global competitiveness, the share ought to be higher. The need for free allocation depends on the international context as well as other policies in the EU and the resulting allowance price. The aim to foster industry competitiveness should be kept in mind. One important aspect is also how the auction revenues are utilized; recirculating revenues back to the industry in order to boost transition to low carbon solutions would make auctioning more justifiable. This depends on development in international negotiations and development and possible linking of emission trading system – i.e development of a global price on carbon. |
a) a substantially higher share than in Phase 3 |
It should be further investigated if compensation for indirect costs could be channeled through this NER 300 programme. If not, innovation support could be channeled through a separate scheme. NER 300 did not manage to finance on single CCS-project – mainly due to low ETS-price. In order to reach EU reduction targets, we need more innovative technology development – in CCS and in storage technologies for electricity from unregulated renewable sources – solar and wind. Therefore – a higher share than in the period 2013-2020 should be set aside to support innovative technologies – but not as support to commercial renewables. |
a) yes |
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a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
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a) yes |
Compensation for indirect costs is necessary. Compensation should be made EU-wide. -The present system to distribute compulsory free allowances for the use of fuels for carbon leakage industries but not compulsory compensating indirect costs in the price of electricity is not technology-neutral and distorts competition at the EU-level and in Member States. -It is fundamental for the functioning of ETS that the carbon leakage is being prevented. -Current various national state subsidies distort competition on the internal EU market. |
e) I don’t know |
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g) I don’t know |
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c) I don’t know |
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c) I don’t know |
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d) in line with the duration of ETS Phase 4 |
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a) the present approach of average of the 10% most efficient installations should remain |
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a) yes (please specify how often) |
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d) I don’t know |
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a) no, there should be no deviations |
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d) yes, in the form of financial compensation at EU-level |
EU-wide compensation scheme of indirect costs caused by the emissions trading scheme for the electro-intensive carbon leakage industries with the same EU-wide or nationally binding rules. It should start at the latest in the beginning of the next ETS period in 2021. There are five major reasons for the need of compensation: - It is fundamental for the functioning ETS that the carbon leakage is being prevented. - It is essential for the European economy, competiveness and welfare. - Current various national state subsidy schemes distort competition on the internal EU market. - The present system to distribute compulsory free allowances for the use of fuels for carbon leakage industries but not compulsory compensating indirect costs in the price of electricity is not technology-neutral and distorts competition at the EU-level and in Member States. - Increasing import of electricity from the third countries which are not involved in the ETS can form a threat to energy security |
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a) from the Member States' auction budgets |
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b) Trade association representing businesses |
Finnish forest industries federation, ID: 39671713910-36 |
Finnish Forest Industries Federation Snellmaninkatu 13 P.O.B 336 FI-00171 Helsinki tel: +358 9 132 61 forest@forestindustries.fi or Tuomas Tikka tel: +358 451316683 tuomas.tikka@forestindustries.fi |
a) yes |
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1) yes |
a) yes |
Yes because it is possible to find new energy efficiency solutions via new innovations and it is also possible to reduce ghg gases by increasing renewable energy usage. NOTE: This highly depends on future energy efficiency technology solutions and the price of the solutions. New economically and technologically applicable innovations will be needed. As emissions reduction requires investments, a global climate deal is needed for sustaining industrial production in the EU whilst reducing greenhouse gas emissions. Without syncronised climate policies, there is clear risk that industrial production in the EU is reduced (Carbon Leakage). |
b) no |
EU industry has to be very energy efficient in the global competition environment with or without ETS regulation. (It is true that ETS will increase the price of the electricity which will speed up the investments to save energy even more. However the price impact of the ETS is negative for the competition and the risk of the carbon leakage will increase.) |
a) yes |
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a) very adequate |
The free allocation has been a shield for the competitiveness of the EU industry and helped maintain economic activity within EU borders. However, competitiveness is not secured over the short and medium term as the fast decrease of free allocation, the cross-sectoral correction factor, the inadequate compensation for indirect costs, and the expected increase in carbon prices are a threat the EU industry faces in the future. |
a) it absolutely keeps the incentive |
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b) quite proportionate |
Proportionate vs. reducing the negative impact of the ETS in the competitiveness by free allocation. But, this administrative burden is one additional cost, that our competitors outside the EU do not have One of the main causes of administrative burden has been the continuous changes in ETS regulation and rules. This has caused uncertainty among industry. Industry needs more stable and consistent ETS policy. |
d) there should be no limit to overall free allocation to industry |
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b) the same share as in Phase 3 |
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a) yes |
The support of the low-carbon technology is needed, but the support scheme must not decrease the amount of the EUAs in the market. |
c) other types of funding (please specify) |
The support scheme should be as simply as possible (even NER300 type). The source of funding should not decrease the amount of emission allowances in the carbon market. |
a) yes |
A global agreement (that could lead to comparable burdens for competing industrial installations around the world) would be the most effective way to prevent the risk of carbon leakage. Until global agreement there is a need for at least: - EU wide equal ETS compensation scheme to address the impact of rising electricity costs due to ETS. - Guaranteed adequate free allocation for the industry (until global agreement) - Also compensation of the rising wood raw material cost due to ETS should be considered. As ETS provides an incentive to burn wood instead of fossil fuels, it has increased demand of wood for energy use. Also national actions to achieve the RES targets set by the EU are increasing energy use of wood. As result of RES-promotion and ETS today even round wood suitable as raw material for forest industry is increasingly burnt across Europe. There is growing pressure for higher price of pulp wood and at some European countries the pulp wood prices have increased. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
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a) the present criteria should remain |
The "carbon costs" should take into account the cost of rising wood raw material price due to ETS in appropriate manner (see answer to Question 11) |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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b) longer (please specify) |
The CL list should remain unchanged until global climate agreement (which guarantees equal competition conditions). |
a) the present approach of average of the 10% most efficient installations should remain |
The benchmarks should remain unchanged until global climate agreement. In case the benchmarks are revised after all, then this should be based only on the HEAT consumption of the 10% most efficient installations. The FOSSIL CO2-emissions of the 10% most efficient installations should not be the basis, as this would penalize the companies that have invested in bioenergy plants to replace fossil fuels. |
b) no |
Fiscal and legislative stability is important for investment and decision-making. All rules including benchmarks should remain unchanged until global agreement. |
c) other (please specify) |
It is better to have several baseline period options for companies. The same phase 3 baseline periods should be maintained and the 2016 - 2018 period should be added as an alternative. It is important to have enough alternatives so that companies will have possibility to pick a sufficient operation period and avoid unusual / unfavorable production periods. |
a) no, there should be no deviations |
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d) yes, in the form of financial compensation at EU-level |
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a) from the Member States' auction budgets |
Any support for innovation in industry should not come at the expenses of carbon leakage protection. Allowances for innovation will have to come on top of free allowances for industry. |
To mitigate climate change the EU should focus on promoting industrial production in Europe, which is good for the environment and climate. The average CO2-emissions caused by electricity production in Europe are low in global comparison. Hence, the more industry produces in Europe, the lower the global CO2-emissions. |
b) Trade association representing businesses |
FuelsEurope |
165 Boulevard du Souverain Brussels 1160 BELGIUM Telephone number: (+32) 25669100 E-mail: info@fuelseurope.eu |
a) yes |
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1) yes |
a) yes |
Some industries may be able to reduce emissions through further energy efficiency improvements. However, the Refining industry has already used most of the options to improve its energy efficiency cost-effectively: the GHG intensity of European refineries is already world class. The proposed 43% emissions reduction objective is technologically and economically unachievable for the refining industry at the pace implied by the Linear Reduction Factor. As a consequence of a too ambitious target, industry would have either to purchase allowances (sunk cost with no return on investment) or reduce capacity and close installations - detrimental for employment, trade balance and security of supply. |
a) yes |
Reporting and monitoring emissions does quantify emissions at installation level. The carbon price does incentivise industrial installations to reduce emissions and improve efficiency. However, for the Refining sector, this is not the most significant factor, as the main driver for such improvements remains the high proportion of energy costs in total operating costs (63% on average for EU-28 refineries, according to Solomon Associates). EU refineries in Europe are the least carbon intensive in the world, driven not by legislation but by measuring the economic cost of energy use. However, the EU ETS is an additional cost to EU industry and not to its non-EU competitors, which is potentially very damaging for competitiveness. This is why industry needs sufficient carbon leakage protection. |
a) yes |
Until there are equivalent carbon pricing policies in competing sectors, support for EU industrial sectors exposed to carbon leakage must continue as a core element of the EU’s post-2020 climate policy framework. Removing carbon leakage protection would result in a sudden decrease in free allocation: from the current allocation at 100% at the benchmark to 80% in 2013 declining to 30% in 2020 and zero by 2027 (EU ETS Article 10a 11). For Refining, competing regions include Russia, Middle East, USA, and parts of Asia and so support measures should remain until these key refining competitors adopt carbon pricing. Delocalisation of petroleum products production outside the EU is also likely to have negative effects of global GHG emissions. According to a recent study from Vivid Economics, commissioned by the UK Department of Energy & Climate Change, EU Refining is on average less emissions-intensive than non-EU competitors. Carbon leakage therefore exceeds output leakage and is about 135%. |
b) quite adequate |
In the absence of an international climate agreement, FuelsEurope prefers both free allocation, and enhanced free allocation for exposed sectors to deal with carbon leakage. However, according to the 2013 final allocation data, the refining industry has received less than 80% of its quota as free allocation and is the only major sector receiving less than its actual emissions. This situation is highly detrimental to the refining industry’s competitiveness and requires corrective action. In addition, under the current system, protection will be further eroded due the decreasing industry cap and the CSCF (by 2030, even the most efficient installations would be left with only 60% free allocation if a 2.2% Linear Reduction Factor continues to be applied). The EU ETS needs to be reformed to provide sufficient levels of protection to industry until carbon leakage is addressed through an international climate change agreement. |
a) it absolutely keeps the incentive |
The main incentive for reducing emission in Refining is reducing energy costs. Carbon cost does add to this incentive. The incentive for any installation with the capacity for cost effective emissions reduction is the carbon price: either avoiding buying allowance or being able to sell their surplus allowances whether these are received free or not. Therefore, free allocation is used to protect industry from carbon leakage while keeping the incentive intact. |
b) quite proportionate |
In the refining sector with large scale complex installations, implementation of the CWT benchmarking provisions was a major undertaking and involved considerable work by the sector, national governments and the Commission. Given the importance of the competitive threat, the work to create an accurate and fair system is considered proportionate to the objectives. However, if the system could be simplified, we would be willing to work with Commission to achieve this. |
d) there should be no limit to overall free allocation to industry |
If the intention is to provide carbon leakage protection to industry then the number of allowances need to fully cover direct and indirect emissions for best performing installations – hence no limit to overall free allocation. There is no centralised post 2020 allowance budget - control of proceeds from auctioning is delegated to Member States, with some redistribution via the solidarity and growth provisions. Until the issue of carbon leakage is addressed through an international climate change agreement, sufficient levels of protection to industry are needed. To provide an adequate protection for the European refining industry, a CSCF should not be employed to avoid reductions in the amount of free allocation. |
e) I don’t know |
The NER 300 programme has been complex to administer, had a market impact of releasing allowances onto the market early, and has not delivered large scale CCS demonstration project. A large scale CCS demonstration project requires dedicated funding outside EU ETS. In Phase 3, auctioning is expected to generate substantial revenue to governments; these revenues, should be returned to the economy without creating distortions between energy sources and technologies. |
b) no |
The NER 300 programme funding is too dependent on market pricing. Instead, there should be more innovation support and new low carbon technologies require more financial stability, thus existing funds such as Horizon 2020, 7th Framework and SET programmes should be augmented, rather than creating new funding frameworks. |
c) other types of funding (please specify) |
Rather than establishing new bureaucracies, existing funds such as Horizon 2020, 7th Framework and SET programmes should, where required, be augmented by EU and Member State funding. In addition, support for innovative low-carbon technologies should be technology neutral as well as time- and cost- limited - all energy sources should be integrated under normal market conditions, without subsidies (including system connection, balancing cost and exposure to price risk) as soon as possible. |
a) yes |
EU industry needs first and foremost greater equity of non-EU with EU abatement measures. Until there are equivalent carbon pricing policies in competing sectors, EU industry need carbon leakage protection to remain competitive, via free allocations. There are currently no EU ETS measures addressing carbon leakage post 2020. Thus, the ETS Directive needs to be reviewed to make sure that levels of free allocation after 2020 adequately reflect the industry’s carbon leakage exposure. The current indirect emissions compensation system is unsuitable. It should be reformed to allow free allocation for all electricity consumed in refineries. In general, the strategic importance of manufacturing industries, such as Refining, needs to sufficiently reflected across all EU policies; the cumulative impact of EU legislation on these industries including the EU ETS, must be carefully looked at. |
a) the present two groups should remain |
Industrial capacity in EU has declined (According to the Commission communication for a European industrial renaissance, the share of manufacturing in GDP has fallen from 15.4% to 15.1% in 2013) and exposure to international competition remains a key concern for many energy intensive industries, including Refining. Creating uncertainty about how the risk of carbon leakage in industrial sectors such as Refining will be mitigated is not the right way to promote recovery. The current two groups should remain until progress is achieved in the international arena to re level the competitive playing field by introducing similar carbon pricing in other regions that compete with EU Refining. |
a) the present criteria should remain |
For Refining as a mixed sector both trade and GVA exposure and thresholds are very important. Refining is a “margin business”, acting between two international, open commodity markets: the crude oil market and the refined products market. EU Refining is also open to traded imports so that pass-through of EU carbon costs is limited by non- or less-regulated trading partners. Pass-through becomes even more difficult as imports rise. For the carbon leakage assessment, it is therefore important to keep looking at the effect of carbon costs on Gross Value Added rather than production costs and to take sectors’ trade intensity into account. Carbon costs should cover both direct and indirect carbon costs due to their cumulative impact on Refining’s competitiveness. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
If the criteria are tightened thus reducing the number of sectors/sub-sectors on the list, some key strategic sectors for the EU’s economy risk being excluded from carbon leakage protection, with potential negative spill-over effects on other industries (e.g. for the oil Refining industry and the petro-chemical industry, which are strongly inter-connected). Specifically for the Refining sector, the thresholds calculation for GVA and Trade Intensity is problematic. The EUROSTAT database shows some 1,000 plants under NACE code 19.20, but there are less than 100 Refineries in the EU covered by the EU ETS. Objective analysis of GVA requires more granular data for the Refining sector. Carbon leakage is also about future investment decisions. Therefore the GVA criteria carbon price must reflect future projected EUA prices and not current prices. This is common refining industry practice in evaluating major projects. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
FuelsEurope supports the use of qualitative assessments but these should be kept as simple as possible. Legislative requirements on the quality of fuels (e.g. marine fuels specifications) and the conversion of heavy residues into lighter products result in the increase of refinery energy intensity and GHG emissions. If the Refining sector undergoes a qualitative assessment, this so-called “Refining paradox” would need to be taken into account. |
d) in line with the duration of ETS Phase 4 |
Mid-period review is detrimental to investment certainty, given the significant difference in the levels of free allocation according to the carbon leakage status, and the rest (allocation at 100% at the benchmark vs. 80% in 2013 declining to 30% in 2020 and zero by 2027). Long-term visibility is essential for investment decisions in the refining industry. |
c) the approach should be less stringent (please specify) |
A benchmark excluding outlying installations would take account of typical carbon leakage exposure rather than average of top 10% which may be atypical in character, depending on sector. This is particularly important as EU benchmarks do not rate performance of installations outside the EU - thus potentially penalising EU installations that are more efficient than their non EU competitors. Potential effects on EU strategic industrial sectors - including those integral to the supply chains of other sectors - must be considered. The current benchmark has turned out to be penalising for the refining sector, both in absolute terms and in comparison with other sectors. In combination with the CSCF, carbon leakage protection currently covers less than 80% of emissions to the refining sector even though it is subject to carbon leakage. |
b) no |
In order to provide free allocation in an effective way, the benchmark should accurately reflect the performance of ETS installations. However FuelsEurope does not support a revision of the benchmarks based on the technological state of the art, as the latter is subject to interpretation (e.g. do we look at progress worldwide where verified data is lacking, or only the situation in the EU?). Integrating state of the art technologies implies a change in the refineries configuration, which is challenging and extremely costly due to physical and other operational constraints. Investments into such technologies have to pay their way. |
c) other (please specify) |
Free allocation should reflect economic reality per installation based on the most recent years. More recent verified data should be used: free allocation should reflect installations’ economic activity, based on the most recent years. In the case of refineries, a regular turn-around period is required for regulatory inspection, maintenance and capital projects. If this is not taken into account, refining installations will be penalised in terms of future allocation. Alternative approaches such as extending baseline periods or some form of dynamic allocation should be considered. |
a) no, there should be no deviations |
General harmonised allocation rules should continue to apply for all carbon leakage installations in the same manner. |
c) yes, in the form of additional free allocation |
Carbon leakage protection should also include free allocation for EU ETS cost pass-through in electricity prices for all sectors exposed to carbon leakage and in a harmonised fashion. This is in addition to free allocation for direct emissions. The absence of an EU harmonised indirect emission compensation system, by leaving decisions to Member States, restricts compensation to a few sectors. As many Member States do not grant such compensation, this creates single market distortions. Compensation should be reformed to allow free allocation for all electricity consumed in refineries (i.e. net power used). If a sector is deemed at risk of direct carbon leakage, then free allocation should automatically be given for indirect carbon emissions to all installations in that sector. |
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d) other |
FuelsEurope is strongly in favour of greater innovation support by the EU and its member states, which may bring more significant and cost-effective results than current renewables mandates, but we do not believe that the use of ETS revenues is the right mechanism. Innovation should be supported by existing funds such as Horizon 2020, 7th Framework and SET programmes. |
Competitiveness and carbon leakage risk must be kept under constant review. Assessments should not look for evidence that leakage has occurred and competitiveness already damaged, but rather assess the level of risk in future. The allocation system must not penalise economic recovery or growth. Regarding the format of the questionnaire, we believe that some of the questions are not neutral and push the respondents to make a certain response. The answers cannot always be as simple as yes or no. Many of the answers are provided as yes or no, with additional conditions – which are required as part to the answer. This does not necessarily mean that the respondent “does not know” and has no valuable input to bring. The report of the consultation should look and separately evaluate the responses from the stakeholder organisations which represent a wider share of civil society and industry. This is to avoid giving undue weight to responses from individuals. |
b) Trade association representing businesses |
Glass Alliance Europe aisbl Register ID: 74505036439-88 Denomination: Comit507950106 |
89, avenue Louise Box5 1050 Brussels Tel. +32 2 538 44 46 Fax. +32 2 537 84 69 Email: info@glassallianceeurope.eu |
a) yes |
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1) yes |
c) I don’t know |
The glass industry is making continuous improvement in energy efficiencies and process technologies to reduce CO2, energy consumption and environmental impacts. While further reductions in the glass industry are possible, what is important is the magnitude of this reduction. All official EU publications such as the “Sector Competitiveness Studies - Competitiveness of the Glass Sector - ENTR/06/054 - Final report, 14 October 2008” or more recently the Glass BREF and the BAT Conclusions show that no breakthrough technology is currently available to reduce CO2 emissions to the extent imposed by the energy and climate package 2030 (-43% for ETS sectors between 2005 and 2030). Emissions reductions cannot be repeated ad infinitum. There is a thermodynamic limit to the glass melting process which is an absolute limit, and that current technology is already approaching. However, process emissions cannot be eliminated, limiting therefore the reduction potential of the glass industries. |
b) no |
The main driver for energy efficiency improvements in the glass industry is the high share of energy costs within production costs. In fact, the glass industry has continuously improved energy efficiency over previous decades. Regulatory instruments and the EU ETS in particular, have only a marginal effect on energy efficiency improvements of glass melting activities, if any. Whilst there is no global ETS in place, the EU ETS is only a source of costs for glass industries (direct but also indirect CO2 costs linked to electricity), and therefore weakens the competitive position of European based glass industries vis-a-vis third country competitors. As such, it indirectly favors production reduction in the EU and rises in imports from non EU countries without carbon constraints into the EU. For these reasons, glass industries need to be fully protected against risks of carbon leakage. |
a) yes |
The EU glass industry faces higher costs for environmental protection, energy, labour and raw materials, than the majority of extra-EU competitors. In the absence of an international climate agreement and a level playing field between EU and extra EU competitors, the EU industry needs to be provided with measures to safeguard its competitiveness. Measures to avoid carbon leakage under the EU ETS are therefore essential. Measures should cover both the direct and indirect CO2 costs. Such measures under the EU ETS must be established in a way that ensures the ETS’ coherence with the EU’s ambition to revitalize European manufacturing activities, as proposed in the EC Communication on Industrial Renaissance. |
c) quite inadequate |
Free allocation has been key up to now to mitigate the negative impacts of a unilateral climate policy. However, the Cross Sectoral Correction Factor which is applied already from 2013 reduces the free allocation, even for the most GHG efficient installations, and will dramatically increase in the future, thus further reducing free allocation. This current system is unsustainable and should be changed in order to ensure that the most GHG efficient installations receive 100% of their allowance needs. |
a) it absolutely keeps the incentive |
Free allocation does not reduce the incentive to innovate; on the contrary, the majority of installations in the sector (about 95%) do not have enough allowances, which encourages industry to invest in the efficiency of its plants to avoid having to purchase a high level of allowances, which would render the sector uncompetitive. For the installations under the benchmark (about 5%), they can sell their allowances on the market, which is also an incentive to continue reducing emissions. The incentive is therefore present. Below, we also call for a periodic revision of the benchmarks (in exchange of the cancellation of the cross-sectoral factor), which also provides for a strong incentive to improve. Free allow. preserve investment capacity and offer industry the incentive to purchase less CO2 allow if they become more GHG efficient. However this last incentive would be better preserved if the CSCF was not forcing an unrealistic and arbitrary reduction of the number of free allow. |
b) quite proportionate |
Administrative burden is accepted, since it is necessary to maintain the free allocation system. However opportunities or improvement to this process should be considered. Conversely, the administration and calculation rules for new entrants are overly complex and can lead to under-allocation. They can therefore be seen as disproportionate and can be a disincentive to new investments. |
d) there should be no limit to overall free allocation to industry |
The current system is unsustainable (from a competition point of view) because the cross sectoral correction factor continually reduces the free allocation given to industry, even for the most GHG efficient installations. Ideally, installations whose efficiency is equal or better than the (periodically reviewed) benchmark should receive 100% of free allocations to produce in the EU and so there should be no limit. In practice, this is likely to lead to a higher share in phase IV. An increased level of EU ambition in terms of GHG reduction would require enhanced measures against carbon leakage and therefore an increase in total free allocations. |
e) I don’t know |
Overall financing for technological innovation in manufacturing should be increased in the EU. However R & D should be funded via a mobilization of different sources of funding - including but not limited to - auctioning revenues. It should not come from the free entrants reserve or Free Allowances reserve. Allowances should be primarily used to ensure that the most GHG efficient installations get 100% of their needs to produce in the EU. Furthermore, financing for R&D and demonstration projects should be technology-neutral and not focused only on CCS or renewables. New technologies such as Carbon Capture and Use (CCU) and others should not be excluded. |
a) yes |
As stated above, industrial innovation, with a focus on the process and on new energy sources for industry, should be promoted. It should not be financed by shares of allowances reserved for free allocation or for new entrants, but rather from a mobilization of different sources, and not limited to auctioning revenues. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Industrial innovation should be promoted in a technology-neutral way. However this should not be done at the expense of free allocation which aims to provide effective support and protection against carbon leakage. Therefore it should be financed via other sources. This could include, among other sources, money from the auctioning revenues, as suggested in the ETS directive (Art 10.3). |
a) yes |
Unequitable carbon costs should not place EU industries at a competitive disadvantage with extra-EU competitors and this should be the ultimate objective pursued in order to achieve the EU’s ambition of 20% GDP realized by industrial activities in 2020. To that end, measures against carbon leakage are a pre-requisite but are not enough. An EU scheme for compensation of indirect costs due to higher electricity prices and some raw materials (e.g. soda ash, industrial gases, ..) should also be developed for Energy Intensive Industries. More generally, the EU needs to assess, and if needed reform, all its policies and in particular energy and environmental ones against the re-industrialisation objective. A longer term re-industrialisation objective for 2030 should be established. |
a) the present two groups should remain |
This binary model ensures that all sectors benefit from carbon leakage protection measures as soon as a risk is detected. This is essential to ensure that carbon leakage measures are effective and that protection is not granted too late, when industries are already in jeopardy. |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
The competitiveness of energy-intensive industries is sensitive to energy and carbon costs, therefore a risk exists for all these industries. For the sake of simplicity and consistency in legislation, all energy-intensive industries, as defined in the Energy taxation directive, could be automatically placed on the carbon leakage list:"energy-intensive business" shall mean a business entity, (…) where either the purchases of energy products and electricity amount to at least 3,0 % of the production value or the national energy tax payable amounts to at least 0,5 % of the added value. In case ETS-specific criteria are maintained, they should continue being based on both the CO2 intensity and the trade intensity metrics. The CO2 cost metric should be made more relevant to analyze the impacts of carbon cost on sectors’ profitability. To that end, the CO2 cost over GVA criteria could be replaced by a CO2 cost over Gross Operating Surplus (GOS) criteria. |
b) other thresholds should be defined. Please specify below |
The competitiveness of energy-intensive industries is sensitive to energy and carbon costs, therefore a risk exists for all these industries. For the sake of simplicity and consistency in legislation, all energy-intensive industries, as defined in the Energy taxation directive, could be automatically placed on the carbon leakage list:"energy-intensive business" shall mean a business entity, (…) where either the purchases of energy products and electricity amount to at least 3,0 % of the production value or the national energy tax payable amounts to at least 0,5 % of the added value. In case ETS-specific criteria are maintained, they should continue being based on both the CO2 intensity and the trade intensity metrics. The CO2 cost metric should be made more relevant to analyze the impacts of carbon cost on sectors’ profitability. To that end, the CO2 cost over GVA criteria could be replaced by a CO2 cost over Gross Operating Surplus (GOS) criteria. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The current criteria under the quantitative assessment at NACE 3 or 4 level should be maintained and used as the first assessment option. When an assessment at NACE 3 or 4 level is not appropriate to identify the relevant industrial activities falling under the EU ETS, then a quantitative assessment at 6- or 8-digit should be carried as a second option. Finally, as a third option, a qualitative assessment must remain possible. Other parameters can be studied as part of qualitative assessments, such as methodology and evidences of investment leakage. |
d) in line with the duration of ETS Phase 4 |
As long as there are no equivalent GHG reduction measures taken by major trading partners, the list of sectors exposed to the risk of carbon leakage should remain valid. This is essential to provide predictability to industries faced with long investment cycles (typically > 15 years). |
a) the present approach of average of the 10% most efficient installations should remain |
Glass industries support ambitious benchmark levels, which reflect the technological capabilities of the sectors best performers using the best available and proven technologies in Europe. It must be kept in mind however that this approach also has limits. Indeed, benchmark curves do not always reflect a difference in terms of « best » (the least GHG emitters per tonne of glass) or « worst » GHG players, but a difference in terms of products produced, cullet availability, age of furnace, available fuels, etc. The 10% best GHG performers can therefore be regarded as extremely challenging, especially for plants producing a wider range of more sophisticated products with higher added-value (as this usually entails higher energy consumption). |
a) yes (please specify how often) |
It seems logical to revise the benchmarks from time to time to reflect GHG improvements over time. Revision cycles should be linked to ETS phases and remain unchanged over this period. Periodical revision of the benchmark should be based on the actual EU based installations. The periodic revision of benchmarks should be the sole instrument leading to a reduction of free allowances over time, as benchmarks reflect true possibilities of GHG improvements according to state-of-the-art technologies deployed in Europe. The periodic revision of benchmarks therefore justifies that the CSCF is abandoned. |
c) other (please specify) |
Ex-ante allocation can only lead to over-allocation in crisis times, and under-allocation when the economy is growing. A better approach is to design an « ex post » system, where real allocation is corrected according to the real production. |
a) no, there should be no deviations |
In principle, there shall be no deviation from the general harmonized allocation rules at the level of an individual installation as this could cause distortion of competition. Only in the case of very specific hardship, should deviations be envisaged for an entire sector after a careful assessment of the competitive effects of such deviations. |
d) yes, in the form of financial compensation at EU-level |
Rules for the compensation of indirect costs should be revised and need to be effective to reflect the real burden of CO2 included in electricity costs for industry. A differentiated compensation approach by Member States is not acceptable from a competitiveness point of view. A harmonized approach at EU level is therefore needed. The harmonized measure should take the form of financial compensation. Free allocation should be kept aside to ensure full relief for direct emissions (most GHG efficient installations should receive 100% of their needs). A compensation system should also be put in place to compensate for higher prices of some raw materials (e.g. soda ash) and industrial gases. |
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a) from the Member States' auction budgets |
Allowances funding low-carbon innovation support should be financed from the Member States’ auction revenues and from a mobilization of additional sources. However, this should not be financed at the expense of free allocation or the new entrants reserve which must be principally used for measures against risks of carbon leakage. |
Generally speaking, glass industries welcome the opportunity to express their views on carbon leakage measures post 2020 and appreciate that this discussion is held without further delay. It is however regrettable that industry is asked to comment on such measures whereas the rules for EU ETS Phase IV have not yet been fully decided. The glass industry wishes to reiterate that so long that there is no comparable ETS system (which means that similar costs are born by competitors) operating in most part of the world and in extra-EU countries with glass industries, EU based glass industries will need to receive full and effective protection against carbon leakage. The recent assessment carried by DG CLIMA on exposure to carbon leakage risks, i.e. the carbon leakage list of 2009 and its recent revision, shows that between 2009 and 2014, risks of carbon leakage has grown in most glass sectors. For these reasons, glass industries need effective protection moving forward. |
b) Trade association representing businesses |
Glass for Europe |
Verónica Tojal Rue Belliard 199, 1040 Brussels (Belgium) Tel: +32 (2) 538.43.77 E-mail: veronica.tojal@gmail.com |
a) yes |
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1) yes |
a) yes |
EU industries can always reduce GHG emissions. The real question is by how much? The flat glass industry has limited possibilities to reduce emissions in the near future. Best available technologies are widespread in flat glass manufacturing and there are thermodynamic limits to the reduction of emissions. According to the revised Glass BREF (2012) there are no major breakthroughs technologies expected in the medium term. Even if they were to be discovered, it would require between 10 and 20 years before these are rolled out to most sites. However a number of techniques are undergoing constant stepwise development. This will provide additional GHG savings. The flat glass industry believes that it will be able to further reduce by 5% to 10% its CO2 emissions per output unit by 2030, provided that ongoing R&D delivers the desired outcomes. Further reduction over the long term could only be achieved thanks to cost-effective CCS and the CO2-free electrification of the economy. |
b) no |
Flat glass manufacturing is an energy intensive process where energy accounts for the largest share of manufacturing costs, i.e. 37% according to the CEPS study on drivers and evolutions of energy costs in the flat glass sector. High energy prices in the EU already provide the strongest incentive to energy efficiency. Reducing energy consumption and CO2 emissions is both an economic imperative and a permanent endeavor pursued by all glass manufacturers in order to remain competitive in the market place. The EU ETS only generates extra costs for EU manufacturers. These extra costs are expected to increase under phase III of the EU ETS as the number of free allowances granted to manufacturing sites reduces due to the high Cross Sectoral Correction Factor. These costs negatively affect the industry’s capacity of investment in ever more efficient manufacturing processes. |
a) yes |
EU industry faces higher costs for environment, energy, labor and raw materials, than the majority of extra-EU competitors. In the absence of an international agreement and a level playing field between EU and extra EU competitors, the EU industry needs to be provided with measures to safeguard its competitiveness. Measures to ensure that the EU ETS does not adversely impact the competitiveness of EU industry is an absolute pre-requisite to ensure the EU ETS’ coherence with the EU’s ambition to revitalize European manufacturing activities, as proposed in the EC Communication on Industrial Renaissance. |
a) very adequate |
Since phase III of the EU ETS has just started, it is too early to draw definite conclusions of its real impacts. In the previous phases of the system, the attribution of free allowances has helped industry invest in the efficiency of its plants. However, this instrument alone does not guarantee full protection against carbon leakage under Phase III. Considering that the amount of free allowances is disconnected from industry needs, CO2 allowances have to be acquired. This represents a cost for manufacturing industries that is not borne by extra-EU competitors. The Cross Sectoral Correction Factor (CSCF) applying from 2013 onwards reduces each year free allocations to each installation, even for the least GHG emitting players. This factor and the subsequent reduction of free allowances are dangerous because they are cross-sectoral and therefore disconnected from both the real potential to reduce GHG emissions in each sector and from the effective risks of carbon leakage. |
a) it absolutely keeps the incentive |
Free allowances do not reduce the incentive to innovate; on the contrary, they allow industry to invest in the efficiency of its plants as they preserve investment capacity. Additionally, they offer industry the perspective to have to acquire less CO2 allowances. This last incentive would be better preserved if the arbitrary CSCF was not forcing an unrealistic reduction of the number of free allowances. |
b) quite proportionate |
Administrative burden should always be minimized to the extent possible. It is clear that the process necessitates a lot of administrative work, however flat glass manufacturers consider it quite proportionate due to the high financial stakes. That said, some improvements must be sought. For example, the replication of reporting and registration platforms between Member States should be avoided. In the case of new entrants (in particular in the case of capacity extensions) the administrative burden associated to the process is higher. It should be envisaged to facilitate procedures for new entrants. |
b) a higher share than in 2013-20 |
In principle, there should be no limit on the allowance budget so that the number of free allowances reflects industrial needs and carbon leakage realities. In practice, this is likely to mean a higher share than in phase III therefore both responses b and d should be ticked. The system should be revised in such a way that each installation receives allowances according to the benchmark level and actual production figures. This means that historical production figures should no longer be used and the CSCF should be abandoned. Only in this way will adequate protection against carbon leakage be guaranteed. It is likely that, at times of industrial growth, this system generates more free allowances than today. Should authorities wish to keep a system whereby free allowances reduce over time, the speed of reduction should not be faster than the cost-effective emissions reduction potential of each sector. That could be achieved by replacing the CSCF by sectoral correction factors. |
e) I don’t know |
With regards CCS, it is not yet evident whether or not CCS is the right direction to go, considering impact on energy efficiency (extra energy consumption for CCS) and investments. It should therefore not be taken for granted as the ‘one-size-fits-all’ low carbon solution for the EU. |
a) yes |
There should a financial support scheme for industry innovation focusing on process improvement and optimization, energy efficiency and new energy sourcing, only if funded by auctioning revenues and not by way of an allowance budget (see next question). |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Support scheme should be funded by auctioning revenues and not by way of an allowance budget. This last option would have two negative effects: first it would generate shortfalls in the allowance market, which will prevent full protection against carbon leakage. Second, it would artificially increase the price of carbon and add extra costs on industries thus limiting their capacities of investment in industrial low carbon technologies. |
a) yes |
Regarding level of free allowances, the system of allocation needs to be revised so that industries exposed to risks of carbon leakage do not face a decrease in free allowances that is greater than their estimated potential to reduce emissions when using best available technologies. This effectively occurs due to the implementation of the CSCF, which forces a steep reduction of free allowances, regardless of industrial realities. This means that industries are gradually less protected against carbon leakage, against all economic and technical evidences. It jeopardizes the system and is a threat to EU industry’s competitiveness. For this reason, the CSCF needs to be abandoned and replaced by another mechanism meant to ensure a realistic decrease in free allowances: either a regular review of the benchmarks or the instauration of a sectoral reduction factor that should reflect each industry’s effective GHG reduction potential when using best available technologies. |
a) the present two groups should remain |
The binary model (in/out) is perfectly suitable so long that assessments of exposure to carbon leakage remain based on objective criteria. It would be dangerous to create categories of exposure. In practice, this would mean that higher level of protection will be granted to EU industrial sectors which have already lost ground in global competition. The risk would therefore be high that most free allocations are poured into industrial sectors whose decline in Europe is likely to continue due to other competitive factors than those related to the ETS. On the contrary, a single category of exposure ensures that all sectors are equally protected as soon as a risk is detected. It helps ensure protection to industry early enough so that they do not loose competitive ground and thus remain profitable in Europe. It is important that the list of sectors at risk of carbon leakage is established for the entirety of the next trading period, so as to provide certainty to industry and investors |
a) the present criteria should remain |
The current criteria under the quantitative assessment should be maintained but adaptations are required to the assessment methodology. An assessment at NACE 3 or 4 level may not always be appropriate to identify the relevant industrial activities that are falling under the ETS. Such a discrepancy between the NACE 4 level and the ETS- covered industrial activities exist in the flat glass sector therefore NACE 4 assessments consistently under-estimate risks of carbon leakage in our sector. Carbon leakage analyses, when focused on industrial activities rather than sectors, like those carried in Australia, show that the activity ‘production of bulk flat glass’ is ‘highly emissions intensive’. This analysis better reflects flat glass reality than the NACE 4 level assessment. To avoid this discrepancy, quantitative assessments should be based either on ‘industrial activities’ or be also possible at NACE 6 or 8 digit level in order to cover the relevant activities only. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The present thresholds for the combination of factors, i.e. 5% for carbon costs over GVA and 10% for trade intensity, must be kept unchanged. They have proved adequate to capture the risks of carbon leakage in the flat glass sector. Additionally, the growing unbalance between the EU GHG reduction commitments and the absence of any such commitment from trading partners suggests that risks of carbon leakage will be growing rather than diminishing therefore all existing thresholds should be maintained and should not be set at higher levels. Raising thresholds will only exclude sectors from free allowances regardless of effective risks and will send a damaging signal to EU industries against the EC’s own re-industrialization objective. An artificial increase to the thresholds would mean that fixing a cap to free allowances is more important than the effective protection of industrial competitiveness. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
In the assessment hierarchy, a new assessment category should be created for quantitative assessments at NACE 6 or 8 digit level. This option should be made available after the NACE 3 or 4 digit level quantitative assessment and before the need for a full qualitative assessment. The possibility for a qualitative assessment, for justified cases when the above two assessments have proven inconclusive, should be maintained. Other relevant parameters should be looked at as part of this qualitative assessment: (i) Projected new capacities around Europe and evolution of production investments within and outside the EU. (ii) Contribution of the sectors and products to the EU economy (jobs, trade balance, other policy goals (such as energy efficiency) taking into account the whole value chain, and including the recycling of the products. (iii) Territorial versus consumption based emissions. |
d) in line with the duration of ETS Phase 4 |
The list should be established for the entire duration of the ETS phase for which it is established. This is essential to provide certainty to industry and long term visibility to investors. Besides as long as there is no global agreement on climate and that outside EU competitors do not effectively make the same level of CO2 emission reduction efforts, effective protection against carbon leakage remains necessary. This is essential to guarantee a level playing field and thus ensure fair competition in open markets. |
a) the present approach of average of the 10% most efficient installations should remain |
Benchmarks, calculated as the 10% least CO2 emitting installations, are already set at challenging levels. In the case of the flat glass industry, the 10% best means that the benchmark is set on the basis of only 5 plants. It therefore provides a clear horizon for possible improvements in 45 other installations. Benchmark levels therefore serve their purpose at the level of the 10% least CO2 emitting installations. Should best performing plants below the benchmark would get 100% free allowances, the system would work reasonably fine. This is however not the case for the time being. Indeed, the number of free allowances granted to each installation is largely influenced and forced down by the implementation of the CSCF. Since the CSCF is disconnected from each industry’s real CO2 reduction potential, it effectively penalizes all players, including best performing ones, regardless of their ability to effectively reduce GHG emissions further. |
a) yes (please specify how often) |
In principle benchmarks should be revised to reflect technology development and deployment. The revision of benchmarks should be aligned with the ETS phases and benchmarks be set for the entirety of the next trading period. Revision of benchmarks should ensure that free allowances are gradually reduced at a speed that reflects industrial ability to improve GHG performance. However, this approach only makes sense if the CSCF is eliminated otherwise a disproportionate decrease in free allowances will be forced on industry via two means (benchmarks and CSCF). To date, the CSCF reduces the amount of free allowances faster than the industry’s ability to reduce emissions. Effective protection against carbon leakage is thus no longer ensured and downward revisions of benchmark levels would only make the situation worse. The response to this question is therefore YES if a comprehensive reform that abandons the CSCF is put in place and NO if the CSCF is not abandoned. |
c) other (please specify) |
The current approach of “ex-ante” allocation, which is independent of market dynamics and production variations, can lead to over-allocation in economic recession periods and under-allocation in economic growth periods. A better approach to address disconnections between allocation of free allowances and real emissions is an “ex-post” allocation approach. In practice, a preliminary amount of free allowances for each installation should be assigned at the beginning of each year. The final amount could then be revised and adjusted at the end of the year based on actual production data. A free allowance reserve could be used to manage the supply and demand of free allocations. |
a) no, there should be no deviations |
There should be no deviations for individual installations in order to guarantee fair competition between companies and production sites. In the very exceptional case of installations facing specific hardships, the situation of the entire sector should be investigated, so that potential adjustment measure applied to that site does not distort fair competition. |
d) yes, in the form of financial compensation at EU-level |
Financial compensation for indirect costs should be foreseen at EU level so as to minimize risks of disruption to fair competition in the internal market. The level of compensation could be defined based on the findings of energy audits, required under the Energy Efficiency Directive. Financial compensations should only be opened to companies having environment management systems in place (ex. ISO 14001 or EMAS). |
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a) from the Member States' auction budgets |
Auctioning revenues should be used to support low-carbon innovation in general. As explained in a previous question, free allowances should only be used to protect industries from carbon leakage. The funding of schemes for any other purposes should not come from free allocation. |
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b) Trade association representing businesses |
Hungarian Chemical Industry Association |
1036 Budapest, Bécsi út 85. +36-1-3638362 magda@mavesz.hu |
a) yes |
1) yes |
b) no |
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a) yes |
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a) yes |
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b) quite adequate |
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a) it absolutely keeps the incentive |
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c) quite exaggerated |
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b) a higher share than in 2013-20 |
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e) I don’t know |
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a) yes |
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b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
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a) yes |
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a) the present two groups should remain |
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a) the present criteria should remain |
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a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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d) in line with the duration of ETS Phase 4 |
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c) the approach should be less stringent (please specify) |
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b) no |
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c) other (please specify) |
To avoid the the limitation of the growth potential of the Hungarian (and any other member state's) industrial sector we recommend the following: The calculation of allocation for all industrial installations should be based on data which are closest to the given period, and thus more realistic from the economic point of view. It means that for the year of 2020 data from 2019 should be taken into account, however, if for some particular reason the installation did not operate in normal or full capacity, then data from 2018 could be applied. |
e) I don’t know |
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c) yes, in the form of additional free allocation |
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a) from the Member States' auction budgets |
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b) Trade association representing businesses |
IFIEC Europe |
Sven Marschalek VIK e.V. Berlin Office Friedrichstraße 187 10117 Berlin Germany s.marschalek@vik.de, Phone: 0049- (0)30 212492-15 |
a) yes |
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1) yes |
a) yes |
The ability of EU industry to further reduce GHG emissions is dependent on a new political environment that takes industry policy seriously and allows investments into innovation and efficiency improvements. Industry needs a stable and predictable cost level playing field. The high costs that will result from the proposed EU targets for 2030 - combined with the uncertainty regarding the future carbon leakage provisions - build an obstacle for such investments and will most likely limit efficient investments and the ability of EU industry to export efficient technologies. That’s why the EU reduction targets are only acceptable with parallel provisions which allow fulfilling the EU target for a growing industry share. Furthermore, industry needs a clear political commitment, that EU climate policy - including targets - will be reviewed if by 2020 no global level playing field is achieved. |
b) no |
Emission trading on a global scale is an effective and efficient market based instrument providing climate protection at lowest costs by introducing a carbon factor in decision making on investment and efficiency improvements. However, as long as there is no global system, a robust carbon leakage protection is needed. This purpose would be served best by a dynamic ETS system (for details see Q4). Otherwise, the additional costs due to the EU ETS – actual and expected - harm competitiveness and the willingness to invest in the EU, reducing in that way the progress in energy efficiency that could have been reached in a prosperous investment climate. Furthermore, the unilateral and absolute cap on emissions is limiting industrial growth potentials. Despite these influences, EU industry is already very carbon efficient and the ETS targets have been achieved through a number of measures taken by the installations involved. |
a) yes |
As long as the ambitious EU climate policy is not mirrored by comparable international efforts with comparable burden for the major competitors, the EU needs to provide for measures that minimize the unilateral cost burden for EU industry. These measures must be predictable and stable. The proposed approach for such measures is a dynamic ET system, including an allocation supply reserve. (see Q4). The secure protection from carbon leakage is important both from an economic and from an environmental point of view, because the EU emission reduction targets should not be achieved through carbon or investment leakage, which would have a damaging effect for the global climate balance and contradict the EU’s industry renaissance strategy. Both cannot be in the interest of EU policy. On the medium to long run we need a clear commitment that without comparable global climate action and burden the EU climate policy approach including the ETS cap must be reviewed. |
b) quite adequate |
Enhanced free allocation would be an adequate instrument to address the risk of carbon leakage. Good performers must be rewarded while bad performers must directly feel positive consequences of improvement measures. To that aim, free allocation post-2020 must be based on a dynamic system, which has the following main components: (1) realistic benchmark levels including direct and indirect emissions (2) the actual production level (3) no correction factors. (4) an allocation supply reserve. With such reforms, enhanced free allocation can minimise carbon leakage also at higher CO2-prices. Furthermore, we need a clear political commitment for a review of the EU climate policy if the EU remains isolated with its ambitious climate policy and the associated high burden after 2020. In the medium- to long-term, an isolated ambitious climate policy with an absolute cap and effective protection against carbon leakage are incompatible. |
a) it absolutely keeps the incentive |
With free allocation based on benchmarks industry can remain competitive, while the incentives to improve carbon efficiency are fully preserved. Such incentive, however, is distorted in the current design of free allocation based on historical instead of actual production data. With free allocation based on actual production data as proposed in Q4, carbon costs are not fully reflected in product prices. –This is a tradeoff, which must be accepted, because full reflection of carbon cost in product prices is incompatible with the avoidance of carbon leakage. Furthermore, free allocation in principle does not impact the overall supply / demand balance of allowances and has no influence on the carbon price. Therefore, it has no impact on the drive to innovate. |
b) quite proportionate |
Administrative burden currently is high, however, acceptable in view of the objective reached thereby. And it must be stated that it could be significantly reduced, when implementing a dynamic system (see Q 4), when the complex rules for new entrants, production cessations etc. would be obsolete. Hence, the current complexity of the system and the thick rule book for allocation result mainly from rules to account for any changes between the historical base period and now. Here is massive red tape and administrative burden. Establishing benchmarks has been a complex exercise both for politicians and the sectors in question. Establishing new benchmarks again should therefore be avoided. |
d) there should be no limit to overall free allocation to industry |
The share of allowances dedicated to free allocation should be sufficient to avoid carbon leakage. That does not mean “a free ride for industry”, but sufficient allowances for efficient producers, i.e. producers who produce at realistic benchmark level. These should receive allowances in an amount that no further costs apply. Only if this is safeguarded, an efficient EU producer has no cost disadvantage from the EU ETS compared to even less efficient competitors worldwide. This approach helps to stimulate efficient production in the EU and the efficient EU re-industrialisation as well as the carbon reduction integrity of EU ETS. |
e) I don’t know |
Research and development in various technologies is crucial for the EU decarbonisation path towards 2050 (picking thereby the most promising approached in terms of cost-efficiency). Support and funding for these technologies should not depend on the auctioning income which varies with the carbon price. For other technologies, there is no need for additional funds, i.e. for renewable energies which are supported by separate national schemes. |
a) yes |
Technologies in industry to meet the 2050 reduction targets are not yet available or even invented. It is therefore crucial that R&D is strengthened. All ETS auctioning revenues should be used more cost-effectively and efficiently to assist the decarbonisation of European industry without impairing its international competitiveness. The ETS directive states that half of auctioning revenues should be spent on decarbonisation measures. This has not been the case so far: a missed opportunity to pursue an active industry policy (i.e. through a large breakthrough technology programme for innovation in energy intensive industry). However, such support must not cannibalize the free allocation volumes and carbon leakage provisions. Furthermore, policy-makers should refrain from raising the costs of decarbonisation policies in order to increase revenues that would otherwise be needed to addressing those costs. |
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
Auction revenues should be earmarked and ring-fenced for innovation purposes rather than going into national budgets. The funding support from the NER300 program should be allocated to the most cost efficient technology developments. The question is, if CCS fits in this frame or whether other options such as CCU, electricity storage and others would be more cost efficient. On the other hand, auction revenues should go back to the industry, ensuring that enough means are available for investments in production capacity and innovation. Therefore, innovation support should not counteract carbon leakage protection measures. Innovation centers are closely linked with production and therefore we both need measures to keep production cluster in Europe and to promote research and development. |
a) yes |
The following measures are needed: • A reform of the EU ETS providing more effective carbon leakage measures (see Q4). If an allocation supply reserve is not acceptable, international credits should be allowed to supplement the missing part. • An adequate compensation of the full CO2 costs in electricity prices. • Taking account of all relevant costs induced by the climate policy package (such as RES-support). • Politicians must commit to review the EU climate change policy including the absolute industry target if a global level playing field is not be achieved by 2020. • The effort sharing between ETS and non-ETS sectors should be in line with the findings of the impact assessment for the Energy Efficiency Directive: the remaining economic potential is much larger in other sectors (building, power, transport) than in industry. • A more consistent overall energy and climate policy on EU and MS levels with the objective to bring energy prices in line with those in competing regions |
a) the present two groups should remain |
We see no reason why the carbon leakage list – established on a thorough investigation of the statistical material - should change: there is no sign of a reduced need for protection, especially taking into consideration the increasing level of globalization, the increasing gap in energy prices and the shrinking cap (which will lead to an increase of the carbon price and the danger of carbon leakage). To avoid value chain effects the level of protection rather needs to be increased. In general, the notion underlying the debate on those sectors exposed to carbon leakage should be based on the precautionary principle and should have the aim: how to give more confidence and predictability to globally competing industries and how to attract more investments into Europe. It is important to look into possible solutions of the key disadvantage of the present two groups: the sharp consequences for individual sectors of changing the list. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
The criteria should be strengthened by complementing the following: • a comprehensive carbon cost comparison: the ETS costs in EU should be compared with those in other major industrial world regions (including an analysis of the allocation rules for direct and indirect emissions) • a clear definition of “a decisive share of global production” (with the same carbon costs) • The full power price effects of climate change policies must be taken into account for the risk evaluation. • the impact of value chain effects: Sub-sectors that are not directly impacted but are inherently linked with exposed sectors are not necessarily on the list. It is therefore important that qualitative assessments are done where relevant to add the necessary value chain aspect (including upstream costs, impact of CL position of upstream sectors on downstream sectors i.e. the respective end products, (im)possibility of cost pass-through). • the impact of product tradability • a forward looking carbon price |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
For further detail we refer to our answer to Q 15. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Qualitative criteria are needed in addition to quantitative criteria e.g. as the latter are solely based on historic data. Historic data does not in all cases reveal the current situation for competing products at the world market. The following parameters are proposed for a forward looking qualitative assessment: • All costs related to climate change policy along the value chain should be taken into account, in particular upstream costs. • The value chain analysis should also consider the implication for downstream sectors if an upstream sector is deleted from the carbon leakage list. • The inability to pass through locally imposed costs to sectors whose product prices are determined internationally (“price takers”) should be taken into account. |
d) in line with the duration of ETS Phase 4 |
The carbon leakage status is a fundamental parameter for investment decisions of companies. Any change here has sharp consequences: the sector can get 100% free allocation in one year and 0% the next year. To avoid negative consequences for decisions to invest in maintaining or expanding manufacturing capacity in Europe, uncertainty about the carbon leakage status should be avoided. Therefore, we need a rather long stable validity of the CL status of the involved players. Once per trading period could be an acceptable compromise, however, much shorter than support and planning horizons realized for investors into RES according to the most MSs’ RES-E support schemes. |
c) the approach should be less stringent (please specify) |
Currently allocation is based on the stringent average of the top 10% performers, meaning that only about 5 out of 100 installations receive 100 % free allocation. All others incur costs. Furthermore, these stringent benchmarks are significantly reduced through the cross-sectoral correction factor and the linear reduction factor (both 1.74% points per year). This adds costs even for the most efficient producers and thereby discourages efficient investments and growth. This approach is not sustainable and does not protect against carbon leakage. Therefore, IFIEC believes that the approach should be rather less stringent and proposes the use of realistic benchmarks. Realistic benchmark levels should reflect the penetration of a given efficiency technology within EU industry sector and be comparable to benchmarks in other schemes globally. Realistic Benchmarks should provide long-term certainty and predictability. |
a) yes (please specify how often) |
An update of the benchmark should reflect the technical development. To ensure that the benchmark level is technically and economically achievable, benchmarks must be defined bottom-up, starting from real performance levels. The benchmark level should not reflect the technological state of the art. In addition, an update of the benchmark must also reflect the carbon leakage risk, i.e. it must be ensured that the carbon leakage protection is not compromised. An update of the benchmark levels should only take place between trading periods and not within a trading period. This is important to limit the impact on the effectiveness of the EU ETS: if efficiency improvements lead to a more stringent benchmark, this could provide an incentive to delay investments if a company has several plants which would then have to bear the more stringent benchmark. Furthermore, an update of the benchmark could undermine the planning of investment decisions. |
c) other (please specify) |
The free allocation should be based on the most actual data to better reflect the need for free allocation of the companies and to allow for industrial growth. This way significant faults and undesired developments of the current system, (e.g. over- and under-allocation to the most efficient producers, incentives to reduce EU production and sell the freed allowances) would also be avoided. Basing allocation to industry on actual production, furthermore, puts carbon efficiency improvements into the focus, because any improvements then bring a direct and logic financial benefit. |
b) yes, there should be deviations with higher allowances for installations facing specific hardships |
Harmonized treatment should be the principle rule. However, the complexity and diversity of installations’ cases is immense and there should be an exceptional option to deviate. |
c) yes, in the form of additional free allocation |
Direct and indirect emissions must be treated equally since they are equally harmful. A solid and predictable alternative for the diverse, unstable and incomplete system of compensation on MS level currently in place could be: indirect allocation on European level without unrealistic reduction factors. |
Less important |
Important |
Most important |
Least important |
The development of new technologies follows a pre-defined path (from development to deployment and commercialisation) where different types and levels of support are needed in the different stages. It is important to adequately define the appropriateness of each type of aid. Support is principally necessary at each stage in order to overcome the market barriers and failures specific to each stage. We see a particular lack of support for large scale pilots in industries and would wish to have the EU more active here. |
d) other |
Free allocation has to protect against carbon leakage adequately. Therefore, the free allocation should not be used for innovation support. There should be no competition between carbon leakage protection and innovation support. The revenues from auctioning should be reinvested for low carbon technology support, as foreseen in the ETS Directive. |
The multiple choice response options often do not provide an option that exactly meets our answer. Therefore, we strongly advise not to make a simple statistical analysis of the multiple choice answers to understand the consultation properly. Only the additional motivations can provide a real picture of the responses given and received. Resulting policy initiatives should allow for industrial growth and the climate change policy of the future should fit with the EU’s industrial renaissance strategy. The results of COP 21 and in general the commitment of the major world regions to climate change policies are a precondition that EU climate policies will have a future in the manner we see it today. Whether avoidance of carbon leakage is really feasible with the high carbon reduction targets foreseen depends on a number of breakthrough technologies. Whether these breakthroughs will come is the crucial question. The EU can help such developments with focused support of innovation and R&D. |
b) Trade association representing businesses |
IKEM - Innovation and Chemical Industries in Sweden |
Mr Mikael Möller Director public affairs Storgatan 19 10216 STOCKHOLM +46 10 455 38 66 |
a) yes |
|
1) yes |
a) yes |
In the chemical industry energy efficiency measures may to some extent contribute to lower emissions with maintained production using known technology. Further reductions in greenhouse gas emissions can only be accomplished by the development of breakthrough technology, R&D and innovations. However, long term sustained growth in industry is the sine qua non for the European industrial base. This entails investment for higher production capacity resulting in lower emissions per volume production but not necessarily emission reductions in absolute terms |
b) no |
The EU ETS was intended to be a market system with the aim of achieving emission reductions at the lowest possible cost thus promoting the most efficient installations in the EU. The ETS will deliver the set 21 % emission reduction target at much lower cost than expected. In that respect it has been a success. However, the ongoing discussion shows that policy makers focus more on high cost for emission and less on the actual reduction in itself. Political interference in the ETS market has severely diminished the credibility of the system. Without global participation and with continued annual reductions for industry, the ETS is no alternative for industry in the long term. The conclusion is that the present ETS promotes the less efficient producer outside the EU to the detriment of highly efficient production inside the EU. |
a) yes |
The measures to support EU industry are vital to the competitive power of those companies as they compete on global markets. All policy measures on climate change depend on global participation without which there can never be a solution. The member state option to financially compensate industry for the indirect effect on electricity prices from the ETS has severely fractioned the EU and created an unleveled playing field in the EU. |
a) very adequate |
Carbon leakage is happening. Multinational corporations opt for investments in other regions than the EU for cost reasons. New investments carry innovation and development of new technology. Investment lost is leadership lost for Europe. In that respect free allocation as it is today is not adequate for the leadership of European lndustry in the world. Making sure that European industry, complying with ambitious climate performance, is the most competitive in the world also means that the EU should be clear vis a vis the lagging regions in the world that Europe will support its industry. |
a) it absolutely keeps the incentive |
Carbon leakage is happening. Multinational corporations opt for investments in other regions than the EU for cost reasons. New investments carry innovation and development of new technology. Investment lost is leadership lost for Europe. In that respect free allocation as it is today is not adequate for the leadership of European lndustry in the world. Making sure that European industry, complying with ambitious climate performance, is the most competitive in the world also means that the EU should be clear vis a vis the lagging regions in the world that Europe will support its industry. |
d) absolutely exaggerated |
In theory, all allocation can be made without cost for industry without compromising the emissions reductions objective. The administrative burden can be seen as the political cost of focusing rather on the cost than on the emission reductions. The cumbersome allocation procedure does not promote emissions reduction as such and should be simplified. |
d) there should be no limit to overall free allocation to industry |
The ETS should promote enhanced production from the efficient industries. Thus, there should not be any limits for the most efficient producers to satisfy the real demand on the global markets and thereby protecting the global climate. No limit in this respect is compatible with climate integrity. |
d) there should be no such innovation support post-2020 |
Finding and testing technology solutions to decrease greenhouse gas emissions is of vital importance for the society. The ETS is about the lowest cost for emission reduction. CCS is a high cost option and should be financed on a societal level. The ETS is not suited to be the main finance instrument for the high cost options. It is obvious that this issue is the main reason for the conflicts of interests surrounding the ETS in the discussions of today. |
b) no |
Supporting industry development in terms of fund for research, innovation and pilot testing is a good way of making it easier to make informed and successful investments in industry. If the ETS is maintained to finance renewables and CCS there should also be financing for the development of industry. However, as described under Question 8, the ETS is not suited to be the main finance instrument for high cost options. |
c) other types of funding (please specify) |
The climate issue is a societal issue. Supporting industry development in terms of fund for research, innovation and pilot testing is a good way of making it easier to make informed and successful investments in industry. |
a) yes |
It is important for all countries to compensate for the increased electricity cost due to the ETS. The optional nature of the compensation scheme has created an unleveled playing field in Europe. The compensation for indirect costs should be handled in a harmonized manner within the EU. |
a) the present two groups should remain |
It is important to have a reasonably simple and transparent system. |
a) the present criteria should remain |
The major focus is to keep or increase the competitiveness of the European industry. When a cost cannot be transferred to a customer while the competitors can, European industry is at a lost. It should be observed that potential competition must be possible to factor in when analyzing the trade intensity. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
There will always be companies with production that does not fit into the bulk of the relevant sector. For these companies there should be a possibility to argue a case built on qualitative criteria. |
d) in line with the duration of ETS Phase 4 |
It makes sense to have an alignment between the ETS phase duration and criteria for carbon leakage to maintain reasonably stable conditions for industry. |
a) the present approach of average of the 10% most efficient installations should remain |
The present level is a true challenge for the various subsectors of chemical industry. Ideally, the average in each subsector should be the starting point for an annual dynamic enhanced performance of the whole subsector. Investments in chemical industry are long-term and the investment cycles are different for different companies. |
b) no |
Forcing new investments of major kind is not something that industry can comply with. The approach should not be more stringent than it already is. |
c) other (please specify) |
The basis for allocation should be actual production and not historic. A dynamic allocation adjusting to the actual production securing allocation for the 10% best performers promotes efficient producers in the EU. |
a) no, there should be no deviations |
Distortions of competition should be avoided |
d) yes, in the form of financial compensation at EU-level |
The existing optional nature of compensation at member state level has created an unleveled playing field in Europe |
Less important |
Least important |
Most important |
I don't know |
Large scale pilots are the hardest to find financing for and for such an important area as this it makes sense to make some funds available |
d) other |
Finding and testing technology solutions to decrease greenhouse gas emissions is of vital importance for the society. The ETS is about the lowest cost for emission reduction. CCS is a high cost option and should be financed on a societal level. The ETS is not suited to be the main finance instrument for the high cost options. It is obvious that this issue is the main reason for the conflicts of interests surrounding the ETS in the discussions of today. |
Not at this time. However, The IKEM is always ready to contribute to any public consultation vital to its members. |
b) Trade association representing businesses |
Institut du Verre |
114 rue la Boétie 75008 Paris France 0142659653 eric.semel@institutduverre.fr |
a) yes |
|
1) yes |
c) I don’t know |
The glass industry is making continuous improvement in energy efficiencies and process technologies to reduce CO2, energy consumption and environmental impacts. While further reductions in the glass industry are possible, what is important is the magnitude of this reduction. All official EU publications such as the “Sector Competitiveness Studies - Competitiveness of the Glass Sector - ENTR/06/054 - Final report, 14 October 2008” or more recently the Glass BREF and the BAT Conclusions show that no breakthrough technology is currently available to reduce CO2 emissions to the extent imposed by the energy and climate package 2030 (-43% for ETS sectors between 2005 and 2030). Emissions reductions cannot be repeated ad infinitum. There is a thermodynamic limit to the glass melting process which is an absolute limit, and that current technology is already approaching. However, process emissions cannot be eliminated, limiting therefore the reduction potential of the glass industries. |
b) no |
The main driver for energy efficiency improvements in the glass industry is the high share of energy costs within production costs. In fact, the glass industry has continuously improved energy efficiency over previous decades. Regulatory instruments and the EU ETS in particular, have only a marginal effect on energy efficiency improvements of glass melting activities, if any. Whilst there is no global ETS in place, the EU ETS is only a source of costs for glass industries (direct but also indirect CO2 costs linked to electricity), and therefore weakens the competitive position of European based glass industries vis-a-vis third country competitors. As such, it indirectly favors production reduction in the EU and rises in imports from non EU countries without carbon constraints into the EU. For these reasons, glass industries need to be fully protected against risks of carbon leakage. |
a) yes |
The EU glass industry faces higher costs for environmental protection, energy, labour and raw materials, than the majority of extra-EU competitors. In the absence of an international climate agreement and a level playing field between EU and extra EU competitors, the EU industry needs to be provided with measures to safeguard its competitiveness. Measures to avoid carbon leakage under the EU ETS are therefore essential. Measures should cover both the direct and indirect CO2 costs. Such measures under the EU ETS must be established in a way that ensures the ETS’ coherence with the EU’s ambition to revitalize European manufacturing activities, as proposed in the EC Communication on Industrial Renaissance. |
c) quite inadequate |
Free allocation has been key up to now to mitigate the negative impacts of a unilateral climate policy. However, the Cross Sectoral Correction Factor which is applied already from 2013 reduces the free allocation, even for the most GHG efficient installations, and will dramatically increase in the future, thus further reducing free allocation. This current system is unsustainable and should be changed in order to ensure that the most GHG efficient installations receive 100% of their allowance needs. |
a) it absolutely keeps the incentive |
Free allocation does not reduce the incentive to innovate; on the contrary, the majority of installations in the sector (about 95%) do not have enough allowances, which encourages industry to invest in the efficiency of its plants to avoid having to purchase a high level of allowances, which would render the sector uncompetitive. For the installations under the benchmark (about 5%), they can sell their allowances on the market, which is also an incentive to continue reducing emissions. The incentive is therefore present. Below, we also call for a periodic revision of the benchmarks (in exchange of the cancellation of the cross-sectoral factor), which also provides for a strong incentive to improve. Free allow. preserve investment capacity and offer industry the incentive to purchase less CO2 allow if they become more GHG efficient. However this last incentive would be better preserved if the CSCF was not forcing an unrealistic and arbitrary reduction of the number of free allow. |
b) quite proportionate |
Administrative burden is accepted, since it is necessary to maintain the free allocation system. However opportunities or improvement to this process should be considered. Conversely, the administration and calculation rules for new entrants are overly complex and can lead to under-allocation. They can therefore be seen as disproportionate and can be a disincentive to new investments. |
d) there should be no limit to overall free allocation to industry |
The current system is unsustainable (from a competition point of view) because the cross sectoral correction factor continually reduces the free allocation given to industry, even for the most GHG efficient installations. Ideally, installations whose efficiency is equal or better than the (periodically reviewed) benchmark should receive 100% of free allocations to produce in the EU and so there should be no limit. In practice, this is likely to lead to a higher share in phase IV. An increased level of EU ambition in terms of GHG reduction would require enhanced measures against carbon leakage and therefore an increase in total free allocations. |
e) I don’t know |
Overall financing for technological innovation in manufacturing should be increased in the EU. However R & D should be funded via a mobilization of different sources of funding - including but not limited to - auctioning revenues. It should not come from the free entrants reserve or Free Allowances reserve. Allowances should be primarily used to ensure that the most GHG efficient installations get 100% of their needs to produce in the EU. Furthermore, financing for R&D and demonstration projects should be technology-neutral and not focused only on CCS or renewables. New technologies such as Carbon Capture and Use (CCU) and others should not be excluded. |
a) yes |
As stated above, industrial innovation, with a focus on the process and on new energy sources for industry, should be promoted. It should not be financed by shares of allowances reserved for free allocation or for new entrants, but rather from a mobilization of different sources, and not limited to auctioning revenues. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Industrial innovation should be promoted in a technology-neutral way. However this should not be done at the expense of free allocation which aims to provide effective support and protection against carbon leakage. Therefore it should be financed via other sources. This could include, among other sources, money from the auctioning revenues, as suggested in the ETS directive (Art 10.3). |
a) yes |
Unequitable carbon costs should not place EU industries at a competitive disadvantage with extra-EU competitors and this should be the ultimate objective pursued in order to achieve the EU’s ambition of 20% GDP realized by industrial activities in 2020. To that end, measures against carbon leakage are a pre-requisite but are not enough. An EU scheme for compensation of indirect costs due to higher electricity prices and some raw materials (e.g. soda ash, industrial gases, ..) should also be developed for Energy Intensive Industries. More generally, the EU needs to assess, and if needed reform, all its policies and in particular energy and environmental ones against the re-industrialisation objective. A longer term re-industrialisation objective for 2030 should be established. |
a) the present two groups should remain |
This binary model ensures that all sectors benefit from carbon leakage protection measures as soon as a risk is detected. This is essential to ensure that carbon leakage measures are effective and that protection is not granted too late, when industries are already in jeopardy. |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
The competitiveness of energy-intensive industries is sensitive to energy and carbon costs, therefore a risk exists for all these industries. For the sake of simplicity and consistency in legislation, all energy-intensive industries, as defined in the Energy taxation directive, could be automatically placed on the carbon leakage list:"energy-intensive business" shall mean a business entity, (…) where either the purchases of energy products and electricity amount to at least 3,0 % of the production value or the national energy tax payable amounts to at least 0,5 % of the added value. In case ETS-specific criteria are maintained, they should continue being based on both the CO2 intensity and the trade intensity metrics. The CO2 cost metric should be made more relevant to analyze the impacts of carbon cost on sectors’ profitability. To that end, the CO2 cost over GVA criteria could be replaced by a CO2 cost over Gross Operating Surplus (GOS) criteria. |
b) other thresholds should be defined. Please specify below |
The competitiveness of energy-intensive industries is sensitive to energy and carbon costs, therefore a risk exists for all these industries. For the sake of simplicity and consistency in legislation, all energy-intensive industries, as defined in the Energy taxation directive, could be automatically placed on the carbon leakage list:"energy-intensive business" shall mean a business entity, (…) where either the purchases of energy products and electricity amount to at least 3,0 % of the production value or the national energy tax payable amounts to at least 0,5 % of the added value. In case ETS-specific criteria are maintained, they should continue being based on both the CO2 intensity and the trade intensity metrics. The CO2 cost metric should be made more relevant to analyze the impacts of carbon cost on sectors’ profitability. To that end, the CO2 cost over GVA criteria could be replaced by a CO2 cost over Gross Operating Surplus (GOS) criteria. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The current criteria under the quantitative assessment at NACE 3 or 4 level should be maintained and used as the first assessment option. When an assessment at NACE 3 or 4 level is not appropriate to identify the relevant industrial activities falling under the EU ETS, then a quantitative assessment at 6- or 8-digit should be carried as a second option. Finally, as a third option, a qualitative assessment must remain possible. Other parameters can be studied as part of qualitative assessments, such as methodology and evidences of investment leakage. |
d) in line with the duration of ETS Phase 4 |
As long as there are no equivalent GHG reduction measures taken by major trading partners, the list of sectors exposed to the risk of carbon leakage should remain valid. This is essential to provide predictability to industries faced with long investment cycles (typically > 15 years). |
a) the present approach of average of the 10% most efficient installations should remain |
Glass industries support ambitious benchmark levels, which reflect the technological capabilities of the sectors best performers using the best available and proven technologies in Europe. It must be kept in mind however that this approach also has limits. Indeed, benchmark curves do not always reflect a difference in terms of « best » (the least GHG emitters per tonne of glass) or « worst » GHG players, but a difference in terms of products produced, cullet availability, age of furnace, available fuels, etc. The 10% best GHG performers can therefore be regarded as extremely challenging, especially for plants producing a wider range of more sophisticated products with higher added-value (as this usually entails higher energy consumption). |
a) yes (please specify how often) |
It seems logical to revise the benchmarks from time to time to reflect GHG improvements over time. Revision cycles should be linked to ETS phases and remain unchanged over this period. Periodical revision of the benchmark should be based on the actual EU based installations. The periodic revision of benchmarks should be the sole instrument leading to a reduction of free allowances over time, as benchmarks reflect true possibilities of GHG improvements according to state-of-the-art technologies deployed in Europe. The periodic revision of benchmarks therefore justifies that the CSCF is abandoned. |
c) other (please specify) |
Ex-ante allocation can only lead to over-allocation in crisis times, and under-allocation when the economy is growing. A better approach is to design an « ex post » system, where real allocation is corrected according to the real production. |
a) no, there should be no deviations |
In principle, there shall be no deviation from the general harmonized allocation rules at the level of an individual installation as this could cause distortion of competition. Only in the case of very specific hardship, should deviations be envisaged for an entire sector after a careful assessment of the competitive effects of such deviations. |
d) yes, in the form of financial compensation at EU-level |
Rules for the compensation of indirect costs should be revised and need to be effective to reflect the real burden of CO2 included in electricity costs for industry. A differentiated compensation approach by Member States is not acceptable from a competitiveness point of view. A harmonized approach at EU level is therefore needed. The harmonized measure should take the form of financial compensation. Free allocation should be kept aside to ensure full relief for direct emissions (most GHG efficient installations should receive 100% of their needs). A compensation system should also be put in place to compensate for higher prices of some raw materials (e.g. soda ash) and industrial gases. |
Important |
Less important |
Most important |
Least important |
|
a) from the Member States' auction budgets |
Allowances funding low-carbon innovation support should be financed from the Member States’ auction revenues and from a mobilization of additional sources. However, this should not be financed at the expense of free allocation or the new entrants reserve which must be principally used for measures against risks of carbon leakage. |
Generally speaking, glass industries welcome the opportunity to express their views on carbon leakage measures post 2020 and appreciate that this discussion is held without further delay. It is however regrettable that industry is asked to comment on such measures whereas the rules for EU ETS Phase IV have not yet been fully decided. The glass industry wishes to reiterate that so long that there is no comparable ETS system (which means that similar costs are born by competitors) operating in most part of the world and in extra-EU countries with glass industries, EU based glass industries will need to receive full and effective protection against carbon leakage. The recent assessment carried by DG CLIMA on exposure to carbon leakage risks, i.e. the carbon leakage list of 2009 and its recent revision, shows that between 2009 and 2014, risks of carbon leakage has grown in most glass sectors. For these reasons, glass industries need effective protection moving forward. |
b) Trade association representing businesses |
International Zinc Association Europe |
IZA-Europe 168 Avenue de Tervueren/Box4 B-1150 Brussels Belgium Tel +32 (0)2 776 00 96 mgilles@zinc.org |
a) yes |
1) yes |
b) no |
Unless: 1. Extra cost due to climate policy is sufficiently compensated. Currently, a key carbon leakage prevention mechanism, compensation for ETS indirect costs on electricity, exists only on paper as only few member states established meaningful schemes. 2. We have a stable, predictable and investment friendly environment in Europe. 3. Conditions are put in place to ensure that EU industry can remain globally competitive so that it can continue to invest in innovation along its entire value chain. 4. Sector specific reduction potentials and technology availability are properly addressed, (when designing new policies). |
b) no |
Energy intensive industry has always had an obvious incentive to become more energy efficient due to high energy cost, independently of the extra cost related to ETS. In these industries, however, the EU ETS may reduce the ability to become more energy efficient. Improvements will require investments, either in upgrading of existing capacity or in new plants. Extra cost due to climate policy is however insufficiently compen¬sated and will reduce the margins of the industry. Shrinking margins lead to reduced energy efficiency investments. |
a) yes |
In our energy intensive zinc industry, product prices are set in global markets. Until a significantly larger share of competitors is influenced by similar increases in energy cost, there is a need for such measures. Otherwise our industry will disappear from Europe. |
a) very adequate |
Compensation for direct and indirect costs, linked to actual output and realistic benchmarks, would be a very adequate measure to address the risk of carbon leakage (predictability and effectiveness is ensured in the long term for both, direct and indirect costs). Today, compensation of indirect cost of electro intensive industry is not compensated unless individual member states provide compensation. This creates unfair competition between companies in different member states. For sake of fair competition within Europe, all compensations should be equal over the whole EU. |
a) it absolutely keeps the incentive |
Full compensation for direct and indirect costs is absolutely necessary for the com¬petitive position of Europe as a localisation of energy intensive industries. Com¬pen¬sation should be linked to actual output in order to provide an incentive for growth and to allow production flexibility through business cycles. Realistic bench¬marks are necessary for full compensation to new capacity and for the preserva¬tion of the undistorted environmental incentive. Expressed differently, allocation of free allowances will not reduce the envir¬on¬mental incentive for the recipi¬ent. On the contrary, full compensation for direct and indirect effects of ETS through allocation or otherwise is a precon¬dition for investment in new capacity in Europe. |
b) quite proportionate |
The administrative burden is not insignificant, but proportionate in the sense that no better solutions to solve the carbon leakage issue have been pro¬posed. It is however disappointing that no extra effort is done by the European administration to compensate for actual direct and indirect emissions instead of historic emissions. This has given raise to inappropriate over-allocations that undermined the credibility of the free allocation system. |
d) there should be no limit to overall free allocation to industry |
The budget should be as much as needed to ensure fair competition at global level and support European industry exposed to carbon leakage. If in the future, there is an inadequate number of allowances available to cover the need for carbon leakage mitigation, compensation could be provided as a sum of money proportionate to a given number of allowances from another source of finance. |
c) a lower share than in Phase 3 |
While investments for innovation are extremely important for the future competitiveness of the industry, the free allocations for direct emissions and compensations for indirect emissions is crucial to allow the European industry to stay competitive in the short term. |
b) no |
ETS should be focused on emission trading and mitigating the effects of such trading. Financing is tight, and there is no room for further programs. |
c) other types of funding (please specify) |
ETS should be focused on emission trading and mitigating the effects of such trading. Auction income should not be diverted to general innovation support. |
a) yes |
The use of free allowances will also have to be extended to cover indirect effects through increased electricity prices. With significantly higher EUA prices, the present solution for indirect costs based on State Aid will: - be insufficient for long term survival of these industries in Europe, - not create the predictability needed for investments, and, as well, - create significant disturbances in the internal market for energy intensive products. Effective carbon leakage prevention will also require exemption from extra costs related to other elements of climate policy like support to development of renew¬able electricity generation and extra grid costs related to transmission and balancing of electricity from renewable sources. |
b) more carbon leakage categories should be defined |
Our electro-intensive primary zinc industry is particularly exposed to carbon leakage and need full compensation of extra cost until a significant share of competitors is influenced by similar cost increases. EUA costs are passed on into electricity prices through the marginal cost of the marginal sources of electricity, and for our industry, electricity related cost make up a high share of total cost. Today, almost 50% of our added value is related to electricity cost which makes our industry extremely vulnerable to additional EUA cost. Most electro-intensive products have a high value compared to their weight, and may be moved between markets at a cost that is small compared to their value. They are thus globally priced with only a minimal price differentiation between markets. Other industries may need compensation, but not necessarily to the same degree. Other trading systems, Australia, have more categories of industries receiving different compensation. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
A single carbon leakage list (with several categories) should be established. The list should be based on the combined effect of direct cost (emission allowances) and indirect costs (increases in electricity costs due to climate policy). The following set of criteria should be established: 1. The exposure to global competition. 2. The exposure to EUA cost 3. The unit is in the most exposed category of the carbon leakage list if both criteria are met being simultaneously at a high threshold. If one or both of the criteria only meets a lower threshold, the unit will be in the less exposed category of the list. The intensity of trade with third countries is a weak proxy to competitive exposure, and should not be used in this context. Intensity of trade is not necessarily reflecting the price equilibrium between different regions. |
b) other thresholds should be defined. Please specify below |
The levels of the thresholds should be based proper analysis of the proposed new set of categories and criteria (see response to Q12 and Q13). |
b) no, all criteria should be based on simple metrics and linked to clearly defined thresholds |
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d) in line with the duration of ETS Phase 4 |
|
a) the present approach of average of the 10% most efficient installations should remain |
|
a) yes (please specify how often) |
A revision of the benchmarks every 4-5 year. Reviewing the benchmark without resetting the free allocations and compensations to 100% of the updated benchmark is not realistic. A revision before the start of the 2020-2030 period should be done and 100% free allocations and compensations should be given based on this updated benchmark. |
c) other (please specify) |
The main advice to be found in the literature is to use output based allocation linked to realistic benchmarks. For each industry, the baseline will then be set by the realistic benchmark. Indirect emission should also be set by realistic bench¬marks and actual output. The compensation will be linked to a sum of two bench¬marks, one derived from emissions and one derived from electricity consumption. |
a) no, there should be no deviations |
There should be no deviations linked to the short-term financial conditions of industries. There might however be a need to find special solutions for industries where it is impossible to establish sectorial benchmarks. |
c) yes, in the form of additional free allocation |
Compensation inside the EU ETS should be extended to cover indirect effects through increased electricity prices. With significantly higher EUA prices, the pre¬sent solution for indirect costs based on State Aid will be insufficient for long term survival of these industries in Europe and, as well, create significant distur¬bances in the internal market. The cost of any compensation measures will be propor¬tionate to the EUA price, thus correspon¬ding to the value of free allowances. Compensation could be provided as free allowances or as a sum of money propor¬tio¬nate to a given number of allowances from another source of finance. |
Important |
Less important |
Most important |
I don't know |
|
d) other |
ETS should be focused on emission trading and mitigating the undesirable effects of such trading. Innovation support should mainly come out of MS general budgets and not from auction income. |
|
b) Trade association representing businesses |
Jernkontoret (Swedish Steel Producers´ Association) Register Id 76331988454-11 |
Jernkontoret Box 1721 SE-111 87 Stockholm Sweden Tel +468 679 17 12 alena.nordqvist@jernkontoret.se |
a) yes |
|
1) yes |
a) yes |
In steel industry, reduction of emissions towards 2020 may be achieved through increased efficiency by investments in known technology with current production levels. To maintain capacity in production equipment, it is essential to be able to vary production levels according to the economic situation. This is difficult with the current layout of EU ETS, resulting in increased cost on marginal products due to the cap on free allowances. This may lead to decreased investments, a slow dismantling of production capacity, and thus reduces production, which will be taken up by producers outside Europe. The incentive for increased production must be improved. In a longer perspective break through techniques are needed to significantly reduce emissions. |
b) no |
The EU-ETS is an extremely laborious system which was intended to be a market system, but is changed by EU and governmental authorities, leaving companies with high energy costs and plans for reduction of production to meet EU emission targets. This decreases the competiveness of the Swedish steel industry and the steel industry in Europe as a whole. The steel industry is energy intensive and constantly works to be more energy efficient. Energy efficiency is not always the same as CO2 efficiency. Investments also have to result in total positive return to increase the competitiveness. ETS increases the costs for industry and thereby reduces the financial possibilities for investments in energy efficiency. |
a) yes |
By pushing tough legislation in Europe, companies with world-wide sales become less competitive, if other countries do not follow fast enough to create a level playing field on the market. Therefore it is important to provide measures making it possible to keep competitiveness until a global agreement, with relevant commitments, is achieved. |
a) very adequate |
Carbon leakage is not a fictive construction, it is reality. Companies seldom "move" but lack of investment and in the end closure of industry in Europe, is a threat to the global greenhouse gas reduction scheme, if less efficient industry in countries outside Europe wins the race. Free allocation creates space for companies within Europe to make necessary investments and changes. Sectors at risk of carbon leakage should be provided with 100% free allocation, based on realistic benchmarks and without any correction factor. In Sweden the electricity cost increase due to EU-ETS not being compensated, which affects the energy intensive industry´s competiveness. Such compensations should be handled in a harmonized manner at EU level. |
a) it absolutely keeps the incentive |
The steel industry is extremely aware of the necessity to decrease the greenhouse gas emissions. The free allocation is, however, needed to create time to develop new techniques for lower emissions and doing the right investments, in order to stay competitive over time. The steel industry in Sweden has high ambitions for emission reductions in a longer perspective, including development of specialized products for globally improved climate efficiency. Increased cost due to lower free allocation does not incentivize such a development. |
d) absolutely exaggerated |
The process of getting free allocation and reporting CO2 emissions is extremely laborious. The changes which are implemented regularly, not enough information available in time and short time spans to act, add additional burden and uncertainty for strategic decisions. |
d) there should be no limit to overall free allocation to industry |
We prefer that the post-2020 free allowances are based on CO2 intensity for the carbon leakage industries and not an absolute cap. The methodology for free allocation needs to give possibilities for increased production, which is also covered by free allowances in relation to efficiency. Staying competitive on the world market is crucial for European industry. Without industry the welfare of the EU union will decrease and create a downward spiral, leaving little room for investments and development. Growth is therefore essential for continuing competitiveness. |
a) a substantially higher share than in Phase 3 |
Finding and testing technological solutions to decrease greenhouse gas emissions is of vital importance for the society. Making funds available for this as a part of the ETS system makes sense. The problem is that the support is linked to the allowances, which have an unknown value. The support has to be changed to a certain amount of money and may be financed in another way. A demonstration plant for CCS is a huge investment, which has to be almost completely subsidized by authorities, not requiring pay back if it fails. |
a) yes |
Just as renewable energy is a part of the solution of reducing greenhouse gas emissions, the development of industry is. Supporting industry development in terms of funds for research, innovation and pilot testing is a good way of making it easier to make informed and successful investments. Since industrial investments, such as in the steel industry, are very long-lived, it is important to dare to make large investments in Europe. |
c) other types of funding (please specify) |
The funding should be robust with a fixed volume of money rather than allowances. A variety of funding sources could be used. |
a) yes |
It is important for all countries to compensate for the increased energy cost due to the ETS system, which also is a source of decreased competitiveness. The compensation for indirect costs should be handled in a harmonized manner within EU. |
a) the present two groups should remain |
It is important to have a reasonably simple and transparent system. |
a) the present criteria should remain |
The major focus at all times must be to keep or increase the competiveness of the European industry. When a cost cannot be transferred to a customer, competitiveness is lost. This includes products with international competition, even if trade intensity currently might be low. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
There will always be companies with production that does not fit into the bulk of the relevant sector. For these companies there should be a possibility to argue a case built on qualitative criteria. |
d) in line with the duration of ETS Phase 4 |
It makes sense to have an alignment between the ETS phase duration and criteria for carbon leakage to maintain reasonably stable conditions for industry. |
a) the present approach of average of the 10% most efficient installations should remain |
In the present approach, product groups include a variety of products; hence the benchmark is not technically achievable for all producers, especially for high quality products. More specialized benchmark groups might, however, make the system more complicated. Therefore the approach should not be more stringent. The benchmark for hot metal is today not set according to the 10% approach, and is thus not achievable for any producer and should be corrected. The benchmark for heat is clear, but the implementation of allocation rules for using heat differ between countries e.g. in Sweden early adopters using heat to increase their energy efficiency get less allocation than companies in other countries who don’t. |
a) yes (please specify how often) |
Not to get stuck in old technology, the benchmarks have to be revised on a regular basis. However, to do this more often than the trading periods makes no sense, as investments in our sector are long-term and often very expensive. Ten years is a minimum span between revisions of the benchmark. The revision should be based on actual industry performance within EU. |
c) other (please specify) |
It is necessary for the ETS system, and the industry, to allocate emission allowances based on actual production and not historic. This would allow for both economic growth and recession, without negatively influencing the ETS-system. |
a) no, there should be no deviations |
Favoring one installation on the expense of another should not be done. That would distort the competition. |
d) yes, in the form of financial compensation at EU-level |
Compensation for increased electricity costs is an example of how different countries can influence the competitiveness of their industry by making different decisions. In a harmonized system also compensations should be fully harmonized at EU-level. Since the auctioning revenues are different in different countries, it is better to make a financial compensation at EU-level. |
Important |
Least important |
Most important |
Less important |
Large scale pilots are the hardest to find financing for, and for such an important area it makes sense to make some funds available. |
a) from the Member States' auction budgets |
Auctioning revenues may be used for funding low-carbon innovation support at EU level, instead of being used for various purposes on national level. |
The steel industry in Sweden has set up a vision for 2050, where we make the following commitments: Our research and innovation revolutionize technology for tomorrow´s society. Our steel constantly challenges the frontiers of engineering. Our working environment fosters new solutions for communities through global collaboration. Our creativity constantly challenges the limits of contemporary thinking. Our production uses resources so efficiently that only products of value to the community leave our plants. Our ambition constantly challenges the limits of the possible. We work very hard to reduce greenhouse gas emissions, but cannot do it on our own. We need to work together in the society to set up conditions for reducing emissions without losing competitiveness. On the contrary we need to increase competitiveness, to be able to continue to develop sustainable solutions for the whole world. This requires research and legislation which does not distort competitiveness on the market. |
b) Trade association representing businesses |
Landbrug & Fødevarer - Danish Agriculture and Food Council (DAFC) |
Axeltorv 3, DK 1609 Copenhagen V; Anette Engelund Friis, aef@lf.dk, tel. +45 33394504 ; Tobias Gräs, tog@lf.dk, tel. +32 479 610420 |
a) yes |
|
1) yes |
c) I don’t know |
It is difficult to assess the impact of the EU ETS on industrial production within the Union, since carbon leakage may also take the form of investment leakage. In particular, export oriented industries currently face asymmetric climate policies, and it is uncertain to what extent the 2015 International agreement may abate such effects prior to 2020. |
c) I don’t know |
|
a) yes |
The Danish Agriculture and Food Council (DAFC) proposes that the Commission changes the current carbon leakage rules, in order to achieve a more targeted allocation of increasingly scarce free ETS allowances, at the benefit of EU climate policies and European competitiveness. Hence, the geographical unit for an analysis of the carbon leakage risk for strategic sectors and subsectors should be changed from EU-level to a NUTS 1 approach. Climate change is set to severely impact global food production; it is estimated, that for every 1 degree temperature increase, world agricultural production is set to diminish by 17%. Hence, EU climate policy should safeguard food security, and the EU agriculture and food sector be regarded as strategic. Indeed, this is not a new approach. Since the founding of the EC, and with the establishment of the Common Agricultural Policy, the EU has taken a strategic approach to food security. |
e) I don’t know |
Free allocation has proven to be a very adequate measure to address the risk of carbon leakage; however, the DAFC opposes an increase in free allocation for certain sectors, since this would have negative impacts on the liquidity of the carbon market, and instead calls for at more targeted tailor made approach for sectors of strategic importance for the EU. |
a) it absolutely keeps the incentive |
In a world of asymmetric climate policies, free allocation for strategic sectors might provide a minimum of leverage vis-à-vis third country competitors, thereby in principle freeing funds for innovation inside the EU. |
e) I don’t know |
|
a) a lower share than in 2013-20 |
From experience, the costs of reductions outside the ETS are typically higher than within the ETS. The Commission’s impact assessment confirms this conclusion. Therefore the DAFC supports the EU ETS, and opposes calls to transfer the reduction burden to more expensive reductions outside the ETS. Similarly, within the ETS, sufficient allowance liquidity is needed in order to secure the effective and cost-efficient functioning of the carbon market, at the benefit of the actors purchasing allowances on the market. As the carbon leakage rules are about to be revised, the DAFC proposes elements for a modernisation of the rules defining actors exposed to carbon leakage, with a view to enabling a more targeted, or tailor made, distribution of increasingly scarce free ETS allowances, and with a view to safeguarding strategic EU sectors. We believe the existing EU sector specific assessment of export flows among actors subject to the ETS needs revision. |
a) a substantially higher share than in Phase 3 |
|
a) yes |
|
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
|
b) no |
Possible further support should first and foremost target sectors of strategic importance for the EU rather than energy intensive sectors per se. |
a) the present two groups should remain |
However, for strategic sectors, a more tailor made assessment of the risk of carbon leakage should be facilitated, which might be done by changing the geographical unit (scope) for an analysis of the carbon leakage risk for such strategic sectors and subsectors from EU-level to a NUTS 1 approach. |
a) the present criteria should remain |
However, for strategic sectors, the scope of analysis should be more targeted and tailor made, enabling an assessment of industrial clusters at NUTS1 level rather than at EU level. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Indeed, the only way to cater for seemingly conflicting calls for both more tailor made approaches, and more simplicity in the system, is to acknowledge the need for a certain level of discretion in the system, which is justified for sectors that are of strategic importance for the EU, such as the agriculture and food sector, in the context of climate change and increasing risks for food security. |
d) in line with the duration of ETS Phase 4 |
|
a) the present approach of average of the 10% most efficient installations should remain |
|
c) I don’t know |
|
d) I don’t know |
|
a) no, there should be no deviations |
In the context of increasingly scarce free ETS allowances, operators that are to purchase allowances on the carbon market should have access to a sufficient number of allowances, securing liquidity in the carbon market and cost-efficient reductions. Increasing the number of free allowances to specific installations on the carbon leakage list risks increasing the ETS price for operators, which are not subject to such free allocation. |
a) no, the present approach should be maintained, i.e. that Member States can provide such compensation based on state aid guidelines |
|
Least important |
Less important |
Important |
Most important |
|
a) from the Member States' auction budgets |
|
A tailor made approach is needed for EU sectors of strategic importance in the context of climate change and increasing risks for food security. The EU agriculture and food sector is strategic, sensitive and exposed to increasing global trade flows; trade negotiations with Canada, the US, and Mercosur are set to exacerbate such trends. In parallel, in the Pacific area, notably the Trans Pacific Partnership (TPP) is set to increase competition faced by EU food and agriculture exporters on Asian markets from North and South American producers, many of which are not subject to carbon pricing. Enabling a more targeted assessment of the risks of carbon leakage would mitigate this challenge, and promote a critical level of EU production, needed to abate food security risks during crisis situations. The DAFC thanks for the opportunity to contribute to this consultation, and signals its continued interest in the dossier, which might take the form of further comments at a later stage. |
b) Trade association representing businesses |
Magyar Cementipari Szövetség (Hungarian Cement Association) |
1034 Budapest, Bécsi út 122-124. HUNGARY 1300 Budapest, Pf.: 230 Web: www.cemkut.hu Tel: +36-1-388-3793, +36-1-388-4199, +36-1-368-8433 /102-es mellék/ Fax: +36-1-368-2005 Email: nemesa@cemkut.hu |
a) yes |
|
1) yes |
a) yes |
2020-ig: nem 2020-25 után: igen 2020-ig kb. 20 %-os kibocsátás-növekedés várható, ugyanis a válság okozta termeléscsökkenés a 2020-ig tartó időszakban kibocsátás-növekedést előidéző termelésnövekedésbe fordul át. A 2020-25-től induló időszakban a nagyobb mértékű energiahatékonyságnak, elektrifikációnak, a zöldgazdaság fejlődésének köszönhetően a kibocsátások kismértékű csökkenését vizionáljuk. A csökkentéshez az új technológiák, mint pl. a CCS (szénmegkötés és tárolás) megjelenése is hozzájárul, azonban ennek hazai alkalmazhatósága jelenlegi ismereteink szerint kétséges, többek között a feltételezhetően rendelkezésre álló alacsony folyékony CO2 tárolókapacitás miatt. |
a) yes |
Az EU ETS költségek a tüzelőanyagok és a villamos energia árában is jelentkeznek, így minden érintett iparág érdekelt a minél jobb hatásfokú energiahatékonyság elérésében. A hazai cementgyárak és a mészüzemek azonban az elérhető legjobb technika szerint működnek (köszönhetően az early action-nek), hőenergia felhasználásuk az EU-ban a jelenleg elérhető legalacsonyabb, pl. a mésziparban a fajlagos fűtőanyag felhasználás uniós szinten 3,5 – 9,2 GJ/t mész, amíg Magyarországon 3,5- 3,7 GJ/t mész. A kibocsátást jellemzően a technológiai folyamatokból (mészkő hőbomlása) származó CO2 jelenti, mely a cementiparban az összes kibocsátás 60 %-a, míg a mésziparban 80 %-a. Az alapanyagból származó CO2 mennyisége nem csökkenthető. A fosszilis tüzelőanyagok részben helyettesíthetők biomassza tartalmú hulladékból visszanyert tüzelőanyagokkal, azonban a helyettesítés mértéke korlátozott, függ az alkalmazott kemence típusától, a termék-specifikációktól, valamint az IPPC szabályozástól. A tüzelőanyag-vált |
a) yes |
Az Európai Unió keleti felében lévő országok vállalatai számára nagy segítséggel bír minden kedvezményt jelentő intézkedés, mely lehetővé teszi versenyképességük megőrzését. Az átmeneti kedvezmények a harmadik országok földrajzi közelsége és az EU keleti régiójának a nyugatihoz képest kevésbé stabil gazdasága miatt különösen nagy jelentőségűek. A szénszivárgás kitettség elemzésről készült tanulmány kihangsúlyozza Magyarország sérülékenységét, hiszen a piac a Fekete-tenger felől a Dunán könnyen elérhető. Ez a folyamat tovább rontaná a hazai cementipar versenyképességét egy olyan helyzetben, amikor Magyarországon minden harmadik tonna cement importból származik. |
a) very adequate |
|
b) it largely keeps the incentive |
Az egyes iparágak részére térítésmentes kiosztott kvóták mennyisége nem fedezi az általuk kibocsátott mennyiséget és a jövőbeni várható termelés-növekedésnek és az egyre kisebb mennyiségű, ingyenesen kiosztott kvótáknak köszönhetően nőni fog a különbség, így az iparágak több kvótát kényszerülnek vásárolni, mely kibocsátás-csökkentési innovációt fog eredményezni. Azonban azt a két tényezőt figyelembe véve, miszerint a cement- és mészipar termelése megfelel az elérhető legjobb technikáknak és a kibocsátások 60, illetve 80 %-a (cement-, ill. mészipar) technológiai kibocsátás (a mészkő hőbomlásából és nem az elégetett tüzelőanyagból származik), kijelenthető, hogy iparágainkban nagyarányú kibocsátás-csökkentés csak aránytalanul költséges, azaz jelentős versenyhátrányt okozó befektetések és még nem kiforrott technikák (pl. CCS) megvalósulása esetén lehetséges. |
b) quite proportionate |
|
b) a higher share than in 2013-20 |
A 2013-20 közötti időszakra megállapított kvóták kiosztása az egyes vállalatok 2005-08-as vagy a 2009-2010-es termelési adatok alapján történt. Ezek a termelési mennyiségek esetenként tükrözhetik a gazdasági válság hatását, így a jelenlegi kereskedési időszakban várható magasabb termelési szintek miatt a következő kereskedési időszakban várhatóan megnövekszik az ingyenes kvóták kiosztására mutatkozó igény. |
a) a substantially higher share than in Phase 3 |
A CCS kereskedelmi szintű elterjedését csak 2025 utánra jósolja a Cementtechnológiai Útiterv, így a 2020 utáni időszakban a fejlesztési projektek támogatására az ipar részéről jelentős igény mutatkozhat. |
a) yes |
Az iparágak nagy hasznát vennék a kibocsátás-csökkentési projektek támogatásának, mivel a CCS technológia hazai alkalmazhatósága jelenlegi ismereteink szerint kétséges, többek között a feltételezhetően alacsony geológiai tárolókapacitás miatt. |
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
|
a) yes |
A hazánkba érkező cementimport közel 90 %-a érkezik az EU-n belülről, Szlovákiából, Romániából és Horvátországból. Annak ellenére, hogy az Európai Unió egyik szabadságelve az áruk szabad áramlása, a hazai munkahelyek megőrzése érdekében szükségesnek tartanánk bizonyos kompenzációt. |
a) the present two groups should remain |
|
a) the present criteria should remain |
|
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
d) in line with the duration of ETS Phase 4 |
|
c) the approach should be less stringent (please specify) |
Amíg nem áll széles körben rendelkezésre hatékony CO2 kibocsátás-csökkentési technológia vagy amíg nem lesz kiforrott a CCS technológia, addig kevésbé szigorú megközelítést tartunk elfogadhatónak, melyet alátámaszt az évről évre csökkenő ingyenes kiosztási mennyiség is. |
a) yes (please specify how often) |
Mivel az egyes iparági, így a cementipari beruházások tervezése, kivitelezése is hosszú időt igényel és a nagyobb jelentőségű modernizációs, a kibocsátott légszennyező anyag csökkentésére irányuló kivitelezések magas költségük miatt ritkábban megvalósíthatóak, így elegendőnek tartjuk a referenciaértékek az egyes kereskedési időszakok kezdete előtti felülvizsgálatát egy időben a szénszivárgási lista megállapításával. |
c) other (please specify) |
A gazdasági válság hatása miatti cementtermelés várakozásaink szerint az előttünk álló években emelkedni fog, így mindenképp fontosnak tartjuk az adatok frissítését. Nagyobb mozgásteret jelentene, ha a IV. kereskedési ciklusra vonatkozó kiosztás alapjául két, vagy akár három választható időtartam állna a vállalatok rendelkezésére termelési adatainak meghatározására. |
d) both b) and c) |
|
c) yes, in the form of additional free allocation |
|
Important |
Least important |
Most important |
Less important |
|
a) from the Member States' auction budgets |
|
|
b) Trade association representing businesses |
Magyar Kerámia Szövetség (Hungarian Ceramics Association) |
1034 BUDAPEST, Bécsi út 120. HUNGARY Telephone / Fax: +36 1 201 6682 Email: mszabo.keramia@upcmail.hu |
a) yes |
|
1) yes |
b) no |
A technológia jelentős – központilag támogatott - fejlesztése a feltétele a kibocsátás további csökkentésének. |
a) yes |
Igen, de csak a kezdeti fázisokban, mindaddig, amíg a technológiai tartalékok tartanak. |
a) yes |
|
a) very adequate |
|
a) it absolutely keeps the incentive |
A késztetés fennmarad, de egyéb tényezők is elősegítik. |
d) absolutely exaggerated |
|
d) there should be no limit to overall free allocation to industry |
|
a) a substantially higher share than in Phase 3 |
|
a) yes |
|
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
|
a) yes |
Az EU tagállamaibaiban egységesíteni szükséges az energiaadó visszaigénylésével kapcsolatos szabályozást. |
a) the present two groups should remain |
|
a) the present criteria should remain |
|
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
a) five years |
|
a) the present approach of average of the 10% most efficient installations should remain |
|
a) yes (please specify how often) |
A felülvizsgálat lehet azonos a tervezési időszakokkal. |
c) other (please specify) |
Mindenképpen indokolt lenne frissítés de döntő mértékben iparági stratégiák figyelembevételével. |
d) both b) and c) |
|
d) yes, in the form of financial compensation at EU-level |
|
Most important |
Important |
Less important |
Least important |
|
c) from both |
|
A kibocsátás-csökkentés szabályozása iparági stratégiák elkészítése nélkül bizonytalanságokat hordoz magában. Ez természetesen EU és tagállami finanszirozás nélkül nem lehetséges. |
b) Trade association representing businesses |
Magyar Téglás Szövetség (Hungarian Brick Association) |
1095 Budapest, Soroksári út 48. 11. ép. IV./12. HUNGARY Telephone/Fax: 0036 1-2017056 Email: iroda@teglasszovetseg.hu www.teglasszovetseg.hu |
a) yes |
|
1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry. Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improvements. |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
d) absolutely exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies. |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. This would limit the list to sectors really exposed and would eliminate the risk of a carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
As explained above, all energy intensive sectors as defined in the Energy Taxation Directive should be considered as exposed to the carbon leakage risk. As an alternative, trade and carbon intensity criteria should be used considering the following elements. First, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS. Second, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
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a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
b) Trade association representing businesses |
Magyar Vas- és Acélipari Egyesülés (Association of the Hungarian Steel Industry) |
Address: Magyar Vas- és Acélipari Egyesülés BUDAPEST, V. Október 6. u. 7. HUNGARY Postal address: 1373 BUDAPEST 5. PF. 548. HUNGARY Tel: (+36 1) 317 0515 Fax: (+36 1) 317 2743 web: http://www.mvae.hu email: steel.hun@euroweb.hu |
a) yes |
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1) yes |
a) yes |
Az EU acéliparának fajlagos kibocsátása globálisan a legkisebbek közé tartozik. A legnagyobb kibocsátó technológia (a nyersvasgyártás) esetében már az elméletileg lehetséges határ közelében van. Jelentős csökkentést csak új, ma még nem alkalmazott, költséges technológiákkal lehetne elérni, ami csak akkor nem rontaná a versenyképességet, ha a többletköltségeket az állam ellentételezné. |
b) no |
Az acélipar esetében az energiahatékonyság növelésének lehetősége erősen korlátozott, az ETS hatása ennek megfelelően ugyancsak korlátozott lehet. Az EU acéliparának versenyképességét az energia költségek mellett számos más tényező befolyásolja (betétanyagok ára, bérköltségek, környezet- és klímavédelmi költségek, stb.), így az említett hatás önmagában nem javíthatja a helyzetet. |
a) yes |
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c) quite inadequate |
Megfelelő csak akkor lehetne, ha az acélipari vállalatok a reális benchmarkokra alapozott határértékeknek megfelelő teljes mennyiséget ingyenesen megkapnák. A jelenleg érvényben lévő benchmarkok figyelembe vételével a hatás csak korlátozott lehet. |
a) it absolutely keeps the incentive |
A késztetés megmarad, hiszen az energiafelhasználás, ezen keresztül az energia költségek csökkentése az ETS-től függetlenül is jelentősen csökkentheti a termelési költségeket. |
c) quite exaggerated |
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c) a constant share as in 2013-20 |
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a) a substantially higher share than in Phase 3 |
Mint jeleztük, a további jelentős kibocsátás csökkentéshez az acéliparban eddig nem használt technológiákat kell alkalmazni. Ezek kifejlesztése és a bevezetéshez szükséges üzemi kísérletek rendkívül költségesek, amit a vállalatok saját erőből nem tudnak előteremteni. |
a) yes |
Mint jeleztük, a további jelentős kibocsátás csökkentéshez az acéliparban eddig nem használt technológiákat kell alkalmazni. Ezek kifejlesztése és a bevezetéshez szükséges üzemi kísérletek rendkívül költségesek, amit a vállalatok saját erőből nem tudnak előteremteni. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
A jelzett esetben lenne meg a probléma nagysága és a megoldandó probléma közötti összefüggés. |
c) I don’t know |
Attól függ, hogy végül milyenek lesznek a 2020 utáni ETS szabályok. |
a) the present two groups should remain |
A szénszivárgás kockázata néhány jelenleg nem érintett tevékenységnél is fennállhat, annak súlya azonban sokkal kisebb. Több kategória meghatározása csak rendkívül bonyolult módon lenne lehetséges és amellett heves vitákat váltana ki (pl. mezőgazdaság, szállítás, stb). |
a) the present criteria should remain |
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a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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b) longer (please specify) |
Az időszak meghatározásánál figyelembe kell venni az adott ágazatok beruházási költségeit, ill. a beruházási tervek kitűzéséhez szükséges előkészületek, tervek kidolgozásának időszükségletét. Nagy volumenű beruházásokhoz, ill. kísérleti technológiák kidolgozásához az acélipar esetében 10 év lenne indokolt. Ez nyújtana biztos alapot a hosszú távú beruházási döntések meghozatalához. |
d) I don’t know |
A jelenlegi alapelv elfogadható lenne, ha a benchmark értékek reálisak lenének. Az acélipar esetében azonban a benchmark értékek a legjobb EU-beli adatoknál is kisebbek. |
a) yes (please specify how often) |
A jelenlegi benchmark értékek az acélipar esetében irreálisak. Felülvizsgálatukra azonnal szükség lenne, ezt követően 5 évenként lehetne indokolt a felülvizsgálat. |
c) other (please specify) |
A kiosztásnál a reális benchmark értékeket és a tervezett termelési volument kellene alapul venni. A következő év elején a tényleges termelési adatok alapján ki kellene számítani a reális kvóta mennyiségeket. Amennyiben azok kisebbek a kapott mennyiségnél, a különbözetet le kell vonni a következő évre számított mennyiségből, amennyiben nagyobbak, hozzá kell adni. |
b) yes, there should be deviations with higher allowances for installations facing specific hardships |
Kivételes esetekben, amikor a létesítmény életképességének fenntartásához szükség van rá, ideiglenesen legyen mód az eltérésre. |
c) yes, in the form of additional free allocation |
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Most important |
Less important |
Important |
Least important |
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b) from free allocation |
A jelzett esetben érhető el, hogy a támogatás oda kerüljön, ahol fejlesztésre van szükség. |
Az ETS legnagyobb problémája, hogy nem globális. Az ETS a szénszivárgásnak kitett ágazatoknak adott kedvezmények (amelyek egyre csökkennek) ellenére sem biztosíthatja a korrekt versenyt azon országokkal szemben, amelyek nem kényszerítik valamilyen eszközzel vállalataikat a kibocsátás csökkentésére. A legjobb megoldás az lenne, ha nemzetközi benchmark értékeket határoznának meg és azon országok importját, amelyeknek ennél nagyobbak a fajlagos kibocsátásuk, az eltérés mértékével arányos vámmal sújtanák (zöld vám). Erre jelenleg nincs esély, de törekedni kell rá. Globális megegyezés hiányában fenn kell tartani a szénszivárgásnak kitett tevékenységeknek adott kedvezményeket. |
b) Trade association representing businesses |
Magyar Vegyipari Szövetség (Hungarian Chemical Industry Association) |
1036 Budapest, Bécsi út 85. HUNGARY Tel: 06-1-363-8720, 363-8362 Fax: 06-1-363-8720 Email: kozpont@mavesz.hu |
a) yes |
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1) yes |
b) no |
Néhány iparágnál lehetséges még csökkentés, de a magyar vegyipar, mint energia intenzív ágazat már korábban hatalmas beruházásokkal csökkentette a kibocsátását. A szigorú benchmark értékek szintén arra kényszerítik a vállalkozásokat, hogy ahol még lehetséges, ott minél előbb végezzék el a kibocsátás csökkentő beruházásokat. A termelés kívánatos és várható bővülése mellett tehát összességében nem reális további kibocsátás csökkentést várni 2020-ig sem, azt követően pedig egészen biztosan nem. |
a) yes |
Csak kismértékben, közvetett módon segíti az energiahatékonyságot és a versenyképességet. A magas energia árak sokkal erősebben motiválják az ezeket szolgáló beruházásokat. |
a) yes |
Ezek a kedvezmények nagyon fontosak, hiszen az EU rendelkezik a legszigorúbb klímavédelmi szabályozással. A magas energia árakkal sem lehet kikényszeríteni egy szint után további kibocsátás csökkentést, hiszen azokat egy ésszerű határon túl nem lehet megvalósítani. Mindezekre tekintettel a kibocsátási lehetőségek szűkítése, vagy erőteljes drágítása az energia intenzív ágazatok EU-n kívülre telepítéséhez vezetne. |
b) quite adequate |
Az ingyenes kiosztás alapvetően megfelelő eszköz a szénszivárgás megakadályozására. A probléma a rendszerrel az, hogy az ágazatközi korrekciós faktor valamint a túl szigorú benchmark értékek miatt a vegyipar versenyhátránya a térítésmentes kiosztási rendszerrel sem került teljes egészében orvoslásra. |
a) it absolutely keeps the incentive |
Miután a benchmark értékek a létesítmények leghatékonyabb 10 %-ának átlagához rendelt érték, nagyon sok érintett vegyipari cég térítésmentes kvótája nem fedezi a kibocsátását, így fennmarad a késztetés a technológiai fejlesztésre. |
c) quite exaggerated |
Az adminisztratív teher a vegyiparban különösen a kisebb cégeknél jelent problémát. |
b) a higher share than in 2013-20 |
A szénszivárgás csökkentésével és az ipari versenyképesség javításával kapcsolatos kvóták mennyiségének növelését javasoljuk. A növekményt az ingyenesen kiosztható sapka progresszív csökkenésének megállítására, valamint az ipari kibocsátás csökkentést eredményező kutatás-fejlesztésre kellene fordítani. |
e) I don’t know |
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a) yes |
Az ipari kibocsátás-csökkentést eredményező technológiai fejlesztések és beruházások az európai és benne a magyar vegyipar versenyhátrányát csökkentené, ezért ennek támogatására nagy szükség lenne. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
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a) yes |
Az ingyenesen kiosztható sapka folyamatos csökkentése komoly versenyhátrányt jelent ezeknek az ágazatoknak, így a sapka csökkentését 2020 után meg kellene szüntetni. Az indirekt kibocsátás tagállami hatáskörben lévő opcionális kompenzációja helyett egységes közösségi szintű megoldást javaslunk, bevonva az indirekt kibocsátást is a térítésmentes kiosztás rendszerébe. |
a) the present two groups should remain |
A szénszivárgásnak kitett ágazatok védelmét fenn kell tartani mindaddig, amíg globális szinten nem születik azonos kibocsátás csökkentési szabályozás. A világ vegyipari termelésében az európai vegyipar egyre szűkülő szeletet képvisel, sőt önmagához képest is csökkent 2013-ban a termelése. Ezt a folyamatot csak hatékony versenyképesség javító intézkedésekkel lehet megállítani, illetve megfordítani. |
a) the present criteria should remain |
A kiszámítható vállalkozói környezet nagyon fontos versenyképességi tényező, ezért a jelenlegi rendszer fenntartását javasoljuk. A vegyiparban egyaránt fontos a vállalati bruttó hozzáadott értékhez képesti arány, illetve a harmadik országokkal folytatott kereskedelem intenzitásának vizsgálata. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
A jelenlegi értékek fenntartását támogatjuk. A kritériumok szigorítása a szénszivárgásnak kitett ágazatok listájának szűküléséhez vezetne, ami a védelemből kieső ágazatoknál, al-ágazatoknál versenyhátrányt okozna. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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d) in line with the duration of ETS Phase 4 |
A kiszámíthatóság növelése önmagában pozitív érték. |
c) the approach should be less stringent (please specify) |
A szénszivárgást megelőző jelenlegi intézkedések alapvetően működőképesek, de finomhangolásra szükség lenne. A létesítmények leghatékonyabb 10 %-ának átlagához rendelt benchmark értékeket közelíteni kellene az átlagos hatékonysági értékhez azoknál az ágazatoknál, ahol a két érték az átlagosnál jobban elválik egymástól. |
b) no |
A vegyiparban a beruházások előkészítése hosszú időt igényel, a technológiai berendezések élettartama pedig 30-40 év. Mindezeket figyelembe véve a rövid távú jogszabályi változások nagyon megnehezítik az ágazat működését. |
c) other (please specify) |
Egy fejlődő magyar gazdaság növekedésének gátja lehet, ha a múltbeli termelési adatokat a jelenlegi időszakra vonatkoztatva kellene meghatározni a jövőben is. Javasoljuk, hogy a térítésmentes allokációt az adott időszakhoz legközelebbi, a reális gazdasági értékeket mutató éves adatra kellene vonatkoztatni valamennyi létesítmény esetében. Tehát alaphelyzetben 2020-ban a 2019-es adatokat kellene figyelembe venni, ám ha egy létesítmény valamilyen egyszeri oknál fogva 2019-ben nem a normál termelési rendben működött, akkor erre a létesítményre a 2018-as adatokat lehessen alkalmazni. |
e) I don’t know |
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c) yes, in the form of additional free allocation |
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Most important |
Important |
Less important |
Least important |
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a) from the Member States' auction budgets |
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b) Trade association representing businesses |
Milchindustrie-Verband e.V. Berlin, MIV |
MIV Jaegerstr. 51 D- 10117 Berlin Eckhard HEUSER heuser@milchindustrie.de |
a) yes |
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1) yes |
a) yes |
The dairy industry has already done a lot to reduce emissions, and the speed of reducing greenhouse gas emissions is slowing down Further reduction of fossil energy will only be possible with a technology breakthrough. |
b) no |
Not in the Current Design. The cost effect is too low. Despite this, most potential for energy efficiency and energy reduction are already implemented for economic reasons. The tax is not fed directly back as an incentive to the industry. Moreover, ETS represents added costs only to the EU industry, decreasing de facto its competitiveness. |
a) yes |
The Goal of carbon leakage is precisely to compensate for the economic disadvantages compared to third countries. Third countries with less ambitious climate policies will not be raising taxes on its industries, but neither does this help with Climate Change. The EU should plan to incentivise industries to reduce their energy intensity, which will help with Climate Change. special measures are needed in order to address potential competitiveness disadvantages vis-à-vis third countries with less ambitious climate policy. These measures must not be transitional but stable until a level playing field of climate policy costs will be achieved |
b) quite adequate |
Free allocation is only adequate in the current structure of a tax burden. It does not achieve forward movement. A more proactive approach where industry is assisted, or nudged, to be competitive will achieve the same outcome. Free emission allowances, thanks to the establishment of the CL list, limits the costs of the EU ETS, thus limiting the negative impact on our international competitiveness. Without free allocations, CL would first result in a decline in investments in EU countries due to the uncertainty of the EU climate policy and carbon market. The allocation of free allowances is of particular importance for energy-intensive processes that have already achieved most of the possible improvements in energy-efficiency and in the reduction of their relative emissions. But if it is one of the necessary tools to address CL, it should be completed with other relevant tools to encompass all effects of carbon costs like indirect emissions and low carbon price effects. |
b) it largely keeps the incentive |
Free allocation does not harm innovation. The cap contributes to innovation. |
b) quite proportionate |
Protecting the EU food industry competitiveness means keeping jobs and investments in the EU. Any measure which helps to protect the competiveness of the EU industry should be implemented. The excuse of "administrative burden" is in our view not appropriate to question a tool which is efficient. |
b) a higher share than in 2013-20 |
The dairy industry exports will increase (especially after the end of the quotas) and competition globally will increase, therefore a higher share is necessary. |
b) the same share as in Phase 3 |
We are against CCS. The efficiency of this method is much too low. There should not be funding for CCS, but instead funding should be driven aggressively towards renewables, renewable energy storage, and the hydrogen economy. These technologies are developing at a rapid pace, and represent the EU’s sustainable future. We do not support CCS for the simple reason that it is hiding the real problem. The burning of fossil fuels needs to be drastically reduced. CCS continues the status quo, but attempts to bury the output (carbon dioxide). If funding is continued with fossil sources, this should be aimed at improving efficiencies, reducing energy need in the first place, and lastly lower carbon intense options (gas). |
a) yes |
ETS money should be used to support innovation, but innovation is of broader public interest and would need additional support and founding as well. |
c) other types of funding (please specify) |
ETS money should be used to support innovation, but innovation is of broader public interest and would need additional support and founding as well. Otherwise it will come to a point where the ETS system must pay innovations in companies that have nothing to do with ETS. Auctioning could be also part of the solution. |
a) yes |
Innovation support in itself is helpful. The base for innovation lies in knowledge development, and Europe’s institutions contain increasing amounts of cutting edge knowledge. But it is essential that this is enabled to be brought to the market place by a carefully managed knowledge transfer system. That knowledge needs to help Europe maintain its sustainable industries, but is too easily exported by a lack of opportunity in the EU to translate the innovation into reality. Additional measures must include free allocation for indirect emissions and no cross-sectorial correction factor for sectors exposed to carbon leakage |
a) the present two groups should remain |
If there is an ETS, then there should be a carbon leakage list, to create a level playing field for the considerable amount of products going out of Europe. |
a) the present criteria should remain |
Ideally any manufacturing company subject to ETS must be protected against carbon leakage. Nonetheless if a carbon leakage list is to be maintained the present criteria should remain. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
For reasons of simplicity and full understanding by all, those thresholds should not be changed. |
c) I don’t know |
The continuation of an already complex system needs review. It would probably not benefit from further complexity? If a carbon leakage list is to be maintained a qualitative assessment should be possible for some sectors. |
a) five years |
Five years are necessary as a minimum to give stability, and the framework needs to be unchanged over this period. |
a) the present approach of average of the 10% most efficient installations should remain |
The current rules, even if very demanding, should be maintained. But there should be no cross sectorial correction factor that circumvents the levels of the benchmarks by reducing the allocation below. |
b) no |
Analogous to the BREF process. Technology continues to change. However, it needs to be recognised that there are at least 3 levels of capacity within industry to be considered. The first level is what is technically possible given state of the art technological improvements. But, this may be cost prohibitive, or the technology still immature, and so the infrastructure for provision and maintenance may not be available. So the second level is what is financially possible, given current accounting and capital flow regulations and options. There is also a third practical level, which reflects real conditions in industries in Europe. To keep the approach of the 10% most efficient installations, it may be advisable to ascertain benchmarks based on the future financially possible technologies, rather than absolute state of the art. Legislative predictability is very important to keep industry investing in the EU. |
c) other (please specify) |
Take the most current phase close to (just before) the writing down to the rules (eg 2013/14 if written down now). |
a) no, there should be no deviations |
Harmonised rules must be kept in order to avoid any case of competition distortion. |
c) yes, in the form of additional free allocation |
Free allocations for indirect emissions will help to avoid the current situation of diverging national approaches leading to competition distortion. |
Most important |
Least important |
Less important |
Important |
When providing innovation support, the first key area is always to get the project from the laboratory (or academic solution) to reality (the small scale prototype). Support is important all through the project, but most innovation fails finally at the “Valley of Death”, so called because external funding only moves in when it is obvious customers are using the technology. It is very difficult to persuade end-users to invest in a technology, even if a large scale pilot is successful, when no-one else has yet purchased and implemented it. Support to bridge that gap is essential for the innovation to finally break through and succeed. |
d) other |
A combination of resources would be necessary (cf. also II. 9 and 10). ETS money should be used to support innovation, but innovation is of broader public interest and would need additional support and founding as well. Auctioning founds could be also part of the solution. |
The upcoming reform of the ETS and the CL-rules is a good opportunity to optimise the system for the dairy companies, whose purpose is not energy consumption (or conversion or supply), but the production of high quality products for human nutrition and well-being. Motivation of energy savings are in the design of optimal and economic processes and a high awareness of the responsibility for our environment. The reform should take into account the efficiencies of various systems and technologies - a link with the BREF process would be helpful. Key to reducing climate impact is reducing carbon output. If an industry is to be allowed to sustainably expand in Europe (e.g. to meet export requirements for a growing world population) the first step has to be to concentrate on conversion efficiency or ratio intensity. The second step needs to approach reuse or recycling of energies and the use of lower carbon technology. Finally technology to reduce energy requirement at source must be develope |
b) Trade association representing businesses |
Mineralölwirtschaftsverband e.V. (Association of the German Petroleum Industry, hereinafter also called "MWV") |
Georgenstraße 25 10117 Berlin Germany ph: *49 (030) 202 205 30 Mail: Info@mwv.de |
a) yes |
|
1) yes |
a) yes |
Some industries may be able to reduce emissions through further energy efficiency improvements. However, the Refining industry has already used most of the options to improve its energy efficiency cost-effectively: the GHG intensity of European refineries is already world class. The proposed 43% emissions reduction objective is technologically and economically unachievable for the refining industry at the pace implied by the Linear Reduction Factor. As a consequence of a too ambitious target, industry would have either to purchase allowances (sunk cost with no return on investment) or reduce capacity and close installations - detrimental for employment, trade balance and security of supply. |
a) yes |
Reporting and monitoring emissions does quantify emissions at installation level. The carbon price does incentivise industrial installations to reduce emissions and improve efficiency. However, for the Refining sector, this is not the most significant factor, as the main driver for such improvements remains the high proportion of energy costs in total operating costs (63% on average for EU-28 refineries, according to Solomon Associates). EU refineries in Western Europe are collectively the least carbon intensive in the world, driven not by legislation but by measuring the economic cost of energy use. However, the EU ETS is an additional cost to EU industry and not to its non-EU competitors, which is potentially very damaging for competitiveness. This is why industry needs sufficient carbon leakage protection. |
a) yes |
Until there are equivalent carbon pricing policies in competing sectors, support for EU industrial sectors exposed to carbon leakage must continue as a core element of the EU’s post-2020 climate policy framework. Removing carbon leakage protection would result in a sudden decrease in free allocation: from the current allocation at 100% at the benchmark to 80% in 2013 declining to 30% in 2020 and zero by 2027 (EU ETS Article 10a 11). For Refining, competing regions include Russia, Middle East, USA, and parts of Asia and so support measures should remain until these key refining competitors adopt carbon pricing. Delocalisation of petroleum products production outside the EU is also likely to have negative effects of global GHG emissions. According to a recent study from Vivid Economics, commissioned by the UK Department of Energy & Climate Change, EU Refining is on average less emissions-intensive than non-EU competitors. Carbon leakage therefore exceeds output leakage and is about 135%. |
b) quite adequate |
In the absence of an international climate agreement, MWV prefers both free allocation, and enhanced free allocation for exposed sectors. For Refining, the benchmark was set at the top 10% performance level. The impact of such a tough benchmark is significant. According to the 2013 allocation data, the refining industry has received less than 80% of its quota as free allocation and is the only major sector receiving less than its actual emissions. This situation is highly detrimental to the refining industry’s competitiveness and requires corrective action. In addition, under the current system, protection will be further eroded due the decreasing industry cap and the CSCF (by 2030, even the most efficient installations would be left with only 60% free allocation if a 2.2% Linear Reduction Factor continues to be applied). The EU ETS needs to be reformed to provide sufficient levels of protection to industry until carbon leakage is addressed through an international agreement. |
a) it absolutely keeps the incentive |
The main incentive for reducing emission in Refining is reducing energy costs. Carbon cost does add to this incentive. The incentive for any installation with the capacity for cost effective emissions reduction is the carbon price: either avoiding buying allowance or being able to sell their surplus allowances whether these are received free or not. Therefore, free allocation is used to protect industry from carbon leakage while keeping the incentive intact. |
b) quite proportionate |
In the refining sector with large scale complex installations, implementation of the CWT benchmarking provisions was a major undertaking and involved considerable work by the sector, national governments and the Commission. Given the importance of the competitive threat, the work to create an accurate and fair system is considered proportionate to the objectives. However, if the system could be simplified, we would be willing to work with Commission to achieve this. |
d) there should be no limit to overall free allocation to industry |
If the intention is to provide carbon leakage protection to industry then the number of allowances need to fully cover direct and indirect emissions for best performing installations – hence no limit to overall free allocation. There is no centralised post 2020 allowance budget - control of proceeds from auctioning is delegated to Member States, with some redistribution via the solidarity and growth provisions. Until the issue of carbon leakage is addressed through an international climate change agreement, sufficient levels of protection to industry are needed. To provide an adequate protection for the European refining industry, a CSCF should not be employed to avoid reductions in the amount of free allocation. |
e) I don’t know |
The NER 300 programme has been complex to administer, had a market impact of releasing allowances onto the market early, and has not delivered large scale CCS demonstration project. A large scale CCS demonstration project requires dedicated funding outside EU ETS. In Phase 3, auctioning is expected to generate substantial revenue to governments; these revenues, should be returned to the economy without creating distortions between energy sources and technologies. |
b) no |
The NER 300 programme funding is too dependent on market pricing. Instead, there should be more innovation support and new low carbon technologies require more financial stability, thus existing funds such as Horizon 2020, 7th Framework and SET programmes should be augmented, rather than creating new funding frameworks. |
c) other types of funding (please specify) |
Rather than establishing new bureaucracies, existing funds such as Horizon 2020, 7th Framework and SET programmes should, where required, be augmented by EU and Member State funding. In addition, support for innovative low-carbon technologies should be technology neutral as well as time- and cost- limited - all energy sources should be integrated under normal market conditions, without subsidies (including system connection, balancing cost and exposure to price risk) as soon as possible. |
a) yes |
EU industry needs first and foremost greater equity of non-EU with EU abatement measures. Until there are equivalent carbon pricing policies in competing sectors, EU industry need carbon leakage protection to remain competitive, via free allocations. There are currently no EU ETS measures addressing carbon leakage post 2020. Thus, the ETS Directive needs to be reviewed to make sure that levels of free allocation after 2020 adequately reflect the industry’s carbon leakage exposure. The current indirect emissions compensation system is unsuitable. It should be reformed to allow free allocation for all electricity consumed in refineries. In general, the strategic importance of manufacturing industries, such as Refining, needs to sufficiently reflected across all EU policies; the cumulative impact of EU legislation on these industries including the EU ETS, must be carefully looked at. |
a) the present two groups should remain |
Industrial capacity in EU has declined (According to the Commission communication for a European industrial renaissance, the share of manufacturing in GDP has fallen from 15.4% to 15.1% in 2013) and exposure to international competition remains a key concern for many energy intensive industries, including Refining. Creating uncertainty about how the risk of carbon leakage in industrial sectors such as Refining will be mitigated is not the right way to promote recovery. The current two groups should remain until progress is achieved in the international arena to re level the competitive playing field by introducing similar carbon pricing in other regions that compete with EU Refining. |
a) the present criteria should remain |
For Refining as a mixed sector both trade and GVA exposure and thresholds are very important. Refining is a “margin business”, acting between two international, open commodity markets: the crude oil market and the refined products market. EU Refining is also open to traded imports so that pass-through of EU carbon costs is limited by non- or less-regulated trading partners. Pass-through becomes even more difficult as imports rise. For the carbon leakage assessment, it is therefore important to keep looking at the effect of carbon costs on Gross Value Added rather than production costs and to take sectors’ trade intensity into account. Carbon costs should cover both direct and indirect carbon costs due to their cumulative impact on Refining’s competitiveness. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
If the criteria are tightened thus reducing the number of sectors/sub-sectors on the list, some key strategic sectors for the EU’s economy risk being excluded from carbon leakage protection, with potential negative spill-over effects on other industries (e.g. for the oil Refining industry and the petro-chemical industry, which are strongly inter-connected). Specifically for the Refining sector, the thresholds calculation for GVA and Trade Intensity is problematic. The EUROSTAT database shows some 1,000 plants under NACE code 19.20, but there are less than 100 Refineries in the EU covered by the EU ETS. Objective analysis of GVA requires more granular data for the Refining sector. Carbon leakage is also about future investment decisions. Therefore the GVA criteria carbon price must reflect future projected EUA prices and not current prices. This is common refining industry practice in evaluating major projects. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
MWV supports the use of qualitative assessments but these should be kept as simple as possible. Legislative requirements on the quality of fuels (e.g. marine fuels specifications) and the conversion of heavy residues into lighter products result in the increase of refinery energy intensity and GHG emissions. If the Refining sector undergoes a qualitative assessment, this so-called “Refining paradox” would need to be taken into account. |
d) in line with the duration of ETS Phase 4 |
Mid-period review is detrimental to investment certainty, given the significant difference in the levels of free allocation according to the carbon leakage status, and the rest (allocation at 100% at the benchmark vs. 80% in 2013 declining to 30% in 2020 and zero by 2027). Long-term visibility is essential for investment decisions in the refining industry. |
c) the approach should be less stringent (please specify) |
A benchmark excluding outlying installations would take account of typical carbon leakage exposure rather than average of top 10% which may be atypical in character, depending on sector. This is particularly important as EU benchmarks do not rate performance of installations outside the EU - thus potentially penalising EU installations that are more efficient than their non EU competitors. Potential effects on EU strategic industrial sectors - including those integral to the supply chains of other sectors - must be considered. The current benchmark has turned out to be penalising for the refining sector, both in absolute terms and in comparison with other sectors. In combination with the CSCF, carbon leakage protection currently covers less than 80% of emissions to the refining sector even though it is subject to carbon leakage. |
b) no |
In order to provide free allocation in an effective way, the benchmark should accurately reflect the performance of ETS installations. However, MWV does not support a revision of the benchmarks in based on the technological state of the art, as the latter is subject to interpretation (e.g. do we look at progress worldwide where verified data is lacking, or only the situation in the EU?). Integrating state of the art technologies implies a change in the refineries configuration, which is challenging and extremely costly due to physical and other operational constraints. Investments into such technologies have to pay their way. |
c) other (please specify) |
Free allocation should reflect economic reality per installation based on the most recent years. More recent verified data should be used: free allocation should reflect installations’ economic activity, based on the most recent years. In the case of refineries, a regular turn-around period is required for regulatory inspection, maintenance and capital projects. If this is not taken into account, refining installations will be penalised in terms of future allocation. Alternative approaches such as extending baseline periods or some form of dynamic allocation should be considered. |
a) no, there should be no deviations |
General harmonised allocation rules should continue to apply for all carbon leakage installations in the same manner. |
c) yes, in the form of additional free allocation |
Carbon leakage protection should also include free allocation for EU ETS cost pass-through in electricity prices for all sectors exposed to carbon leakage and in a harmonised fashion. This is in addition to free allocation for direct emissions. The absence of an EU harmonised indirect emission compensation system, by leaving decisions to Member States, restricts compensation to a few sectors. As many Member States do not grant such compensation, this creates single market distortions. Compensation should be reformed to allow free allocation for all electricity consumed in refineries (i.e. net power used). If a sector is deemed at risk of direct carbon leakage, then free allocation should automatically be given for indirect carbon emissions to all installations in that sector. |
Important |
Most important |
Less important |
I don't know |
|
d) other |
MWV is strongly in favour of greater innovation support by the EU and its member states, which may bring more significant and cost-effective results than current renewables mandates, but we do not believe that the use of ETS revenues is the right mechanism. Innovation should be supported by existing funds such as Horizon 2020, 7th Framework and SET programmes. |
Competitiveness and carbon leakage risk must be kept under constant review. Assessments should not look for evidence that leakage has occurred and competitiveness already damaged, but rather assess the level of risk in future. The allocation system must not penalise economic recovery or growth. Regarding the format of the questionnaire, we believe that some of the questions are not neutral and push the respondents to make a certain response. The answers cannot always be as simple as yes or no. Many of the answers are provided as yes or no, with additional conditions – which are required as part to the answer. This does not necessarily mean that the respondent “does not know” and has no valuable input to bring. The report of the consultation should look and separately evaluate the responses from the stakeholder organisations which represent a wider share of civil society and industry. This is to avoid giving undue weight to responses from individuals. |
b) Trade association representing businesses |
MKB-Nederland (Royal Association representing Dutch SME's; transparency register: 05673984520-73) |
Bram Borgman 5 Rue Archimède, box 4 1000 Brussels Belgium |
c) not relevant |
MKB-Nederland represents both companies that do and companies that do not fall under the scope of the EU ETS |
1) yes |
c) I don’t know |
Provided sufficient protection against carbon leakage (for both direct and indirect CO2-costs) is given to companies exposed to international competition, and sufficient support for research, development and innovation is provided, carbon leakage industries should be able to further reduce GHG emissions without (substantially) reducing Industrial production in the EU. Sufficient protection against carbon leakage will have to be based on free allocation based on actual production and realistic benchmarks, where the most CO2-efficient installations receive 100% of their needed allowances for free. However, you never know upfront whether the necessary breakthrough technologies will be developed in time. Furthermore this partially depends on which sectors will and will not be included in the CLL. |
c) I don’t know |
The EU ETS is first and foremost a compliance instrument which ensures that the EU achieves, for that part of the emission that fall under the EU ETS, its CO2-reduction goal in the most economically efficient way. For the companies that fall under the EU ETS energy consumption is a relatively large share of production costs and these companies therefore have a natural incentive to become more energy efficient and have done so over the past decades. However it should be noted that investment decisions are made on an international scale and that the EU ETS may divert investments away from Europe if insufficient protection against carbon leakage is provided. |
a) yes |
The position of internationally competitive companies (“carbon leakage companies”) should be secured by a 100% free allocation of rights based on actual production and realistic benchmarks based on the best performance in the sector; and compensation for the indirect (electricity) costs also based on the best performance in the sector. In order to guarantee 100% free allocation and prevent the application of the C-factor, a certain amount of allowances will have to be put aside in a separate reserve (Allocation Supply Reserve). |
a) very adequate |
Provided free allocation is based on actual production levels and realistic benchmarks |
a) it absolutely keeps the incentive |
The incentive remains in place through both the benchmarking system and teh carbon price. |
a) absolutely proportionate |
|
d) there should be no limit to overall free allocation to industry |
The share of allowances to an individual installation should be dependent on the actual production of that individual installation. If production is higher, allowances allocation should be higher, and vice versa. The fixed ratio between the industry and energy sector pots should be let go of and in case of higher than expected economic growth allowances to industry should be provided from an allocation supply reserve. This allocation supply reserve is to be filled with allowances from the auctioning. |
a) a substantially higher share than in Phase 3 |
|
a) yes |
|
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
|
a) yes |
|
a) the present two groups should remain |
|
a) the present criteria should remain |
|
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
d) in line with the duration of ETS Phase 4 |
|
a) the present approach of average of the 10% most efficient installations should remain |
|
a) yes (please specify how often) |
|
c) other (please specify) |
|
e) I don’t know |
|
c) yes, in the form of additional free allocation |
|
I don't know |
Most important |
Important |
Less important |
4x "I don't know" (however, that's not allowed) |
c) from both |
|
The position of internationally competitive companies (“carbon leakage companies”) should be secured by a 100% free allocation of rights based on actual production and realistic benchmarks based on the best performance in the sector; and compensation for the indirect (electricity) costs also based on the best performance in the sector. In order to guarantee 100% free allocation and prevent the application of the C-factor, a certain amount of allowances will have to be put aside in a separate reserve. Ecofys recently studied the possibilities of model which meets these requirements. The resulting report (“A dynamic allocation model for the EU Emissions Trading System”) can be found via: http://www.ecofys.com/en/news/a-dynamic-allocation-model-for-the-eu-emissions-trading-system/ |
b) Trade association representing businesses |
Nordenergi (the joint collaboration between the Nordic associations for electricity producers, suppliers and distributors) |
NORDENERGI SECRETARIAT c/o Finnish Energy Industries Fredrikinkatu 51-53 B P.O.Box 100 FI-00101 Helsinki, Finland Tel: +358 9 5305 2115 Email: taina.wilhelms@energia.fi www.nordenergi.org |
a) yes |
1) yes |
a) yes |
Implementation of further measures might be possible without reducing production. For example energy efficiency measures including further process optimisation and fuel switch to natural gas and biomass in some industries. However, the potential is rather small with existing technologies. Emission reduction measures in the EU have so far been far from cost optimal. Failure to prioritise affordable measures has put remarkable stress on the economy and is risking industrial growth in the future. Cost efficient action through a carbon price signal can further reduce emissions without loss of growth. |
a) yes |
A price on carbon makes fossil energy more expensive hence creating a direct incentive to reduce the use of fossil energy, but also indirectly through a higher price of electricity. However, one needs to differentiate between energy-intensive industries and non energy-intensive industries. The indirect effect of EU ETS on the electricity cost may make energy-intensive industries non-competitive due to limited possibilities to reduce energy use without reducing production. |
a) yes |
In order to reduce emissions, the price on carbon needs to increase substantially and it will be difficult for industries to cope with this price level. Here, the indirect effect via the electricity price is of significant importance, especially for industry in countries with a low share of fossil based electricity generation. Therefore special transitional measures for EU industry are necessary. |
b) quite adequate |
Historically, low electricity prices has been one of the most important feature explaining the global competitiveness for energy intensive industries in the Nordic countries, and at the same time to extremely low emissions of carbon dioxide. By the EU-ETS this benefit is deteriorated with lower reinvestments and also a serious risk of pre-mature closing of production in the Nordic countries. A significant rise in CO2 prices could have a negative effect on investments in these sectors, if not mitigated by assisting measures – such as free allocations. The global demand will instead have to be met by production with a less carbon efficient energy supply. Free allocation is a good measure to alleviate the impact of direct cost of allowances to the industry. Though, the allocation has historically showed a large “over- allocation”. Therefore it is important to reduce the overall amount of quotas and also the free allocation. See also question 24. |
b) it largely keeps the incentive |
The economic incentive does not depend on the way the allowances have been received, but on the alternative cost for abatement or non-abatement. The obligation to surrender emission allowances each year imposes a cost on ETS-companies. The use of free allowances has an alternative cost as you can choose between surrendering the allowance or selling it at the same time as reducing your own emissions. So in principle, the incentive to reduce emissions is still there even though the allowances are allocated for free. |
e) I don’t know |
|
c) a constant share as in 2013-20 |
This question concerns the distribution of the burden of cost to achieve the climate target. There cannot be a limitless free allocation, since this would erode the EU-ETS totally. The need for free allocation depends on the international context as well as other policies in the EU and the resulting allowance price. Incentives and/or compensation to industries with risk of carbon leakage should be adapted to the development of regulations for industries in competing countries. |
a) a substantially higher share than in Phase 3 |
It should be further investigated if compensation for indirect costs could be channeled through this NER 300 programme. If not, innovation support could be channeled through a separate scheme. NER 300 did not manage to finance a single CCS-project, mainly due to low ETS-price. In order to reach EU reduction targets, we need more innovative technology development. Therefore a higher share than in the period 2013-2020 should be set aside to support innovative technologies – but not as a support to commercial renewable. |
c) I don’t know |
See answer to question 8. |
d) I don’t know |
|
a) yes |
Compensation for indirect costs is necessary. Compensation should be made EU-wide. -The present system to distribute compulsory free allowances for the use of fuels for carbon leakage industries but not compulsory compensating indirect costs in the price of electricity is not technology-neutral and distorts competition at the EU-level and in Member States. -It is fundamental for the functioning of ETS that the carbon leakage is being prevented. -Current various national state subsidies distort competition on the internal EU market. |
a) the present two groups should remain |
The system should not be too complicated. |
g) I don’t know |
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c) I don’t know |
|
c) I don’t know |
|
b) longer (please specify) |
Investments in these sectors need long term contracts and investment horizons. 5 years will only contribute to carbon leakage. |
a) the present approach of average of the 10% most efficient installations should remain |
|
c) I don’t know |
|
d) I don’t know |
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a) no, there should be no deviations |
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d) yes, in the form of financial compensation at EU-level |
Nordenergi proposes EU-wide compensation scheme of indirect costs caused by the emissions trading scheme for the electro-intensive carbon leakage industries with the same EU-wide or nationally binding rules.It should start at the latest in the beginning of the next ETS period in 2021.There are five major reasons for the need of compensation: -Fundamental for the functioning ETS that the carbon leakage is being prevented. -Essential for the European economy, competiveness and welfare. -Current various national state subsidy schemes distort competition on the internal EU market. -Present system to distribute compulsory free allowances for the use of fuels for carbon leakage industries but not compulsory compensating indirect costs in the price of electricity is not technology-neutral and distorts competition at the EU-level and in Member States. -Increasing import of electricity from the third countries which are not involved in the ETS can form a threat to the energy security of the EU. |
Least important |
Less important |
Most important |
Important |
|
e) I don't know |
|
In addition to our previous comments concerning free allocation (question 4) we would like to emphasize that free allocation by itself will not help the case of electricity consuming industries. Industries with remarkable electricity input in their process and a risk for carbon leakage should, in addition to free allowances, receive compensation for the increased electricity cost. See also question 21. |
b) Trade association representing businesses |
Ocean Energy Europe |
63-67 rue d’Arlon, 1040 Brussels, Belgium 003224001040 r.gruet@eu-oea.com |
a) yes |
1) yes |
a) yes |
Industrial production in the sense of the ETS only encompasses a comparatively small portion of all EU emissions while most of the emissions comes from combustion installations. In general, new technologies, such as renewable energies for that field, can often replace advantageously older emitting technologies without reducing output of a given good. |
a) yes |
The signs of climate change are every year clearer: heat waves, extreme weather events, agricultural impacts… In a world where, in the medium term, all countries and businesses will have to address climate change, orienting our industry towards products that are competitive in this field is a clear winning strategy. Often those products present benefits beyond their reduction in CO2 emissions (health, avoided imports…) which makes their development already useful in the short-term |
b) no |
The reports on this issue (Sandbag, CE Delft among others) have shown that the risk of competitive disadvantage for EU industry is very low to non existent, especially at current carbon prices. Some countries already provide exemptions to their industry from a number of ETS impacts (electricity price increase in Germany) |
d) very inadequate |
Free allocation has been shown to generate winfall profits, disincentive innovation and potentially generate surpluses of allowances on the market as is presently the case. Free allocation goes against the very idea of carbon pricing, which aims at making products as expensive as demanded by their cost, externalities included. |
d) it absolutely compromises the incentive |
Free allocation means that for whole or part of one’s production, the carbon price must not be paid. It obviously reduces the incentives to reduce carbon emissions if only part of the cost is incurred. |
a) absolutely proportionate |
The current ETS already includes exemptions for small emitters and big emitters have the necessary resources to deal with the burden. Benchmarking is also the only acceptable option for free allocations, albeit even this method can lead to over allocation depending on how the benchmark are made and who validates them. The historical emissions method used in 2008-2012 for determining levels of free allocation, combined with the economic crisis, has led to a 2 billion EUA surplus in the ETS and estimated €10bn worth of subsidy to heavy industry players (EWEA 2013), who have been able to sell their freely allocated surplus on the market. This threatened the very functioning of the scheme and has to be prevented in the next ETS phase. |
e) there should be no free allocation post-2020 |
While 45% is the average free allocation, the current directive foresees a start at around 100% and a regular decrease of free allocations to zero in 2020. Ocean Energy Europe sees no reason to review this clause of the directive. For industries deemed “at risk of carbon leakage” a new assessment must be made before any conclusion on resorting to free allocations is made. The current carbon leakage list has been drawn up based on a price of carbon of 30€, a price that has never (and most likely will never) been reached since January 2013. At current price levels it is likely that most of the industries on that list would be removed from it. The criteria for determining carbon leakage are paramount. |
a) a substantially higher share than in Phase 3 |
The expectations for the NER300 budget when it got designed in 2008-2010 were for a €9bn budget. The final budget is closer to €2.4bn and has not enabled financing many of the projects that were available. On the plus side, the NER300 has clearly demonstrated that such an EU-Level selection method for projects enable trans-national planning, a long-term vision and delivered a large range of innovative projects from different technologies. It also ensures that the cost of carbon is put to good use in the fight against climate change, rather than enabling other initiatives, potentially even climate-damaging ones, via national budgets. |
b) no |
Heavy industry players have significantly benefited from the ETS so far, through the generous allocations that were already planned in the first place, and via the crisis in a second time, which reduced outputs and provided industries with a benefit estimated at €10bn over the period 2008-2012 (EWEA 2013, Sandbag “Fat cats” reports). Additionally several Member States provided help for direct or indirect ETS effects to those sectors. Finally, those deemed at risk of carbon leakage are, for the current ETS period and against the intention of the Directive, benefitting from free-allocations for up to 100% of their emissions. This is enough support to enable investments in innovation in those sectors. Other sectors (power, especially renewables such as ocean energy) have more difficulty raising capital for such innovation and should be prioritised. |
c) other types of funding (please specify) |
See above. If a new dedicated scheme financed by auctioning revenues was created it should in any case encompass renewable energies, including ocean energies, and not focus solely on one area of the ETS. The question of the scope of such a new scheme should be addressed, as it is today clear that some technologies, such as CCS, don’t have the potential for affordable emission abatement that was originally thought. Their inclusion in the scope of such a scheme should be reconsidered. |
b) no |
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d) there is no need for a carbon leakage list, all industrial installations should be treated as not exposed |
Many reports (Sandbag, CE Delft) have shown that in most sectors, as much as 100% of the carbon cost was passed to consumers/clients and have hence been recuperated. This negates the claims of exposure to carbon leakage and the need for a list of exemptees. |
c) the share of 'carbon costs' in the GVA should be maintained, but 'carbon costs' should be taken into account to the extent that they can't be recuperated in product prices |
Many reports (Sandbag, CE Delft) have shown that in most sectors, as much as 100% of the carbon cost was passed to consumers/clients and have hence been recuperated. This speaks against the need for a carbon leakage list at all ; and should at the very least be taken into account if one is still drawn up. |
c) I don’t know |
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b) no, all criteria should be based on simple metrics and linked to clearly defined thresholds |
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c) shorter (please specify) |
Fluctuations in the carbon price mean that more or less sectors should be deemed at risk of carbon leakage. As such, a regular review of the list is needed to ensure public money is not being wasted on subsidising industry. E.g. a rolling 3 year time frame could ensure both adaptation and enable visibility for companies. |
a) the present approach of average of the 10% most efficient installations should remain |
Or be more stringent, but in no way go above this threshold |
a) yes (please specify how often) |
3-4 years (burden versus benefit analysis) This could depend on the industry concerned as well as the pace of technological evolution is different. |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
Due to the crisis, the production in heavy industry sectors has been significantly and durably reduced. Electricity production has plateaued around 3100 TWh (with significant differences year on year) while it was expected to increase, up to 4000 TWh in some scenarii. This shows that the 2005-2008 basis is clearly no longer relevant and should not be used. It also speaks for using a range of dates closer to the present to ensure representativeness of data. |
c) yes, there should be deviations with lower allowances for installations enjoying very favourable circumstances |
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a) no, the present approach should be maintained, i.e. that Member States can provide such compensation based on state aid guidelines |
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Important |
Less important |
Most important |
Least important |
Currently Horizon 2020 provides a welcome boost to R&D activities, but doesn’t enjoy a budget that enables to fund significant demonstration projects. Member States revenue-support schemes (FIT, ROCs…) enable support for commercial technologies. This form of support is proving difficult to design to support early projects such as Ocean Energy Project as the technology and financial risk is higher than for more commercial technologies. CAPEX grants and financial guarantees are direly needed to help those projects. NER300, like the EEPR, has filled that gap, albeit with a smaller budget than previously thought and only as a one-off scheme without a real CAPEX grant possibility. There is a clear need for funding this link in the innovation chain to enable new technology to progress towards commercialisation. |
c) from both |
Member States pledged to use at least 50% of ETS revenues for climate change mitigation and adaptation. This includes funding innovation in those areas but has been generally undermined by the possibility to include existing national schemes in that overall budget share. This means that this new source of funding has potentially been used for other purposes for more than 50% of the total amount. This speaks in favour of using MS auction budgets. Additionally, as there should be no free allocation post 2020, the answer to this question depends on the final schemes. |
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b) Trade association representing businesses |
OEIT - European Organisation of Tomato Industries |
OEIT KellenAGEP Avenue Jules Bordet 142 1140 Brussels Tel: +32 2 761 16 57 Email : oeit@agep.eu |
a) yes |
1) yes |
b) no |
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b) no |
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a) yes |
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a) very adequate |
The EU production model for tomato processing is one of the best in the world; nevertheless costs are higher in the EU than in other parts of the world as a consequence of the demanding EU environmental and social legislation. There is a clear risk of carbon leakage for this sector. Free allocation is an adequate instrument for certain sectors, such as tomato processing, to address the risk of carbon leakage. |
b) it largely keeps the incentive |
Companies have an intrinsic interest in improving efficiency and reducing emissions. Most companies in the sector have innovated and have reduced emissions. The problem is that not all companies have all possibilities to install innovative equipment because of limitations intrinsic to the location of the factory, for example because the gas grid does reach until the factory. |
c) quite exaggerated |
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d) there should be no limit to overall free allocation to industry |
The sectors at risk of carbon leakage should have the guarantee that the free allowance covers their production needs. |
e) I don’t know |
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a) yes |
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d) I don’t know |
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a) yes |
it would be useful to have compensation for indirect costs, which are also an important cost for companies, whereas today only direct costs are compensated. |
a) the present two groups should remain |
It is fundamental that the list with sectors at risk of carbon leakage continues to exist and that those sectors are allocated free allowances, in order to avoid relocation and decreased competitiveness compared to other countries. |
a) the present criteria should remain |
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a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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d) in line with the duration of ETS Phase 4 |
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a) the present approach of average of the 10% most efficient installations should remain |
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b) no |
As mentioned above, it is not because technological state of the art equipment can be installed in one factory that it is also possible in all other. Criteria intrinsic to the area or location of the factory may impede the installation of certain equipment. It would not be correct that companies with such limitations are benchmarked against the available state of the art technology. |
c) other (please specify) |
The current system does not take into account the fact that an exceptional reduction in production (bad production campaign or reduction of production following the economic crisis) results in reduced emissions; but that the next year emissions can increase again (when the exceptional situation is restored). A method which takes into account the connection between the kilos of production and the emissions should be considered. |
e) I don’t know |
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d) yes, in the form of financial compensation at EU-level |
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Important |
Most important |
Less important |
Least important |
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e) I don't know |
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It is fundamental for our sector that free allocations continue to exist for sectors at risk of carbon leakage. In addition, it is important that other countries start similar exercises, to reduce the competitiveness distortion between countries that have and do not have such a system in place. |
b) Trade association representing businesses |
OFICEMEN (Spanish Cement Association) |
Pedro Mora Peris Technical Policy Director Jose Abascal, 53, 1º.28003 Madrid. Spain Tel: +34 91 4411688 Email:pmora@oficemen.com Jose Abascal, 53. 28003 Madrid. Spain Tel: +34 91 441 16 88 - Fax: +34 91 442 38 17 http://www.oficemen.com |
a) yes |
1) yes |
a) yes |
The cement industry is fully committed to reducing Greenhouse Gas emissions in line with overall EU policy objectives. This has been demonstrated by investments over the past 20 years which have driven down CO2 emissions from clinker production and by our roadmap to go much further in the coming decades. To achieve this, the industry needs to innovate and invest. This requires a return on investment above the cost of capital and a policy framework that promotes the competitiveness of the sector and allows for a secure access to raw materials and affordable energy prices. The cement companies in Europe need a stable legal framework with predictable CO2 pricing in order to justify and allocate scarce investment funds to realize carbon emission reduction ambitions. 2030 targets have to take into account each sector specific roadmap. The Commission’s proposals for a Climate Change Policy in 2030 imposes a proportionately higher reduction burden on energy-intensive sectors compared to other sectors such as transport and households and do not take into account the abatement potential per sector. Therefore, the proposed rules will only serve to reduce competitiveness and preclude the essential investment to drive down emissions, secure jobs and innovate in the years to come. This is unsustainable and will lead to progressive atrophy of the industry. |
b) no |
Measures to decrease energy consumption and improve resources efficiency will de facto reduce CO2 emissions. Some industries like cement have very high energy costs as a proportion of GVA or profit which means that energy efficiency is an integral part of manufacturing. The EU ETS emphasis is GHG efficiency and in this regard it does put pressure on businesses to become more GHG efficient. In doing so EU ETS places CO2 costs on power generators and these costs are passed on to electricity consumers. There are limitations to which added costs act as a driver for efficiency before imports become more attractive. Furthermore, the cement and lime industry are unique due to the fact that the majority of GHG emissions are not caused by energy use from fuel combustion but come from the raw materials themselves. Around 60% of total CO2 emissions from clinker production are released directly from limestone. On the other hand, energy efficiency and CO2 reduction represents conflicting goals when looking e.g. at CCS. With the current ETS design, the energy efficiency achieved by the industry is not valued, focusing only on the CO2 emissions direct, so it penalizes the most efficient facilities because they have not guaranteed it´s 100% free allocation limiting their ability to compete. |
a) yes |
The EU has aspirations of leading on CC policy but globally unequal carbon pricing has the ability to shift trade patterns. In order to direct investments to growth and jobs in Europe, the cement industry needs a global level playing field, including imports and exports: climate change is a global problem that needs a global solution. EU policy can only incentivize companies to aggressively work on further emissions reduction if there is predictability in and equality in carbon prices and if it is part of an overall industrial policy ensuring companies to be competitive in the international arena. This also applies to energy costs. For cement, energy costs are especially important representing 30 % of operational costs with European costs being substantially higher than in the US, Russia and plants in North Africa. Transitional measures are needed to bridge the gap between the EU and other countries. Free allocation is the most effective transitional mechanism. Take into account that there is no binding international climate agreement which imposes similar burdens on operators in the major cement producing jurisdictions; countries such as China, whose emissions account for 29% of global emissions, have already reached per capita emissions equal to the EU average and also they have increased their emissions by 290% from 1990. |
b) quite adequate |
As long as emissions do not have the same cost in different countries, a level playing field can be achieved most effectively by equalising measures such as free allocation. The limited evidence of leakage and empirical studies demonstrates (see the report by Vivid Economics last June), in part, that free allocation is working. However, it should not be assumed that free allocation is insulating operators from all of the ETS costs as it does not mean ‘full free allocation’ because of the CSRF and as some operators will face higher costs than others depending on the allocation base year activity. Furthermore, the indirect costs of ETS have not been selected for compensation for cement in the Commission guidelines creating a distortion of competition with competitors. So, not only does the cement industry face the full indirect costs of ETS but competing construction sectors are able to be compensated for their additional costs related to indirect CO2. Prices have risen to unprecedented levels in Europe at a time when our main competitor, the United States, is benefitting from increasingly lower energy prices. These price variations are affecting industrial competitiveness and leading to “investment leakage” with new investments in manufacturing sectors progressively moving outside Europe For cement manufacture, energy costs are especially important representing 30 % of operational costs with European costs being substantially higher than in the US, Russia and plants in North Africa. |
a) it absolutely keeps the incentive |
With free allocation based on benchmark, the incentive to invest is provided by the benchmark. The magnitude of the residual incentive is a function of carbon costs as a proportion of GVA. Cement has one of the highest CO2 costs/GVA of any industrial sector so the residual effort is greater than in most sectors. In its search for a legal framework that fosters a competitive environment, OFICEMEN has considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The EU cement industry has a relatively flat benchmark curve indicating that there is a narrow gap between the best and the worst performers; this limited level of abatement potential makes the task of emissions reduction more difficult in the cement sector compared to many other sectors. |
b) quite proportionate |
Overall, the administrative burden is quite proportionate but the system is extremely disproportionate for small/trivial combustion sources. In many cases these minor sources were not part of the benchmarking exercise and should not be included in reporting. |
d) there should be no limit to overall free allocation to industry |
There should be free allocation if there isn’t an international agreement which places all competing manufacturers on an equal footing. Until certain conditions can be met with regard to the veracity of the schemes within other countries then transitional arrangements need to be maintained. Free allocation is the most effective transitional arrangement. The share of allowances dedicated to free allocation should be sufficient to avoid carbon leakage. To uphold this principle that carbon leakage should be minimized, the cross sectoral correction factor should be replaced by an adjustment to the auctioned amount to maintain the cap trajectory. That does not mean “a free ride for industry” but it would mean that sufficient allowances are provided for the most efficient producers because at present the CSCF has the ability to reduce free allocation beyond what is technically possible. Full compensation through free allocation must allow the most efficient companies to be globally competitive without being penalised by direct carbon costs. |
e) I don’t know |
There are too many uncertainties on what the post 2020 allowances budget will be for the cement industry to be able to decide what share of the budget should be dedicated to such innovation support. The EU ETS does not encourage investment in new technology. The rules for accessing NER allowances discourage investment due to the uncertainty of the postcommissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) yes |
To date, the NER 300 has been ineffective at stimulating novel CO2 reduction projects in the cement industry. The power generation sector which is passing on investment costs has benefitted most from the NER 300. The cement sector is not experiencing the same level of investment de-risking. The cement industry needs - an investment enhancing climate should encourage investments over long term (30 y) cycles in a capital intensive industry. Legal stability and CO2 price predictability are key to achieve this goal - safeguards against price fluctuations in market based policy instruments; which objectives, if kept, should be clearly defined and not be prone to abuse for speculation purposes - an innovation policy which provides clear incentives for breakthrough technologies in a cost-effective way. Policy makers should consider hypothecation (earmarking) of revenues from allowance auctions and direct innovation support to those sectors facing the greatest abatement challenges. The cement industry needs an innovation policy which provides clear incentives for breakthrough technologies for CO2 reduction in a cost-effective way. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Given the high costs associated with breakthrough technologies, funding from auctioning revenues should account for both capital and operational cost of projects. There should in addition be a ring fenced fund for the manufacturing industry. |
a) yes |
In its search for a legal framework that fosters a competitive environment, OFICEMEN has considered an improved ETS with a performance based free allocation for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions cost impacts. In order to protect “carbon leakage” sectors’ competitiveness, the system could foresee either an adjustment to the overall cap to the auction amount or a sectoral cap with the inclusion of importers. However, a carbon pricing mechanism which is market-based and prone to wide fluctuations militates against effective investment. OFICEMEN is ready to explore mechanisms which deliver price stabilization and global carbon price convergence to engage in a thorough reflection of a climate policy and energy policy that is fully integrated in a single industrial growth policy. |
a) the present two groups should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. One should consider a special treatment for process emissions e.g. full free allocation as those emissions are not linked to energy efficiency and are irreducible by their very nature. |
a) the present criteria should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. Nevertheless, as a static indicator trade intensity is of limited validity/conclusiveness. It is based solely on historic data and does not reflect future developments, i.e. resulting from changing cost patterns, at all. The competitiveness of European industry has deteriorated significantly as a result of the deep economic crisis and rising energy and electricity costs, caused by a combination of a non-integrated European electricity market and distribution network, support schemes for renewables that need to be cross-subsidized by energyintensive industries and pass through of CO2 prices by the power sector; it imperative to preserve industry’s competitiveness in order to guarantee survival of the industry in Europe in the years to come. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria e.g. a complete loss of 30% of GVA is normally economically not acceptable for any industry or sector. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
EU trade and economic data is not always exact and its comparability with the EUITL CO2 data not always appropriate so there will always be a need to hear special cases. |
d) in line with the duration of ETS Phase 4 |
It is essential for the predictability of the system to introduce as little changes as possible in the course of a trading period; hence the validity of the list of sector exposed should be in line with the duration of the ETS phase 4. Review list of sectors deemed to be exposed to a significant risk of 'carbon leakage' every five years give great uncertainty for companies leading to a lack of investment confidence for a capital-intensive industry with long-term investment cycles, like the cement industry, caused by the constant unpredictability of the regulatory framework. |
c) the approach should be less stringent (please specify) |
The benchmark would be calculated in a statistically solid way and be updated periodically to ensure predictability. It should be set at an ambitious but reasonable level and should not be distorted by statistical outliers. This can be achieved by defining percentile (e.g. 10%-percentile) or e.g. the average of a range including the 5% to 15% top performers of specific direct emissions (excluding the extreme outliers between 0% and 5%). Only this way, the benchmarking methodology will achieve sufficient statistical robustness for international application in ETS system. |
a) yes (please specify how often) |
Benchmark should be updated between two trading periods depending on what has been achieved but not during one trading period. |
c) other (please specify) |
In its search for a legal framework that fosters a competitive environment, OFICEMEN has considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The historic activity level (HAL) should be more closely aligned to recent production to avoid surplus allocation e.g. the average of the preceding 3 years. In this context, OFICEMEN considers the recently released EcoFys study (Dynamic allocation for the EU Emissions Trading System, Enabling sustainable growth, 20 June 2014) and its allowances allocation reserve as an interesting step forward. However, a more recent HAL has its potential downsides for installations that have extended shutdowns or breakdowns, provision will be necessary to deal with exceptional HAL circumstances. |
a) no, there should be no deviations |
A more recent HAL e.g. preceding 3 years average, has its potential downsides for installations that have extended shutdowns or breakdowns, provision will be necessary to deal with exceptional HAL circumstances. |
c) yes, in the form of additional free allocation |
OFICEMEN believes that EU Compensation should be granted for indirect emission impact where carbon leakage vulnerability is a combination of direct plus indirect emission cost. There is no need for two state aid guidelines and the compensation for indirect costs could be internalized in the ETD by providing free allocation for indirect CO2. |
Less important |
Important |
Most important |
I don't know |
OFICEMEN regrets the focus on carbon capture and storage and believes that carbn capture and re-use should be equally considered. OFICEMEN believes that funding should be technology neutral. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) from the Member States' auction budgets |
b) Trade association representing businesses |
Polish Glass Manufacturers Federation |
6A/16 Pasteura street 02-093 Warsaw, Poland tel./fax. (+48 22) 828 70 91 e-mail: biuro@zpps.pl |
a) yes |
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1) yes |
c) I don’t know |
The glass industry is making continuous improvement in energy efficiencies and process technologies to reduce CO2, energy consumption and environmental impacts. While further reductions in the glass industry are possible, what is important is the magnitude of this reduction. All official EU publications including Glass BREF and the BAT Conclusions show that no breakthrough technology is currently available to reduce CO2 emissions to the extent imposed by the energy and climate package 2030 (-43% for ETS sectors between 2005 and 2030). Emissions reductions cannot be repeated ad infinitum. There is a thermodynamic limit to the glass melting process which is an absolute limit, and that current technology is already approaching. Moreover, process emissions (arising from the decomposition of the raw materials such as carbonates, and leading to non-fuel related CO2 emissions) cannot be eliminated, limiting therefore the reduction potential of the glass industries. |
b) no |
The main driver for energy efficiency improvements in the glass industry is the high share of energy costs within production costs. In fact, the glass industry has continuously improved energy efficiency over previous decades. Regulatory instruments and the EU ETS in particular, have only a marginal effect on energy efficiency improvements of glass melting activities, if any. Whilst there is no global ETS in place, the EU ETS is only a source of costs for glass industries (direct but also indirect CO2 costs linked to electricity), and therefore weakens the competitive position of European based glass industries vis-a-vis third country competitors. As such, it indirectly favors production reduction in the EU and rises in imports from non EU countries without carbon constraints into the EU. For these reasons, glass industries need to be fully protected against risks of carbon leakage. |
a) yes |
The EU glass industry faces higher costs for environmental protection, energy, labour and raw materials, than the majority of extra-EU competitors. In the absence of an international climate agreement and a level playing field between EU and extra EU competitors, the EU industry needs to be provided with measures to safeguard its competitiveness. Measures to avoid carbon leakage under the EU ETS are therefore essential. Measures should cover both the direct and indirect CO2 costs. Such measures under the EU ETS must be established in a way that ensures the ETS’ coherence with the EU’s ambition to revitalize European manufacturing activities, as proposed in the EC Communication on Industrial Renaissance. |
b) quite adequate |
Free allocation has been key up to now to mitigate the negative impacts of a unilateral climate policy. However, the Cross Sectoral Correction Factor which is applied already from 2013 reduces the free allocation, even for the most GHG efficient installations, and will dramatically increase in the future, thus further reducing free allocation. This current system is unsustainable and should be changed in order to ensure that the most GHG efficient installations receive 100% of their allowance needs. |
a) it absolutely keeps the incentive |
Free allocation does not reduce the incentive to innovate; on the contrary, the majority of installations in the sector (about 95%) do not have enough allowances, which encourages industry to invest in the efficiency of its plants to avoid having to purchase a high level of allowances, which would render the sector uncompetitive. For the installations under the benchmark (about 5%), they can sell their allowances on the market, which is also an incentive to continue reducing emissions. The incentive is therefore present. Below, we also call for a periodic revision of the benchmarks (in exchange of the cancellation of the cross-sectoral factor), which also provides for a strong incentive to improve. In addition, free allowances preserve investment capacity. Free allowances offer industry the incentive to purchase less CO2 allowances if they become more GHG efficient. However this last incentive would be better preserved if the CSCF was not forcing an unrealistic and arbitrary reduction |
b) quite proportionate |
Administrative burden is accepted, since it is necessary to maintain the free allocation system. However opportunities or improvement to this process should be considered. Conversely, the administration and calculation rules for new entrants are overly complex and can lead to under-allocation. They can therefore be seen as disproportionate and can be a disincentive to new investments. |
d) there should be no limit to overall free allocation to industry |
The current system is unsustainable (from a competition point of view) because the cross sectoral correction factor continually reduces the free allocation given to industry, even for the most GHG efficient installations. Ideally, installations whose efficiency is equal or better than the (periodically reviewed) benchmark should receive 100% of free allocations to produce in the EU and so there should be no limit. In practice, this is likely to lead to a higher share in phase IV. An increased level of EU ambition in terms of GHG reduction would require enhanced measures against carbon leakage and therefore an increase in total free allocations. |
e) I don’t know |
Overall financing for technological innovation in manufacturing should be increased in the EU. However R & D should be funded via a mobilization of different sources of funding - including but not limited to - auctioning revenues. It should not come from the free entrants reserve or Free Allowances reserve. Allowances should be primarily used to ensure that the most GHG efficient installations get 100% of their needs to produce in the EU. Furthermore, financing for R&D and demonstration projects should be technology-neutral and not focused only on CCS or renewables. New technologies such as Carbon Capture and Use (CCU) and others should not be excluded. |
a) yes |
As stated above, industrial innovation, with a focus on the process and on new energy sources for industry, should be promoted. It should not be financed by shares of allowances reserved for free allocation or for new entrants, but rather from a mobilization of different sources, and not limited to auctioning revenues. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Industrial innovation should be promoted in a technology-neutral way. However this should not be done at the expense of free allocation which aims to provide effective support and protection against carbon leakage. Therefore it should be financed via other sources. This could include, among other sources, money from the auctioning revenues, as suggested in the ETS directive (Art 10.3). |
a) yes |
Unequitable carbon costs should not place EU industries at a competitive disadvantage with extra-EU competitors and this should be the ultimate objective pursued in order to achieve the EU’s ambition of 20% GDP realized by industrial activities in 2020. To that end, measures against carbon leakage are a pre-requisite but are not enough. An EU scheme for compensation of indirect costs due to higher electricity prices and some raw materials (e.g. soda ash, industrial gases, ..) should also be developed for Energy Intensive Industries. More generally, the EU needs to assess, and if needed reform, all its policies and in particular energy and environmental ones against the re-industrialisation objective. A longer term re-industrialisation objective for 2030 should be established. |
a) the present two groups should remain |
The present two groups should remain. This binary model ensures that all sectors benefit from carbon leakage protection measures as soon as a risk is detected. This is essential to ensure that carbon leakage measures are effective and that protection is not granted too late, when industries are already in jeopardy. |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
The competitiveness of energy-intensive industries is sensitive to energy and carbon costs, therefore a risk exists for all these industries. For the sake of simplicity and consistency in legislation, all energy-intensive industries, as defined in Art 17 (1) a of the Energy taxation directive 2003/96/EC could be automatically placed on the carbon leakage list, i.e. An "energy-intensive business" shall mean a business entity, (…) where either the purchases of energy products and electricity amount to at least 3,0 % of the production value or the national energy tax payable amounts to at least 0,5 % of the added value. In case ETS-specific criteria are maintained, they should continue being based on both the CO2 intensity and the trade intensity metrics. The CO2 cost metric should be made more relevant to analyze the impacts of carbon cost on sectors’ profitability. To that end, the CO2 cost over GVA criteria could be replaced by a CO2 cost over Gross Operating Surplus (GOS) criteria. |
b) other thresholds should be defined. Please specify below |
The competitiveness of energy-intensive industries is sensitive to energy and carbon costs, therefore a risk exists for all these industries. For the sake of simplicity and consistency in legislation, all energy-intensive industries, as defined in Art 17 (1) a of the Energy taxation directive 2003/96/EC could be automatically placed on the carbon leakage list, i.e. An "energy-intensive business" shall mean a business entity, (…) where either the purchases of energy products and electricity amount to at least 3,0 % of the production value or the national energy tax payable amounts to at least 0,5 % of the added value. In case ETS-specific criteria are maintained, they should continue being based on both the CO2 intensity and the trade intensity metrics. The CO2 cost metric should be made more relevant to analyze the impacts of carbon cost on sectors’ profitability. To that end, the CO2 cost over GVA criteria could be replaced by a CO2 cost over Gross Operating Surplus (GOS) criteria. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The current criteria under the quantitative assessment at NACE 3 or 4 level should be maintained and used as the first assessment option. When an assessment at NACE 3 or 4 level is not appropriate to identify the relevant industrial activities falling under the EU ETS, then a quantitative assessment at 6- or 8-digit should be carried as a second option. Finally, as a third option, a qualitative assessment must remain possible. Other parameters can be studied as part of qualitative assessments, such as methodology and evidences of investment leakage. |
d) in line with the duration of ETS Phase 4 |
As long as there are no equivalent GHG reduction measures taken by major trading partners, the list of sectors exposed to the risk of carbon leakage should remain valid. This is essential to provide predictability to industries faced with long investment cycles (typically > 15 years). |
a) the present approach of average of the 10% most efficient installations should remain |
Glass industry support ambitious benchmark levels, which reflect the technological capabilities of the sectors best performers using the best available and proven technologies in Europe. It must be kept in mind however that this approach also has limits. Indeed, benchmark curves do not always reflect a difference in terms of « best » (the least GHG emitters per tonne of glass) or « worst » GHG players, but a difference in terms of products produced, cullet availability, age of furnace, available fuels, etc. The 10% best GHG performers can therefore be regarded as extremely challenging, especially for plants producing a wider range of more sophisticated products with higher added-value (as this usually entails higher energy consumption). |
a) yes (please specify how often) |
It seems logical to revise the benchmarks from time to time to reflect GHG improvements over time. Revision cycles should be linked to ETS phases and remain unchanged over this period. Periodical revision of the benchmark should be based on the actual EU based installations. The periodic revision of benchmarks should be the sole instrument leading to a reduction of free allowances over time, as benchmarks reflect true possibilities of GHG improvements according to state-of-the-art technologies deployed in Europe. The periodic revision of benchmarks therefore justifies that the CSCF is abandoned. |
c) other (please specify) |
Ex-ante allocation can only lead to over-allocation in crisis times, and under-allocation when the economy is growing. A better approach is to design an « ex post » system, where real allocation is corrected according to the real production. |
a) no, there should be no deviations |
In principle, there shall be no deviation from the general harmonized allocation rules at the level of an individual installation as this could cause distortion of competition. Only in the case of very specific hardship, should deviations be envisaged for an entire sector after a careful assessment of the competitive effects of such deviations. |
d) yes, in the form of financial compensation at EU-level |
Rules for the compensation of indirect costs should be revised and need to be effective to reflect the real burden of CO2 included in electricity costs for industry. A differentiated compensation approach by Member States is not acceptable from a competitiveness point of view. A harmonized approach at EU level is therefore needed. The harmonized measure should take the form of financial compensation. Free allocation should be kept aside to ensure full relief for direct emissions (most GHG efficient installations should receive 100% of their needs). A compensation system should also be put in place to compensate for higher prices of some raw materials (e.g. soda ash) and industrial gases. |
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a) from the Member States' auction budgets |
Allowances funding low-carbon innovation support should be financed from the Member States’ auction revenues and from a mobilization of additional sources. However, this should not be financed at the expense of free allocation or the new entrants reserve which must be principally used for measures against risks of carbon leakage. |
Generally speaking, glass producers welcome the opportunity to express their views on carbon leakage measures post 2020 and appreciate that this discussion is held without further delay. It is however regrettable that industry is asked to comment on such measures whereas the rules for EU ETS Phase IV have not yet been fully decided. The glass industry wishes to reiterate that so long that there is no comparable ETS system (which means that similar costs are born by competitors) operating in most part of the world and in extra-EU countries with glass industries, EU based glass industries will need to receive full and effective protection against carbon leakage. The recent assessment carried by DG CLIMA on exposure to carbon leakage risks, i.e. the carbon leakage list of 2009 and its recent revision, shows that between 2009 and 2014, risks of carbon leakage has grown in most glass sectors. For these reasons, glass industries need effective protection moving forward. |
b) Trade association representing businesses |
Romanian Glass Association, register ID: 4433686 |
45, Boulevard Theodor Pallady, sector 3, Bucharest, RO-032258, tel. 4021 / 201.85.06; Fax: +4021 / 345.10.23, email: iiorga@stirom.ro, radu.pupaza@gmail.com |
a) yes |
|
1) yes |
c) I don’t know |
The glass industry is making continuous improvement in energy efficiencies and process technologies to reduce CO2, energy consumption and environmental impacts. While further reductions in the glass industry are possible, what is important is the magnitude of this reduction. All official EU publications such as the “Sector Competitiveness Studies - Competitiveness of the Glass Sector - ENTR/06/054 - Final report, 14 October 2008” or more recently the Glass BREF and the BAT Conclusions show that no breakthrough technology is currently available to reduce CO2 emissions to the extent imposed by the energy and climate package 2030 (-43% for ETS sectors between 2005 and 2030). Emissions reductions cannot be repeated ad infinitum. There is a thermodynamic limit to the glass melting process which is an absolute limit, and that current technology is already approaching. Howover, process emissions cannot be eliminated, limiting therefore the reduction potential of the glass industries. |
b) no |
The main driver for energy efficiency improvements in the glass industry is the high share of energy costs within production costs. In fact, the glass industry has continuously improved energy efficiency over previous decades. Regulatory instruments and the EU ETS in particular, have only a marginal effect on energy efficiency improvements of glass melting activities, if any. Whilst there is no global ETS in place, the EU ETS is only a source of costs for glass industries (direct but also indirect CO2 costs linked to electricity), and therefore weakens the competitive position of European based glass industries vis-a-vis third country competitors. As such, it indirectly favors production reduction in the EU and rises in imports from non EU countries without carbon constraints into the EU. For these reasons, glass industries need to be fully protected against risks of carbon leakage |
a) yes |
The EU glass industry faces higher costs for environmental protection, energy, labour and raw materials, than the majority of extra-EU competitors. In the absence of an international climate agreement and a level playing field between EU and extra EU competitors, the EU industry needs to be provided with measures to safeguard its competitiveness. Measures to avoid carbon leakage under the EU ETS are therefore essential. Measures should cover both the direct and indirect CO2 costs. Such measures under the EU ETS must be established in a way that ensures the ETS’ coherence with the EU’s ambition to revitalize European manufacturing activities, as proposed in the EC Communication on Industrial Renaissance. |
c) quite inadequate |
Free allocation has been key up to now to mitigate the negative impacts of a unilateral climate policy. However, the Cross Sectoral Correction Factor which is applied already from 2013 reduces the free allocation, even for the most GHG efficient installations, and will dramatically increase in the future, thus further reducing free allocation. This current system is unsustainable and should be changed in order to ensure that the most GHG efficient installations receive 100% of their allowance needs. |
a) it absolutely keeps the incentive |
Free allocation does not reduce the incentive to innovate; on the contrary, the majority of installations in the sector (about 95%) do not have enough allowances, which encourages industry to invest in the efficiency of its plants to avoid having to purchase a high level of allowances, which would render the sector uncompetitive. For the installations under the benchmark (about 5%), they can sell their allowances on the market, which is also an incentive to continue reducing emissions. The incentive is therefore present. Below, we also call for a periodic revision of the benchmarks (in exchange of the cancellation of the cross-sectoral factor), which also provides for a strong incentive to improve. Free allowances preserve investment capacity and offer industry the incentive to purchase less CO2 allowances if they become more GHG efficient. However this last incentive would be better preserved if the CSCF was not forcing an unrealistic and arbitrary reduction of the number of free |
b) quite proportionate |
Administrative burden is accepted, since it is necessary to maintain the free allocation system. However opportunities or improvement to this process should be considered. Conversely, the administration and calculation rules for new entrants are overly complex and can lead to under-allocation. They can therefore be seen as disproportionate and can be a disincentive to new investments. |
d) there should be no limit to overall free allocation to industry |
The current system is unsustainable (from a competition point of view) because the cross sectoral correction factor continually reduces the free allocation given to industry, even for the most GHG efficient installations. Ideally, installations whose efficiency is equal or better than the (periodically reviewed) benchmark should receive 100% of free allocations to produce in the EU and so there should be no limit. In practice, this is likely to lead to a higher share in phase IV. An increased level of EU ambition in terms of GHG reduction would require enhanced measures against carbon leakage and therefore an increase in total free allocations. |
e) I don’t know |
Overall financing for technological innovation in manufacturing should be increased in the EU. However R & D should be funded via a mobilization of different sources of funding - including but not limited to - auctioning revenues. It should not come from the free entrants reserve or Free Allowances reserve. Allowances should be primarily used to ensure that the most GHG efficient installations get 100% of their needs to produce in the EU. Furthermore, financing for R&D and demonstration projects should be technology-neutral and not focused only on CCS or renewables. New technologies such as Carbon Capture and Use (CCU) and others should not be excluded. |
a) yes |
As stated above, industrial innovation, with a focus on the process and on new energy sources for industry, should be promoted. It should not be financed by shares of allowances reserved for free allocation or for new entrants, but rather from a mobilization of different sources, and not limited to auctioning revenues. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Industrial innovation should be promoted in a technology-neutral way. However this should not be done at the expense of free allocation which aims to provide effective support and protection against carbon leakage. Therefore it should be financed via other sources. This could include, among other sources, money from the auctioning revenues, as suggested in the ETS directive (Art 10.3). |
a) yes |
Unequitable carbon costs should not place EU industries at a competitive disadvantage with extra-EU competitors and this should be the ultimate objective pursued in order to achieve the EU’s ambition of 20% GDP realized by industrial activities in 2020.To that end, measures against carbon leakage are a pre-requisite but are not enough. An EU scheme for compensation of indirect costs due to higher electricity prices and some raw materials (e.g. soda ash, industrial gases, ..) should also be developed for Energy Intensive Industries. More generally, the EU needs to assess, and if needed reform, all its policies and in particular energy and environmental ones against the re-industrialisation objective. A longer term re-industrialisation objective for 2030 should be established. |
a) the present two groups should remain |
This binary model ensures that all sectors benefit from carbon leakage protection measures as soon as a risk is detected. This is essential to ensure that carbon leakage measures are effective and that protection is not granted too late, when industries are already in jeopardy. |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
Both the trade intensity and CO2 cost related criteria should be kept but reformed. The CO2 cost criteria could be made more relevant, if it was looking at the true impact of carbon cost on the profitability of industrial sectors. To that end, the European Commission should envisage replacing the CO2 cost over GVA criteria by a CO2 cost over Gross Operating Surplus (GOS) criteria. By removing labour costs from the denominator, this criterion would better reflect industry’s realities. |
b) other thresholds should be defined. Please specify below |
Present thresholds are generally appropriate to detect risks of carbon leakage, provided the denominator of the carbon cost criteria is changed to Gross Operating Surplus.Raising thresholds will only exclude sectors from free allowances regardless of effective risks and will send a damaging signal to EU industries against the EC’s own re-industrialisation objective. An artificial increase to the thresholds would mean that fixing a cap to free allowances is more important than the effective protection of industrial competitiveness.There should however be a carbon cost minimum threshold for sectors with a trade intensity higher than 30%. The risk is otherwise high that the system protects sectors that in fact have nearly no carbon cost constraints. For those sectors with a trade intensity higher than 30%, a threshold of CO2 costs (though lower than the current 5%) should also be considered. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The current criteria under the quantitative assessment at NACE 3 or 4 level should be maintained and used as the first assessment option.When an assessment at NACE 3 or 4 level is not appropriate to identify the relevant industrial activities falling under the EU ETS, then a quantitative assessment at 6- or 8-digit should be carried as a second option. Finally, as a third option, a qualitative assessment must remain possible. Other parameters can be studied as part of qualitative assessments, such as methodology and evidences of investment leakage. |
d) in line with the duration of ETS Phase 4 |
As long as there is no equivalent GHG reduction measures taken by major trading partners, the list of sectors exposed to the risk of carbon leakage should remain valid. This is essential to provide predictability to industries faced with long investment cycles (typically >15 years). |
a) the present approach of average of the 10% most efficient installations should remain |
Glass industries support ambitious benchmark levels, which reflect the technological capabilities of the sectors best performers using the best available and proven technologies in Europe. It must be kept in mind however that this approach also has limits. Indeed, benchmark curves do not always reflect a difference in terms of « best » (the least GHG emitters per tonne of glass) or « worst » GHG players, but a difference in terms of products produced, cullet availability, age of furnace, available fuels, etc. The 10% best GHG performers can therefore be regarded as extremely challenging, especially for plants producing a wider range of more sophisticated products with higher added-value (as this usually entails higher energy consumption). |
a) yes (please specify how often) |
It seems logical to revise the benchmarks from time to time to reflect GHG improvements over time. Revision cycles should be linked to ETS phases and remain unchanged over this period. Periodical revision of the benchmark should be based on the actual EU based installations. The periodic revision of benchmarks should be the sole instrument leading to a reduction of free allowances over time, as benchmarks reflect true possibilities of GHG improvements according to state-of-the-art technologies deployed in Europe. The periodic revision of benchmarks therefore justifies that the CSCF is abandoned. |
c) other (please specify) |
Ex-ante allocation can only lead to over-allocation in crisis times, and under-allocation when the economy is growing. A better approach is to design an « ex post » system, where real allocation is corrected according to the real production. |
a) no, there should be no deviations |
In principle, there shall be no deviation from the general harmonized allocation rules at the level of an individual installation as this could cause distortion of competition. Only in the case of very specific hardship, should deviations be envisaged for an entire sector after a careful assessment of the competitive effects of such deviations. |
d) yes, in the form of financial compensation at EU-level |
Rules for the compensation of indirect costs should be revised and need to be effective to reflect the real burden of CO2 included in electricity costs for industry. A differentiated compensation approach by Member States is not acceptable from a competitiveness point of view. A harmonized approach at EU level is therefore needed.The harmonized measure should take the form of financial compensation. Free allocation should be kept aside to ensure full relief for direct emissions (most GHG efficient installations should receive 100% of their needs). A compensation system should also be put in place to compensate for higher prices of some raw materials (e.g. soda ash) and industrial gases. |
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Least important |
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a) from the Member States' auction budgets |
Allowances funding low-carbon innovation support should be financed from the Member States’ auction revenues and from a mobilization of additional sources. However, this should not be financed at the expense of free allocation or the new entrants reserve which must be principally used for measures against risks of carbon leakage. |
Generally speaking, glass industries welcome the opportunity to express their views on carbon leakage measures post 2020 and appreciate that this discussion is held without further delay. It is however regrettable that industry is asked to comment on such measures whereas the rules for EU ETS Phase IV have not yet been fully decided.The glass industry wishes to reiterate that so long that there is no comparableETS system (which means that similar costs are born by competitors) operating in most part of the world and in extra-EU countries with glass industries, EU based glass industries will need to receive full and effective protection against carbon leakage. The recent assessment carried by DG CLIMA on exposure to carbon leakage risks, i.e. the carbon leakage list of 2009 and its recent revision, shows that between 2009 and 2014, risks of carbon leakage has grown in most glass sectors. For these reasons, glass industries need effective protection moving forward. |
b) Trade association representing businesses |
Spanish Ceramic Tile Manufacturers´ Association (ASCER) |
Ginjols, 3 12003 Castellón SPAIN E-mail address: global@ascer.es Phone: +34 964 727200 |
a) yes |
1) yes |
b) no |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For ex. pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improveme |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
a) the present two groups should remain |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value) which are subject to international competition should be considered as exposed to the risk of carbon leakage, until an international agreement is established. It is important to limit the list to sectors that really compete globally, and thus it is vital to maintain an assessment based on trade intensity with third countries. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
The present criteria should be used, considering the following element. GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
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a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
b) Trade association representing businesses |
SveMin (Swedish association of mines and metall producers) |
SveMin Kungsträdgårdsgatan 10 Box 1721 11187 Stockholm Sweden Phone +4687626717 Mail Anders.Lundkvist@svemin.se |
a) yes |
1) yes |
a) yes |
There is no one size fits all answer. On the contrary, a sectorial approach should prevail. While some sectors/subsectors might still have some margins to further reduce GHG, others don’t because of physical constraints. This is the case for industrial activities whose emissions cannot be prevented or reduced without reducing the production simply because they are process emissions arising from the chemical transformation of the raw materials needed to produce the end-product. |
b) no |
Energy intensive industry has an innate incentive to become more energy efficient due to high energy cost, independently of the extra cost related to ETS. In these industries, however, the EU ETS may reduce the ability to become more energy efficient. Improvements will require investments, either in upgrading of existing capacity or in new plants. Extra cost due to climate policy is however insufficiently compensated and will reduce the margins of the industry. Shrinking margins lead to reduced energy efficiency investments. |
a) yes |
Competitive disadvantages EU industries are facing are real and take the form of comparatively higher production costs (including energy). In most energy intensive industries, product prices are set in global markets. Until a significantly larger share of competitors is influenced by similar increases in energy cost, there is a need for such measures. Otherwise such industries will disappear from Europe. |
a) very adequate |
Free allocation has proved to be an efficient policy instrument to ensure, in the framework of climate policy, a level playing field at international level and mitigate the risk of carbon leakage. So far, there is no better mechanism than free allocation to address the CL risk. It is therefore essential (i) to preserve free allocation without reducing its scope as in the current foreseen terms and conditions as long as international competitors are not facing a similar cost burden and (ii) guarantee a stable CL mechanism over long periods of time so as to respect legal certainty. Compensation should include direct and indirect costs, linked to actual output and realistic benchmarks, would be a very adequate measure to address the risk of carbon leakage (predictability and effectiveness is ensured in the long term for both direct and indirect costs). |
a) it absolutely keeps the incentive |
Full compensation for direct and indirect costs is absolutely necessary for the competitive position of Europe as a localization of energy intensive industries. Compensation should be linked to actual output in order to provide an incentive for growth and to allow production flexibility through business cycles. Realistic benchmarks are necessary for full compensation to new capacity and for the preservation of the undistorted environmental incentive. Expressed differently, allocation of free allowances will not reduce the environmental incentive for the recipient. On the contrary, full compensation for direct and indirect effects of ETS through allocation or otherwise is a precondition for investment in new capacity in Europe. |
c) quite exaggerated |
The administrative burden ensuing from the implementation of the EU ETS (initial application, monitoring and reporting schemes, comparatively high compliance burden with the 'de minimis' rule for installations having 2 CL statuses) represents a significant red- tape for companies. As usual, it is much more difficult for SMEs to handle this burden due to more limited resources as well as for small industrial sub-sectors. A major mining iron ore producer whose activity is covered by a small NACE code (0710) reports that in his particular case, the internal company cost related to EU ETS (compliance and information gathering to ensure a fair treatment) is in the range of 1 million € annually. Administrative burden linked to EU ETS must also be put in perspective with the burden ensuing from other EU/national ever-increasing/changing regulatory requirements which oblige companies to devote more resources to activities other than their core business |
d) there should be no limit to overall free allocation to industry |
Carbon leakage undermines the environmental efficiency of EU ETS as well as EU’s industrial growth. Certain industries have to be protected for unfair international competition until fair conditions are restored by an international climate agreement. Without a comprehensive international agreement giving the global competitors of European industry a similar cost element related to emissions and electricity consumption, the cost of carbon leakage mitigation will be more or less stable, whereas the number of allowances to cover this cost will gradually diminish. This is a cost that is directly linked to emission trading and should be covered by the ETS system itself before any money is taken out of the system. If in the future, there is an inadequate number of allowances available to cover the need for carbon leakage mitigation, compensation could be provided as a sum of money proportionate to a given number of allowances from another source of finance. |
b) the same share as in Phase 3 |
Financing of CCS should not be a priority for the allowance budget. It is illogical to reserve a given share of the budget for this purpose: When the EUA prices are low the need for support is high and vice versa. Furthermore, the lack of stability in the EUA market creates a high project risk and high financing cost. This adds the project cost and the need for support |
b) no |
ETS should be focused on emission trading and mitigating the effects of such trading. Financing is tight, and there is no room for further programs. |
c) other types of funding (please specify) |
ETS should be focused on emission trading and mitigating the effects of such trading. Auction income should not be diverted to general innovation support. |
a) yes |
Various measures are needed: 1/ EU ETS must ensure a stable legal framework as industry needs predictability to invest. Proposals contradicting that objective must be ruled out. 2/ Free allocation for sectors at risk of CL should continue as long as a scheme similar to the EU ETS is not implemented at global level. 3/ The EC shall not set aside beforehand any option to bring EU trade partners to commit to an international climate agreement or to draw the consequences of a potential refusal to commit to it. 4/ Compensation measures must be flexible enough to enable industrial growth. In practice, free certificates must be granted when installations, fulfilling the relevant conditions, increase their production. 5/ A better solution is needed to tackle indirect carbon costs. State aids’ measures are insufficient discrepancies between MS exist. It is of utmost importance to improve: -the coordination between EU&National policies impacting indirect costs. -their financial compensation |
b) more carbon leakage categories should be defined |
The distinction between sectors which are not deemed to be at risk of CL and sectors that are not makes sense. However, a sub-distinction deserves to be defined within the former for sectors, such as the mining industry, that are price-takers and cannot pass on indirect costs to consumers because they compete at global level. Beside free allocation, those sectors need to obtain full compensation for indirect CO2 costs. From a more general standpoint, it is likely also that more categories might require CL status in the future as long as non-EU competitors do not have to comply with a similar cost burden. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
It is important to keep both the share of carbon costs in the GVA as well as the trade intensity as relevant criteria. With respect to the carbon cost/GVA criterion, proposal c) (the share of 'carbon costs' in the GVA should be maintained, but carbon costs should be taken into account to the extent that they can't be recuperated in product prices) should be further explored at the condition that both the trade intensity and qualitative assessment (see Q.15) are kept. Secondary effects with large impact on competitiveness on companies within the EU-ETS, like impact on electricity price and carbon taxation on production, should also be a part of the evaluation of CL. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The qualitative assessment must be kept as it enables to include sectors at significant risk of CL which would otherwise fail to qualify under the sole quantitative criteria for various reasons such as the fact that NACE codes – primarily used for statistical purposes – do not accurately reflect the cost structure of the industry. |
d) in line with the duration of ETS Phase 4 |
Predictability is the key to incentive efficiency. There is reason to believe that the set of criteria described above will establish robust and stable lists. |
a) the present approach of average of the 10% most efficient installations should remain |
Though SveMin supports proposal a), it would be appropriate to remedy to inconsistencies of the current system. For example, for small sectors for which there are less than 10 installations in Europe, no benchmark is derived and the fall-back option is less favorable. This rule indirectly discriminates against the relevant companies active in that sector, which are subject to a less favorable treatment. Europe's major iron ore producer is facing such a situation. To overcome such discrepancy, benchmarks for small sectors only could be global |
a) yes (please specify how often) |
Not to get stuck in old technology, the benchmarks have to be revised on a regular basis. However, to do this more often than the trading periods makes no sense, as investments in our industry are long-term and often very expensive. Ten years is a minimum span between revisions of the benchmark. The revision should be based on actual industry performance within EU or globally if there are no similar technology within Europe. |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
As a matter of principle, data used to determine allocations for a given period must be up to date. This therefore tends to support taking the period 2016-2018 as a basis to determine phase 4 allocations. However, it is equally important to bear in mind that historic levels, even very recent, tell little about future prospects. Therefore, the method to be used for phase 4 allocations should provide for sufficient flexibility so as to allow, if production increases during this period, to grant consequently more allowances, so as to avoid in practice placing a ceiling on investment in new industrial activities. |
a) no, there should be no deviations |
There should be no deviations linked to the short-term financial conditions of industries. There might however be a need to find special solutions for industries where it is impossible to establish sectorial benchmarks like for the iron ore industry |
c) yes, in the form of additional free allocation |
Compensation inside the EU ETS should be extended to cover indirect effects through increased electricity prices. With significantly higher EUA prices, the present solution for indirect costs based on State Aid will be insufficient for long term survival of these industries in Europe and, as well, create significant disturbances in the internal market. The cost of any compensation measures will be proportionate to the EUA price, thus corresponding to the value of free allowances. Compensation could be provided as free allowances or as a sum of money proportionate to a given number of allowances from another source of finance. |
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d) other |
ETS should be focused on emission trading and mitigating the undesirable effects of such trading. Innovation support should mainly come out of MS general budgets and not from auction income. |
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b) Trade association representing businesses |
Swedish Forest Industries Federation |
Box 55525 SE 102 04 Stockholm |
a) yes |
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1) yes |
a) yes |
The pulp, paper & board manufacturing industry, already invested significantly to reduce its GHG emissions. There are however ways for the industry sector as a whole to increase energy efficiency and exchange fuels. The important question is how this can be done without harming competitiveness. The European industry can not endure higher costs due to EU energy and climate policy goals. Compensation for increased cost is therefore essential. This means both free allocation to cover actual emissions and compensation for indirect effect on electricity prices. Technological breakthroughs are often needed in order to further reduce GHG emission. This requires time and financial support (research and investment cycles). The focus of EU policy should be on total decreased emissions, not only from industry. Other sectors (outside EU ETS) many times have lower hanging fruit. |
b) no |
The high costs of energy and the related tax burden already act like an incentive for the pulp, paper and board manufacturing industry to reduce energy costs, thus reduce GHG emissions. This industry also competes with companies around the world, with very low possibility to increase the market prices. Increasing the cost of CO2-emissions has a negative impact on efficiency since the amount of money to invest in more efficient technology decreases with decreased revenues for the industry. Overall, the EU ETS severely impairs our industry competitiveness. It provides short-term visibility to industry (rules set for single trading periods) which does not give the long-term investment visibility needed to industry. Key is the long-term investment cycle. |
a) yes |
Since the EU ETS was set up in 2005, the international economic context dramatically changed: the shale gas production in the USA offered a significant competitive edge to the American industry, the oil price increased dramatically, the debt crisis in Europe further increased the tax burden, the very low margins of the pulp, paper and board industry impaired its ability to invest, etc. Sectors that compete on a global market needs to be protected from politically increased costs that cannot be transferred onto the product price. Until there is a global agreement, and relevant markets around the world meet the same cost increase, the European industry needs measures that shield from increased costs. |
a) very adequate |
Without a global agreement (that could lead to comparable burdens for competing industrial installations around the world), Europe will have to mitigate the impact of its policies for industries producing globally trading goods. Without free allocation a great cost disadvantage is introduced. The free allocation should be based on relevant BM and relevant production, the best performing installation should receive 100 % free allocation. In addition, regarding the carbon leakage issue, the objective should be to attract more industrial activity while reducing the GHG emission and not only to avoid the decrease of industrial activity. |
a) it absolutely keeps the incentive |
EU ETS should reduce CO2-emissions in a cost-efficient manner. If 100 % free allocation is given, there is still an incentive for the companies to decrease their emissions since they can then sell the left over allowances. It should also be pointed out that “not having to pay for increased cost does not mean there is a revenue”.In addition, free allocation is a counterpart to the investments conceded to reduce GHG emission. No free allocation would mean a lot less ability to invest in CAPEX for GHG emissions reduction. |
a) absolutely proportionate |
One of the main causes of administrative burden has been the continuous changes in ETS framework and implementing rules. This has caused uncertainty among industry. There is an urgent need for a more stable and consistent ETS policy. The initial burden is very high. Afterwards, it depends on Member States. Constant changes, almost every year, in MRV rules, without delivering any environmental benefits. The fines used for making a wrong entry or failing to produce necessary reports on time are much too high. With spreadsheets being altered and the system changed frequently there should be a greater acceptance for errors. |
b) a higher share than in 2013-20 |
There is only one overall EU allowance budget. If there is a risk of carbon leakage due to EU energy-climate policies, this has to be prevented with additional credits available in the system, including the ones covering indirect costs for increased electricity prices. In fact, carbon leakage would mean failure of the EU ETS to contain global GHG emission. Thus, the avoidance of carbon leakage should be an absolute priority. Today European industry suffer from increased costs induced by EU ETS. This cost increase must be minimized Given the current economic context, a higher share of allowances is needed to ensure growth in Europe and prevent businesses from moving abroad. Looking at current rules, the linear factor and correction factor makes that even being carbon leakage installations are allocated bellow benchmarks values. |
b) the same share as in Phase 3 |
There should be an overview of the projects reciving NER300 allowances, some of the investments has not been made. This is not due to the amount of allowances used for NER300 but to the low credibility of the European energy and climate policy. To increase the amount of NER300 allowances will not change this, a clear, transparent and stringent policy would mean much more. |
b) no |
EU ETS should not strive to have all solutions. Industrial innovation and deployment of new low-carbon technologies should not be funded from support schemes within EU ETS. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Better to ear-mark auctioning revenues to be put back into the system to help create low – CO2 technology, than to let the MS have free ruling of them. |
a) yes |
A global agreement (that could lead to comparable burdens for competing industrial installations around the world) would be the most effective way to address the risk of carbon leakage. In the absence of that, EU-wide harmonized measures addressing indirect costs should include both the rising of electricity costs due to energy-climate related policies (ETS + Renewables) and rising of wood raw material costs. Specifically on the latter, the ETS and renewables targets provide an incentive to burn wood instead of fossil fuels. It has strongly increased demand of wood for energy use. Hence today even round wood suitable as raw material for forest industry is increasingly burnt across Europe. As result, there is growing pressure for higher price of pulp wood and at some European countries the pulp wood prices have increased. |
a) the present two groups should remain |
There is no need for a revision of the carbon leakage list. The pulp, paper & board manufacturing industry needs stability in the regulatory framework. Further categories will result in greater administration, the increased benefit is questionable, it is important that the criteria used to determine CL-status is right. |
a) the present criteria should remain |
The current criteria should remain. HOWEVER the “carbon costs” criteria should be expanded to include the cost of rising wood raw material cost due to ETS (see answer to Question 11). Move to NACE 3 level in assessing integrated sectors, such as the pulp and paper. As a way to simplify the system, all energy intensive industries could be considered by default at risk of carbon leakage. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
There will always be companies with production that does not fit into the bulk of the relevant sector. For these companies there should be a possibility to argue a case built on qualitative criteria. |
d) in line with the duration of ETS Phase 4 |
The long-term certainty is of great importance in order not to harm investments |
a) the present approach of average of the 10% most efficient installations should remain |
Fiscal and legislative stability is important for investment and decision-making. Therefore, we advise not to revise the benchmark. Moreover, revising the benchmarks would greatly reduce the benefits that industrial installations should receive for their last energy-saving and GHG reduction investments, resulting in a loss of confidence and thus a decrease in investments. It should be reminded that the ETS in general, and the benchmarks in particular, should reward installations and sectors reducing GHG emissions. Revising benchmarks will only penalise the most virtuous sectors, rewarding the most carbon intensive. |
b) no |
The purpose of free allocation within EU ETS is to maintain competitiveness of European industry. Forcing even the best industry in EU to invest in state of the art technology to get full allocation does not accomplish this. |
c) other (please specify) |
Three year average of relevant period could be OK, but there should be some flexibility in the reference years to take into consideration economic activities. Nevertheless, it should be kept the possibility to revise according to the state of the economy, crises, catastrophes etc. The allocation system should not constrain economic growth. |
a) no, there should be no deviations |
long-term reliability is the key to credibility for the system, no alterations should be made to the system during an ongoing Phase. |
d) yes, in the form of financial compensation at EU-level |
auctioning revenues should be used for the compensation of indirect effects, since different MS get very varying shares of the revenues, and since these shares has no correlation to the amount of energy intensive industry harmed by the indirect effect, this compensation should be at EU-level .Any system should be mandatory and harmonized for all the states. |
Least important |
Less important |
Important |
Most important |
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a) from the Member States' auction budgets |
There is no reasoning behind the fact the the memberstates get such a large part of the revenues from the EU ETS. For this money to be spent on decarbonisation it is better to “earmark” it at EU level. |
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b) Trade association representing businesses |
Syndicat National des Fabricants de Sucre de France (French Sugar Manufacturers Association) |
Remi Aubry 23, avenue d'Iena F-75783 Paris cedex 16 33 (0)1 49 52 66 74 raubry@snfs.fr |
a) yes |
1) yes |
b) no |
There are physical constraints that cannot be ignored about energy use on an industrial site. Current benchmarks are based on efficient gas combustion plants, minored by a coefficient reduction: they are practically not achievable by 2020. |
b) no |
ETS currently applied is contradictory with efficiency: it implies costs (direct and indirect) that are disproportionate to "benefits". Furthermore, industry is heavily (and costly) monitored and carbon finance is not at all monitored. |
a) yes |
Those measures have to persist as long as there is competition distortion with countries that have not developed such a scheme. At some time reduction is simply not physically possible to industry (see answer to question 1). |
b) quite adequate |
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a) it absolutely keeps the incentive |
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d) absolutely exaggerated |
ETS costs (direct and indirect) that are disproportionate to "benefits" (the development of inspection and auditing companies is not the objective!). Furthermore, industry is heavily (and costly) monitored and carbon finance is not at all monitored. This imbalance bas to be corrected in order to avoid the huge frauds from traders. |
d) there should be no limit to overall free allocation to industry |
ETS is accelerating the relocation of EU industries with no effect on climate change... |
e) I don’t know |
Anyway, the whole quota reserve should go back to support EU industry exposed to competition from countries where no such scheme exists. |
c) I don’t know |
ETS is not designed to serve this, even if there is indeed a need for other dedicated mechanisms to support innovation and development |
d) I don’t know |
ETS is not designed to serve this, even if there is indeed a need for dedicated mechanisms to support innovation and development. ETS should not provoke nor accelerate the disappearance of the EU industry. |
a) yes |
There is a need for compensation for indirect emissions costs. All sectors in the CL list at EU level and in all EU countries should be eligible to compensation for indirect emissions. The current EU industrial disaster deserves to be dealt with more seriously. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
The current EU industrial disaster should be dealt with seriously. |
b) only the share of 'carbon costs' in the GVA should be maintained |
All EU industries submitted to ETS should be supported because it is in a great danger. Climate should not be taken as a reason for EU industrial suicide. |
c) I don’t know |
All EU industries submitted to ETS are currently endangered by the current application of the system, with no environmental benefit. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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b) longer (please specify) |
At least as long as phase 4 will last but industry needs long predictability for heavy investments (cycles of more than several decades). Industry needs stability. |
c) the approach should be less stringent (please specify) |
Cross sectoral correction is nonsense as benchmark values are the 10% lowest technically possible. It has to be suppressed. Industry needs more time to reach the 10 percent best performing level... or disappear? |
b) no |
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c) other (please specify) |
For seasonal activities, a dynamic system is necessary to be able to adapt to longer (or variable) campaign durations that should be eligible to supplementary free allocations (or less in case campaign duration is shorter). |
a) no, there should be no deviations |
All EU industry is facing specific hardship... Our institutions and representatives need to be aware of that. |
c) yes, in the form of additional free allocation |
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I don't know |
Important |
Less important |
Least important |
I don't know for all the four proposals but it is not possible to answer |
e) I don't know |
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b) Trade association representing businesses |
The Carbon Capture and Storage Association (CCSA) |
Carbon Capture and Storage Association 6th Floor, 10 Dean Farrar Street London SW1H 0DX United Kingdom t. 02030318750 e. theo.mitchell@ccsassociation.org |
a) yes |
1) yes |
a) yes |
EU industry can retain and indeed grow its industrial production while reducing CO2 emissions. However in addition to policies to reduce emissions appropriate policies are required to support the transition to a low carbon economy without negatively impacting on production or risking competitiveness. In this regard, the EU has a major role to play in ensuring the European policy framework is fit for purpose, and to support Member States to implement appropriate policies at the national level. For many EU energy-intensive sectors CCS is the only technology capable of significantly reducing CO2 emissions at the required scale. This is because many of their CO2 emissions come not just from the combustion of fossil fuels but also from the chemical process itself. The use of sustainable biomass and CCS offers the potential to remove CO2 already in the atmosphere and in the future this could enable some industrial processes to continue to emit CO2 where complete abatement is not possibl |
a) yes |
Market based instruments such as the EU ETS are the most cost efficient tool to reduce CO2 emissions and should remain the central tool of EU emission reduction efforts. A strong carbon price will encourage industry and power sector to reduce emissions, and be more CO2 and energy efficient. These improvements will help European industry becomes more cost efficient and better prepared to meet stricter CO2 restrictions in the future. It must be recognised that the application of CCS technologies commonly leads to a net decrease in energy efficiency although it results in a dramatic increase in the CO2 efficiency of the industrial activity as very substantial proportions of the plants CO2 is abated. It should also be noted that the EU ETS alone is not enough to increase the competitiveness of European industry and complementary policies are required to support the transition to a low carbon economy. |
a) yes |
Where there is evidence that EU industrial sectors are exposed to carbon leakage then special transitional measures must continue as a core element of the EU’s post-2020 climate policy framework in order to remove these competitiveness disadvantages. In addition the EU should, in parallel, support the development and deployment of technologies, such as CCS, that can enable CO2 emitting sectors to make the longer-term transition to a low-carbon economy. The EU has a particularly important role to play in supporting the development of CCS as the technology is critical for the decarbonisation of so many European CO2 emitting sectors and no single sector or Member State has the capacity to single handedly commercialise and deploy the technology. |
b) quite adequate |
The CCSA supports short-term, transitional policy measures to address potential competitiveness disadvantages with third countries, including the continuation of free allowances for certain industrial sectors. However, this will only delay the impact of carbon price liabilities and temporarily reduce the risk of carbon leakage. Longer term, an effective low-carbon industrial policy is contingent on its ability to increase deployment of CCS and the ability for Energy Intensive Industries (EIIs) to access affordable CO2 transport and storage infrastructure. CCS is the only option for large-scale emission reductions from EIIs such as steel, cement and chemical production therefore is not only critical to maintaining the future viability of industrial activity in Europe. Looking further forward the development of a cost-efficient EU CCS industry could become a competitive advantage in a carbon-constrained world as it would effectively cap companies’ exposure to carbon price liabili |
e) I don’t know |
Clearly there is a potential for free allocation to impact on the incentives to innovate to reduce emissions. However in the case of CCS technologies - which are likely to be essential for many sectors exposed to competitiveness concerns - then the EU ETS alone is not expected to be the near term driver for the technology. Instead what is required are project specific incentives to commercialise the technology, e.g. development of CO2 transport and storage infrastructure, early commercial scale deployment, etc. |
e) I don’t know |
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f) I don’t know |
The extent of the carbon leakage mitigation required post-2020 will, in part, depend on the climate policies that have been implemented within the markets that EU industrial players have to compete against. In addition the degree of EU innovation support that is drawn from the post-2020 budget may also determine the proportion used for carbon leakage mitigation. |
e) I don’t know |
The NER300 has awarded €300 million to the White Rose CCS project. This is the only CCS project in Europe to have been successfully awarded funding despite the original objective to support up to eight CCS projects. The CCSA supports the continuation of an innovation programme. Any new innovation support programme should incorporate the learnings from NER300. The limited success of NER300 for CCS was due to a number of reasons, including limited funding available to CCS. CCS projects are large in size and each requires a relatively large amount of support. Any future innovation support must be able to generate sufficient funding for CCS projects. A new innovation programme should focus on delivering the outcome of large-scale deployment of CCS in the EU post-2020. It should be flexible enough to support a range of projects which enable individual Member States to contribute to the outcome, including, CO2 storage appraisal, large scale projects, transport infrastructure, etc |
a) yes |
Financial support for industrial innovation is required and should be implemented rapidly (i.e. pre-2020) to avoid an investment hiatus following the end of the NER300. In the case of CCS there are relatively large concentrations of already separated CO2 that could be used to implement early commercial scale projects. An Industrial Innovation Fund should develop an outcomes-focused assessment criteria, including: • Reduce CO2 intensity of industrial sectors. This should not be based on energy consumption and should not allow fuel switching; • Favour technologies that can be deployed across multiple sectors to ensure that maximum benefits are achieved for EU industries; • Be consistent with decarbonising the EU’s economy and energy system at least cost to the consumer; • Make all installations under the EU ETS eligible, specifically not excluding the power sector. • Focus on activities that are “value-adding” and maximise the abatement opportunities for industrial sectors |
c) other types of funding (please specify) |
In light of the scale of the investment challenge facing the transition to the low-carbon economy it is critical that steps are taken to unlock all possible sources of funding. In particular it will also be critical to ensure that projects receive Member State co-financing and support. It is therefore essential that industrial innovation projects are investable for both Member States and project developers. Funding initiatives should be outcomes- rather than means-focused, with development of project proposals led by Member States with assessment for fit against desired outcomes undertaken by the European Commission. This would help ensure that Member States retain the flexibility to support projects which best-meet national circumstances whilst still delivering progress towards European 2030 objectives. |
c) I don’t know |
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e) I don’t know |
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g) I don’t know |
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c) I don’t know |
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c) I don’t know |
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e) I don’t know |
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d) I don’t know |
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c) I don’t know |
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d) I don’t know |
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e) I don’t know |
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e) I don’t know |
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Less important |
Least important |
Important |
Most important |
For CCS - the only large-scale emissions reduction option for many EIIs - it is essential that a support scheme allows for a range of projects to come forward that contribute towards an overall outcome of increasing the speed and scale of CCS deployment on industries. This should include providing support for point-to-point demonstration projects, part-chain projects, technology pilots, infrastructure investments and storage site appraisals, and should explicitly make eligible both the power sector and other industries. |
c) from both |
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b) Trade association representing businesses |
The European Copper Institute (ECI) headquartered in Brussels since 1998, represents the copper industry in Europe and is part of the Copper Alliance, a global platform. We represent 28 companies, including EU’s top six producers of copper, Europe’s leading manufacturers of semi-fabricated copper products, such as tube, wire and sheet, plus downstream companies exploiting copper’s benefits in end-use applications and innovative technologies. |
Dr. Katia Lacasse, REACH & Regulatory Affairs manager (Health, Environment & Sustainable Development), European Copper Institute, Avenue de Tervueren 168 (b-10), B- 1150 Brussels (Belgium), Phone +32 (0)2 777 70 86, E-mail katia.lacasse@copperalliance.eu, www.copperalliance.eu/policy |
a) yes |
1) yes |
b) no |
No, unless: 1. Extra cost due to climate policy is sufficiently compensated. Currently, a key carbon leakage prevention mechanism, compensation for ETS indirect costs, exists only on paper as only few member states established meaningful compensation schemes. 2. We have a stable, predictable and investment friendly legislative environment in Europe. 3. Conditions are put in place to ensure that EU copper industry can remain globally competitive so that it can continue to invest in innovation along its entire value chain. 4. Sector specific reduction potentials and technology availability are properly and realistically assessed, (when designing new policies). |
b) no |
Energy intensive industry such as the Copper Industry for example has an innate incentive to become more energy efficient due to high energy cost, independently of the extra cost related to ETS. In these industries, however, the EU ETS may reduce the ability to become more energy efficient. The reason is that additional improvements will require investments, either in upgrading of existing capacity or in new plants. Extra cost due to climate policy, if insufficiently compensated, will reduce the margins of the European industry. And shrinking margins lead intrinsically to reduced energy efficiency investments. |
a) yes |
In most energy intensive industries, product prices are set in global markets. This is particularly true for copper which price is fixed globally at LME London Metal Exchange. Until a significantly larger share of global competitors is influenced by similar increases in energy cost, there is a need for such measures. Otherwise such industries will disappear from Europe. |
a) very adequate |
Compensation for direct and indirect costs, linked to actual output and realistic benchmarks, would be a very adequate measure to address the risk of carbon leakage (predictability and effectiveness is ensured in the long term for both, direct and indirect costs). |
a) it absolutely keeps the incentive |
Full compensation for direct and indirect costs is absolutely necessary for the competitive position of Europe as a localisation of energy intensive industries. Compensation should be linked to actual output in order to provide an incentive for growth and to allow production flexibility through business cycles. Realistic benchmarks are necessary for full compensation to new capacity and for the preservation of the undistorted environmental incentive. Expressed differently, allocation of free allowances will not reduce the environmental incentive for the recipient. On the contrary, full compensation for direct and indirect effects of ETS through allocation or otherwise is a precondition for investment in new capacity in Europe. |
b) quite proportionate |
The administrative burden is not insignificant, but proportionate in the sense that no better solutions to solve the carbon leakage issue have been pro¬posed. |
d) there should be no limit to overall free allocation to industry |
Carbon leakage undermines the environmental efficiency of EU ETS as well as EU’s industrial growth. Certain industries have to be protected for unfair international competition until fair conditions are restored by an international climate agreement. Without a comprehensive international agreement giving the global competitors of European industry a similar cost element related to emissions and electricity consumption, the cost of carbon leakage mitigation will be more or less stable, whereas the number of allowances to cover this cost will gradually diminish. This is a cost that is directly linked to emission trading and should be covered by the ETS system itself before any money is taken out of the system. If in the future, there is an inadequate number of allowances available to cover the need for carbon leakage mitigation, compensation could be provided as a sum of money proportionate to a given number of allowances from another source of finance. |
c) a lower share than in Phase 3 |
Financing of CCS should not be a priority for the allowance budget. It is illogical to reserve a given share of the budget for this purpose: When the EUA prices are low the need for support is high and vice versa. Furthermore, the lack of stability in the EUA market creates a high project risk and high financing cost. This adds the project cost and the need for support. |
b) no |
ETS should be focused on emission trading and mitigating the effects of such trading. Financing is tight, and there is no room for further programs. |
c) other types of funding (please specify) |
ETS should be focused on emission trading and mitigating the effects of such trading. Auction income should not be diverted to general innovation support. |
a) yes |
The use of free allowances will also have to be extended to cover indirect effects through increased electricity prices. With significantly higher EUA prices, the present solution for indirect costs based on State Aid will: - be insufficient for long term survival of these industries in Europe, - not create the predictability needed for investments, and, as well, - create significant disturbances in the internal market for energy intensive products. Effective carbon leakage prevention will also require exemption from extra costs related to other elements of climate policy like support to development of renewable electricity generation and extra grid costs related to transmission and balancing of electricity from renewable sources. |
b) more carbon leakage categories should be defined |
Electro-intensive industries are particularly exposed to carbon leakage and need full compensation of extra cost until a significant share of competitors is influenced by similar cost increases. EUA costs are passed on into electricity prices through the marginal cost of the marginal sources of electricity, and for these industries, electricity related cost make up a high share of total cost. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
A single carbon leakage list (with several categories) should be established. The list should be based on the combined effect of direct cost (emission allowances) and indirect costs (increases in electricity costs due to climate policy). The following set of criteria should be established: 1. The exposure to global competition. 2. The exposure to EUA cost 3. The unit is in the most exposed category of the carbon leakage list if both criteria are met being simultaneously at a high threshold. If one or both of the criteria only meets a lower threshold, the unit will be in the less exposed category of the list. The intensity of trade with third countries is a weak proxy to competitive exposure, and should not be used in this context. |
b) other thresholds should be defined. Please specify below |
The levels of the thresholds should be based proper analysis of the proposed new set of categories and criteria (see response to Q12 and Q13). |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Justified cases could be: inability to pass through the CO2 costs to its global customers (i.e. price-taker industrial sector), economic activity of major importance for EU society (eg recycling as a contribution to the "circular society") |
d) in line with the duration of ETS Phase 4 |
Predictability is the key to incentive efficiency. There is reason to believe that the set of criteria described above will establish robust and stable lists. |
a) the present approach of average of the 10% most efficient installations should remain |
Special solutions for industries where it is impossible to establish sectorial benchmarks (as for eg small number of installations) should remain. |
a) yes (please specify how often) |
In alignment with other EU environmental legislations tackling sustainability goals (eg IED) |
c) other (please specify) |
The main advice to be found in the literature is to use output based allocation linked to realistic benchmarks. For each industry, the baseline will then be set by the realistic benchmark. Indirect emission should also be set by realistic benchmarks and actual output. The compensation will be linked to a sum of two benchmarks, one derived from emissions and one derived from electricity consumption. |
a) no, there should be no deviations |
There should be no deviations linked to the short-term financial conditions of industries. There might however be a need to find special solutions for industries where it is impossible to establish sectorial benchmarks. Overall, EU’s sustainability and climate goals should be better linked throughout core environmental and climate policies. |
c) yes, in the form of additional free allocation |
Compensation inside the EU ETS should be extended to cover indirect effects through increased electricity prices. With significantly higher EUA prices, the present solution for indirect costs based on State Aid will be insufficient for long term survival of these industries in Europe and, as well, create significant disturbances in the internal market. The cost of any compensation measures will be proportionate to the EUA price, thus corresponding to the value of free allowances. Compensation could be provided as free allowances or as a sum of money proportionate to a given number of allowances from another source of finance. |
Important |
Least important |
Most important |
Less important |
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d) other |
ETS should be focused on emission trading and mitigating the undesirable effects of such trading. Innovation support should mainly come out of MS general budgets and not from auction income. |
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b) Trade association representing businesses |
The Federal Association of the German Glass Industry (Bundesverband Glasindustrie e.V. - BV Glas) |
Am Bonneshof 5, 40474 Düsseldorf, Germany; Tel: + 49 (0) 211.4796 134; Email: info@bvglas.de |
a) yes |
1) yes |
b) no |
The glass industry is making continuous improvement in energy efficiencies and process technologies to reduce CO2, energy consumption and environmental impacts. While further reductions in the glass industry are possible, what is important is the magnitude of this reduction. All official EU publications such as the “Sector Competitiveness Studies - Competitiveness of the Glass Sector - ENTR/06/054 - Final report, 14 October 2008” or more recently the Glass BREF and the BAT Conclusions show that no breakthrough technology is currently available to reduce CO2 emissions to the extent imposed by the energy and climate package 2030 (-43% for ETS sectors between 2005 and 2030). Emissions reductions cannot be repeated ad infinitum. There is a thermodynamic limit to the glass melting process which is an absolute limit, and that current technology is already approaching. However, process emissions cannot be eliminated, limiting therefore the reduction potential of the glass industries. |
b) no |
The main driver for energy efficiency improvements in the glass industry is the high share of energy costs within production costs. In fact, the glass industry has continuously improved energy efficiency over previous decades. Regulatory instruments and the EU ETS in particular, have only a marginal effect on energy efficiency improvements of glass melting activities, if any. Whilst there is no global ETS in place, the EU ETS is only a source of costs for glass industries (direct but also indirect CO2 costs linked to electricity), and therefore weakens the competitive position of European based glass industries vis-a-vis third country competitors. As such, it indirectly favors production reduction in the EU and rises in imports from non EU countries without carbon constraints into the EU. For these reasons, glass industries need to be fully protected against risks of carbon leakage |
a) yes |
The EU glass industry faces higher costs for environmental protection, energy, labour and raw materials, than the majority of extra-EU competitors. In the absence of an international climate agreement and a level playing field between EU and extra EU competitors, the EU industry needs to be provided with measures to safeguard its competitiveness. Measures to avoid carbon leakage under the EU ETS are therefore essential. Measures should cover both the direct and indirect CO2 costs. Such measures under the EU ETS must be established in a way that ensures the ETS’ coherence with the EU’s ambition to revitalize European manufacturing activities, as proposed in the EC Communication on Industrial Renaissance. |
b) quite adequate |
Free allocation has been key up to now to mitigate the negative impacts of a unilateral climate policy. However, the Cross Sectoral Correction Factor which is applied already from 2013 reduces the free allocation, even for the best GHG performers, and will dramatically increase in the future, thus further reducing free allocation. This current system is unsustainable and should be changed in order to ensure that best GHG performers receive 100% of their allowance needs. |
a) it absolutely keeps the incentive |
Free allocation does not reduce the incentive to innovate; on the contrary, the majority of installations in the sector do not have enough allowances which encourage industry to invest in the efficiency of its plants and avoid having to purchase a high level of allowances, which would render the sector uncompetitive. Free allowances preserve investment capacity. Free allowances offer industry the incentive to purchase less CO2 allowances if they become more GHG efficient. However this last incentive would be better preserved if the CSCF was not forcing an unrealistic and arbitrary reduction of the number of free allowances even for producers who are the most GHG efficient in the sector. |
b) quite proportionate |
Administrative burden is consequent, but it is necessary to maintain the free allocation system. However opportunities or improvement to this process should be considered. Conversely, the administration and calculation rules for new entrants are overly complex and can lead to under-allocation. They can therefore be seen as disproportionate and can be a disincentive to new investments. |
d) there should be no limit to overall free allocation to industry |
The current system is unsustainable because the cross sectoral correction factor continually reduces the free allocation given to industry, even for the best GHG performers. Ideally, best GHG performers should receive 100% of free allocations to produce in the EU and so there should be no limit. In practice, this will mean a higher share. An increased level of EU ambition in terms of GHG reduction should lead to enhanced measures against carbon leakage and therefore an increase in free allocations. |
e) I don’t know |
Overall financing for technological innovation in manufacturing should be increased in the EU. However R & D should be funded via a mobilization of different sources of funding - including but not limited to - auctioning revenues. It should not come from the free entrants reserve or Free Allowances reserve. Allowances should be primarily used to ensure that best GHG performers get 100% of their needs to produce in the EU. Furthermore, financing for R&D and demonstration projects should be technology-neutral and not focused only on CCS or renewables. New technologies such as Carbon Capture and Use (CCU) and others should not be excluded. |
a) yes |
As stated above, Industrial innovation with a focus on the process and on new energy sources for industry, should be promoted. It should not be financed by shares of allowances reserved but rather from a mobilization of different sources, and not limited to auctioning revenues. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Industrial innovation should be promoted in a technology-neutral way. However this should not be done at the expense of free allocation which aims to provide effective support and protection against carbon leakage. Therefore it should be financed via other sources. This could include, among other sources, money from the auctioning revenues, as suggested in the ETS directive (Art 10.3). |
a) yes |
A level-playing field between EU industries and extra-EU competitors should be the ultimate objective pursued in order to achieve the EU’s ambition of 20% GDP realized by industrial activities in 2020. To that end, measures against carbon leakage are a pre-requisite but are not enough. An EU scheme for compensation of indirect costs due to higher electricity prices and some raw materials (e.g. soda ash, industrial gases, ..) should also be developed for Energy Intensive Industries. More generally, the EU needs to assess, and if needed reform, all its policies and in particular energy and environmental ones against the reindustrialization objective. A longer term reindustrialization objective for 2030 should be established. |
a) the present two groups should remain |
The present two groups shall remain. This binary model ensures that all sectors benefit from carbon leakage protection measures as soon as a risk is detected. This is essential to ensure that carbon leakage measures are effective and that protection is not granted too late, when industries are already in jeopardy. It is nevertheless important to ensure an evidence-based assessment in order to select industries that are exposed to carbon leakage and therefore to ensure the good use of free allowances throughout the next trading period. |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
The competitiveness of energy-intensive industries is sensitive to energy and carbon costs; therefore a risk exists for all these industries. For the sake of simplicity and consistency in legislation, all energy-intensive industries, as defined in Art 17 (1) a of the Energy taxation directive 2003/96/EC could be automatically placed on the carbon leakage list, i.e. An "energy-intensive business" shall mean a business entity, (…) where either the purchases of energy products and electricity amount to at least 3,0 % of the production value or the national energy tax payable amounts to at least 0,5 % of the added value. In case ETS-specific criteria are maintained, they should continue being based on both the CO2 intensity and the trade intensity metrics. The CO2 cost metric should be made more relevant to analyse the impacts of carbon cost on sectors’ profitability. In the case the ETS-criteria are maintained, it is absolutely essential to set the CO2 price to the amount of 30€/t. |
b) other thresholds should be defined. Please specify below |
The competitiveness of energy-intensive industries is sensitive to energy and carbon costs; therefore a risk exists for all these industries. For the sake of simplicity and consistency in legislation, all energy-intensive industries, as defined in Art 17 (1) a of the Energy taxation directive 2003/96/EC could be automatically placed on the carbon leakage list, i.e. An "energy-intensive business" shall mean a business entity, (…) where either the purchases of energy products and electricity amount to at least 3,0 % of the production value or the national energy tax payable amounts to at least 0,5 % of the added value. In case ETS-specific criteria are maintained, they should continue being based on both the CO2 intensity and the trade intensity metrics. The CO2 cost metric should be made more relevant to analyze the impacts of carbon cost on sectors’ profitability. In the case the ETS-criteria are maintained, it is absolutely essential to set the CO2 price to the amount of 30€/t. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The current criteria under the quantitative assessment at NACE 3 or 4 level should be maintained and used as the first assessment option. When an assessment at NACE 3 or 4 level is not appropriate to identify the relevant industrial activities falling under the EU ETS, then a quantitative assessment at 6- or 8-digit should be carried as a second option. Finally, as a third option, a qualitative assessment must remain possible. Other parameters can be studied as part of qualitative assessments, such as methodology and evidences of investment leakage. |
b) longer (please specify) |
As long as there is no equivalent GHG reduction measures taken by major trading partners, Energy Intensive industries at risk of carbon leakage should benefit from free allocation.The list of sectors exposed to the risk of carbon leakage should be valid for the entire duration of the trading period for which it is established. This is essential to provide predictability to industries faced with long investment cycles. Moreover, the duration should be until there is a global agreement ensuring that all competitors face similar carbon costs. In this context, BV Glas is calling for more long-term planning security especially referring to emissions trading. Although all glass industry segments are on the Carbon Leakage List in the European Commission’s current draft bill, the mandatory 5-yearly review is causing considerable concern in the entire industry. BV Glas believes it is necessary to extend the validity term of the Carbon Leakage List due to the glass industry’s 15-year Investment. |
a) the present approach of average of the 10% most efficient installations should remain |
BV Glas supports ambitious benchmark levels, which reflect the technological capabilities of the sectors best performers using the best available and proven technologies in Europe. It must be kept in mind however that this approach also has limits. Indeed, benchmark curves do not always reflect a difference in terms of « best » (the least GHG emitters per ton of glass) or « worst » GHG players, but a difference in terms of products produced, cullet availability, age of furnace, available fuels, etc. The 10% best GHG performers can therefore be regarded as extremely challenging, especially for plants producing a wider range of more sophisticated products with higher added-value (as this usually entails higher energy consumption). |
a) yes (please specify how often) |
It seems logical to revise the benchmarks from time to time to reflect GHG improvements over time. Revision cycles should be linked to ETS phases and remain unchanged over this period. Periodical revision of the benchmark should be based on the actual EU based installations. The periodic revision of benchmarks should be the sole instrument leading to a reduction of free allowances over time, as benchmarks reflect true possibilities of GHG improvements according to state-of-the-art technologies deployed in Europe. The periodic revision of benchmarks therefore justifies that the CSCF is abandoned. |
c) other (please specify) |
Ex-ante allocation can only lead to over-allocation in crisis times, and under-allocation when the economy is growing. A better approach is to design an « ex post » system, where real allocation is corrected according to the real production. |
a) no, there should be no deviations |
In principle, there shall be no deviation from the general harmonized allocation rules at the level of an individual installation as this could cause distortion of competition. Only in the case of very specific hardship, should deviations be envisaged for an entire sector after a careful assessment of the competitive effects of such deviations. |
d) yes, in the form of financial compensation at EU-level |
Rules for the compensation of indirect costs should be revised and need to be effective to reflect the real burden of CO2 included in electricity costs for industry. A differentiated compensation approach by Member States is not acceptable from a competitiveness point of view. A harmonized approach at EU level is therefore needed.The harmonized measure should take the form of financial compensation. Free allocation should be kept aside to ensure full relief for direct emissions (best GHG performers should receive 100% of their needs). The list for compensation of indirect costs has to be extended. It is not understandable that the glass industry is not on the list for compensation of indirect costs. The Commission has not provide a comprehensible calculation for this decision up to now. A compensation system should also be put in place to compensate for higher prices of some raw materials (e.g. soda ash) and industrial gases. |
Important |
Less important |
Most important |
I don't know |
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a) from the Member States' auction budgets |
Allowances funding low-carbon innovation support should be financed from the Member States’ auction revenues and from a mobilization of additional sources. However, this should not be financed at the expense of free allocation or the new entrants reserve which must be principally used for measures against risks of carbon leakage. |
Generally speaking, BV Glas welcomes the opportunity to express its view on carbon leakage measures post 2020 and appreciates that this discussion is held without further delay. It is however regrettable that industry is asked to comment on such measures whereas the rules for EU ETS Phase IV have not yet been fully decided. The glass industry wishes to reiterate that so long that there is no comparable ETS system (which means that similar costs are born by competitors) operating in most part of the world and in extra-EU countries with glass industries, EU based glass industries will need to receive full and effective protection against carbon leakage. The recent assessment carried by DG CLIMA on exposure to carbon leakage risks, i.e. the carbon leakage list of 2009 and its recent revision, shows that between 2009 and 2014, risks of carbon leakage has grown in most glass sectors. For these reasons, glass industries need effective protection moving forward. |
b) Trade association representing businesses |
The Federation of Finnish Technology Industries, ID-number: 39705603497-38 |
Mr. Martti Kätkä The Federation of Finnish Technology Industries Eteläranta 10 00130 Helsinki Finland telephone: +358 50 380 4496 email: martti.katka@teknologiateollisuus.fi |
a) yes |
1) yes |
b) no |
If there is no global and binding climate agreement in Paris in 2015, European industries lose their competitiveness and is thereby unble to invest in new low carbon processes. This is why the EU must not continue unilateral climate policy after 2020, if the climate negotiations fail. If, however, the agreement is achieved, then it is possible to establish a global level playing field for industries and in this case European industries have a good chance of being leader in low carbon technologies. |
b) no |
In case of unilateral EU ETS, industrial investments are diverted to those economic areas where there are no extra carbon costs. This means loss of market share of EU industries, loss of jobs and welfare in Europe. Investments in energy efficiency, research and development of low carbon technologies are in the key role. And if investors face more stringent conditions in Europe, they decide to invest somewhere else. This must be prevented by active participation in the climate negotiations in Paris in 2015 to achieve a global and binding climate agreement. |
a) yes |
Carbon cost is reducing the competitiveness of European industries, especially energy intensive industries, and this is why special measures are needed to compensate for the costs in order to prevent carbon leakage and investment leakage. |
a) very adequate |
Free allocation is absolutely necessary for energy intensive industries to compensate for direct socts of EU ETS. |
a) it absolutely keeps the incentive |
The incentive for reducing emissions is maintained, because the cap is continuosly decreasing in the future. Free allocation according to benchmarks of 10 percent best performers give an adequate incentive to reduce emissions. |
e) I don’t know |
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d) there should be no limit to overall free allocation to industry |
As free allocation is intended to protect energy intensive industries from carbon leakage, full compensation according the benchmarks should be allocated. |
e) I don’t know |
Funding large scale CCS projects and innovative renewable energy must be secured, no matter what is the funding source. NER300 programme is only one of the many options. |
a) yes |
It is of crucial importance that industrial innovation and deployment of new low carbon technologies are enhanced as effectively as possible. |
c) other types of funding (please specify) |
There should be a variety of different funding sources. Together with NER300 and revenues from auctioning schemes also structural funds and regional funds should be allocated for research, developement and deployment of low carbon technologies. |
a) yes |
We need to prevent carbon price pass through in the market price of electricity. These indirect costs are much higher to some electro-intensive industries than direct costs of EU ETS. Consumers could pay the carbon costs of electricity production directly in their grid fee. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Unilateral climate policy is EU is harmful for all industries. It must be determined, which installations are most exposed and if the cost exceeds 0,5 percent of value added, then the installation is eligible for free allowances. Carbon leakage cathegories do not take into account the situation of individual installations. |
b) only the share of 'carbon costs' in the GVA should be maintained |
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b) other thresholds should be defined. Please specify below |
The simplest and most effective threshold is the share of carbon cost of gross value added. If the carbon cost is over 0,5 percent of gross value added, the full compensation should be granted above that threshold. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
There may be a need for qualitative criteria for price-taker industrial sectors which are not able to pass through the carbon costs to its global costomers. |
d) in line with the duration of ETS Phase 4 |
The compensation is needed as long as their is not a globally level playing field for industries. |
a) the present approach of average of the 10% most efficient installations should remain |
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a) yes (please specify how often) |
The benchmarks should be revised once in the commitment period. When more efficient and lower carbon technologies are introduced during a commitment period, these must be taken into account when calculating the benchmarks for the next period. |
c) other (please specify) |
Allocation of free allowances should be flexible and reflect continuosly real production levels rather than historical production data. One approach could be the calculation of free allowances carried out annually so that the real production level of the last year serves as the basis for allocation of next year. |
a) no, there should be no deviations |
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d) yes, in the form of financial compensation at EU-level |
Indirect costs should be eliminated by a new market design for electricity market in Europe. Carbon costs shoud be paid by consumers in connection with their grid bill. Carbon cost should be determined according to marginal producer in all European price areas; i.e. according to carbon cost of coal condensing power. This fee should be the same for all European consumers and determined by ACER according to real production data. ACER sends the information of carbon fee to natioanal authorities, who give it to distribution network companies. The funds from the consumers are collected by the authorities and power generators under ETS can apply for the compenstion from the authorities according to their real production. When this is applied in all European price areas, there is no distortion of competition. Electrcity prices decrease all over Europe as the windfall profits disappear at the same time as the goals of ETS are acieved. |
Important |
Least important |
Most important |
Less important |
Commercial products and services should not be subsidised. |
a) from the Member States' auction budgets |
Free allocation should be kept at a minimum level in order to maintain the functioning of EU ETS. However, all installations under threat of carbon leakage should be fully compensated. |
EU should set the new targets for 2030 so that they serve as on offer in climate negotiations in Paris in 2015. If no agreement is achieved, the offer expires and the EU must reconsider its climate and energy policy targets. EU should, however, continue to foster new low carbon technologies, the so called no-regret options, as intensively as possible. These options include smart grids, electric mobility, CHP, nuclear power, renewable energies, fuel cells, hydrogen technologies and in the long run CCS and fusion energy. |
b) Trade association representing businesses |
The Federation of Finnish Technology Industries, Register ID: 39705603497-38 The Federation of Finnish Technology Industries comprises five sub-sectors: • electronics and electro technical industry, • mechanical engineering, • metals industry, • consulting engineering and • information technology industries. Of these currently metals industry falls under the scope of the EU ETS. |
Mia Nores, mia.nores@techind.fi , +358 44 3300928 P.O.Box 10, 00131 Helsinki, Finland |
a) yes |
1) yes |
b) no |
Many of the energy intensive sectors have developed sectors-specific low-carbon roadmaps. Most of these roadmaps show only small additional reduction in the CO2 emissions. This applies especially for the steel sector. As demonstrated in the Steel Roadmap 2050, technologies able to drastically decrease the sector’s emissions are either uncompetitive because relying on expensive reducing agents (pre-reduction of iron) or involving Carbon Capture and Storage. At the moment there are no technologically and economically feasible technologies available to speed up the CO2 reduction. Most sectors will need the development, piloting, demonstration and of breakthrough technologies to meet long term goals of around -80%. These technologies, if they would be developed, would be available only after 2030. |
b) no |
The export industry, such as the steel and non-ferrous metals industry is competing on global level. The export industry is not able to pass on the direct and indirect CO2 costs on prices. Currently, the decision and the amount of the compensation of the EU ETS indirect costs is done on Member State level. At the moment, only few Member States have made the decision to compensate. This is leading to an unharmonised situation. Industry in those Member States where indirect costs are not compensated, faces additional costs of the EU ETS. Instead, the compensation of the indirect costs should be on EU level. Industry needs a stable, predictable and investment friendly environment in Europe. The CO2 emissions are lower in the EU compared to global CO2 emission level. Having sustainable industry in Europe means also less CO2 emissions globally. |
a) yes |
In most energy intensive industries, product prices are set in global markets. For example steel is a globally traded commodity and steel companies compete on global market. The global crude steel output is 1,607 Mio t of which the output of China is 779 Mio t and is followed by the EU-28. The EU-28 is the first steel importing region in the world and the third export region. Thus, the EU steel sector faces fierce competitiveness from third countries on domestic and on global level. In the absence of an international climate agreement providing level playing field special measures are needed to support EU industry covered by the EU ETS to address the competitiveness issue and avoid carbon leakage. This means free allocation and full compensation for indirect costs. |
a) very adequate |
The free allocation has protected the competitiveness of the export industry of the EU and helped maintain economic activity in EU. In the Ecorys ‘Carbon leakage evidence project’ - fact sheet for steel, it is shown that one of the main reasons why no evidence of leakage could be found in the first two trading periods is that the protection provided by free allocation has worked. Sectors at risk of carbon leakage should be provided with 100% free allocation at the level of the most efficient installations, based on achievable benchmarks and without any correction factor. Equally there should be full off-setting of CO2 cost-pass through in electricity prices in all member states for example by re-designing the electricity market so that it prevents any carbon price pass-through in electricity prices. |
b) it largely keeps the incentive |
Full compensation for direct and indirect costs is absolutely necessary for the competitiveness of European energy intensive industry. With a free allocation based on achievable benchmarks companies have an incentive to catch up more quickly to the benchmark due to the level of carbon related costs. Companies in the lead are incentivised to innovate to perform even better. On the contrary, a higher level of auctioning for sectors exposed to leakage as induced by the Cross Sectoral Correction Factor decreases the profit margins and the financial ability to invest. |
b) quite proportionate |
The administrative burden is not insignificant, but proportionate in the sense that no better solutions to solve the carbon leakage issue have been proposed. This administrative burden is one additional cost that competitors outside the EU do not have. The resource and time consumed to reporting is away from for example the emissions reduction actions. |
d) there should be no limit to overall free allocation to industry |
To secure the global competitiveness of EU industries, as there is no comprehensive international climate agreement, sectors at risk of carbon leakage need to be provided with 100% free allocation for the most efficient installations, based on achievable benchmarks and no correction factor. |
e) I don’t know |
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a) yes |
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d) I don’t know |
|
a) yes |
A globally binding climate agreement would be the most effective way to prevent the risk of carbon leakage. Until there is such an agreement, sectors at risk of carbon leakage should be provided with 100% free allocation at the level of the most efficient installations, based on achievable benchmarks and no correction factor. Also, they should be provided with full off-setting of CO2 cost-pass through in electricity prices in all member states by for example re-designing the electricity market in a way that it prevents any carbon price pass-through in electricity prices. |
e) I don’t know |
Electro-intensive industries are particularly exposed to carbon leakage and need full compensation of extra cost until a significant share of competitors is influenced by similar cost increases. It is important that the sectors most exposed to carbon leakage should get 100% free allowances. Also other industries may need compensation, but not necessarily to the same degree. |
g) I don’t know |
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c) I don’t know |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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d) in line with the duration of ETS Phase 4 |
The revision of carbon leakage list creates uncertainty and additional burden. There should also be a possibility to add sectors to the list. Otherwise the list should remain unchanged. |
a) the present approach of average of the 10% most efficient installations should remain |
Realistic benchmarks with the goal of the 10% best performers is ambitious enough to lead the EU-ETS on an economical way to success. The benchmarks need to reflect real technical and economical possibilities to produce the product to be benchmarked and to sell it on the relevant market taking international trade into account. Any adaptation of benchmarks for 2021 onwards should be considered only if the best performers of sectors at risk of carbon leakage receive true 100% free allocation and full off-set of CO2 costs pass-through in electricity prices in a harmonized way in all Member States. |
a) yes (please specify how often) |
It is important to have a long-term stability and predictability for the European industry. However, there could be a periodical review of the benchmarks once per emission trading period to reflect the technological progress and uptake of new and proven technologies in the EU. This could be done by assessing the benchmarks through an analysis of the CO2 performance of the EU industry and not by best available techniques (BAT), because BAT feasibility depends to a large extent on local conditions. |
c) other (please specify) |
The allocation should be based on real production levels or a rolling average of production levels over closer years (e.g. n-1, n-2). If there are baseline periods, there should be several alternatives for the companies to choose from to avoid unusual or unfavorable production periods. |
a) no, there should be no deviations |
Distortion of competition within the single market shall be avoided. |
d) yes, in the form of financial compensation at EU-level |
Full off-setting of CO2 cost-pass through in electricity prices could be done for example by re-designing the electricity market in a way that it prevents any carbon price pass-through in electricity prices. |
Less important |
Least important |
Most important |
Important |
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d) other |
The allowances funding low-carbon innovation support should come from MS’s auction budgets. Other public and private funding sources should also be considered. |
Climate policy should be in line with industrial policy. To mitigate climate change the EU should focus on promoting industrial production in Europe, which is good for the environment and climate. The average CO2-emissions caused by electricity production in Europe are low in global comparison. Thus, the more industry production there is in Europe the lower are the global CO2-emissions. |
b) Trade association representing businesses |
The International Association of Oil & Gas Producers (OGP) |
165, Bd du Souverain, B-1160 Brussels Tel: +32 2 566 9150 Email: bernard.vanheule@ogp.be |
a) yes |
|
1) yes |
b) no |
The EU oil and gas extractive sector (NACE sectors 06.10 and 06.20) has already one of the lowest average CO2 intensity per t. produced (0,08/t in EU versus 0,13/t World average)[1] and is located in a mature and high-cost operating region. Independent studies (e.g. Konkraft study N°5, Norway) show that incremental energy efficiencies offshore are likely to be technologically difficult, expensive and small in magnitude compared to the past. Achieving a potential -43% CO2 reduction by 2030 is likely to be technologically unachievable for the offshore sector. Without strong carbon leakage protection it will only comply by purchasing allowances adding cost to an already high-cost area with the inevitable early closure of installations and loss in indigenous resources which is detrimental to security of supply. With diminishing returns, the ability to invest in new field developments with greater energy efficiency may be lost too. |
a) yes |
ETS is one of the contributing factors but not the main one. Oil and gas producers in the EU and Norway continually strive for energy efficiency improvements, both through application of internal energy and environmental management systems and through compliance with the IPPC (now IED) Directive requirement to use energy efficiently. The EU ETS is likely one contributing factor but is not as important a factor as the business need to drive down operating costs or the loss of value from burning field gas rather than exporting it as revenue contributing sales gas. In the absence of a global agreement, however, the EU ETS is an additional cost to EU and Norwegian producers but not to non-EU producers which is detrimental to EU competitiveness. This is why industry needs sufficient carbon leakage protection. |
a) yes |
The EU & Norway have the most stringent GHG reduction policies of all the industrialized nations and the related oil and gas extraction industry is already one of the most energy efficient in the world. Until a global agreement is in place, support for EU industrial sectors exposed to carbon leakage must continue as a core element of the EU’s post-2020 climate policy framework. If carbon leakage protection were missing, allocation levels would reduce from 100% free allocation at the benchmark to below 30% of the benchmark in 2020 and continuing to decline thereafter. For the oil and gas sector, allocation of free allowances would be substantially lower than this given the need to generate electricity on-site, an activity that receives no free allowances at all (see next response). |
b) quite adequate |
In the absence of a global climate agreement, OGP prefers both free allocation and enhanced free allocation for exposed sectors to deal with carbon leakage. Even under the current system such protection is already eroding due the decreasing industry cap and earlier than anticipated application of the Cross-Sectoral Correction Factor. Additionally upstream oil and gas is already heavily burdened by electricity production being subject to 100% auctioning (offshore grid connection being generally infeasible). About 50% of sector emissions relate to electricity production on offshore platforms. OGP re-iterates its request that free allowances should be given to offshore installations for the on-site generation of electricity given the infeasibility of connecting to the grid. |
a) it absolutely keeps the incentive |
The main incentive for reducing CO2 emissions in the oil and gas sector is reducing energy costs and to maximize the amount of field gas than can be exported and sold. Installations are still free to innovate, implement reduction measures and sell freed up allowances into the market in order to offset investment costs for energy efficiency improvements. In principle, free allocation does not impact the overall supply/demand balance, does not influence the carbon price and therefore does not impact the drive to innovate. Free allocation is designed to address carbon leakage risk not to drive innovation. |
b) quite proportionate |
The administrative burden was significant in the 2008-9 period when the benchmarking system was being developed. The oil and gas sector is covered by the fuel benchmark: we would expect this to continue and for the administrative burden to be proportionate in the future. |
d) there should be no limit to overall free allocation to industry |
Within the anticipated range of the overall EU ETS ambition, the “full” carbon leakage protection given to industry as foreseen by the EU ETS directive’s current setup (progressive decrease of the cap and the CSCF) will decrease the industry’s free allocation to as low as 34% of current levels by 2030. To maintain an adequate level of carbon leakage protection, the share for industry should at least be maintained at the 2020 level if not increased: there should be sufficient free allowances available to make this work until 2030 without the ETS cap being breached. Only such a solution can safeguard the competitiveness of European industries exposed to carbon leakage |
e) I don’t know |
The proposed a) and b) answers are actually ill-drafted. The NER 300 programme has been complex to administer, had a market impact by releasing allowances onto the market early, and has not delivered a single, large scale CCS demonstration project and lessons should be learned based on experience to date. A critical component to achieving real CO2 reductions will be to change the qualifying criteria to take into account the lower carbon content of gas (and so the lower volumes of CO2 generated). This would address the current perverse advantage for coal. The criterion should not be the extra cost per tonne of stored CO2, but rather the extra cost per kWh of electricity. Further, the scheme might be more efficient if it gave sufficient funding to fewer projects rather than a thin layer of funding to too many projects. The mechanism should also take into consideration operational costs for CCS which are likely to remain high until the energy penalty issue is solved. |
b) no |
New low carbon technologies are already catered for through existing processes, such as Horizon 2020, 7th Framework and SET programmes, and these are probably more appropriate. |
c) other types of funding (please specify) |
Rather than establishing new bureaucracies, existing processes such as Horizon 2020, 7th Framework and SET programmes are more appropriate. Support for innovative low-carbon technologies should be technology neutral as well as time- and cost- limited; all energy sources should be integrated in the market under normal market conditions and without subsidies (including system connection, balancing cost and exposure to price risk) as soon as possible. |
b) no |
Assuming that both direct and indirect costs are fully covered then there is no need for additional measures for carbon leakage protection post-2020. However, the current system does not deliver this particularly in regard to indirect costs. The oil and gas extraction sector re-iterates its desire for on-site generation of electricity to receive free allowances where connecting to the grid is infeasible. Innovation support does not directly address the risk of carbon leakage. Support to innovation can reduce future costs, e.g. from successful step-out R&D, but this is better addressed through economy-wide processes that can better allocate such resources on a societal basis. |
a) the present two groups should remain |
OGP supports the current design and the current two groups should remain. |
a) the present criteria should remain |
The oil&gas sector qualifies under the trade intensity metric. OGP would want to see this option maintained as is, including the level of the qualifying threshold. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
In our experience the EUROSTAT database, which is the main source of data for calculating the industrial sectors’ exposure, is not granular enough to provide a reliable picture of the oil&gas sector, particularly since the revision of the NACE system split the oil and gas sector into two sub-sectors. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
OGP supports the flexibility offered by the use of qualitative assessments but these should be kept as simple as possible. |
d) in line with the duration of ETS Phase 4 |
The oil and gas sector prefers the increased predictability that a longer period would offer as this is more conducive to investment decisions but recognizes that any decision would need to be revisited in the light of a global agreement. |
d) I don’t know |
OGP is not in a position to comment on the benchmarks for other sectors. However, the oil and gas extraction sector is subject to the “fuel” benchmark and would strongly prefer that this remain in its current form. For offshore oil and gas installations this already represents a stretch target as combustion units may be dual-fuelled (diesel and gas) in order to maintain operational reliability. |
c) I don’t know |
OGP would support review of the benchmarks as long as this is completed prior to an ETS Phase. |
c) other (please specify) |
Artificially fixing a one-size-fits-all baseline period does not take into account the specificities of individual national economies or industrial sectors that engage in global trade. Free allocation should reflect economic reality per installation based on the most recent years: more recent verified data should be used to reflect recent activity. This could be constructed as an ex post allocation system that keeps track of actual production levels. Combined with an appropriate benchmark, sectors would be adequately protected – receiving neither more nor fewer allowances than needed – but the benchmark would still ensure on-going energy efficiency improvements at installation level. |
a) no, there should be no deviations |
General harmonised allocation rules should continue to apply for all carbon leakage installations in the same manner and provide a level playing field for all. |
d) yes, in the form of financial compensation at EU-level |
It is equally as important to compensate sectors at risk of carbon leakage for the indirect costs of ETS associated with electricity purchase as it is for direct costs. This should be harmonized at the EU level rather than left to the discretion of member states as this may lead to uneven application and subsequent market distortions. If a sector is deemed at risk of direct carbon leakage, compensation should automatically be given for indirect carbon emissions to all installations in that sector. OGP believes that where an installation is not physically connected to the electricity grid, all activity should be eligible for free allocation. |
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OGP understands for the purpose of this question that «large-scale pilot project» covers EU-wide demonstration-scale plant, particularly for CCS. Further reducing costs and assessing the commercial scale of CCS technology is critical. |
d) other |
OGP is not in favour of reducing the number of free allowances available to industry in order to fund low-carbon innovation support. If the member states wish to support such endeavours in addition to the numerous processes already available (Horizon 2020, 7th Framework and SET programmes) then they can do so from their auction revenues or from general taxation according to societal priorities. |
Regarding the format of the questionnaire, we believe that some of the questions are not neutral and push the respondents in the direction of making a certain response. The answer will not always be a simple yes or no. This does not necessarily mean that the respondent “does not know” and has no valuable input to bring. The report of the consultation should give due weight to the comments accompanying the questions and not just be a quantitative analysis of responses in a pie-chart. Future carbon leakage assessments should be forward looking only; looking for evidence of carbon leakage in the past means that it is too late and the competitiveness of energy intensive EU industry may already have been adversely impacted. |
b) Trade association representing businesses |
The Scotch Whisky Association |
20 Atholl Crescent, Edinburgh, EH3 8HF, UK Telephone: 0131 222 9204 E-mail: pclark@swa.org.uk |
a) yes |
1) yes |
a) yes |
It might be possible but could be costly, particulalrly in sectors which already invested in emission reduction technologies. |
c) I don’t know |
EU ETS is one of a number of policy measures which the Scotch Whisky industry is subject to. Energy efficiency improvements have been made in parts of the industry which are outside of the scope of EU ETS, for example malt distilling and packaging. It is therefore not possible to state definitively the impact of EU ETS on increasing energy efficiency. |
a) yes |
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a) very adequate |
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a) it absolutely keeps the incentive |
In addition to the cost of carbon, the use of energy carries a cost. High energy prices alone (i.e. excluding the cost of carbon) in the EU act as an incentive to reduce energy use or use it more efficiently. This will therefore help lower emissions. |
b) quite proportionate |
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c) a constant share as in 2013-20 |
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e) I don’t know |
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a) yes |
Support is needed to develop innovative renewable energy forms. For example, in the Scotch Whisky industry, distillers are looking at using draff (spent ceral grains - a by-product of the distillation process) as a renewable form of renewable energy (biomass). |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
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c) I don’t know |
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b) more carbon leakage categories should be defined |
The production (distillation and maturation (and bottling of Single Malt Scotch Whisky)) of Scotch Whisky is tied to Scotland by law. It cannot be produced anywhere else. However, Scotch Whisky distillers face competition from other spirits producers both in the EU and around the world, most of whom operate outside of the scope of EU ETS. 'Leakage' may occur if the cost of production in Scotland causes the cost of Scotch to rise which may cause consumers to purchase alternative beverages which are not exposed to the same additional carbon costs on their manufacture. |
a) the present criteria should remain |
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c) I don’t know |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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d) in line with the duration of ETS Phase 4 |
This will help business planning. Businesses face uncertainty as the current Carbon Leakage list expires at the end of 2014. Although a draft list has now been published for the remainer of Phase III, it is yet to be finalised. To help operators forecast likely costs, they should know in advance (before a phase begins) whether they will receive a free allocation for the duration of a phase. |
a) the present approach of average of the 10% most efficient installations should remain |
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a) yes (please specify how often) |
Technology changes - benchmarks should reflect those changes. |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
Industry is not static. More recent production levels should be used. |
a) no, there should be no deviations |
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d) yes, in the form of financial compensation at EU-level |
We have expressed concern to the UK Government that the current UK provisions introduced to compensate industry for the cost pass-through on the price of electricity does not benefit the most electricity intensive part of the production of Scotch Whisky - bottling. Part of the UK compensation scheme increased the amount of relief of the UK Climate Change Levy ('energy tax') on electricity (from 65% to 90%) for instaalltions covered by a UK Climate Change Agreement (CCA). However, because of the rules of the UK CCA scheme, the Scotch Whisky industry's large blending and bottling operations are not eligible to be covered by a CCA. As a result, those operations do not benefit from the compensation available. Many other alcohol beverage producers are able to benefit as their production operations are integrated and can be covered by a CCA. This puts Scotch Whisky at a further competitive disadvantage. Perhaps an EU-wide compensation scheme might address such inequalities. |
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d) other |
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b) Trade association representing businesses |
The Society of Motor Manufacturers and Traders Limited |
Monika Bomba Technical Manager- Environment Public Policy and Vehicle Legislation Department The Society of Motor Manufacturers and Traders Limited Tel: +44 (0)20 7344 1615 Mob:+44 (0)7557 432973 Fax: +44 (0)20 7235 7112 |
a) yes |
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1) yes |
a) yes |
Yes. The automotive industry has a strong track record on reducing emissions and improving energy efficiency, and will seek to deliver further improvements ahead. The level of ambition will be crucial to understanding the competitive impact of further emissions reductions. The level of ambition must be set in a global framework, understanding the high degree of international competition between automotive manufacturers and suppliers across the world. |
a) yes |
Given the right targets the EU ETS can help improve energy efficiency, which can in turn help improve the sectors competitiveness. Given the need to improve competitiveness and the myriad of policy measures on energy efficiency, determining the exact impacts of the EU ETS can be difficult. Industry would like to see EU ETS targets reflect global levels of ambition and for a simplification on the number of measures designed to encourage energy efficiency, understanding that EU ETS should be at the cornerstone for EU policy. EU ETS recognises participants vulnerable to carbon leakage to protect their competitiveness and should continue to do so post 2020. |
a) yes |
The carbon leakage provision should continue post 2020. The industry believes that the environmental and industrial policy should be aligned to ensure economic growth and environmental sustainability. |
b) quite adequate |
Given the high degree of trade intensity in the automotive sector, to ensure international competitiveness free allocation of allowances is important. The scheme does encourage innovation and investment to reduce emissions and improve efficiency, but a balance must be struck between costs to comply and enabling industry scare resource – financial and human – to tackle the real issue at hand of improving efficiency. Unused NER should be auctioned, and funds used to invest in innovations for sectors covered by the EU ETS. Those sectors could tender projects for funding. |
b) it largely keeps the incentive |
We continue to support free allocations as the optimal way of ensuring operators receive adequate level of allowance to remain competitive. Companies covered by the scheme are likely to be high energy users with significant pressure to reduce costs and already looking at innovative ways to reduce emissions especially so after the ‘low hanging fruits’ have been taken. |
b) quite proportionate |
The burden is appropriate, given the importance of allocations to ensure the competitiveness of the sector. In the UK there was a protracted approach, whereby participants had to submit two versions of the ETS300 which was used to assess allocations. The EC should adopt a harmonised approach across member states to ensure a level playing field and no single member state tries to gold-plate their approach. |
d) there should be no limit to overall free allocation to industry |
Whatever the appropriate level to be allocated, once the methodology has been applied, to ensure the competitiveness of EU industry. |
e) I don’t know |
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a) yes |
Yes. It would be very supportive of the scheme to use funds raised from participants to be used to supportive innovative new technologies or efficiency measures which could actually help improve the competitiveness of the EU industry. This would link industrial and environmental activity and help create a more sustainable business. Unused NER should be used to fund such activities. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
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a) yes |
Free allocations, coupled with measures to support innovation, would help support sectors at risk of carbon leakage, but also encourage and enable energy efficiency measures to be developed and adopted. At the same time the EC should look to ensure other countries are also signing up to and delivering upon energy targets comparable to those set out at a European level. This will help create a level playing field at a global level. If an international agreement is not approved the Commission should look at additional measures |
a) the present two groups should remain |
The definition of carbon leakage will be very important here. Sectors such as automotive are growth areas highly exposed to international competition. In principle there could be a sliding scale of exposure, better linking need to allocation. |
a) the present criteria should remain |
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a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Determining support through qualitative measures (eg abatement potential, profits) could be explored, but is likely to create considerable administrative burden and possibly require the release of confidential data, or information that could be used by competitors if publicly released. |
a) five years |
The validity should remain at least five years, to give industry suitable planning certainty. |
d) I don’t know |
Not applicable as we use fuel and heat benchmark as product benchmarking is not feasible in our sector. |
c) I don’t know |
See question 17. |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
The three years closest to the start of the target period should be used, to ensure the most up-to-date data is used. This should ensure allocation is most closely related to need. Given the distortions from the recession, it may be necessary to build-in some planned review of the data to ensure certain sectors performance is not unduly adversely affected by any recent or future downturn in demand. Potentially a continuous rolling baseline could be used to better match allocations to need, however, we understand this may create uncertainty for business and create additional administrative burden. |
a) no, there should be no deviations |
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d) yes, in the form of financial compensation at EU-level |
Ideally policies, and so compensation schemes, should be harmonised to ensure a level playing field. However, this assumes a level playing field in energy markets and member states not implementing local policies, however, compensation on the EU scheme should be agreed at an EU level. For example in the UK there is an additional financial burden on businesses through the carbon floor price, and then compensation packages around that. This means that UK businesses pay higher carbon costs, which undermines their competitiveness. |
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a) from the Member States' auction budgets |
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It is noted that the current carbon leakage list shows a NACE code of 29.10 for the auto sector, we believe that 29.2 and 29.3 should also be included within the carbon leakage list (so in effect 34.10, 34.20 and 34.30 under the old NACE code list are included within 29.1). The fundamental purpose of the EU ETS must remain that of delivering emissions reductions at least cost. It should not be a means of delivering a pre-determined carbon price to drive investment in a pre-determined list of technologies. Small sources must be removed from ETS. Operators that are small emitters should be allowed to voluntarily exclude themselves from ETS. The industry is cautious over the use of a Market Stability Reserve (MSR) in conjunction with other necessary reforms to the system of free allocation. A MSR should not penalise over performance due to decarbonisation measures. The Commission should deter Member States from supplementing or enhancing carbon costs e.g. the UK carbon floor price. |
b) Trade association representing businesses |
The Unión Nacional de Industrias del Cobre (UNICOBRE) founded in 1978, represents the basic copper industry in Spain. The mission of UNICOBRE is to promote a competitive industry, to improve the life conditions of the society and to contribute to the sustainable development in an environmentally friendly way. We represent Spain’s leaders of copper producers and manufacturers of semi-fabricated copper products, such as tube, wire and sheet. Register ID 38429435750-97. |
Mr. Diego García Carvajal, Director, UNICOBRE, Calle de la princesa, 79, 28008 Madrid (Spain), Phone +34 915448451, E-mail diego.carvajal@unicobre.org.es |
a) yes |
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1) yes |
b) no |
1. Extra cost due to climate policy is sufficiently compensated. Currently, a key carbon leakage prevention mechanism, compensation for ETS indirect costs, exists only on paper as only few member states established meaningful compensation schemes. 2. We have a stable, predictable and investment friendly legislative environment in Europe. 3. Conditions are put in place to ensure that EU copper industry can remain globally competitive so that it can continue to invest in innovation along its entire value chain. 4. Sector specific reduction potentials and technology availability are properly and realistically assessed, (when designing new policies). |
b) no |
Energy intensive industry such as the Copper Industry for example has an innate incentive to become more energy efficient due to high energy cost, independently of the extra cost related to ETS. In these industries, however, the EU ETS may reduce the ability to become more energy efficient. The reason is that additional improvements will require investments, either in upgrading of existing capacity or in new plants. Extra cost due to climate policy, if insufficiently compen¬sated, will reduce the margins of the European industry. Shrinking margins lead intrinsically to reduced energy efficiency investments. |
a) yes |
In most energy intensive industries, product prices are set in global markets. This is particularly true for copper which price is fixed globally at LME London Metal Exchange. Until a significantly larger share of global competitors is influenced by similar increases in energy cost, there is a need for such measures. Otherwise such industries will disappear from Europe. |
a) very adequate |
Compensation for direct and indirect costs, linked to actual output and realistic benchmarks, would be a very adequate measure to address the risk of carbon leakage (predictability and effectiveness is ensured in the long term for both, direct and indirect costs). |
a) it absolutely keeps the incentive |
Full compensation for direct and indirect costs is absolutely necessary for the com-petitive position of Europe as a localisation of energy intensive industries. Compensation should be linked to actual output in order to provide an incentive for growth and to allow production flexibility through business cycles. Realistic benchmarks are necessary for full compensation to new capacity and for the preservation of the undistorted environmental incentive. Expressed differently, allocation of free allowances will not reduce the environmental incentive for the recipient. On the contrary, full compensation for direct and indirect effects of ETS through allocation or otherwise is a precondition for investment in new capacity in Europe. |
b) quite proportionate |
The administrative burden is not insignificant, but proportionate in the sense that no better solutions to solve the carbon leakage issue have been proposed. |
d) there should be no limit to overall free allocation to industry |
Carbon leakage undermines the environmental efficiency of EU ETS as well as EU’s industrial growth. Certain industries have to be protected for unfair international competition until fair conditions are restored by an international climate agreement. Without a comprehensive international agreement giving the global competitors of European industry a similar cost element related to emissions and electricity consumption, the cost of carbon leakage mitigation will be more or less stable, whereas the number of allowances to cover this cost will gradually diminish. This is a cost that is directly linked to emission trading and should be covered by the ETS system itself before any money is taken out of the system. If in the future, there is an inadequate number of allowances available to cover the need for carbon leakage mitigation, compensation could be provided as a sum of money proportionate to a given number of allowances from another source of finance. |
c) a lower share than in Phase 3 |
Financing of CCS should not be a priority for the allowance budget. It is illogical to reserve a given share of the budget for this purpose: When the EUA prices are low the need for support is high and vice versa. Furthermore, the lack of stability in the EUA market creates a high project risk and high financing cost. This adds the project cost and the need for support. |
b) no |
ETS should be focused on emission trading and mitigating the effects of such trading. Financing is tight, and there is no room for further programs. |
c) other types of funding (please specify) |
ETS should be focused on emission trading and mitigating the effects of such trading. Auction income should not be diverted to general innovation support. |
a) yes |
The use of free allowances will also have to be extended to cover indirect effects through increased electricity prices. With significantly higher EUA prices, the present solution for indirect costs based on State Aid will: - be insufficient for long term survival of these industries in Europe, - not create the predictability needed for investments, and, as well, - create significant disturbances in the internal market for energy intensive products. Effective carbon leakage prevention will also require exemption from extra costs related to other elements of climate policy like support to development of renewable electricity generation and extra grid costs related to transmission and balancing of electricity from renewable sources. |
b) more carbon leakage categories should be defined |
Electro-intensive industries are particularly exposed to carbon leakage and need full compensation of extra cost until a significant share of competitors is influenced by similar cost increases. EUA costs are passed on into electricity prices through the marginal cost of the marginal sources of electricity, and for these industries, electricity related cost make up a high share of total cost. Most electro-intensive products have a high value compared to their weight, and may be moved between markets at a cost that is small compared to their value. They are thus globally priced with only a minimal price differentiation between markets. Other industries may need compensation, but not necessarily to the same degree. Other trading systems, like the Australian one, have more than one category of industries receiving different degrees of compensation. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
A single carbon leakage list (with several categories) should be established. The list should be based on the combined effect of direct cost (emission allowances) and indirect costs (increases in electricity costs due to climate policy). The following set of criteria should be established: 1. The exposure to global competition. 2. The exposure to EUA cost 3. The unit is in the most exposed category of the carbon leakage list if both criteria are met being simultaneously at a high threshold. If one or both of the criteria only meets a lower threshold, the unit will be in the less exposed category of the list. The intensity of trade with third countries is a weak proxy to competitive exposure, and should not be used in this context. |
b) other thresholds should be defined. Please specify below |
The levels of the thresholds should be based proper analysis of the proposed new set of categories and criteria (see response to Q12 and Q13). |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Justified cases could be: inability to pass through the CO2 costs to its global customers (i.e. price-taker industrial sector), economic activity of major importance for EU society (eg recycling as a contribution to the "circular society"). |
d) in line with the duration of ETS Phase 4 |
Predictability is the key to incentive efficiency. There is reason to believe that the set of criteria described above will establish robust and stable lists. |
a) the present approach of average of the 10% most efficient installations should remain |
Alternative options should remain in case a benchmark cannot be defined (as for eg in case of small number of installations, specific resources, etc.). |
a) yes (please specify how often) |
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c) other (please specify) |
The main advice to be found in the literature is to use output based allocation linked to realistic benchmarks. For each industry, the baseline will then be set by the realistic benchmark. Indirect emission should also be set by realistic bench¬marks and actual output. The compensation will be linked to a sum of two bench¬marks, one derived from emissions and one derived from electricity consumption. |
a) no, there should be no deviations |
There should be no deviations linked to the short-term financial conditions of industries. There might however be a need to find special solutions for industries where it is impossible to establish sectorial benchmarks. |
c) yes, in the form of additional free allocation |
Compensation inside the EU ETS should be extended to cover indirect effects through increased electricity prices. With significantly higher EUA prices, the present solution for indirect costs based on State Aid will be insufficient for long term survival of these industries in Europe and, as well, create significant disturbances in the internal market. The cost of any compensation measures will be proportionate to the EUA price, thus corresponding to the value of free allowances. Compensation could be provided as free allowances or as a sum of money proportionate to a given number of allowances from another source of finance. |
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d) other |
ETS should be focused on emission trading and mitigating the undesirable effects of such trading. Innovation support should mainly come out of MS general budgets and not from auction income. |
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b) Trade association representing businesses |
UFIP (Union Française des Industries pétrolières) UFIP, the French Union of Petroleum Industries, is an industry association for companies operating in France in one of the oil and gas industry's three major segments: oil and gas exploration & production, refining and marketing. From well to pump, UFIP represents and expresses the business and professional viewpoints of its almost 40 member companies. |
UFIP. ( Transparency register identification number : 798404313938-50 4, avenue Hoche 75008 Paris Tel: + 33 (0)1 40 53 70 00 www.ufip.fr email : jytouboulic@ufip.fr |
a) yes |
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1) yes |
a) yes |
Some industries may be able to reduce emissions through further energy efficiency improvements. However, the Refining industry has already used most of the options to improve its energy efficiency cost-effectively: the GHG intensity of European refineries is already world class. The proposed 43% emissions reduction objective is technologically and economically unachievable for the refining industry at the pace implied by the Linear Reduction Factor. As a consequence of a too ambitious target, industry would have either to purchase allowances (sunk cost with no return on investment) or reduce capacity and close installations - detrimental for employment, trade balance and security of supply. |
a) yes |
Reporting and monitoring emissions does quantify emissions at installation level. The carbon price does incentivise industrial installations to reduce emissions and improve efficiency. However, for the Refining sector, this is not the most significant factor, as the main driver for such improvements remains the high proportion of energy costs in total operating costs (63% on average for EU-28 refineries, according to Solomon Associates). EU refineries in Western Europe are collectively the least carbon intensive in the world, driven not by legislation but by measuring the economic cost of energy use. However, the EU ETS is an additional cost to EU industry and not to its non-EU competitors, which is potentially very damaging for competitiveness. This is why industry needs sufficient carbon leakage protection. |
a) yes |
Until there are equivalent carbon pricing policies in competing sectors, support for EU industrial sectors exposed to carbon leakage must continue as a core element of the EU’s post-2020 climate policy framework. Removing carbon leakage protection would result in a sudden decrease in free allocation: from the current allocation at 100% at the benchmark to 80% in 2013 declining to 30% in 2020 and zero by 2027 (EU ETS Article 10a 11). For Refining, competing regions include Russia, Middle East, USA, and parts of Asia and so support measures should remain until these key refining competitors adopt carbon pricing. Delocalisation of petroleum products production outside the EU is also likely to have negative effects of global GHG emissions. According to a recent study from Vivid Economics, commissioned by the UK Department of Energy & Climate Change, EU Refining is on average less emissions-intensive than non-EU competitors. Carbon leakage therefore exceeds output leakage and is about 135%. |
b) quite adequate |
In the absence of an international climate agreement, UFIP prefers both free and enhanced free allocation for exposed sectors to deal with carbon leakage. For Refining , the ETS benchmark was set from 2013 at the average of the top 10% performance level and the impact of such a tough benchmark is significant. According to the 2013 final allocation data, the refining industry has received less than 80% of its quota as free allocation and is the only major sector receiving less than its actual emissions. This situation is highly detrimental to the refining competitiveness and requires corrective action. Protection will be further eroded due the decreasing industry cap and the CSCF (by 2030, even the most efficient installations would be left with only 60% free allocation if a 2.2% Linear Reduction Factor continues to be applied). The EU ETS needs to be reformed to provide sufficient levels of protection to industry until carbon leakage is addressed trough an international agreement. |
a) it absolutely keeps the incentive |
The main incentive for reducing emission in Refining is reducing energy costs. Carbon cost does add to this incentive. The incentive for any installation with the capacity for cost effective emissions reduction is the carbon price: either avoiding buying allowance or being able to sell their surplus allowances whether these are received free or not. Therefore, free allocation is used to protect industry from carbon leakage while keeping the incentive intact. |
b) quite proportionate |
In the refining sector with large scale complex installations, implementation of the CWT benchmarking provisions was a major undertaking and involved considerable work by the sector, national governments and the Commission. Given the importance of the competitive threat, the work to create an accurate and fair system is considered proportionate to the objectives. However, if the system could be simplified, we would be willing to work with Commission to achieve this. |
d) there should be no limit to overall free allocation to industry |
If the intention is to provide carbon leakage protection to industry then the number of allowances needs to fully cover emissions of best performing installations – hence no limit to overall free allocation. There is no centralised post 2020 allowance budget - control of proceeds from auctioning is delegated to Member States, with some redistribution via the solidarity and growth provisions. Until the issue of carbon leakage is addressed through an international climate change agreement, sufficient levels of protection to industry are needed. To provide an adequate protection for the European refining industry, a CSCF should not be employed to avoid reductions in the amount of free allocation. |
e) I don’t know |
The NER 300 programme has been complex to administer, had a market impact of releasing allowances onto the market early, and has not delivered large scale CCS demonstration project. A large scale CCS demonstration project requires dedicated funding outside EU ETS. In Phase 3, auctioning is expected to generate substantial revenue to governments; these revenues, should be returned to the economy without creating distortions between energy sources and technologies. |
b) no |
The NER 300 programme funding is too dependent on market pricing. Instead, there should be more innovation support and new low carbon technologies require more financial stability, thus existing funds such as Horizon 2020, 7th Framework and SET programmes should be augmented, rather than creating new funding frameworks. |
c) other types of funding (please specify) |
Rather than establishing new bureaucracies, existing funds such as Horizon 2020, 7th Framework and SET programmes should, where required, be augmented by EU and Member State funding. In addition, support for innovative low-carbon technologies should be technology neutral as well as time- and cost- limited - all energy sources should be integrated under normal market conditions, without subsidies (including system connection, balancing cost and exposure to price risk) as soon as possible. |
a) yes |
EU industry needs first and foremost greater equity of non-EU with EU abatement measures. Until there are equivalent carbon pricing policies in competing sectors, EU industry need carbon leakage protection to remain competitive, via free allocations. There are currently no EU ETS measures addressing carbon leakage post 2020. Thus, the ETS Directive needs to be reviewed to make sure that levels of free allocation after 2020 adequately reflect the industry’s carbon leakage exposure. The current indirect emissions compensation system is unsuitable. It should be reformed to allow full compensation for ETS carbon costs passed through into the electricity price. In general, the strategic importance of manufacturing industries, such as Refining, needs to sufficiently reflected across all EU policies; the cumulative impact of EU legislation on these industries including the EU ETS, must be carefully looked at. |
a) the present two groups should remain |
Industrial capacity in EU has declined (According to the Commission communication for a European industrial renaissance, the share of manufacturing in GDP has fallen from 15.4% to 15.1% in 2013) and exposure to international competition remains a key concern for many energy intensive industries, including Refining. Creating uncertainty about how the risk of carbon leakage in industrial sectors such as Refining will be mitigated is not the right way to promote recovery. The current two groups should remain until progress is achieved in the international arena to re level the competitive playing field by introducing similar carbon pricing in other regions that compete with EU Refining. |
a) the present criteria should remain |
For Refining as a mixed sector both trade and GVA exposure and thresholds are very important. Refining is a “margin business”, acting between two international, open commodity markets: the crude oil market and the refined products market. EU Refining is also open to traded imports so that pass-through of EU carbon costs is limited by non- or less-regulated trading partners. Pass-through becomes even more difficult as imports rise. For the carbon leakage assessment, it is therefore important to keep looking at the effect of carbon costs on Gross Value Added rather than production costs and to take sectors’ trade intensity into account. Carbon costs should cover both direct and indirect carbon costs due to their cumulative impact on Refining’s competitiveness. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
If the criteria are tightened thus reducing the number of sectors/sub-sectors on the list, some key strategic sectors for the EU’s economy risk being excluded from carbon leakage protection, with potential negative spill-over effects on other industries (e.g. for the oil Refining industry and the petro-chemical industry, which are strongly inter-connected). Specifically for the Refining sector, the thresholds calculation for GVA and Trade Intensity is problematic. The EUROSTAT database shows some 1,000 plants under NACE code 19.20, but there are less than 100 Refineries in the EU covered by the EU ETS. Objective analysis of GVA requires more granular data for the Refining sector. Carbon leakage is also about future investment decisions. Therefore the GVA criteria carbon price must reflect future projected EUA prices and not current prices. This is common refining industry practice in evaluating major projects. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
UFIP supports the use of qualitative assessments but these should be kept as simple as possible. Legislative requirements on the quality of fuels (e.g. marine fuels specifications) and the conversion of heavy residues into lighter products result in the increase of refinery energy intensity and GHG emissions. If the Refining sector undergoes a qualitative assessment, this so-called “Refining paradox” would need to be taken into account. |
d) in line with the duration of ETS Phase 4 |
Mid-period review is detrimental to investment certainty, given the significant difference in the levels of free allocation according to the carbon leakage status, and the rest (allocation at 100% at the benchmark vs. 80% in 2013 declining to 30% in 2020 and zero by 2027). Long-term visibility is essential for investment decisions in the refining industry. |
c) the approach should be less stringent (please specify) |
A benchmark excluding outlying installations would take account of typical carbon leakage exposure rather than average of top 10% which may be atypical in character, depending on sector. This is particularly important as EU benchmarks do not rate performance of installations outside the EU - thus potentially penalising EU installations that are more efficient than their non EU competitors. Potential effects on EU strategic industrial sectors - including those integral to the supply chains of other sectors - must be considered. The current benchmark has turned out to be penalising for the refining sector, both in absolute terms and in comparison with other sectors. In combination with the CSCF, carbon leakage protection currently covers less than 80% of emissions to the refining sector even though it is subject to carbon leakage. |
b) no |
In order to provide free allocation in an effective way, the benchmark should accurately reflect the performance of ETS installations. However UFIP does not support a revision of the benchmarks in based on the technological state of the art, as the latter is subject to interpretation (e.g. do we look at progress worldwide where verified data is lacking, or only the situation in the EU?). Integrating state of the art technologies implies a change in the refineries configuration, which is challenging and extremely costly due to physical and other operational constraints. Investments into such technologies have to pay their way. |
c) other (please specify) |
Free allocation should reflect economic reality per installation based on the most recent years. More recent verified data should be used: free allocation should reflect installations’ economic activity, based on the most recent years. In the case of refineries, a regular turn-around period is required for regulatory inspection, maintenance and capital projects. If this is not taken into account, refining installations will be penalised in terms of future allocation. Alternative approaches such as extending baseline periods or some form of dynamic allocation should be considered. |
a) no, there should be no deviations |
General harmonised allocation rules should continue to apply for all carbon leakage installations in the same manner. |
d) yes, in the form of financial compensation at EU-level |
Carbon leakage protection should also include full compensation for EU ETS cost pass-through in electricity prices for all sectors exposed to carbon leakage and in a harmonised fashion. The absence of an EU harmonised indirect emission compensation system, by leaving decisions to Member States, restricts compensation to a few sectors. As many Member States do not grant such compensation, this creates single market distortions. |
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I don't know |
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d) other |
UFIP is strongly in favour of greater innovation support by the EU and its member states, which may bring more significant and cost-effective results than current renewables mandates, but we do not believe that the use of ETS revenues is the right mechanism. Innovation should be supported by existing funds such as Horizon 2020, 7th Framework and SET programmes. |
Competitiveness and carbon leakage risk must be kept under constant review. Assessments should not look for evidence that leakage has occurred and competitiveness already damaged, but rather assess the level of risk in future. The allocation system must not penalise economic recovery or growth. Regarding the format of the questionnaire, we believe that some of the questions are not neutral and push the respondents to make a certain response. The answers cannot always be as simple as yes or no. Many of the answers are provided as yes or no, with additional conditions – which are required as part to the answer. This does not necessarily mean that the respondent “does not know” and has no valuable input to bring. The report of the consultation should look and separately evaluate the responses from the stakeholder organisations which represent a wider share of civil society and industry. This is to avoid giving undue weight to responses from individuals. |
b) Trade association representing businesses |
UIC (Union des Industries Chimiques) - the French chemical industries association |
14, rue de la République 92800 Puteaux FRANCE +33 1 46 53 11 12 ylenain@uic.fr |
a) yes |
|
1) yes |
b) no |
This is hardly possible with the actual scheme. Going further on reduction implies massive investments which are not possible without any significant gain in competitiveness. Europe face a challenge to attract investments. As it is today, the EU ETS without a true carbon leakage system, amongst other regulations, is driving investments outside Europe. |
b) no |
Today, the EU ETS is just adding costs to a high price energy. Benchmarks and the CSCF are too ambitious to make energy efficiency gain a competition factor. The carbon market will take any economic benefit from the industrial of an energy efficiency gain. |
a) yes |
The EU ETS should make companies which are implementing climate change efforts more competitive vis-à-vis any company in the world which are not doing equivalent efforts. |
a) very adequate |
Industries exposed to international competition should have more free allocations to cover their need, especially when carbon price is supposed to rise. Climate change will not be fought when carbon leakage occurs. |
a) it absolutely keeps the incentive |
The economic gain to make greenhouse gases emission reduction is the same, whether the company has free allocations or not. Free allocations are only not endangering the investment capacity through an additional burden. The chemical industry is an energy intensive sector. Our competitiveness is linked to the energy costs. Any system which leads to increase competitiveness through more climate change efforts will attract investment. Thus, free allocations drive the innovation. |
b) quite proportionate |
The administrative burden may be heavy, but is acceptable if it is the fairest way to allocate free allowances. Any simplification approach will be considered with interest by our members. |
d) there should be no limit to overall free allocation to industry |
The absolute cap from international negotiations should not be guaranteed by the EU ETS alone. The reindustrialisation of Europe has positive effect on climate, since it ensure that the industrial production is under carbon regulations. Thus, the only restriction which should apply on the production should be the benchmark. No free allocation reduction should be done, since it endangers the perimeter of the EU climate change efforts. There should also be free allocations for new capacities. |
d) there should be no such innovation support post-2020 |
A high support must be done for innovation after 2020, especially in order to pilot the absolute cap considering the best innovation opportunities to fight climate change efficiently. However, the EU ETS and carbon allowances are not the best tool to do so: the support removes allowances from the market, and the financing depends on carbon price, which is not the best idea to clearly promote innovation. |
b) no |
While this is a highly important matter, the carbon market is not the best tool to fund such experimentations. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Helping mature but still too costly technologies to spread would be an interesting way to use the auctioning revenue. |
a) yes |
It is necessary to allocate free allowances for industry on the basis of their electricity consumption. An "electricity benchmark" is needed, much like the "heat benchmark". It would ensure that carbon-free electricity will have the same value on the electricity market that carbon-based electricity. Today, if both are sold on the same market at the same price, the carbon-based is cheaper when compensations for indirect costs are granted. The compensation for indirect costs will be very important for member states after 2020, since electricity production will be in higher pressure, and electro-intensive industry exposed to international competition must be protected without any penalty for carbon-free electricity. |
a) the present two groups should remain |
The measure of the international competition exposure is the main purpose of the free allocations. This does not mean that the list of carbon leakage should be large or not. It should serve a clear and identified purpose. This list is also used as a reference for international competition exposure. In France, the gas intensive status requires to be on the European carbon leakage list. The UIC is in favor of a shared European criteria which establish which sectors are exposed to carbon leakage list, and which are not. |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
The intensity of trade criterion should be kept as it is. The share of carbon costs in the GVA should be replaced by the share of all energy costs in the GVA. The carbon approach was relying on the hypothesis that energy prices are homogeneous in the world. This is not the case anymore since the gas price dropped in the US. Carbon costs alone are not relevant anymore to measure this sensitiveness to carbon costs. The competitiveness disadvantage of energy price for industry towards third countries should be taken into account. |
c) I don’t know |
A deep economic analysis should be made with the support of all stakeholders. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Some sectors are exposed to the risk of carbon leakage although they may not at first glance the quantitative criteria. This can be due to abatement potential, market characteristics, or profit margins. Sectors with complex manufacturing systems and diverse, interrelated value chains, it is justified and essential to apply qualitative criteria for their exposure assessment. |
d) in line with the duration of ETS Phase 4 |
The duration of the phase and the duration of the carbon leakage list should be in line, in order to ensure more visibility for investments. |
c) the approach should be less stringent (please specify) |
It should be more realistic to go for 25% of the most efficient installations, as a transitional period towards an international level playing field on climate change. The European industry needs to have positive message for their future investments. |
b) no |
This could threaten the innovation process. If an industry is innovating in some installations but not all in order to test a technology, this could lead to reduce the free allocations for other installations. The carbon leakage protection should not be endangered in order to reflect the technological state of the art. |
c) other (please specify) |
Updating production data is far not enough to make the EU ETS fair and efficient. An ex-post allocation (dynamic) should replace the ex-ante allocation (static). The EU ETS should be design to address the carbon intensity of the production, and not an overall cap. |
a) no, there should be no deviations |
The risks involved is to shrink the protection against carbon leakage. Carbon leakage is the main threat against the efficiency of the EU ETS, not low prices. If production leak outside Europe, nothing would have been done for climate, and the economic downturn would endanger EU jobs. |
c) yes, in the form of additional free allocation |
(CF Q11): It is necessary to allocate free allowances for industry on the basis of their electricity consumption. An "electricity benchmark" is needed, much like the "heat benchmark". It would ensure that carbon-free electricity will have the same value on the electricity market that carbon-based electricity. Today, if both are sold on the same market at the same price, the carbon-based is cheaper when compensations for indirect costs are granted. The compensation for indirect costs will be very important for member states after 2020, since electricity production will be in higher pressure, and electro-intensive industry exposed to international competition must be protected without any penalty for carbon-free electricity. |
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Least important |
The most difficult stage is usually to initiate and run a successful large scale pilot. |
a) from the Member States' auction budgets |
Once more, the European industry is facing a serious competitiveness deterioration, which leads to an investment leakage. No effects should result in a decreasing of the free allocations. The carbon leakage protection is the last adjustment lever which should be used, since it has negative impact on climate change fighting. |
No mechanism such as the CSCF should endanger free allocations anymore. For the 2021-2030 period, the priority of the European Commission should be to link the European market to other initiatives in the world, in order to harmonize the burden of climate change fighting. Rising unexpectedly the effort on the production has little impact in terms of climate, is inefficient economically, and generate uncertainties which endangers the acceptability of carbon constraints. On the CER, the European Commission should not lock this possibility to make reductions in countries which would no climate targets at the COP 21. |
b) Trade association representing businesses |
UNESID. Unión de Empresas Siderúrgicas Transparency Reg. No. 44209611834-88 |
UNESID. Unión de Empresas Siderúrgicas Castelló 128, 3ª planta 28006 Madrid Spain +34 91 562 40 10 Santiago Oliver soliver@unesid.org |
a) yes |
|
1) yes |
b) no |
Only very marginally. There is little further ground for efficiency improving; nevertheless the physic CO2 efficiency/energy efficiency reduction margin is limited to a spread around 5-15% depending of each plant. Our sector has gone much further than 20% reduction in comparison with 1990 values per ton of steel. The sector does not expect any considerable improvement with the current technology. This is the reason why only by reducing production in our sector, as many of the energy intensive ones, we would be able to reduce emissions. Reducing production and welfare in Europe would be the only solution. In parallel these reductions would be offset by increasing production somewhere else with quite likely higher CO2 intensity. What steel is doing is researching to find solutions that help to reduce emissions in other sectors/activities
Further declines based on outsourcing CO2 emissions (electrometallurgical processes, H2 reduction//pre-reduction), CCS, are not considered since they are absolutely impossible of maintaining in a competing global market. |
b) no |
As long as there is little margin for further improvements, CO2 local cost (ETS) either directly or indirectly, through the electricity price, only help to reduce the competitiveness of the EU industry. A prove of this is the very limited success in domestic initiatives to generate ERUs west Europe. Nonetheless, EU ETS as currently designed would erode the competitiveness of EU industry in the long term. On the one hand it does not ensure that the most efficient plants in Europe would receive 100% of free CO2 for its entire production, and on the other hand it does not fully consider the impact of CO2 of other source of energy as electricity. ONLY an international system covering the most emitting and competing countries (China-half of the world steel production-, India, USA, Brazil, Mexico, Maghreb, Russia, Ukraine, Middle East, Japan, Australia, etc) would promote a real improvement on mitigating Climate Change. At the end EU-ETS just represent a very good business to the electricity generators which can make very good business out of the windfall profits due to an increased marginal price in the electricity which is transferred to all the kWh, regardless of each actual emissions to be generated. |
a) yes |
ON the short term it is necessary the most energy efficient plants could produce at its maximum capacity without need to penalize its production due to the CO2 (direct and indirect) cost. It would imply full Carbon leakage provisions+compulsory full electricity extra cost compensation. It is reasonable that these “0” related cost would be extended to all the efficient production in Europe in comparison with the production somewhere else. Initially at least the first third of cumulative CO2+electricity benchmark that should be increased as long as the efficiency gap is reduced at the long term. The carbon leakage provision could be lowered if there were a real and comparable international agreement with similar constrain in the main producers of steel somewhere else and all of them would participate in a similar market. |
a) very adequate |
Under the current EU-ETS scheme it represents the only tool to address risk of delocalizing due to the regional CO2 cost together with a “non harmonised” electricity cost compensation. An alternative for the second point is reviewing the electricity market to set up the require provisions to prevent carbon price to became a business for electricity utilities. |
a) it absolutely keeps the incentive |
If carbon leakage allocation is increased, eg, as an application of the Cross sectoral Correction factor, the effect is that even the better performance for a well developed benchmark will not receive 100% of allocation for free. All the companies would suffer a decrease in profit margins, and the financial availability for investment in whatever further measure available in the future. Free allocation proportion is to be based in a benchmarking methodology. It should consider also indirect emissions from electricity, at least. All these comments are gone in parallel to the legislative uncertainty that an unstable and unfair EU-ETS scheme is generating for (attracting/diverging) industrial investments (to/from) Europe. |
b) quite proportionate |
Some improvements could be set up to reduce the administrative burden. Probably it is not for large emitters, but it could be reduced for smaller ones. Probably the Commission should make the templates more specific for each sectors instead of trying every company to fulfill the same one which, at the end, is empty at a 98% in many cases. We should not misconfuse the requirements for allocation with those for the carbon leakage consideration. |
d) there should be no limit to overall free allocation to industry |
EU-ETS should not endanger any energy efficient industrial production in EU. It should not be any preset cap. Therefore a bottom up approach for allocation to the industry should be the choice Revision of benchmark should be part of the process with a frequency either of 5 years or ones before every trading period stars. A new ETS should not forget to cover the risk of carbon leakage due to indirect CO2 cost for electricity consumption. There should be a compulsory and realistic compensation scheme, considering actual market situation for each country, analyzing what is the situation of electricity purchase in each country. Even the most reasonable way is through the access of additional CO2 allowances. All the companies with a reasonable proximity to the benchmark should have not any extra cost due to the CO2 either direct or indirect A special care should be considered to avoid offset the emissions if changing raw materials more intensive in CO2 or displacing another consumers from a secondary raw material. |
e) I don’t know |
NER 300 has only been partially used due to the fact most of the European Industry cannot afford the prices for which the CCS could entail. These prices would render most of the European Energy Intensive Industries no competitive at global scale. Unless the ETS framework change to a global scale, this problem will remain. Unfortunately the system as currently set up would not be supported by any other important emitting country in the world. |
a) yes |
Yes, and it should not entitle additional cost for the industry. Additionally, if there were found any probed and economically viable results, there should be some support for deployment in Europe. Nevertheless development and deployment of CO2/energy efficient technologies should not hide state aids for unviable companies. |
c) other types of funding (please specify) |
There could be a combination of funding sources. Energy efficiency programs, research programs, etc. It preferably should not come from auctioning of allowances of the ETS scheme itself since it would artificially increase the price of the CO2 even further, and then reducing financing possibilities of the less efficient companies which require investing most. |
a) yes |
In a future scheme for the EU ETS been “exported” to third countries. EU ETS should be changed to make it attractive for third countries to join. Currently, there is no incentive at all in this sense for any company from a third country to join An energy efficient installation should have no any extra cost due to the ETS scheme. It should include the compensation for indirect electricity extra cost based on the marginal pass through cost to the electricity prices. It is scarier the huge differences on the actual electricity compensation schemes currently in Europe, if any. The situation in relation to the EU economic downturn is generating yet another additional competitiveness handicap in the industry of those countries which are suffering the most in relation against other European competing ones. This ranks from current full offsetting schemes with compensation between 3-5€/MWh to “0 (or almost 0)” compensation. This originates additional competing discrepancies over factors out of control of the companies. In addition, Europe had much higher energy cost in comparison on very important competing areas of the world. |
a) the present two groups should remain |
Currently the list of exposed sectors seems to be reasonable. There is an additional mechanism for any needed sector to be included. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
There could be some minimum thresholds to focus the list on those sector really exposed to carbon leakage (eg. below 5% of exposition to trade, or below 1% of GVA CO2 related cost). |
b) other thresholds should be defined. Please specify below |
There is the possibility of reducing the list by including some minimum excluding threshold, regardless of the other (eg. below 5% of exposition to trade, or below 1% of GVA due to the FULL (direct and indirect) CO2 related cost). This way, future discussions on leaking effects of the ETS would be much more focus. Nevertheless the door for new inclusions in an ad-hoc procedure should always be kept open. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
When sectors are really complex in its layouts, structures, boundaries and products statistical data is not as reliable as needed for the evaluation. Therefore this door should be kept open. |
b) longer (please specify) |
Investing decisions are based on redemption time which for very large investments can reach 15 years. 3-8 for “small” ones. These investments need a lower legal and economical uncertainty as reasonable possible. Therefore they needs to be assessed with at least a extension similar to the ETS phase |
c) the approach should be less stringent (please specify) |
Nevertheless 1/3 cumulative percentile could be enough to move the sector to the most efficient one, especially when the differences in the efficiency becomes smaller with the ongoing time. Nevertheless, the sector at carbon leakage risk should receive a true 100% harmonized compensation due to the undue carbon price cost past through to the electricity marginal price |
a) yes (please specify how often) |
Yes, once before every trading period. These revisions should account CO2 emissions and electricity consumption. These are not necessary the same of the environmental wider impacts and local consideration taken in into account for the definition of the Best Available Techniques |
c) other (please specify) |
The reference for allocation should be based on recent actual production figures which gives a lesser uncertainty for regulator, and reflect the economic evolution in a realistic way. It could even be corrected by ex-post data every year. |
a) no, there should be no deviations |
It is preferable not having any deviation. |
d) yes, in the form of financial compensation at EU-level |
It does not matter if it is a financial compensation of electricity price transferred to the marginal price of the market (pool) based on allowances or a financial scheme, or whatever other alternative, as long as there is a harmonized one which account for a full actual extra-cost. |
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Less important |
Important |
I don't know |
The support should be lower for commercialization if the solution is fully economically viable. There could be an anticipation (either physically or by financial incentive) of the future allowances received, to facilitate the deployment of a certain technology. Nevertheless development and deployment of CO2/energy efficient technologies should not hide state aids for unviable companies. |
e) I don't know |
The important aspect is that there is a harmonised support for R+D+I, and even deployment, and not where it comes from. |
|
b) Trade association representing businesses |
UNIDEN |
Raphaelle IMBAULT (152 avenue Aristide Briand 92220 Bagneux FRANCE, +33 6 17 92 09 92, raphaelle.imbault@airliquide.com) |
a) yes |
|
1) yes |
b) no |
The industry we represent is already reducing its GHG emissions wherever it makes sense technologically and financially. There are thermodynamic limits and some technological breakthrough needed for beyond 2020 that have not yet been invented. Moreover these potential breakthroughs ought also to be commercially viable to be implemented. |
b) no |
The ETS system is the most efficient system for driving the GHG emissions of the industry. However ETS adds costs to the European industry only which contributes to decrease its competitiveness towards third countries. The drivers to become more energy efficient are not the same as the drivers for becoming more carbon efficient (e.g. switching from natural gas to biomass will make industry less energy efficient but more carbon efficient). |
a) yes |
These measures must not be transitional but stable for the period until a level playing field of climate policy costs will be achieved. |
b) quite adequate |
Free allocation is one of the necessary tools to address carbon leakage and it should encompass all effects of carbon costs like indirect emissions and low carbon price effects. |
a) it absolutely keeps the incentive |
the free allocations are based on ambitious benchmarks (10% best) which maintain the incentive to innovate in emissions reductions |
b) quite proportionate |
Currently benchmarks are set and are not difficult to apply. However establishing benchmarks was a complex exercise therefore doing the whole exercise once again should be avoided by all means. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage its share should be sufficient to avoid carbon leakage. An efficient producer in the EU must not have any competitiveness disadvantage compared to his competitors in third countries. |
d) there should be no such innovation support post-2020 |
Such support system is not adequate to finance non- competitive technologies as well as research programs. ETS is an instrument that must curb emissions at the lowest cost for participants. Dedicated funds, independent from the price of carbon, already exist for research and innovation projects in Europe. |
b) no |
ETS is not the right instrument for financing, through a specific support scheme, expensive or uncompetitive technologies. Dedicated funds, independent from the price of carbon, should be implemented for research and innovation projects in Europe. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This 50% share should first be secured for industry through a compulsory mechanism and possibly become a 100% share. |
a) yes |
additional measures must include free allocation for indirect emissions with the same list of sectors exposed to carbon leakage applied in an harmonized way in all European countries, free allocations based on actual production (dynamic allocations) rather than historical ones, no cross-sectoral correction factor for sectors exposed to carbon leakage, use of offsets (international credits). |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
the whole value chain is concerned by carbon leakage therefore the absence of any list would simplify the process since today almost 95% of the sectors are anyway included in the list. Moreover it would reinforce the legislative predictability which is an important factor for securing investments in Europe. |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
Any manufacturing company subject to ETS must be protected against carbon leakage. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
For the sake of simplicity, administrative burden and full understanding by all, we should not change the parameters unless they would become obsolete by having all sectors listed as carbon leakage sectors. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
for some sectors heavily exposed to international competition the quantitative criteria might not be sufficient to reveal their particular situation. It then requires a qualitative assessment to justify the cases. |
b) longer (please specify) |
longer and at least for the duration of phase 4 since we need the longest legislative predictability possible and preferably in line with the average industrial investment cycle (several decades). |
c) the approach should be less stringent (please specify) |
there should be no system (Cross sectoral correction factor, linear reduction factor) that implicitly circumvent the level of the benchmarks by reducing the allocation below this level leading to unrealistic values. |
b) no |
legislative predictability is very important to keep industry investing in Europe. Moreover early movers would be discouraged to invest since it would contribute to decrease their benchmark and it would make them loose their payback on the investment |
c) other (please specify) |
Frozen ex-ante allocation does prevent growth of the industry. A dynamic system with a rolling basis should be the system of choice to accompany the economic situation. |
a) no, there should be no deviations |
Harmonized rules must be kept in order to avoid any competition distortion cases. |
c) yes, in the form of additional free allocation |
free allocations for indirect emissions will avoid the current situation of diverging national approaches leading to competition distortion. |
Least important |
Less important |
Most important |
I don't know |
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a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This 50% share should first be secured for industry through a compulsory mechanism and possibly become a 100% share. ETS is not a scheme designed to finance Member States budget deficit. |
Growth and competitiveness of the EU industry is of paramount importance for investments and jobs in the EU and should be at the top of criteria when assessing any change to the ETS. |
b) Trade association representing businesses |
Union Professionnelle des Industries Privées du Gaz (UPRIGAZ) |
UPRIGAZ Immeuble Citicenter Bureau 300 - 19 Le Parvis 92800 PUTEAUX LA DEFENSE (France) Tél. 01 47 44 62 22 Fax : 01 47 44 47 88 e-mail : uprigaz@uprigaz.com |
a) yes |
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1) yes |
b) no |
La problèmatique des émissions de CO2 en Europe est largement le fait des centrales électriques, en particulier depuis la fermeture de 50 000 MW de CCGT et leur remplacement par des centrales fonctionnant au charbon. Il conviendrait donc de substituer du système d'ETS actuel un dispositif à 2 niveaux : - un dispositif du type "Emission Performance Standards" britannique limitant les émissions de CO2 des centrales - une taxation minimale du CO2 pour l'industrie soumise à la concurrence mondiale La pertinence de ce dispositif est double : - protéger le climat et la santé contre les émissions de CO2 les plus importantes - ne pas handicaper la compétitivité de l'industrie européenne. |
b) no |
Le "moteur" des industriels est la réduction des coûts, en particulier du coût de l'énergie consommée, ce qui conduit naturellement à améliorer l'efficacité énergétique. L'ETS serait une charge supplémentaire sans bénéfice pour l'environnement. |
a) yes |
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a) very adequate |
Mais il serait préférable de ne pas mettre en place ce dispositif (cf. réponse à la question 1) |
e) I don’t know |
La question est mal posée. L'industrie européenne n'a pas besoin d'un dispositif réglementaire supplémentaire pour l'inciter à réduire ses émissions. Le vértable sujet est d'assurer la cohérence entre le développement irrationnel des renouvelables conduisant les opérateurs électriques pour maintenir un coût moyen acceptable pour le marché de l'électricité produite, à recourir massivement au charbon. |
e) I don’t know |
Si accorder des allocations gratuites est positif, le mécanisme lui-même de l'ETS est critiquable. Il faut éviter de multiplier les charges administratives des entreprises. |
d) there should be no limit to overall free allocation to industry |
Le premier objectif de l'Union devrait être de préserver la compétitivité des industries européennes et la sauvegarde de l'emploi, dans un contexte mondial où les Etats-Unis offrent des coûts de l 'énergie plus faibles qu'en Europe et bénéficient d'une relocalisation de l'industrie sur leur territoire. |
a) a substantially higher share than in Phase 3 |
Les programmes de recherche doivent être encouragés. Si le CCS se développe, le secteur électrique européen pourra de nouveau faire appel au charbon. |
a) yes |
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a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
Dans la mesure où on ne souhaite pas développer un système ETS, le financement de la recherche doit être complètement dissocié du mécanisme ETS. |
a) yes |
Tout le secteur industriel pour lequel l'énergie représente plus de 3 % de la valeur ajoutée doit être exonéré de l'ETS. Seules les centrales électriques y seraient soumises. |
b) more carbon leakage categories should be defined |
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f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
Le critère de l'exposition, même faible, à la concurrence internationale doit être pris en considération. On peut y ajouter, tout secteur que l'Europe souhaite protéger et encourager. |
b) other thresholds should be defined. Please specify below |
- L'emploi dans ces industries - Les parts de marché à l'international - Les perspectives de développement |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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b) longer (please specify) |
Important de donner un cadre stable pour faciliter les investissements et réduire le risque régulatoire. |
c) the approach should be less stringent (please specify) |
Le benchmark devrait intégrer la situation de nos concurrents à travers le monde. |
a) yes (please specify how often) |
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a) no, the same baseline period chosen for allocation in Phase 3 should be maintained also for post 2020 (Phase 4) allocation |
Le souci de stabilité de la référence justifie la réponse a) |
b) yes, there should be deviations with higher allowances for installations facing specific hardships |
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c) yes, in the form of additional free allocation |
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Most important |
Important |
Less important |
Least important |
L'UPRIGAZ est favorable à un soutien renforcé aux technologies bas carbone jusqu'à leur premier déploiement (CCS). |
b) from free allocation |
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L'UPRIGAZ souhaite que soit évitée désormais la fixation d'objectifs politiques incompatibles ou contradictoires (tel que le 202020) qui s'est en effet avérée inefficace et très coûteuse en particulier en Allemagne, sans bénéfice réel pour l'environnement, les contraintes économiques ayant conduit à un recours massif au charbon pour la production d'électricité. |
b) Trade association representing businesses |
Unione Petrolifera |
Piazzale Luigi Sturzo,31 00144 Roma Italy - Tel. +39 06 54236542 - delmanso@unionepetrolifera.it |
a) yes |
|
1) yes |
a) yes |
Some industries may be able to reduce emissions through further energy efficiency improvements. However, the Refining industry has already used most of the options to improve its energy efficiency cost-effectively: the GHG intensity of European refineries is already world class. The proposed 43% emissions reduction objective is technologically and economically unachievable for the refining industry at the pace implied by the Linear Reduction Factor. As a consequence of a too ambitious target, industry would have either to purchase allowances (sunk cost with no return on investment) or reduce capacity and close installations - detrimental for employment, trade balance and security of supply. |
a) yes |
Reporting and monitoring emissions does quantify emissions at installation level. The carbon price does incentivise industrial installations to reduce emissions and improve efficiency. However, for the Refining sector, this is not the most significant factor, as the main driver for such improvements remains the high proportion of energy costs in total operating costs (63% on average for EU-28 refineries, according to Solomon Associates). EU refineries in Europe are the least carbon intensive in the world, driven not by legislation but by measuring the economic cost of energy use. However, the EU ETS is an additional cost to EU industry and not to its non-EU competitors, which is potentially very damaging for competitiveness. This is why industry needs sufficient carbon leakage protection. |
a) yes |
Until there are equivalent carbon pricing policies in competing sectors, support for EU industrial sectors exposed to carbon leakage must continue as a core element of the EU’s post-2020 climate policy framework. Removing carbon leakage protection would result in a sudden decrease in free allocation: from the current allocation at 100% at the benchmark to 80% in 2013 declining to 30% in 2020 and zero by 2027 (EU ETS Article 10a 11). For Refining, competing regions include Russia, Middle East, USA, and parts of Asia and so support measures should remain until these key refining competitors adopt carbon pricing. Delocalisation of petroleum products production outside the EU is also likely to have negative effects of global GHG emissions. According to a recent study from Vivid Economics, commissioned by the UK Department of Energy & Climate Change, EU Refining is on average less emissions-intensive than non-EU competitors. Carbon leakage therefore exceeds output leakage and is about 135%. |
b) quite adequate |
In the absence of an international climate agreement, Unione Petrolifera prefers both free allocation, and enhanced free allocation for exposed sectors to deal with carbon leakage. However, according to the 2013 final allocation data, the refining industry has received less than 80% of its quota as free allocation and is the only major sector receiving less than its actual emissions. This situation is highly detrimental to the refining industry’s competitiveness and requires corrective action. In addition, under the current system, protection will be further eroded due the decreasing industry cap and the CSCF (by 2030, even the most efficient installations would be left with only 60% free allocation if a 2.2% Linear Reduction Factor continues to be applied). The EU ETS needs to be reformed to provide sufficient levels of protection to industry until carbon leakage is addressed through an international climate change agreement. |
a) it absolutely keeps the incentive |
The main incentive for reducing emission in Refining is reducing energy costs. Carbon cost does add to this incentive. The incentive for any installation with the capacity for cost effective emissions reduction is the carbon price: either avoiding buying allowance or being able to sell their surplus allowances whether these are received free or not. Therefore, free allocation is used to protect industry from carbon leakage while keeping the incentive intact. |
c) quite exaggerated |
In the refining sector with large scale complex installations, implementation of the CWT benchmarking provisions was a major undertaking and involved considerable work by the sector, national governments and the Commission. Also considering the importance of the competitive threat, the work to create an accurate and fair system is considered quite exaggerated to the objectives. So the system need to be simplified and we would be willing to work with Commission to achieve this. |
d) there should be no limit to overall free allocation to industry |
If the intention is to provide carbon leakage protection to industry then the number of allowances need to fully cover direct and indirect emissions for best performing installations – hence no limit to overall free allocation. There is no centralised post 2020 allowance budget - control of proceeds from auctioning is delegated to Member States, with some redistribution via the solidarity and growth provisions. Until the issue of carbon leakage is addressed through an international climate change agreement, sufficient levels of protection to industry are needed. To provide an adequate protection for the European refining industry, a CSCF should not be employed to avoid reductions in the amount of free allocation. |
e) I don’t know |
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b) no |
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c) other types of funding (please specify) |
Rather than establishing new bureaucracies, existing funds such as Horizon 2020, 7th Framework and SET programmes should, where required, be augmented by EU and Member State funding. In addition, support for innovative low-carbon technologies should be technology neutral as well as time- and cost- limited - all energy sources should be integrated under normal market conditions, without subsidies (including system connection, balancing cost and exposure to price risk) as soon as possible. |
a) yes |
EU industry needs first and foremost greater equity of non-EU with EU abatement measures. Until there are equivalent carbon pricing policies in competing sectors, EU industry need carbon leakage protection to remain competitive, via free allocations. There are currently no EU ETS measures addressing carbon leakage post 2020. Thus, the ETS Directive needs to be reviewed to make sure that levels of free allocation after 2020 adequately reflect the industry’s carbon leakage exposure. The current indirect emissions compensation system is unsuitable. It should be reformed to allow free allocation for all electricity consumed in refineries. In general, the strategic importance of manufacturing industries, such as Refining, needs to sufficiently reflected across all EU policies; the cumulative impact of EU legislation on these industries including the EU ETS, must be carefully looked at. |
a) the present two groups should remain |
Industrial capacity in EU has declined (According to the Commission communication for a European industrial renaissance, the share of manufacturing in GDP has fallen from 15.4% to 15.1% in 2013) and exposure to international competition remains a key concern for many energy intensive industries, including Refining. Creating uncertainty about how the risk of carbon leakage in industrial sectors such as Refining will be mitigated is not the right way to promote recovery. The current two groups should remain until progress is achieved in the international arena to re level the competitive playing field by introducing similar carbon pricing in other regions that compete with EU Refining. |
a) the present criteria should remain |
For Refining as a mixed sector both trade and GVA exposure and thresholds are very important. Refining is a “margin business”, acting between two international, open commodity markets: the crude oil market and the refined products market. EU Refining is also open to traded imports so that pass-through of EU carbon costs is limited by non- or less-regulated trading partners. Pass-through becomes even more difficult as imports rise. For the carbon leakage assessment, it is therefore important to keep looking at the effect of carbon costs on Gross Value Added rather than production costs and to take sectors’ trade intensity into account. Carbon costs should cover both direct and indirect carbon costs due to their cumulative impact on Refining’s competitiveness. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
If the criteria are tightened thus reducing the number of sectors/sub-sectors on the list, some key strategic sectors for the EU’s economy risk being excluded from carbon leakage protection, with potential negative spill-over effects on other industries (e.g. for the oil Refining industry and the petro-chemical industry, which are strongly inter-connected). Specifically for the Refining sector, the thresholds calculation for GVA and Trade Intensity is problematic. The EUROSTAT database shows some 1,000 plants under NACE code 19.20, but there are less than 100 Refineries in the EU covered by the EU ETS. Objective analysis of GVA requires more granular data for the Refining sector. Carbon leakage is also about future investment decisions. Therefore the GVA criteria carbon price must reflect future projected EUA prices and not current prices. This is common refining industry practice in evaluating major projects. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Unione Petrolifera supports the use of qualitative assessments but these should be kept as simple as possible. Legislative requirements on the quality of fuels (e.g. marine fuels specifications) and the conversion of heavy residues into lighter products result in the increase of refinery energy intensity and GHG emissions. If the Refining sector undergoes a qualitative assessment, this so-called “Refining paradox” would need to be taken into account. |
d) in line with the duration of ETS Phase 4 |
Mid-period review is detrimental to investment certainty, given the significant difference in the levels of free allocation according to the carbon leakage status, and the rest (allocation at 100% at the benchmark vs. 80% in 2013 declining to 30% in 2020 and zero by 2027). Long-term visibility is essential for investment decisions in the refining industry. |
c) the approach should be less stringent (please specify) |
A benchmark excluding outlying installations would take account of typical carbon leakage exposure rather than average of top 10% which may be atypical in character, depending on sector. This is particularly important as EU benchmarks do not rate performance of installations outside the EU - thus potentially penalising EU installations that are more efficient than their non EU competitors. Potential effects on EU strategic industrial sectors - including those integral to the supply chains of other sectors - must be considered. The current benchmark has turned out to be penalising for the refining sector, both in absolute terms and in comparison with other sectors. In combination with the CSCF, carbon leakage protection currently covers less than 80% of emissions to the refining sector even though it is subject to carbon leakage. |
b) no |
In order to provide free allocation in an effective way, the benchmark should accurately reflect the performance of ETS installations. However Unione Petrolifera does not support a revision of the benchmarks based on the technological state of the art, as the latter is subject to interpretation (e.g. do we look at progress worldwide where verified data is lacking, or only the situation in the EU?). Integrating state of the art technologies implies a change in the refineries configuration, which is challenging and extremely costly due to physical and other operational constraints. Investments into such technologies have to pay their way. |
a) no, the same baseline period chosen for allocation in Phase 3 should be maintained also for post 2020 (Phase 4) allocation |
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b) yes, there should be deviations with higher allowances for installations facing specific hardships |
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c) yes, in the form of additional free allocation |
Carbon leakage protection should also include free allocation for EU ETS cost pass-through in electricity prices for all sectors exposed to carbon leakage and in a harmonised fashion. This is in addition to free allocation for direct emissions. The absence of an EU harmonised indirect emission compensation system, by leaving decisions to Member States, restricts compensation to a few sectors. As many Member States do not grant such compensation, this creates single market distortions. Compensation should be reformed to allow free allocation for all electricity consumed in refineries (i.e. net power used). If a sector is deemed at risk of direct carbon leakage, then free allocation should automatically be given for indirect carbon emissions to all installations in that sector. |
Important |
Most important |
Less important |
I don't know |
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d) other |
Unione Petrolifera is strongly in favour of greater innovation support by the EU and its member states, which may bring more significant and cost-effective results than current renewables mandates, but we do not believe that the use of ETS revenues is the right mechanism. Innovation should be supported by existing funds such as Horizon 2020, 7th Framework and SET programmes. |
Competitiveness and carbon leakage risk must be kept under constant review. Assessments should not look for evidence that leakage has occurred and competitiveness already damaged, but rather assess the level of risk in future. The allocation system must not penalise economic recovery or growth. Regarding the format of the questionnaire, we believe that some of the questions are not neutral and push the respondents to make a certain response. The answers cannot always be as simple as yes or no. Many of the answers are provided as yes or no, with additional conditions – which are required as part to the answer. This does not necessarily mean that the respondent “does not know” and has no valuable input to bring. The report of the consultation should look and separately evaluate the responses from the stakeholder organisations which represent a wider share of civil society and industry. This is to avoid giving undue weight to responses from individuals. |
b) Trade association representing businesses |
Verband der Chemischen Industrie e.V. (VCI) German Chemical Industries Association |
German Chemical Industry Association Dr. Tina Buchholz Mainzer Landstraße 55 60329 Frankfurt Germany Phone: +49 69 2556 1483 Mobile: +49 170 5666 247 buchholz@vci.de |
a) yes |
|
1) yes |
b) no |
As the chemical industry has reduced its emissions in the past significantly, potential for further reduction become smaller. As the system of the free allocation rules enables companies to reduce emissions via production shift to countries outside EU, this is a possible scenario for the future to reduce emissions and to cope with the amount of free allowances based on historic production volumes. |
b) no |
ETS does not increase competitiveness as the instrument is not designed for this. Carbon leakage measures only prevent partially a weakening of competitiveness, therefore carbon leakage measures need to be more sufficient. E.g. they have to enable industrial growth. The current system with free allocation based on historic production volumes offers the possibility to reach reduction aims via transfer of production to countries outside the ETS. A free allocation fully benchmark based with no further reduction factors and based on current production volumes would enable industry to better protect competitiveness. |
a) yes |
Yes, carbon leakage measures are necessary as long as we do not have an international climate protection agreement with efforts and burdens of similar sectors in competing countries. The current carbon leakage measures do not protect competitiveness sufficiently as the system of free allocation should be revised to a fully benchmark based system without further reduction factors and based on current production volumes. |
a) very adequate |
The general idea of free allocation is quite adequate to address the risk of carbon leakage. But the calculation of the amount of free certificates should be revised to a fully benchmark based system without further reduction factors and based on current production volumes. Indirect burden from risen electricity prices has to be addressed adequately as well. Border tax adjustments would be an inadequate measure and VCI strongly objects such measures. The extension of ETS to imports from some countries only (climate sinners) could constitute a violation of GATT Article I. Hence, border tax adjustments will probably be considered WTO incompatible. In fact the measure would not be taken for climate change but for competitiveness reasons. The latter are not protected by the WTO, and rightly so. |
a) it absolutely keeps the incentive |
A benchmark based system absolutely keeps the incentive for reducing emissions. The current system should be revised towards a benchmark representing the average of the European plants and not the 10% best plants. |
c) quite exaggerated |
The administrative burden for initial application for free allocation, the set-up of monitoring plans and the annual monitoring and reporting is an extensive administrative burden for companies. In case of higher production volumes or new installations it is of high administrative burden for companies to apply for free certificates. |
d) there should be no limit to overall free allocation to industry |
To avoid perverse incentives to carbon leakage or inhibit growth, a dynamic “ex post” system must be adopted. This dynamic allocation should be fully benchmarks based and oriented on current production volumes. This means, undertakings meeting the benchmark should not have to bear any ETS costs. This would ensure that undertakings not meeting the benchmark are continuing incentives to invest in carbon efficiency while also ensuring that undertakings that make those investments are free to grow without bearing a policy cost penalty. An industry fund must be established to guarantee that sufficient free allowances are available to meet the needs of industry that is receiving free allocation until a global climate agreement with comparable burden for our competitors exists. The backloaded certificates should be transferred into this fund reserved for industrial growth. In addition, CO2 costs in electricity have to be fully compensated to prevent carbon leakage due to indirect costs. |
d) there should be no such innovation support post-2020 |
CCS should only be supported via research and development funding. Any further subventions at later market steps should be avoided. The CCS technology has to compete on the market with other climate protecting technologies as the ETS designed to reach emission reductions the most cost efficient way. |
b) no |
ETS does not aim at supporting selected technologies or innovations. The system just gives carbon a price, hence it triggers emission reductions at the most affordable price. Financial support for technologies and innovation should only be granted in the beginning, in R&D. In case of market maturity subsidies should be avoided. Auctioning revenues by member states have to be used to support climate protection measures in industry in a technological neutral way. In general, we lack a support of R&D via tax incentives additional to use of the auctioning revenues. The best support to foster construction of new, innovative low carbon production plants would be a stable political framework which allows for industrial growth and guarantees production-based free allocation based on benchmarks set by the average of the European plants. Industry needs the confidence that growth will still be accepted under a tightening cap. |
c) other types of funding (please specify) |
Financial support for technologies and innovation should only be granted in the beginning of the technology. In case of market maturity subsidies should be avoided. Support of F&E could be realized via tax incentives. The best support to foster construction of new, innovative low carbon production plants would be a stable political framework which allows for industrial growth and guarantees production-based free allocation based on benchmarks set by the average of the European plants. Industry needs the confidence that growth will still be accepted under a tightening cap. |
a) yes |
Indirect cost of risen electricity prices also need to be adressed via carbon leakage measures. Indirect compensation needs to be sufficient to protect against carbon leakage effects. The current system does not compensate for the full CO2 price in electricity prices. In addition, it does not take into account electricity consumption of infrastructure which is necessary to run the eligible processes and in case of fallback-benchmark there is a not justified deduction factor taken into account (0,8). |
a) the present two groups should remain |
The current criteria for eligible sectors are adequate. |
a) the present criteria should remain |
The current criteria for eligible sectors are adequate. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The current criteria for eligible sectors are adequate. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The current criteria for eligible sectors including the qualitative criteria are adequate. Qualitative criteria are needed in addition to quantitative criteria as the latter are based on historic data. Historic data does not reveal in all cases the current situation for competing products at the world market. |
d) in line with the duration of ETS Phase 4 |
The discussion about the current carbon leakage list shows, that a list, valid for the duration of the trading period would have been better. This leads to more market stability and confidence in the market as the carbon leakage status for products is a fundamental parameter for investment decision of companies. |
c) the approach should be less stringent (please specify) |
The current free allocation system should be revised towards a fully benchmark based and dynamic allocation (=based on current production volumes) with no further reductions. The average of the plants is necessary to build the benchmarks to better reflect the penetration of a given efficiency technology or process methods within the industry. |
a) yes (please specify how often) |
The benchmarks should be revised in adequate time distances. This may be different from process to process as technology development is at different rates in different sectors. |
c) other (please specify) |
The free allocation should be based at most current data to better reflect the need for free allocation for companies and to allow industrial growth. |
b) yes, there should be deviations with higher allowances for installations facing specific hardships |
A hardship-closure is necessary to avoid unjustified hardness for exceptional cases and in order to protect competitiveness sufficiently. |
a) no, the present approach should be maintained, i.e. that Member States can provide such compensation based on state aid guidelines |
In general a compensation for indirect costs is necessary. To pay the indirect compensation with free certificates, a change in the entitlement for receivers of free certificates would become necessary, as under the current system non-ETS installation cannot receive free allocation (but they may have carbon leakage status). The current system causes in Germany an enormous burden of bureaucracy and costs within the companies as chartered accountants (auditors) have to confirm the application for electricity compensation. |
Most important |
Important |
Less important |
Least important |
The best support to foster construction of new, innovative low carbon production plants would be a stable political framework which allows for industrial growth and guarantees production-based free allocation based on benchmarks set by the average of the European plants. Industry needs the confidence that growth will still be accepted under a tightening cap. |
a) from the Member States' auction budgets |
Free allocation has to protect against carbon leakage adequately. Therefore the free allocation should not be used for innovation support. The revenues from auctioning should be reinvested for low carbon technology support, as foreseen in the ETS-directive. |
Carbon Leakage measures have to be adequate to fully protect against carbon leakage. The rules for carbon leakage have to be reliable and stable as investment decision in the chemical sectors are investments in decades. The current system of historically based free allocation needs to be revised as it now opens the possibility to reduce emissions (and fit the amount of free allocation a companies has received based on historic data) via transfer of production in countries outside the ETS. A revised system has to enable industrial growth, as chemical products are key for a low carbon society |
b) Trade association representing businesses |
Verband der Kali- und Salzindustrie e.V. (VKS) (http://www.vks-kalisalz.de/) Der VKS ist im Transparenz-register registriert: ID number 85717948337-22. |
Manfred Steinhage Verband der Kali- und Salzindustrie e.V. Büro Brüssel Rue du Commerce 31 1000 Bruxelles Tel.: 02-290 8985 Mail: manfred.steinhag@vks-kalisalz.de |
a) yes |
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1) yes |
b) no |
There is no one size fits all answer. It must differentiated between the different sectors. Our sector -the potash and saltindustry- is not able to further reduce greenhouse gas emissions towards 2020 and beyond. |
b) no |
|
a) yes |
Competitiveness disadvantages EU industries are facing are not "potential" but real. They take the form of comparatively higher production costs (energy being part of them), highly-regulated and ever-evolving EU/national regulatory framework and sometimes untackled unfair trade practices. |
b) quite adequate |
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b) it largely keeps the incentive |
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c) quite exaggerated |
The administrative burden ensuing from the implementation of the EU ETS represents a significant red-tape for companies. This burden can be reduced without influencing the effectiveness of the system. |
b) a higher share than in 2013-20 |
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d) there should be no such innovation support post-2020 |
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a) yes |
The scope of NER 300 is rather limited and does not directly benefit to all industrial sectors covered by EU ETS. This must be corrected. Revenues generated by EU ETS must be earmarked for investments made in Europe in new cost-efficient & low-carbon technologies. They should be made available for example, via a fund, to all stakeholders across the value chain covered by the EU ETS. |
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
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a) yes |
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a) the present two groups should remain |
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a) the present criteria should remain |
Also the CO2 price should remain constant. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The qualitative assessment must be kept as it enables to include sectors at significant risk of CL which would otherwise fail to qualify under the sole quantitative criteria for various reasons. |
a) five years |
This would improve legal certainty and consistency. |
a) the present approach of average of the 10% most efficient installations should remain |
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b) no |
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b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
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b) yes, there should be deviations with higher allowances for installations facing specific hardships |
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a) no, the present approach should be maintained, i.e. that Member States can provide such compensation based on state aid guidelines |
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Least important |
Less important |
Most important |
Important |
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d) other |
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VKS would like to stress the need for the EU to opt for an integrated (and not only sectoral) approach to prevent carbon leakage as this risk is amplified by many other parameters: - energy prices much higher in Europe than the ones of our main competitors; - the lack of a predictable legal framework in the EU, sometimes overlapping, regulatory instruments applicable to industrial activities; - the qualitatively weak competitiveness proofing made in impact assessments. There is a need to effectively implement the competitiveness proofing and to recognize in future initiatives/recommendations the statement recalled in the recent Conclusions of the Council according to which: "Industrial competitiveness concerns should be systematically mainstreamed across all EU policy areas and be part of impact assessments in view of getting a stronger industrial base for our economy." |
b) Trade association representing businesses |
Vereniging Nederlandse glasfabrikanten Marijke van den Bosch |
Postbus 50 9600AB Hoogezand |
a) yes |
|
1) yes |
c) I don’t know |
The glass industry is making continuous improvement in energy efficiencies and process technologies to reduce CO2, energy consumption and environmental impacts. While further reductions in the glass industry are possible, what is important is the magnitude of this reduction. All official EU publications such as the “Sector Competitiveness Studies - Competitiveness of the Glass Sector - ENTR/06/054 - Final report, 14 October 2008” or more recently the Glass BREF and the BAT Conclusions show that no breakthrough technology is currently available to reduce CO2 emissions to the extent imposed by the energy and climate package 2030 (-43% for ETS sectors between 2005 and 2030). Emissions reductions cannot be repeated ad infinitum. There is a thermodynamic limit to the glass melting process which is an absolute limit, and that current technology is already approaching. Moreover, further reductions will strongly depend upon external factors such as cullet (= recycled glass) availability |
b) no |
Comment: The main driver for energy efficiency improvements in the glass industry is the high share of energy costs within production costs. In fact, the glass industry has continuously improved energy efficiency over previous decades. Regulatory instruments and the EU ETS in particular, have only a marginal effect on energy efficiency improvements of glass melting activities, if any. Whilst there is no global ETS in place, the EU ETS is only a source of costs for glass industries (direct but also indirect CO2 costs linked to electricity), and therefore weakens the competitive position of European based glass industries vis-a-vis third country competitors. As such, it indirectly favors production reduction in the EU and rises in imports from non EU countries without carbon constraints into the EU. For these reasons, glass industries need to be fully protected against risks of carbon leakage. |
a) yes |
Comment: The EU glass industry faces higher costs for environmental protection, energy, labour and raw materials, than the majority of extra-EU competitors. In the absence of an international climate agreement and a level playing field between EU and extra EU competitors, the EU industry needs to be provided with measures to safeguard its competitiveness. Measures to avoid carbon leakage under the EU ETS are therefore essential. Measures should cover both the direct and indirect CO2 costs. Such measures under the EU ETS must be established in a way that ensures the ETS’ coherence with the EU’s ambition to revitalize European manufacturing activities, as proposed in the EC Communication on Industrial Renaissance. |
b) quite adequate |
Comment: Free allocation has been key up to now to mitigate the negative impacts of a unilateral climate policy. However, the Cross Sectoral Correction Factor which is applied already from 2013 reduces the free allocation, even for the most GHG efficient installations, and will dramatically increase in the future, thus further reducing free allocation. This current system is unsustainable and should be changed in order to ensure that the most GHG efficient installations receive 100% of their allowance needs. |
a) it absolutely keeps the incentive |
Comment: Free allocation does not reduce the incentive to innovate; on the contrary, the majority of installations in the sector (about 95%) do not have enough allowances, which encourages industry to invest in the efficiency of its plants to avoid having to purchase a high level of allowances, which would render the sector uncompetitive. For the installations under the benchmark (about 5%), they can sell their allowances on the market, which is also an incentive to continue reducing emissions. The incentive is therefore present. Below, we also call for a periodic revision of the benchmarks (in exchange of the cancellation of the cross-sectoral factor), which also provides for a strong incentive to improve. In addition, free allowances preserve investment capacity. Free allowances offer industry the incentive to purchase less CO2 allowances if they become more GHG efficient. However this last incentive would be better preserved if the CSCF was not forcing an unrealistic and arbi |
b) quite proportionate |
Comments: Administrative burden is accepted, since it is necessary to maintain the free allocation system. However opportunities or improvement to this process should be considered. Conversely, the administration and calculation rules for new entrants are overly complex and can lead to under-allocation. They can therefore be seen as disproportionate and can be a disincentive to new investments. |
d) there should be no limit to overall free allocation to industry |
Comment: The current system is unsustainable (from a competition point of view) because the cross sectoral correction factor continually reduces the free allocation given to industry, even for the most GHG efficient installations. Ideally, installations whose efficiency is equal or better than the (periodically reviewed) benchmark should receive 100% of free allocations to produce in the EU and so there should be no limit. In practice, this is likely to lead to a higher share in phase IV. An increased level of EU ambition in terms of GHG reduction would require enhanced measures against carbon leakage and therefore an increase in total free allocations. |
e) I don’t know |
Overall financing for technological innovation (and not only connected with CO2 reductions) in manufacturing should be increased in the EU. However R & D should be funded via a mobilization of different sources of funding - including but not limited to - auctioning revenues. It should not come from the free entrants reserve or Free Allowances reserve. Allowances should be primarily used to ensure that the most GHG efficient installations get 100% of their needs to produce in the EU. Furthermore, financing for R&D and demonstration projects should be technology-neutral and not focused only on CCS or renewables. New technologies such as Carbon Capture and Use (CCU) and others should not be excluded. |
a) yes |
: As stated above, industrial innovation, with a focus on the process and on new energy sources for industry, should be promoted. It should not be financed by shares of allowances reserved for free allocation or for new entrants, but rather from a mobilization of different sources, and not limited to auctioning revenues. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Comment: Industrial innovation should be promoted in a technology-neutral way. However this should not be done at the expense of free allocation which aims to provide effective support and protection against carbon leakage. Therefore it should be financed via other sources. This could include, among other sources, money from the auctioning revenues, as suggested in the ETS directive (Art 10.3). |
a) yes |
Comment: Unequitable carbon costs should not place EU industries at a competitive disadvantage with extra-EU competitors and this should be the ultimate objective pursued in order to achieve the EU’s ambition of 20% GDP realized by industrial activities in 2020. To that end, measures against carbon leakage are a pre-requisite but are not enough. An EU scheme for compensation of indirect costs due to higher electricity prices and some raw materials (e.g. soda ash, industrial gases, ..) should also be developed for Energy Intensive Industries. More generally, the EU needs to assess, and if needed reform, all its policies and in particular energy and environmental ones against the re-industrialisation objective. A longer term re-industrialisation objective for 2030 should be established. |
a) the present two groups should remain |
Answer to question 12: a - The present two groups should remain. This binary model ensures that all sectors benefit from carbon leakage protection measures as soon as a risk is detected. This is essential to ensure that carbon leakage measures are effective and that protection is not granted too late, when industries are already in jeopardy. |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
The competitiveness of energy-intensive industries is sensitive to energy and carbon costs, therefore a risk exists for all these industries. For the sake of simplicity and consistency in legislation, all energy-intensive industries, as defined in Art 17 (1) a of the Energy taxation directive 2003/96/EC could be automatically placed on the carbon leakage list, i.e. An "energy-intensive business" shall mean a business entity, (…) where either the purchases of energy products and electricity amount to at least 3,0 % of the production value or the national energy tax payable amounts to at least 0,5 % of the added value. In case ETS-specific criteria are maintained, they should continue being based on both the CO2 intensity and the trade intensity metrics. The CO2 cost metric should be made more relevant to analyze the impacts of carbon cost on sectors’ profitability. To that end, the CO2 cost over GVA criteria could be replaced by a CO2 cost over Gross Operating Surplus (GOS) crit |
b) other thresholds should be defined. Please specify below |
The competitiveness of energy-intensive industries is sensitive to energy and carbon costs, therefore a risk exists for all these industries. For the sake of simplicity and consistency in legislation, all energy-intensive industries, as defined in Art 17 (1) a of the Energy taxation directive 2003/96/EC could be automatically placed on the carbon leakage list, i.e. An "energy-intensive business" shall mean a business entity, (…) where either the purchases of energy products and electricity amount to at least 3,0 % of the production value or the national energy tax payable amounts to at least 0,5 % of the added value. In case ETS-specific criteria are maintained, thresholds must be maintained at their current levels even if the denominator of the carbon cost criteria is changed to Gross Operating Surplus. Raising thresholds would send a damaging signal to EU industries, meaning that fixing a cap to free allowances is more important than safeguarding industrial competitiveness . |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Comment: : The current criteria under the quantitative assessment at NACE 3 or 4 level should be maintained and used as the first assessment option. When an assessment at NACE 3 or 4 level is not appropriate to identify the relevant industrial activities falling under the EU ETS, then a quantitative assessment at 6- or 8-digit should be carried as a second option. Finally, as a third option, a qualitative assessment must remain possible. Other parameters can be studied as part of qualitative assessments, such as methodology and evidences of investment leakage. |
d) in line with the duration of ETS Phase 4 |
Comment: As long as there are no equivalent GHG reduction measures taken by major trading partners, the list of sectors exposed to the risk of carbon leakage should remain valid. This is essential to provide predictability to industries faced with long investment cycles (typically > 15 years). |
c) the approach should be less stringent (please specify) |
Comment: Glass industries support ambitious benchmark levels, which reflect the technological capabilities of the sectors best performers using the best available and proven technologies in Europe. It must be kept in mind however that this approach also has limits. Indeed, benchmark curves do not always reflect a difference in terms of « best » (the least GHG emitters per tonne of glass) or « worst » GHG players, but a difference in terms of products produced, cullet availability, age of furnace, available fuels, etc. The 10% best GHG performers can therefore be regarded as extremely challenging, especially for plants producing a wider range of more sophisticated products with higher added-value (as this usually entails higher energy consumption). |
a) yes (please specify how often) |
Comment: It seems logical to revise the benchmarks from time to time to reflect GHG improvements over time. Revision cycles should be linked to ETS phases and remain unchanged over this period. Periodical revision of the benchmark should be based on the actual EU based installations. The periodic revision of benchmarks should be the sole instrument leading to a reduction of free allowances over time, as benchmarks reflect true possibilities of GHG improvements according to state-of-the-art technologies deployed in Europe. The periodic revision of benchmarks therefore justifies that the CSCF is abandoned. |
c) other (please specify) |
Comment: Ex-ante allocation can only lead to over-allocation in crisis times, and under-allocation when the economy is growing. A better approach is to design an « ex post » system, where real allocation is corrected according to the real production. |
a) no, there should be no deviations |
Comment: In principle, there shall be no deviation from the general harmonized allocation rules at the level of an individual installation as this could cause distortion of competition. Only in the case of very specific hardship, should deviations be envisaged for an entire sector after a careful assessment of the competitive effects of such deviations. |
d) yes, in the form of financial compensation at EU-level |
Comment: Rules for the compensation of indirect costs should be revised and need to be effective to reflect the real burden of CO2 included in electricity costs for industry. A differentiated compensation approach by Member States is not acceptable from a competitiveness point of view. A harmonized approach at EU level is therefore needed. The harmonized measure should take the form of financial compensation. Free allocation should be kept aside to ensure full relief for direct emissions (most GHG efficient installations should receive 100% of their needs). A compensation system should also be put in place to compensate for higher prices of some raw materials (e.g. soda ash) and industrial gases. |
Important |
Less important |
Most important |
Least important |
|
a) from the Member States' auction budgets |
Comment : Allowances funding low-carbon innovation support should be financed from the Member States’ auction revenues and from a mobilization of additional sources. However, this should not be financed at the expense of free allocation or the new entrants reserve which must be principally used for measures against risks of carbon leakage. |
Generally speaking, glass industries welcome the opportunity to express their views on carbon leakage measures post 2020 and appreciate that this discussion is held without further delay. It is however regrettable that industry is asked to comment on such measures whereas the rules for EU ETS Phase IV have not yet been fully decided. The glass industry wishes to reiterate that so long that there is no comparable ETS system (which means that similar costs are born by competitors) operating in most part of the world and in extra-EU countries with glass industries, EU based glass industries will need to receive full and effective protection against carbon leakage. The recent assessment carried by DG CLIMA on exposure to carbon leakage risks, i.e. the carbon leakage list of 2009 and its recent revision, shows that between 2009 and 2014, risks of carbon leakage has grown in most glass sectors. For these reasons, glass industries need effective protection moving forward. This should |
b) Trade association representing businesses |
VIK e.V. |
Sven Marschalek VIK e.V. Berlin Office Friedrichstraße 187 10117 Berlin Germany s.marschalek@vik.de Phone: 0049- (0)30 212492-15 |
a) yes |
1) yes |
a) yes |
The ability of EU industry to further reduce GHG emissions is dependent on a new political environment that takes industry policy seriously and allows investments into innovation and efficiency improvements. Industry needs a stable cost level playing field. The high costs that will result from the proposed EU targets until 2030 – combined with the uncertainty regarding the future carbon leakage provisions - are an obstacle for such investments and will most likely limit investments in efficiency. That’s why the EU reduction targets are only acceptable if also the EU target for a growing industry share is guaranteed. Furthermore, industry needs a clear political commitment that EU climate policy – including targets – will be reviewed if by 2020 no global level playing field is achieved. |
b) no |
Emission trading on a global scale is an effective and efficient market based instrument providing climate protection at lowest costs by introducing a carbon factor in decisions on investments and efficiency improvements. However, in its current form, ETS has not lead to the desired energy efficiency investments in industry. Instead, the additional costs due to ETS – actual and expected - harm competitiveness and the willingness to invest in the EU. Furthermore, the unilateral and absolute cap on emissions is limiting industrial growth potentials. To improve energy efficiency in the energy-intensive industries, the ETS carbon leakage measures must be revised to better protect competitiveness and at the same time set incentives for efficiency improvements. This purpose would be served by a fully benchmark based free allocation with no further reduction factors and based on actual production volumes. Also all processes that reduce emissions should get compensation, e.g. recycling plants. |
a) yes |
As long as the ambitious EU Climate policy is not mirrored by comparable international efforts with comparable burden for the major competitors, the EU needs to provide for measures that minimize the unilateral cost burden for EU industry. These measures must be predictable and stable. The following changes will at least partially tackle the competitiveness disadvantages the EU industry faces under ETS: The system of free allocation should be revised to a fully benchmark based system without further reduction factors and based on actual production volumes. This is important from an economic and also from an environmental point of view - the EU emission reduction targets should not be achieved through carbon or investment leakage. Without a global agreement on climate change action, the EU ETS cap should be revised. |
b) quite adequate |
Enhanced free allocation would be an adequate instrument to address the risk of carbon leakage. However, the faults made when implementing EU ETS must be corrected in order to optimise its effectiveness. Free allocation should give a positive stimulation for good performers and enable bad performers to improve. To that aim, free allocation post-2020 must be based on a dynamic system, which has the following main components: (1) realistic benchmark levels, (2) the actual activity level (= production volume), (3) no correction factors. With such reforms, enhanced free allocation can minimise carbon leakage also at higher CO2-prices. Furthermore, the system needs fundamental revision if the EU remains isolated with its ambitious climate policy. In the medium- to long-term, an isolated ambitious climate policy and effective protection against carbon leakage are not compatible. |
a) it absolutely keeps the incentive |
With free allocation based on benchmarks, the incentive to make the investment for emission efficiency improvements is provided by the benchmark, i.e. the cost difference (savings) achievable through an investment. This incentive is distorted in the current design of free allocation based on historical instead of actual production data. Product substitution towards more carbon-efficient products is not achieved with free allocation as there is no full carbon cost pass-through into product prices. This is a tradeoff: full carbon cost pass through is not compatible with the avoidance of carbon leakage. However; energy costs and market development have been driving product replacements since a long time. The market effects are based on life-cycle views, taking also energy consumption during the use phase into account. |
d) absolutely exaggerated |
The initial application for free allocation, the set-up of monitoring plans and the annual monitoring and reporting is an enormous administrative burden for companies. The complexity of the system results from • the rules to account for any changes between the historical base period and now. Here is massive red tape and administrative burden, which could be avoided by a better alternative: allocation based on actual production data. • Specificities of national implementation. Implementing authorities should only request those data which is actually required. Establishing benchmarks has been a complex exercise (especially the definition of boundaries) both for politicians and the sectors in question. Establishing new benchmarks should be avoided. |
d) there should be no limit to overall free allocation to industry |
The share of allowances dedicated to free allocation should be sufficient to avoid carbon leakage. That does not mean “a free ride for industry”, but sufficient allowances for efficient producers, i.e. producers who produce at realistic benchmark level. These should receive allowances in an amount that no further costs apply. Only if this is safeguarded, an efficient producer in the EU has no cost disadvantage from the EU ETS compared to competitors worldwide. This approach helps to stimulate efficient production in the EU. |
d) there should be no such innovation support post-2020 |
Research and development in various technologies is crucial for the EU decarbonisation path towards 2050. However, support and funding for these technologies should not depend on the auctioning income which varies with the carbon price. |
b) no |
Technologies in industry to meet the 2050 reduction targets are not yet available or even invented. It is therefore crucial that R&D is strengthened. However, the EU ETS has been primarily designed as a tool to reduce emissions in the most cost-effective way and should not be considered as the innovation driver. The EU ETS should not support selected technologies or innovations, i.e. support schemes for industrial innovation should not be financed from the EU ETS. Instead, the new design of the EU ETS must focus on adequate carbon leakage provisions, i.e. the required volumes for free allocation must not be compromised by other aims. |
d) I don’t know |
|
a) yes |
The following measures are needed: • A reform of the EU ETS providing more effective carbon leakage measures (see Q4). • An adequate compensation of the indirect CO2 costs. The current system does not compensate for the full CO2 costs in electricity prices. • To minimise the total costs, politicians should commit to rethink the EU targets and the EU climate change policy if a global level playing field is not be achieved by 2020. • To achieve further emission reductions cost-efficiently, the effort sharing between ETS and non-ETS sectors should be in line with the findings of the impact assessment for the Energy Efficiency Directive: accordingly, the remaining economic potential is much larger in other sectors (building, power, transport) than in industry. • A more consistent overall energy and climate policy on EU and on MS level with the objective to bring energy prices in line with those in competing regions. |
a) the present two groups should remain |
We see no reason why the carbon leakage list – established on a thorough investigation of the statistical material - should change: there is no sign of a reduced need for protection, especially taking into consideration the increasing level of globalization and the shrinking cap (which will lead to an increase of the carbon price and the danger of carbon leakage). In general, the notion underlying the debate on those sectors exposed to carbon leakage should be: how to give more confidence and predictability to globally competing industries and how to attract more investment into Europe. In this context, it is important to look into possible solutions of the key disadvantage of the present two groups: the sharp consequences for individual sectors of changing the list, i.e. a sector can get 100% free allocation in one year and 0% the next year. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
The criteria should be strengthened by complementing the following: • a comprehensive carbon/climate cost comparison: the ETS costs in Europe should be compared with those in other major industrial world regions (including an analysis of the allocation rules for direct and indirect emissions), • a clear definition of “a decisive share of global production” (with the same carbon costs and the same carbon price), • the marginal power plants should be used to calculate the indirect carbon cost, • the impact of value chain effects: Sub-sectors that are not directly impacted but are inherently linked with exposed sectors are not necessarily on the list. It is therefore important that qualitative assessments are done where relevant to add the necessary value chain aspect (including upstream costs, impact of carbon leakage position of upstream sectors on downstream sectors i.e. the respective end products, (im)possibility of cost pass-through), • a forward looking carbon price. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The current thresholds are adequate. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Qualitative criteria are needed in addition to quantitative criteria as the latter are based on historic data. Historic data does not in all cases reveal the current situation for competing products at the world market. The following parameters are proposed for a forward looking qualitative assessment: • All costs related to climate change policy along the value chain should be taken into account, in particular upstream costs. • The value chain analysis should also consider the implication for downstream sectors if an upstream sector is deleted from the carbon leakage list. • The inability to pass through locally imposed costs to sectors whose product prices are determined internationally (“price takers”) should be taken into account. |
d) in line with the duration of ETS Phase 4 |
The carbon leakage status is a fundamental parameter for investment decisions of companies because a change in the status has sharp consequences: the sector can get 100% free allocation in one year and 0% the next year. To avoid negative consequences for decisions to invest in maintaining or expanding manufacturing capacity in Europe, uncertainty about the carbon leakage status should be avoided. Therefore, planning stability as realized in RES-E schemes (15-20 years) should be realized also for industry and should be shortened/terminated only in case a global level playing field is reached. As a minimum, the carbon leakage list should be valid for the duration of the fourth trading period. |
c) the approach should be less stringent (please specify) |
Currently allocation is based on the stringent average of the top 10% performers, meaning that only about 5 out of 100 installations receive 100 % free allocation. All others incur costs. Furthermore, these stringent benchmarks are significantly reduced through the cross-sectoral correction factor and the linear reduction factor (both 1.74% points per year). This adds costs even for the most efficient producers and thereby discourages efficient investments and growth. This approach is not sustainable and does not protect against carbon leakage. Therefore, VIK believes that the approach should be rather less stringent and proposes the use of realistic benchmarks. Realistic benchmark levels should reflect the penetration of a given efficiency technology within EU industry sector and be comparable to benchmarks in other schemes globally. Realistic Benchmarks should provide long-term certainty and predictability. |
a) yes (please specify how often) |
An update of the benchmark should reflect the technical development. To ensure that the benchmark level is technically and economically achievable, benchmarks must be defined bottom-up, starting from real performance levels. The benchmark level should not reflect the technological state of the art. In addition, an update of the benchmark must also reflect the carbon leakage risk, i.e. it must be ensured that the carbon leakage protection is not compromised. An update of the benchmark levels should only take place between trading periods and not within a trading period. This is important to limit the impact on the effectiveness of the EU ETS: if efficiency improvements lead to a more stringent benchmark, this could provide an incentive to delay investments if a company has several plants which would then have to bear the more stringent benchmark. Furthermore, an update of the benchmark could undermine the planning of investment decisions. |
c) other (please specify) |
The free allocation should be based on the most current data to better reflect the need for free allocation of the companies and to allow for industrial growth. This way, over- and underallocation to the most efficient producers would also be avoided. In contrast, the current ex-ante allocation is adding costs to the production of efficient plants thereby discouraging growth and perversely rewarding relocation to outside Europe. |
b) yes, there should be deviations with higher allowances for installations facing specific hardships |
A hardship clause is necessary to avoid unjustified hardness for exceptional cases and in order to protect competitiveness sufficiently. |
a) no, the present approach should be maintained, i.e. that Member States can provide such compensation based on state aid guidelines |
Compensation for indirect CO2 costs is necessary. For some sectors these costs are much more significant than the direct CO2 costs. While the present approach has some disadvantages, any change of the system brings uncertainty as there are many unanswered questions regarding implementation. VIK therefore calls to maintain the present approach. |
Less important |
Important |
Most important |
Least important |
The development of new technologies follows a pre-defined path (from development to deployment and commercialisation) where different types and levels of support are needed. It is important to adequately define the appropriateness of each type of aid. Support is necessary at each stage in order to overcome the market barriers and failures specific to each stage. We see a lack of support for large scale pilots in industries and would wish to have the EU more active here. |
d) other |
Free allocation has to protect against carbon leakage adequately. Therefore, the free allocation should not be used for innovation support. The revenues from auctioning should be reinvested for low carbon technology support, as foreseen in the ETS Directive. |
While the details regarding the carbon leakage protection measures post-2020 may be implemented in different ways, the principle must be respected that the most efficient EU producers (i.e. those producing at benchmark level) incur no additional costs due to ETS. Any policy initiatives resulting from this consultation should allow for industrial growth and the climate change policy of the future should fit with the EU’s industrial renaissance strategy. The results of COP 21 and in general the commitment of the major world regions to climate change policies are a precondition that EU climate policies will have a future in the manner we see it today. Whether avoidance of carbon leakage is really feasible with the high carbon reduction targets foreseen depends on a number of breakthrough technologies. Whether these breakthroughs will come is the crucial question. The EU can help such developments with focused support of innovation and R&D. |
b) Trade association representing businesses |
VINCENZO PILONE S.p.A. |
Bergerone Orazio Via Vecchia di Pianfei 2/B - 12084 Mondovì (CN) tel.+39.0174.42468 fax.+39.0174.551372 info@pilone.it |
a) yes |
1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improvement |
a) yes |
EU ETS creates costs for European industry and this creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies. |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. This would limit the list to sectors really exposed and would eliminate the risk of a carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
All energy intensive sectors as defined in the Energy Taxation Directive should be considered as exposed to the carbon leakage risk. As an alternative, trade and carbon intensity criteria should be used considering the following elements. GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS. Second, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥10%) should be introduced. |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
b) Trade association representing businesses |
VNCI, Association of the Dutch Chemical Industry |
Association of the Dutch Chemical Industry (VNCI) Loire 150 P.O. Box 443 NL-2260 AK Leidschendam www.vnci.nl gerrits@vnci.nl +31 6 34924871 |
a) yes |
1) yes |
b) no |
For the chemical industry further reduction is very difficult and is combined with very high investments which are not economically feasible in the current European investment climate. Most of the technological efficiency options (incremental improvements) have been realised. Further reductions require significant investments (and growth) in Europe and the necessary (policy) conditions to do so. |
b) no |
A trading system should guarantee investments on climate against the lowest cost. In the end it still remains a raise of operational costs in EU. It can however help EU industryto become more efficient under the right protection against Carbon Leakage. This however is currently not the case, see our plea at question 3. |
a) yes |
EU climate policy must not add costs to efficient EU manufacturers: 100% free direct and indirect allocation according to realistic benchmarks are the solution. Allocation should be dynamic according to recent production output in order to avoid over- and under allocation and to avoid rewarding relocation. |
b) quite adequate |
Free allocation of direct and indirect costs is the best tool to avoid carbon leakage, if it shields efficient producers from any additional climate policy costs. |
a) it absolutely keeps the incentive |
It keeps resources in company, e.g. to innovate. The positive reward on investing and thus saving EUA's which can be sold remains. |
b) quite proportionate |
Administrative burden could be simplified. Dynamic allocation would not lead to additional burden since reporting on manufacturing output is already done anyway. |
d) there should be no limit to overall free allocation to industry |
I.e. in the absence of equitable global action, EU industry must not be unilaterally burdened with limits and constraints. The incentive to improve efficiency performance is given due to benchmark-based free allocation already. |
b) the same share as in Phase 3 |
It is seen as unlikely that member states will free resources from auctioning revenues due to national budgetary challenges. |
a) yes |
There should be no limit on the percentage used for free allocation of direct and indirect costs (or compensation indirect costs). Remaining budget can be used to stimulate investments and/or innovation. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The Directive already suggests to spend 50% of revenues by member states to be earmarked for such purposes. |
a) yes |
In addition, free allocation for indirect emissions (carbon cost contained in electricity costs) are needed. |
a) the present two groups should remain |
Manufacturing of e.g. basic building blocks or of ingredients etc. may not directly qualify under too strict parameters. However, - i.e. in a continued unlevel climate policy playing field - these building blocks remain essential for maintaining end production and employment of entire value chains that depend on thriving European supply manufacturing. Accordingly, a simplified carbon leakage list would reduce administrative burden and be more effective. It is of importance though under the current cap to focus on those sectors that are exposed in order not to burden the amount of free allowances too much. |
a) the present criteria should remain |
It is of great importance to create certainty for companies, therefore changing criteria is very much unwanted. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
If not all manufacturing ETS sectors are listed, the present parameters should be maintained. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Some sectors are exposed to the risk of carbon leakage although they may not at first glance the quantitative criteria. This can be due to abatement potential, market characteristics, or profit margins. Sectors with complex manufacturing systems and diverse, interrelated value chains, it is justified and essential to apply qualitative criteria for their exposure assessment. |
d) in line with the duration of ETS Phase 4 |
The validity should be in line with the duration of phase 4 (minimum). |
c) the approach should be less stringent (please specify) |
The benchmark could be less stringent (e.g. rather the weighted average). It should be more realistic and more sector specific. In any case, the application of a linear reduction factor brings allocation below the level needed to maintain the output for many sectors. This gives a negative signal to industry, i.e. adds costs also for most efficient producers, disencourages investment and growth in Europe. |
b) no |
Benchmarks do not describe the 'state of the art' but describe the level of performance of a plant population in a sector. Revising benchmarks to make them more stringent would remove the relative pioneer advantage of early movers and discourage performance improvements. We plea for realistic benchmarks with respect to awarding pioneer advantage (benchmarks should be revised with a long enough period like 10 years) |
c) other (please specify) |
Current 'frozen' ex-ante allocation is adding costs on the production of efficient plants thereby discouraging growth and perversely rewarding relocation to outside Europe. This needs to be changed through dynamic allocation based on recent production output. This way, over- and underallocation to most efficient producers can be avoided. In the Netherlands both NGO's Government and industry agreed upon a structural improvement package for ETS (http://www.ecofys.com/files/files/ecofys-2014-dynamic-allocation-for-the-eu-ets.pdf) which is based on dynamic allocation |
a) no, there should be no deviations |
|
c) yes, in the form of additional free allocation |
Through harmonised indirect allocation, diversity of national approaches can be overcome. We included this also in our improvement proposals for ETS in the Netherlands ( http://www.ecofys.com/files/files/ecofys-2014-dynamic-allocation-for-the-eu-ets.pdf) . It should however not lead to lowering the amount of compensation for indirect costs in the memberstates that already make use of this option. |
Least important |
Important |
Most important |
Less important |
The most difficult stage is usually to initiate and run a successful large scale pilot. |
a) from the Member States' auction budgets |
|
It is of utmost importance that the Commission implements the following improvements when it wants to push further on tightening up the reduction path for the ETS cap, aimed at achieving it's long-term goal of an 80 to 95% reduction in greenhouse gases for the whole economy by 2050; - securing the position of internationally competitive companies (“carbon leakage companies”) by a 100% free allocation of rights based on realistic benchmarks and actual production, based on the best performance in the sector; - compensation for the indirect (electricity) costs, based on the best performance in the sector. Together with Dutch government and NGO's we had Ecofys describe our package of structural improvements for the ETS: http://www.ecofys.com/files/files/ecofys-2014-dynamic-allocation-for-the-eu-ets.pdf |
b) Trade association representing businesses |
VNO-NCW (Confederation of Netherlands Industry and Employers; Transparency register: 13255254129-80) |
Bram Borgman 5 Rue Archimède, box 4 1000 Brussels Belgium borgman@vnoncw-mkb.nl +32 2 510 08 72 |
c) not relevant |
VNO-NCW represents both companies that fall and that do not fall under the scope or EU ETS. |
1) yes |
c) I don’t know |
Provided sufficient protection against carbon leakage (for both direct and indirect CO2-costs) is given to companies exposed to international competition, and sufficient support for research, development and innovation is provided, carbon leakage industries should be able to further reduce GHG emissions without (substantially) reducing Industrial production in the EU. Sufficient protection against carbon leakage will have to be based on free allocation based on actual production and realistic benchmarks, where the most CO2-efficient installations receive 100% of their needed allowances for free. However, you never know upfront whether the necessary breakthrough technologies will be developed in time. |
c) I don’t know |
The EU ETS is first and foremost a compliance instrument which ensures that the EU achieves, for that part of the emission that fall under the EU ETS, its CO2-reduction goal in the most economically efficient way. For the companies that fall under the EU ETS energy consumption is a relatively large share of production costs and these companies therefore have a natural incentive to become more energy efficient and have done so over the past decades. However it should be noted that investment decisions are made on an international scale and that the EU ETS may divert investments away from Europe if insufficient protection against carbon leakage is provided. |
a) yes |
The position of internationally competitive companies (“carbon leakage companies”) should be secured by a 100% free allocation of rights based on actual production and realistic benchmarks based on the best performance in the sector; and compensation for the indirect (electricity) costs also based on the best performance in the sector. In order to guarantee 100% free allocation and prevent the application of the C-factor, a certain amount of allowances will have to be put aside in a separate reserve (Allocation Supply Reserve). |
a) very adequate |
Provided free allocation is based on actual production and realistic benchmarks. |
a) it absolutely keeps the incentive |
The incentive remains intact through both the benchmarking system and the carbon price. |
a) absolutely proportionate |
|
d) there should be no limit to overall free allocation to industry |
The share of allowances to an individual installation should be dependent on the actual production of that individual installation. If production is higher, allowances allocation should be higher, and vice versa. The fixed ratio between the industry and energy sector pots should be let go of and in case of higher than expected economic growth allowances to industry should be provided from an allocation supply reserve. This allocation supply reserve is to be filled with allowances from the auctioning. |
a) a substantially higher share than in Phase 3 |
|
a) yes |
|
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
|
a) yes |
Free allocation should also be used to compensate for indirect CO2-costs passed through in the electricity price. |
a) the present two groups should remain |
|
a) the present criteria should remain |
|
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
d) in line with the duration of ETS Phase 4 |
|
a) the present approach of average of the 10% most efficient installations should remain |
|
a) yes (please specify how often) |
|
c) other (please specify) |
Free allocation should be calculated on the basis of actual production |
e) I don’t know |
|
c) yes, in the form of additional free allocation |
|
I don't know |
Most important |
Important |
Less important |
4x "I don't know" (but that's not allowed) |
c) from both |
|
The position of internationally competitive companies (“carbon leakage companies”) should be secured by a 100% free allocation of rights based on actual production and realistic benchmarks based on the best performance in the sector; and compensation for the indirect (electricity) costs also based on the best performance in the sector. In order to guarantee 100% free allocation and prevent the application of the C-factor, a certain amount of allowances will have to be put aside in a separate reserve. Ecofys recently studied the possibilities of model which meets these requirements. The resulting report (“A dynamic allocation model for the EU Emissions Trading System”) can be found via: http://www.ecofys.com/en/news/a-dynamic-allocation-model-for-the-eu-emissions-trading-system/ |
b) Trade association representing businesses |
Wirtschaftskammer Österreich |
Wiedner Hauptstraße 63 1045 Vienna Austria Tel: 0043-1-590 900 Email: up@wko.at |
a) yes |
1) yes |
c) I don’t know |
The roadmaps that energy intensive sectors developed show only moderate GHG emission reduction potential until 2030. Also, most sectors require the development, piloting, demonstration and commercialisation of breakthrough technologies to meet long term climate targets. These technologies would only come in play after 2030. As demonstrated in e.g. the Steel Roadmap 2050, technologies able to drastically decrease the sector’s emissions are either uncompetitive because they rely on expensive reducing agents or involve CCS. For the ceramic industry, access to low carbon energy sources at competitive prices, which today is constrained by availability and technical limits, is crucial. Process emissions cannot be reduced as they are related to the mineralogical properties of raw materials. Currently, abatement potentials are narrow and further reductions will be very expesinve. It also largely depends on how climate policy is designed after 2020, further costs are unacceptable for industry. |
b) no |
The ETS is meant to reduce CO2 emissions in a cost efficient way. Energy effeciency is not a primary goal in itself. In medium-long term, the EU ETS will entail a stringent cap, very limited free allocation, a high carbon price and high indirect costs via electricity prices. A global commitment is absolutely mandatory to create a shared burden of CO2 -emissions reduction. The proposed - 40% target for CO2 has the potential to threaten industrial production in Europe until 2030. It must be noted that high energy prices are already an incentive for the industry to continuously improve its energy efficiency. Other policy measures and requirements are also in place to further promote such investments. The success of European products on the global market depends to a large extent on global climate change ambitions. Third countries will only be interested in energy efficient products “made in Europe” if they are required to meet specific GHG emissions targets themselves. |
a) yes |
Yes, absolutely! Globally, the gap between the EU and growth front runner countries is still widening. Against the background of an increasingly difficult international business environment, differing degrees of climate protection efforts - as well as the comparatively high energy prices - result in a dramatic and dangerous competitive disadvantages for EU businesses. Therefore, industry in the ETS must be protected! The key element of a substantial and necessary support for industry is the continuation of the carbon leakage regime post 2020, but it is not the only measure needed. A substantial reform of the ETS is needed. A global agreement should be the condition for further European commitment. Post 2020 carbon leakage measures must be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 requires an increased and not a decreased protection against carbon leakage. |
a) very adequate |
The effectiveness of the protection provided by free allocation is one of the main reasons why very little evidence of carbon leakage could be found in the first two trading periods. Free allocation is the best instrument to date to address carbon leakage risk for certain industrial sectors. Sectors at risk of carbon leakage shall be provided with 100% free allocation at the level of the most efficient installations, based on achievable benchmarks and without any correction or other limiting factor. Equally they shall be provided with full off-setting of CO2 costs being passed through in electricity prices in all Member States via financial compensation and/or increased free allocation. All this is absolutely necessary to ensure the competitiveness of EU industry. |
a) it absolutely keeps the incentive |
With a 100% free allocation based on achievable and realistic benchmarks, companies that do no yet achieve the benchmarks have an incentive to catch up more quickly to the benchmark- due to the level of carbon related costs. Companies in the lead are incentivised to innovate to perform even better. But it should be clear that free allocation does not primarily aim at creating incentives for reducing emissions, but instead at preventing carbon leakage - the cap encourages emissions reductions. If industry can rely on sufficient free allocation for an adequate period of time, investment decisions will trigger improvements and innovation. Review processes shall be adapted to fit investment cycles and adequate incentives, including financing instruments, must be available. The currently foreseen 5 year interval for an update of the carbon leakage list is definitely too short to guarantee investment and planning reliability. |
c) quite exaggerated |
The implementation of the benchmarks through the "NIMs" requires significant resources, both from the industry as well as from the competent authorities. The initial burden is very high. Efforts must be undertaken to reduce this burden. However, not having free allocation would have dramatic consequences for the sectors most exposed to carbon leakage. The cost (for the companies as well as for the society because of the costs deriving from lost market shares and plant closures) would be much higher than the current administrative burden. One of the main causes of these burdens has been the continuous changes in ETS framework and implementing rules. This has caused uncertainty among industry. There is an urgent need for a more stable and consistent ETS policy. In general, benchmarks have to be a) feasible (i.e. achievable in a cost-effective way); b) practical, pragmatic and in collaboration with industry representatives and stakeholders. |
d) there should be no limit to overall free allocation to industry |
Free allocation is the main instrument to avoid carbon leakage and therefore its share of the allowance budget must be sufficient to guarantee the achievement of this absolutely vital objective. Post 2020 carbon leakage measures have to be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 requires increased and not decreased protection against carbon leakage. An efficient producer in the EU should not have any competitiveness disadvantage compared to his competitors in third countries. Therefore, free allocation should not be subject to any reductions (correction factor, etc). As long as the international imbalance of CO2 costs remains, a guaranteed 100% allocation for free emissions certificates is needed. Sectors at risk of carbon leakage that produce CO2 efficiently should receive 100% of their required certificates for fre. |
e) I don’t know |
Funding of low carbon innovation must be consistent with the level of ambition of the 2030 objectives. The share of allowances are not crucial. What matters is the total amount that is made available for funding. Linking the NER budget to a share of the total budget of allowances makes the amount available for funding dependent on the carbon price. This brings too much uncertainty as to what can be done in terms of support for new technologies. Instead, funding needs should be clearly identified and taken from auctioning revenues and other sources of public or private funding, if needed. However, it must be made unequivocally clear that any financial support for R&D&I must be generated form auction revenues and must not replace free allocation. |
a) yes |
The primary objective of the EU ETS should remain the reduction of emissions in the most cost-efficient way. Provided that this objective is preserved, the EU ETS can be a tool for the development of low-carbon technologies. However, this must not be done at the expense of free allocations for industry, or by arbitrarily manipulating the carbon price though policy interventions (e.g. backloading). Furthermore, the complementarity with existing instruments like the Horizon 2020 Framework should be assessed and optimised. Furthermore, earmarking auction revenues for industrial innovation should become obligatory for all Member States to increase the financial support for innovation. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
As mentionend, 100% from the auctioning revenues should be reinvested to support industrial low carbon projects. This should be a binding requirement for every single member state. It should not be left open as an option of choice for Member States. |
a) yes |
Energy intensive sectors suffer from a lack of competitiveness partly due to a) high energy costs; b) high level of taxation and c) high direct and indirect GHG emission reduction cost relative to their competitors outside the EU. As mentioned, sectors at risk of carbon leakage shall be provided with 100% free allocation at the level of the most efficient installations, based on achievable benchmarks and no correction factors. Equally, they must be provided with full off-setting of the CO2 costs that are passed through in electricity prices. This must occur in all Member States by either financial compensation, free allocation, or, althernatively, the electricity market shall be re-designed in a way that it prevents any carbon price pass-through in electricity prices- or a combination of these. In other words, sufficient and robust protection against indirect carbon leakage must be provided in a harmonised manner across the EU. |
e) I don’t know |
This depends on the overall structure of the ETS post-2020. Most importantly, it must be possible for the most efficient plants to receice 100% free allocation of allowances. Furthermore, all non electricity generating installations in Annex I of the ETS Directive, and at least the energy-intensive sectors as defined in the Energy Taxation Directive, should be considered as exposed to the risk of carbon leakage. This would reinforce the predictability of the legal framework, which is a vital factor for securing investments in Europe. In other words, sectors which are currently not on the carbon leakage list should, in justified cases, also be treated as exposed. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
This depends on the overall structure of the ETS post-2020. Generally speaking, the current criteria should remain. The two presented criteria should be complemented by a) indirect costs (higher energy prices due to CO2-costs being passed down to industry) and b) import competition. However, a detailed analysis as part of a structural reform of the carbon leakage system must be considered. Therfore, access to free allocation should be provided by being on a list which is created using the cumulative combination of a direct plus indirect carbon cost, various intensity criteria and a trade exposure metric. |
c) I don’t know |
The current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, a third set of criteria could be a trade intensity ≥ 5% combined with a carbon intensity ≥ 10%. As there have been changes at NACE-Code Level 4 lower thresholds should be considered. Again, much will depend on the overall carbon leakage system in the next trading period. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
For some sectors, statistical data doesn’t fully capture the reality of their exposure to carbon leakage. They do not enable to have a comprehensive picture of the complexity of reality and of the real situation of a sector. This is often due to boundary issues or linked to the complexity of the sector and its market (e.g. technological limits of the sector). There the option to undergo a qualitative assessment must be kept. |
b) longer (please specify) |
Stability is crucial for investments in Europe. In order to guarantee long-term investment security, carbon leakage status must not be reviewed every 5 years, but instead remain unchanged until other economic areas draw level in terms of CO2 costs for industries. "In line with the duration of ETS Phase 4" is an interesting option, could however be too short as well (considering incestment cycles and the slow progress regarding an international level playing field). |
a) the present approach of average of the 10% most efficient installations should remain |
The benchmark of the 10% best performing installations is used only to calculate the preliminary free allocation, while the final free allocation is affected also by the cross sectoral reduction factor. Rules on free allocation should be adjusted so that the 10% best performing installations get 100 % free allocation without any reduction. |
a) yes (please specify how often) |
The benchmarks should reflect the technological state of the art. However, in order not to harm the long-term planning certainty of businesses, the technological state of the art should not be updated within a trading period. |
c) other (please specify) |
The production data used to determine the allocation should be as up-to-date as possible. We call on the Commission to apply a dynamic approached based on real production levels or a rolling average of production levels over closer years (e.g. n-1, n-2). The ex-ante allocation may prevent industrial growth, in particular in a period of economic recovery. The reference period to determine the free allocation should reflect the economic reality. To this purpose, a dynamic system based on more recent years should be explored. The administrative burden of this dynamic allocation should not increase. |
e) I don’t know |
|
d) yes, in the form of financial compensation at EU-level |
Implementing an EU-wide compensation scheme would avoid distortion of competition within the EU: There should be a unique EU-wide compensation scheme for indirect costs. The compensation should be granted for every installation independently from the member state where it is situated. The current approach, where only some member states provide compensation for specific installations, leads to Internal Market distortions and has to be avoided. Additional free allocation of allowances may be an equally good option, if it occurs at EU level and is manditory for all Member States |
Important |
Least important |
Most important |
Less important |
A ranking of this sort is difficult and not optimal, as support for all these stages is absolutely important and varies by project or technology. Also, this type of support is largely missing at EU level. Moreover, the question presupposes that all preceding R&D stages are adequately supported as well - this is not the case. |
a) from the Member States' auction budgets |
The allowances funding low-carbon innovation support should derive from Member States’ auction budgets. Furthermore, other public and private funding sources should also be considered. |
The EU should focus on a stable, long-term perspective for climate action. What industry needs most is planning certainty, confidence in Europe as business location and a level playing field with global competitors. Though the EU can act as pace-setter, it cannot shoulder climate protection alone. Today, Europe is responsible for 11 % of global GHG emissions, by 2020 this share will even decrease to below 10%. Therefore, the EU has to put every effort into the conclusion of an international agreement by 2015. However, until such a binding agreement that includes all major emitters and results in comparable worldwide carbon costs enters into force, our CO2 & energy intensive businesses must not be subject to any new burdens. Instead, they must be aequately protected as a matter of urgency. Moreover, the EU must not only concentrate only on mitigation but also on adaptation measures, which lead to concrete and economically quantifiable results. |
b) Trade association representing businesses |
WirtschaftsVereinigung Metalle: 9002547940-17 |
WirtschaftsVereinigung Metalle e. V. Wallstraße 58/59 10179 Berlin Tel: 030-726207-122 E-Mail: baeumchen@wvmetalle.de |
a) yes |
1) yes |
b) no |
unless, 1. Extra cost due to climate policy is sufficiently compensated. Currently, a key carbon leakage prevention mechanism, compensation for ETS indirect costs, exists only on paper as only few member states established meaningful schemes. 2. We have a stable, predictable and investment friendly environment in Europe. 3. Conditions are put in place to ensure that EU industry can remain globally competitive so that it can continue to invest in innovation along its entire value chain. 4. Sector specific reduction potentials and technology availability are properly addressed, (when designing new policies). |
b) no |
Energy intensive industry has an innate incentive to become more energy efficient due to a high share of energy cost, independently of the extra cost related to ETS. In these industries, however, the EU ETS may reduce the ability to become more energy efficient. Improvements will require investments, either in upgrading of existing capacity or in new plants. Extra cost due to climate policy is however insufficiently compensated and will reduce the margins of the industry. Shrinking margins lead to reduced energy efficiency investments. The EU ETS should also see the plants working for the recycling value added chain as a way to substantially reduce emissions. Therefore, these participants in the value chain should get full compensation as well, since they are producing in line with the goals of the EU ETS. |
a) yes |
In most energy intensive industries, product prices are set in global markets. Until a significantly larger share of competitors is influenced by similar increases in energy cost, there is a need for such measures. Otherwise such industries will disappear from Europe. |
a) very adequate |
Compensation for direct and indirect costs, linked to actual output and realistic benchmarks, would be a very adequate measure to address the risk of carbon leakage (predictability and effectiveness is ensured in the long term for both, direct and indirect costs). |
a) it absolutely keeps the incentive |
Full compensation for direct and indirect costs is absolutely necessary for the competitive position of Europe as a localisation of energy intensive industries. Compensation should be linked to actual output in order to provide an incentive for growth and to allow production flexibility through business cycles. Realistic benchmarks are necessary for full compensation to new capacity and for the preservation of the undistorted environmental incentive. Expressed differently, allocation of free allowances will not reduce the environmental incentive for the recipient. On the contrary, full compensation for direct and indirect effects of ETS through allocation or otherwise is a precondition for investment in new capacity in Europe. |
c) quite exaggerated |
In some countries the administrative burden is quite big. Here, it should be considered to ask the EU to give guidelines to which degree a reporting should be set. |
d) there should be no limit to overall free allocation to industry |
Carbon leakage undermines the environmental efficiency of EU ETS as well as EU’s industrial growth. Certain industries have to be protected for unfair international competition until fair conditions are restored by an international climate agreement. Economically, fairness means not only equal ambition on a macro level, fairness means more over equal marginal costs of mitigation on plant level. Measures against carbon leakage have to set the marginal costs of mitigation on level playing field. This is a cost that is directly linked to emission trading and should be covered by the ETS system itself before any money is taken out of the system. If in the future, there is an inadequate number of allowances available to cover the need for carbon leakage mitigation, compensation could be provided as a sum of money proportionate to a given number of allowances from another source of finance. |
c) a lower share than in Phase 3 |
Financing of CCS should not be a priority for the allowance budget. It is illogical to reserve a given share of the budget for this purpose: When the EUA prices are low the need for support is high and vice versa. Furthermore, the lack of stability in the EUA market creates a high project risk and high financing cost. This adds the project cost and the need for support. |
b) no |
ETS should be focused on emission trading and mitigating the effects of such trading. Financing is tight, and there is no room for further programs. |
c) other types of funding (please specify) |
ETS should be focused on emission trading and mitigating the effects of such trading. Auction income should not be diverted to general innovation support. |
a) yes |
The use of free allowances will also have to be extended to cover indirect effects through increased electricity prices. With significantly higher EUA prices, the pre¬sent solution for indirect costs based on State Aid will: - be insufficient for long term survival of these industries in Europe, - not create the predictability needed for investments, and, as well, - create significant disturbances in the internal market for energy intensive products. Effective carbon leakage prevention will also require exemption from extra costs related to other elements of climate policy like support to development of renewable electricity generation and extra grid costs related to transmission and balancing of electricity from renewable sources. |
b) more carbon leakage categories should be defined |
Non-ferrous metals industries are particularly exposed to carbon leakage and need full compensation of extra cost until a significant share of competitors is influenced by similar cost increases. EUA costs are passed on into electricity prices through the marginal cost of the marginal sources of electricity, and for these industries, electricity related cost make up a high share of total cost. Most non-ferrous metals products have a high value compared to their weight, and may be moved between markets at a cost that is small compared to their value. They are thus globally priced with only a minimal price differentiation between markets. Different categories of carbon leakage exposure may have the opportunity to design a more suitable instrument against carbon leakage due to direct and indirect cost of carbon. At a glance different categories with respect to the exposure to global competition and to EUA costs may be outlined. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
A single carbon leakage list (with several categories) should be established. The list should be based on the combined effect of direct cost (emission allowances) and indirect costs (increases in electricity costs due to climate policy). The following set of criteria should be established: 1. The exposure to global competition i.e. the inability to pass through locally imposed costs to sectors whose product prices are determined internationally (price taker) should be taken into account. 2. The exposure to EUA cost 3. The unit is in the most exposed category of the carbon leakage list if both criteria are met being simultaneously at a high threshold. If one or both of the criteria only meets a lower threshold, the unit will be in the less exposed category of the list. Additionally, the criteria may be met by qualitative indicators in case a sector does not fulfil the quantitative threshold given. |
b) other thresholds should be defined. Please specify below |
The levels of the thresholds should be based on proper analysis of the proposed new set of categories and criteria (see response to Q12 and Q13). |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The risk of carbon leakage is not fully measureable by metric criteria. A set of qualitative indicators may help to select the sectors at risk in an adequate and suitable manner. For example, the global pricing system for non-ferrous metals imply a very high exposure to local cost increases like direct and indirect costs of carbon. Especially the figures for the trade intensity and the cost of carbon cannot mirror the extraordinary high exposure of the non-ferrous metal industry. |
d) in line with the duration of ETS Phase 4 |
Predictability is the key to incentive efficiency. There is reason to believe that the set of criteria described above will establish robust and stable lists. |
a) the present approach of average of the 10% most efficient installations should remain |
We support the approach of a 10 % benchmark. However, currently, not even the most efficient 10% of the industry receive full compensation. In the fallback industries this is even less and it should be avoided to increase these reductions further. |
b) no |
First, any revise of benchmarks directly affects free allocation. If necessary, revision should only take place at the starting point of a trading period. Single or even revolving revisions during periods the will cause uncertainty and will hamper long term investments in carbon efficiency. Secondly, the technological state of the art is hard to define. Research findings could not easily and automatically transformed in high scale production plants. Investments cycles make things more complicated. The 10 percent best performing plants in Europe should be restored as indicator for the technological state of the art. |
c) other (please specify) |
The main advice to be found in the literature is to use output based allocation linked to realistic benchmarks. For each industry, the baseline will then be set by the realistic benchmark. Indirect emission should also be set by realistic benchmarks and actual output. The compensation will be linked to a sum of two benchmarks, one derived from emissions and one derived from electricity consumption. |
a) no, there should be no deviations |
There should be no deviations linked to the short-term financial conditions of industries. There might however be a need to find special solutions for industries where it is impossible to establish sectorial benchmarks. |
c) yes, in the form of additional free allocation |
Compensation inside the EU ETS should be extended to cover indirect effects through increased electricity prices. With significantly higher EUA prices, the present solution for indirect costs based on State Aid will be insufficient for long term survival of these industries in Europe and, as well, create significant disturbances in the internal market. The cost of any compensation measures will be proportionate to the EUA price, thus corresponding to the value of free allowances. Compensation could be provided as free allowances or as a sum of money proportionate to a given number of allowances from another source of finance. |
Less important |
Least important |
Most important |
Important |
The main concern should be to keep the competitiveness of the energy intensive industry and their specific situation in mind. |
d) other |
ETS should be focused on emission trading and mitigating the undesirable effects of such trading. Innovation support should mainly come out of MS general budgets and not from auction income. |
|
b) Trade association representing businesses |
Wirtschaftsvereinigung Stahl (German Steel Federation) |
Abteilung Energie und Klima
Französische Straße 8
D-10117 Berlin
+49 30 2325546-11
roderik.hoemann@wvstahl.de
henning.reichenbacher@wvstahl.de |
a) yes |
The steel industry is amongst the first participants of the EU ETS, that means since the start of the first trading period in 2005. |
1) yes |
b) no |
Industrial sectors that participate in EU ETS have already reduced their greenhouse gases. For instance the greenhouse gas emissions per ton of crude steel decreased by 14 percent between 1990 and 2010 in the former 27 European Union countries. Meanwhile the steel industry has achieved the technical limit in the available technologies. The emissions of steel industry in Europe can only be reduced by 15 % by 2050 against 2010 in an economical matter because of the high share of process-related irreducible emissions (BCG study, 2013). So there is now an obligation for others not belonging to EU ETS to fulfill their responsibilities. |
b) no |
The steel industry as an energy intensive industry has an origin incentive to reduce energy consumption and therefore emissions to optimize its costs in an intensive international competition. Long before introduction of ETS, fundamental efforts have been visible. From this point of view, an additional steering effect is not to be expected. This is especially true because the benchmarks for crude iron and steel are well below the technically feasible level. On the other side, by the obligation to buy allowances the budget for investments is reduced so that there is also a counterproductive effect.
The EU ETS is a big disadvantage for the steel producers in Europe. All of their competitors in third countries benefit from unilateral hurdles for the European producers. That means costs for direct emissions and for indirect effects for the European producers. There is clearly a loss of competitiveness for European steel producers through EU ETS. |
a) yes |
As long as there is no level-playing with competitors in other parts of the world, there has to be a special arrangement for European companies, which allows for competitive costs. |
a) very adequate |
See Answer question 3; As long as in other parts of the world there are no or not comparably binding ETS, free allocation is the only instrument to prevent massive cost disadvantages, carbon leakage and the loss of production and jobs. |
b) it largely keeps the incentive |
German Steel Producers are exposed to an intensive international competition. Cost disadvantages and cuts in the investment budget can only be avoided by free allocation. In order to maintain their market share, it is necessary to permanently improve the production and the products. This is a precondition in order to reduce costs and to reach new applications including technologies to reduce emissions. |
d) absolutely exaggerated |
There is indeed by far too much administrative burden to fulfill the conditions to ensure the free allocation. It should be the aim to minimize these bureaucratic hurdles. Nevertheless, the system of free allocation has to remain. |
d) there should be no limit to overall free allocation to industry |
From third countries there are only intentions known to reduce their greenhouse gas emissions. Indeed there are no comparably binding ETS implemented. Therefore free allocations are necessary post-2020. A continuing decrease of the cap without considering the technologies potentials of the industry would hamper the international competitiveness of the steel industry and already today the investment perspective. After all, it would be equivalent to a production decrease, leading to carbon leakage. Therefore, the allocation budget for energy intensive industries like steel has to been determined bottom-up, derived from technical feasible benchmarks and not reduced by a correction factor. |
d) there should be no such innovation support post-2020 |
The allowances from ETS should be first of all provided for a sufficient allocation for direct emissions and indirect effects. Innovation support is not as a priority of the ETS. |
b) no |
In the steel industry there is only a tiny potential to reduce greenhouse gas emissions in production processes. Nevertheless steel industry delivers solutions to reduce greenhouse gas emissions in new applications like in conventional power stations or in car production. Therefore programs like Horizon 2020 are currently good instruments. Much more important is the use of the allowances from ETS for free allocations for direct and indirect effects. Innovation support is not as a priority of the ETS. |
c) other types of funding (please specify) |
Actually funding should occur outside the ETS. If not avoidable, the NER should be chosen before new schemes are founded. See our answer to question 9. |
a) yes |
One necessary implicit measure is to redetermine benchmarks to a feasible level. For example for steel industry there is a benchmark for hot metal that no company worldwide is able to achieve. Waste gases should be completely included. Secondly, for energy intensive industries no correction factor may be applied. |
a) the present two groups should remain |
In the meantime the categories are appreciated. So the system should be remained. In each case every further differentiation is due to further administrative burden to be avoided. In this context the examination of the international level-playing-field is quite important. The European Union should avoid to be much more restrictive than third countries in exploring ETS. |
a) the present criteria should remain |
This system should not be made too complex by changing the modus. It should remain for the sake of planning certainty. The European Commission had determined in a transparent and logic manner plausible indicators for quantitative and qualitative criteria. These should be used also for the fourth trading period (between 1 and 1000 characters) |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
See our answer to question 13. |
b) no, all criteria should be based on simple metrics and linked to clearly defined thresholds |
See answers to questions 13 and 14 |
d) in line with the duration of ETS Phase 4 |
The validity of the list for the post-2020 should be in line with the duration of ETS phase 4 for the sake of planning certainty and to avoid further administrative burden. The option of rechecking the list in a shorter period causes coordination costs and should therefore be left. |
a) the present approach of average of the 10% most efficient installations should remain |
Unfortunately the first sentence is not true, because there is a benchmark for hot metal that no steel company worldwide is able to fulfill. Nevertheless the principle, that the average of the 10% most efficient installations as benchmark should remain and if necessary an up-date every five years could be performed. |
a) yes (please specify how often) |
The benchmarks could be revised every five years based on the technical development of the 10% best installations. |
c) other (please specify) |
The allocation should performed in a dynamic manner. That means that historic data are not necessary any more. Every industrial company should obtain its allocation for direct emissions and indirect effects according to the actual production. It is for this purpose sufficient to have only the actual production data for the relevant year. |
a) no, there should be no deviations |
The system should be fixed so that for industrial companies free allocations for direct emissions and indirect effects in the whole fourth trade period are distributed. In this framework exemptions are redundant. |
a) no, the present approach should be maintained, i.e. that Member States can provide such compensation based on state aid guidelines |
The present approach is sufficient for the current trading period. The transparent guidelines of the Commission are giving a clear framework. They are plausible worked out. This approach should remain in considering its planning certitude.
Moreover as long as there are different energy prices in the European Union with special exoneration mechanism in several Member States (e.g. through guaranteed fix prices for the industry or high refund for cut off capacities) as long is a national compensation scheme indispensable. Ideally, the indirect emissions are included in allocation starting from 2021.
II. Options |
Important |
Less important |
Important |
Least important |
For the steel industry the most important thing is to get further free allowances. The question of getting money for innovations and for which precise purposes could indeed be additionally seized. Nevertheless the potentials to reduce greenhouse gas emissions in the steel industry are limited according to the study of BCG, 2013: They can only be reduced by 15 % by 2050 against 2010 in an economical matter. |
d) other |
The allowances funding low-carbon innovation support should come from Horizon 2020. The compensation for indirect effects should come from the Member States auction budgets. |
The review of the EU ETS offers opportunities. We therefore welcome the proposal of the European Commission to reform the system for the time post-2020. Indeed, the current system represents a costly and bureaucratic instrument. The German Steel industry will suffer in the third trade period from an increasingly short allocation. The shortage of certificates is hampering the competitiveness of this industry, their competitors in third countries do not have. So it is very urgent to reform the EU ETS in a manner that the European steel companies will get in the fourth trading free allocation for direct emissions and indirect effects. This will include a new realistic determination of benchmarks e.g. for hot metal and sinter, the absence of a correction factor as well as a dynamic allocation method. This should be the highest priority in the reform of the EU ETS post-2020. |
b) Trade association representing businesses |
Wood Panel Industries Federation |
Autumn Park Business Centre Dysart Road Grantham Lincolnshire NG31 7EU UK Tel: 0044(0)1476512381 |
a) yes |
1) yes |
b) no |
The Wood Based Panel Sector is energy intensive. EUETS and Nattional Climate Change actions have driven energy efficiency improvements. By 2020 the majority of large capital investments will have been made. The ability to make further significant savings will be extremely limited and so the EUETS will increasingly act as a tax withought the realistic opportunity for mitigation. |
b) no |
National climate change measures have been more effective at driving change. the EUETS has contributed.By 2020 the majority of large capital investments will have been made. The ability to make further significant savings will be extremely limited and so the EUETS will increasingly act as a tax withought the realistic opportunity for mitigation. The markets in which the wood panel sector operates are such that the ability to pass on cost is limited and so as the EUETS increasingly acts as a tax withought mitigation potential it will directly impact on competitiveness and increase carbon leakage. |
a) yes |
|
d) very inadequate |
The current criteria is more a test of output leakage rather than carbon leakage. The eligibility criteria should be improved to reflect 'economic markets'. This would make the trade criteria more accurate and would more closely reflect the market experience. Eligibility determined at the EU doesn't reflect the wide variation in National power generation. |
b) it largely keeps the incentive |
|
b) quite proportionate |
|
f) I don’t know |
|
e) I don’t know |
|
a) yes |
|
d) I don’t know |
|
c) I don’t know |
|
b) more carbon leakage categories should be defined |
|
c) the share of 'carbon costs' in the GVA should be maintained, but 'carbon costs' should be taken into account to the extent that they can't be recuperated in product prices |
The impact of rising carbon prices should be reflected. Some sectors are more accutely affected than others. the wood based panel sector is one such case because the nature of the main markets are such that costs cannot be continually passed on. |
b) other thresholds should be defined. Please specify below |
cost pass through rate Carbon price vs decrease in output |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
a) five years |
|
d) I don’t know |
|
b) no |
State of teh Art in energy efficiency might in some sectors result in poorer environmental emmission abatement. There is a n increased risk of unintended consequences. |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
|
e) I don’t know |
|
a) no, the present approach should be maintained, i.e. that Member States can provide such compensation based on state aid guidelines |
|
Least important |
Less important |
Important |
I don't know |
|
e) I don't know |
|
|
c) Government institution/regulatory authority |
Bavaria State Ministry of the Environment and Consumer Protection |
Rosenkavalierplatz 2 81925 München Germany Dr. Martin Frede email:martin.frede@stmuv.bayern.de |
c) not relevant |
member of government (see question 0.1) |
1) yes |
a) yes |
under the condition of an adequate price for emission certificates |
a) yes |
see question 1 |
a) yes |
|
b) quite adequate |
free allocation in combination with benchmarks should continue |
b) it largely keeps the incentive |
see question 4 |
a) absolutely proportionate |
|
c) a constant share as in 2013-20 |
|
c) a lower share than in Phase 3 |
ccs is no realistic option in near future |
b) no |
tends to make the EU ETS more complicated; EU ETS itself is an incentive for implementation of low carbon technologies and measures |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
|
b) no |
|
b) more carbon leakage categories should be defined |
the extent of exposition to carbon leakage should be further differentiated |
c) the share of 'carbon costs' in the GVA should be maintained, but 'carbon costs' should be taken into account to the extent that they can't be recuperated in product prices |
realistic approach |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
criteria should be combined with a realistic price for emission certificates (see question 1) |
b) no, all criteria should be based on simple metrics and linked to clearly defined thresholds |
|
a) five years |
|
a) the present approach of average of the 10% most efficient installations should remain |
|
a) yes (please specify how often) |
see question 16; in accordance with the validity of the carbone leakage list |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
2009 - 2010 isn't a good choice between of economic crisis |
a) no, there should be no deviations |
|
d) yes, in the form of financial compensation at EU-level |
|
Least important |
Less important |
Most important |
Important |
|
b) from free allocation |
|
|
c) Government institution/regulatory authority |
City of Vienna |
Chief Executive Office of the City of Vienna Executive Office for the Coordination of Climate Protection Measure Wipplingerstraße 24-26 A-1010 Vienna Austria Phone: +43 1 4000 75085 email: post@md-kli.wien.gv.at |
c) not relevant |
The City of Vienna represents no sector/industry. |
1) yes |
a) yes |
|
a) yes |
|
a) yes |
|
b) quite adequate |
There were too much free allowances allocated, which led to disturbencies on the trading market, to less emission reductions and to considerable windfall profits for some companies. |
c) it largely compromises the incentive |
|
a) absolutely proportionate |
|
a) a lower share than in 2013-20 |
|
c) a lower share than in Phase 3 |
There should be no allowances for CCS. |
a) yes |
But neither for CCS nor shale gas. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
|
b) no |
|
a) the present two groups should remain |
|
c) the share of 'carbon costs' in the GVA should be maintained, but 'carbon costs' should be taken into account to the extent that they can't be recuperated in product prices |
|
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
b) no, all criteria should be based on simple metrics and linked to clearly defined thresholds |
|
a) five years |
|
d) I don’t know |
|
a) yes (please specify how often) |
in a five-year cycle |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
|
d) both b) and c) |
|
c) yes, in the form of additional free allocation |
|
Most important |
Important |
Less important |
Least important |
|
b) from free allocation |
|
|
c) Government institution/regulatory authority |
Directorate General for Nature Protection Government of the Canary Islands |
Avenida José Manuel Guimerá nº 8 Edificio Múltiples II 5ª Planta 38071 Santa Cruz de Tenerife dgeuropa@gobiernodecanarias.org |
c) not relevant |
The Economic sectors we represent are in some specific cases relevant toc arbon leakage since the industrial structure of the Canary Islands is limited and mostly geared to internal consumption, whilst, the transport costs established an economic entry/exit barrier. Should the maritime transport be, at a certain stage, included in an ETS system, then on the contrary the relevance to the Canary Islands should be extraordinary both in terms of increasing the costs of imported goods |
1) yes |
c) I don’t know |
|
c) I don’t know |
|
a) yes |
Should the EU adopt ETS for maritime industries some exceptional measures should be given to EU Outermost Regions. |
a) very adequate |
Free allocation to Harbours in EU Outermost Regions will place them on a level playing field with alternative ports in the vicinity or in the same maritime routes. |
b) it largely keeps the incentive |
|
a) absolutely proportionate |
The administrative costs are less than the ETS costs but at the same time the inspection procedures have to be simplified and smoothed as much as possible. |
c) a constant share as in 2013-20 |
|
e) I don’t know |
|
c) I don’t know |
|
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
|
c) I don’t know |
|
b) more carbon leakage categories should be defined |
As explained, if EU ETS might be extended to the maritime industry a new category should be established. |
a) the present criteria should remain |
|
b) other thresholds should be defined. Please specify below |
Specific criteria need to be established to the maritime sector if included in the ETS. |
b) no, all criteria should be based on simple metrics and linked to clearly defined thresholds |
|
d) in line with the duration of ETS Phase 4 |
|
d) I don’t know |
Since we have concentrated only on a potential ETS for the maritime industry, these possibilities have to be reconsidered accordingly. |
a) yes (please specify how often) |
Every five years. |
d) I don’t know |
|
b) yes, there should be deviations with higher allowances for installations facing specific hardships |
To reflect the extraordinary and new case of ETS in the maritime industry. |
a) no, the present approach should be maintained, i.e. that Member States can provide such compensation based on state aid guidelines |
|
Least important |
Most important |
Less important |
Important |
|
a) from the Member States' auction budgets |
|
The ETS in Aviation regarding Outermost Regions were largely overlooked and the effects on traffic deviation have not been established sufficiently. A further analysis, conducing to the establishment of potential new compensation measures might be envisaged by the European Commission. |
c) Government institution/regulatory authority |
Estonian Ministry of the Environment |
Narva mnt 7a, Tallinn 15172, tel +372 626 2802 e-mail: keskkonnaministeerium@envir.ee |
c) not relevant |
Questions are answered by Estonian Ministry of the Environment. |
1) yes |
a) yes |
Greenhouse gas emissions in Estonia have decreased 50% compared to 1990 and at the same time GDP has increased 5 times. |
a) yes |
EU ETS reduces greenhouse gas emissions in the EU cost-effectively and helps to move towards low-carbon economy. |
a) yes |
The list of sectors and sub-sectors deemed to be exposed to a significant risk of carbon leakage is an important measure to address the risk of carbon leakage and definitely needs to be continued until the global agreement has been concluded which can give certainty that third countries would also take measures to reduce greenhouse gas emissions. |
a) very adequate |
Determining the list of sectors and sub-sectors deemed to be exposed to a significant risk of carbon leakage and giving free allowances to installations in those sectors should continue in the future to assure that the competitiveness of those installations will not be negatively affected. |
b) it largely keeps the incentive |
The EU climate policy has general long-term goals for 2050 and these give installations the investment assurance which helps to reduce greenhouse gas emissions. |
b) quite proportionate |
Implementing the process for the first time via appliactions was quite complicated but under the assumption that the system will not going to change significantly the installations now have the experience and therefore the process should run smoothly. |
c) a constant share as in 2013-20 |
The rate of sectors and sub-sectors covered should remain the same and the final amount of allowances allocated for free should depend on the validatable methodology. The amount of allocated allowances should be sufficient to cover the risk of carbon leakage. |
b) the same share as in Phase 3 |
NER300 is an important funding programme for innovative carbon projects which helps to reduce greenhouse gas emissions and should definitely continue after 2020. |
a) yes |
Such financial support scheme should follow the same principles as NER300 to help to reduce greenhouse gas emissions. |
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
NER300 should be considered as a possible source of funding. |
a) yes |
To prevent carbon leakage in energy intensive sectors the current system which allows countries to compensate indirect costs (e.g. increases in electricity prices in the EU ETS) based on the state aid guidelines, should continue. |
e) I don’t know |
Estonia has not yet considered the addition of the complementary categories besides the current two. |
a) the present criteria should remain |
The current criteria is functioning and should stay the same. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The current system functions very well and therefore there is no need to change the current thresholds. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The current criteria is functioning and should stay the same. |
a) five years |
Five years is appropriate time because it gives sufficient flexibility and provides sufficient assurance for installations. |
a) the present approach of average of the 10% most efficient installations should remain |
The current approach should be considered in general. In sectors with very few installations should have separate approach. |
a) yes (please specify how often) |
Benchmarks should be revised after five years to take into account the technological progress. |
d) I don’t know |
Estonian Ministry of the Environment has to evaluate additionally which period should be the basis for allocating free allowances after 2020. |
a) no, there should be no deviations |
Uniform system provides certainty and would be preferable. |
a) no, the present approach should be maintained, i.e. that Member States can provide such compensation based on state aid guidelines |
The current system should continue in the future. |
Less important |
Least important |
Important |
Most important |
It is important to help tested technologies to come on the market to achieve greenhouse gas emission reduction. |
e) I don't know |
|
|
c) Government institution/regulatory authority |
Flemish Region |
Stijn Caekelbergh
Climate Policy Advisor - EU ETS
Graaf de Ferrarisgebouw, 7th floor, room 7P62
Tel direct: +32 (0)2 553 27 33
Tel general: +32 (0) 2 553 11 20
Fax: +32 (0)2 553 11 45
E-mail: stijn.caekelbergh@lne.vlaanderen.be |
1) yes |
a) yes |
The widely deployment of the current most GHG-efficient -techniques applied in Europe to produce some products, as embodied in the product benchmarks, to all industrial operators in the EU would already bring about a significant emission reduction. As an example of this, we saw a quick deployment of abatement techniques for some non-CO2 emissions that are covered by the ETS as from 2013. Secondly, even for the best-performing industries, the application of more advanced resource and energy-efficiency techniques can further improve the CO2 -efficiency. Both ambitious energy-efficiency improvements as changes in fuel mix for heat demand have a major role to play. An ambitious innovation strategy is key to develop the technological breakthroughs that are needed to achieve the 2050 emission reduction target. To fuel this innovation and to install the techniques, investments are crucial. The potential of reduction potential of EU industry is linked to the improvement of the competitiveness of industry. |
a) yes |
The EU ETS puts a price on carbon. Therefore, it can be assumed that ETS operators do take the CO2 -cost into account for investment decisions. However, the current CO2 -price is too low to have a significant impact on long term investment decisions in CO2 reduction. Another incentive lays in the benchmarking exercise, as individual operators are stimulated to obtain this benchmarking level to preserve their competitiveness. Having said this, the ETS on its own is not enough to stimulate the energy efficiency needed to reach our long term climate ambitions while ensuring the competitiveness of our industry. A corresponding innovation strategy is paramount to develop the necessary technological breakthroughs. |
a) yes |
As long as there are regions with less ambitious climate policy, carbon leakage protection is justified, in particular in relation to the ambition of the EU to maintain a strong industrial base. |
b) quite adequate |
In principle, free allocation is an adequate instrument to mitigate the risk of carbon leakage. While free allowances reduce the overall cost for the operator, the incentive to reduce emissions is present through the CO2 -price signal. The design of the free allocation scheme is however crucial.
We are in favour of free allocation based on ambitious but at the same time feasible benchmarks combined with actual production data (dynamic allocation). Furthermore, the degree to which a sector can pass on the CO2 costs to its customers, should determine the carbon leakage factor. For sectors which have clearly no potential to pass on the costs, the allocation should be based on the benchmark multiplied with the actual production data, without additional correction factors.
Next to free allocation for direct emissions, a compensation should be foreseen for indirect costs due to CO2 costs incorporated in the electricity price. For the long term, the CO2 price signal itself should serve as a driver for further energy efficiency improvements -and thus the competitiveness of the industry.
|
b) it largely keeps the incentive |
The main incentive for reducing emissions comes from the CO2 -price signal. Free allocation, when given on a benchmark multiplied with actual production basis, will not change this incentive. Furthermore, free allocation is meant to mitigate the carbon leakage risk, it is not meant as an instrument to stimulate innovation. Therefore, complementary funds especially targeted on innovation for reducing emissions should be deployed. |
b) quite proportionate |
The reporting and verification of the necessary production data to determine the allocation data requires a significant effort. However, as the free allocation equals a considerable amount of money, this thorough reporting exercise is justified.
Furthermore, an allocation method based on benchmarks will inevitably go hand in hand with an extensive data collection. |
d) there should be no limit to overall free allocation to industry |
The preservation of the competitiveness of the EU industry is crucial to maintain a sustainable industrial base in the EU. Therefore, a robust carbon leakage scheme, in which the most vulnerable sectors are adequately protected against carbon leakage with a free allocation based on ambitious but feasible benchmarks multiplied with actual production data, should be the starting point of the allocation methodology. The implementation of an upfront free allocation budget, which would possibly result in the implementation of a cross sectoral correction factor, risks to undermine the predictability for the operators. This being said, we propose an allocation based on actual production figures, a more targeted carbon leakage list and the further implementation of ambitious but feasible benchmarks. If there is a demonstrated need for an upfront fixed amount of auctioned allowances, an allocation stability reserve could be considered as a tool to reconcile a fixed auctioning amount with dynamic allocation. |
a) a substantially higher share than in Phase 3 |
We see the fostering of innovation as a crucial part of the post-2020 climate package. The auctioning revenues could serve as funds to stimulate this target. As innovation is a common challenge for all regions, each member state should be guaranteed a fair share of the innovation fund. Furthermore, where possible an integration of the innovation support with existing programs should be looked at. A third important element is that the list of eligible technologies should be flexible. The European financial support mechanisms should also aim to serve as a lever to mobilize private funds for innovative projects, although we recognize that for certain phases in the innovation process, high levels of public funding are required. |
a) yes |
An additional scheme which is focused on the deployment of new carbon technologies seems a useful addition for the EU ETS. It can be considered to use the information contained in the benchmarking curve, by rewarding installations which outperform the benchmark or achieve a significant improvement, as already put forward by the Commission in its Analysis of options to move beyond 20% greenhouse gas emission reductions and assessing the risk of carbon leakage |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The EU ETS should develop a substantial innovation pillar, as to stimulate the technological breakthroughs necessary to and to preserve the long term competiveness of the EU industry. The auctioning revenues can be used for this purpose. See Q 8, 9. |
a) yes |
Indirect CO2 emissions are a genuine cost for electro-intensive industries and can be the source of carbon leakage. If the indirect costs cannot be passed through, additional measures beyond free allocation for direct emissions are appropriate.
It should be looked at whether the measures could take the form of additional free allocations for EU ETS installations. By integrating the indirect emissions as much as possible in the benchmarks, this seems the most simple approach. However, for installations outside the EU ETS monetary compensations could be considered.
The modalities of the compensation scheme should be harmonized throughout the EU and based on realistic assumptions. In this respect, a thorough study on the emission factors which determine the indirect costs is necessary.
|
b) more carbon leakage categories should be defined |
With the current carbon leakage criteria, all sectors which pass the relevant thresholds get the same carbon leakage treatment. A graduated system, in which each sector is assigned a level of free allocation correlated with its carbon leakage risk, seems more appropriate and leads to a more targeted, jusitified carbon leakage approach. Based on the sectoral scores on the carbon leakage assessment, a categorization of low, medium and highly exposed sectors could be made. |
c) the share of 'carbon costs' in the GVA should be maintained, but 'carbon costs' should be taken into account to the extent that they can't be recuperated in product prices |
When assessing the carbon leakage risk, the part of the carbon cost which cannot be passed through to customers should be well delineated. This proportion of the cost is usually correlated with the trade intensity of a sector. Therefore, we support a combined criterion of carbon costs and trade intensity to assess the carbon leakage risk. A carbon leakage assessment based on a sole criterion such as trade intensity seems less appropriate. Furthermore, when estimating the carbon costs, a realistic carbon price, auctioning factor and the emission abatement potential should be taken into account. If data availability permits the profit margin instead of the GVA seems more adequate to determine relative importance of the carbon cost, as the profit margin is a more determining factor in relocation decisions. |
c) I don’t know |
As put in our previous answer, a combined criterion including a carbon cost and trade intensity threshold seems most appropriate. At the moment we do not have specific quantitative thresholds in mind. However, the thresholds should be based on thorough research, in which the possibility of passing on the cost to customers should be taken into account. A gradual approach, with different thresholds per carbon leakage category, can help to focus the carbon leakage approach and preserve a sufficient protection against carbon leakage for the most exposed sectors. |
a) yes |
yes, especially if tresholds are not considered on value chains in sectors. |
d) in line with the duration of ETS Phase 4 |
To optimize the predictability of the EU ETS, in principle a long validity of the list is desirable. However, a revision of the assessment should be made possible in the case of
1) a substantial increase in comparable climate policies on comparable industries in other regions (which represent x % of the market share);
2) an average carbon price that is substantially higher/lower than the carbon price used for the assessment. |
a) the present approach of average of the 10% most efficient installations should remain |
This approach should remain as the starting point, however a periodical improvement exercise for the benchmarks based on bottom up peer review of EU benchmarks could be considered. |
a) yes (please specify how often) |
As the current benchmarks are developed on the GHG-efficiency of 2007-2008 in Europe, they are not representative for the period 2021-2030. Close to the start of the post 2020-period the benchmarks should be revised to reflect the recent GHG-efficiency in the EU. Furthermore, an periodical ual improvement exercise for the benchmarks could be considered from a bottom up evaluation. |
c) other (please specify) |
We favor an allocation methodology based on actual production data, instead of historical production data. This dynamic allocation would, as opposed to the current methodology, maintain a full carbon leakage protection for operators who increase their production. It provides certainty and predictability for operators considering investments and would lead to a harmonized approach for incumbent installations and new entrants. Secondly, dynamic allocation avoids a substantial overallocation when operators decrease their production levels.
Notwithstanding these substantial advantages, dynamic allocation would incur an extra administrative effort. Therefore, the precise design modalities of the dynamic allocation scheme should be explored, taking into account that full transparency is needed on the production data. Furthermore, the focus should lay on the product benchmarks, for the fall back methods dynamic allocation solutions are possible and need to be investigated.
|
a) no, there should be no deviations |
|
Indirect CO2 emissions are a genuine cost for electro-intensive industries and can be the source of carbon leakage. If the indirect costs cannot be passed through, additional measures beyond free allocation for direct emissions seem appropriate to mitigate the risk.
These measures could take the form of additional free allocations for EU ETS installations. By integrating the allowances as much as possible in the benchmarks, this seems the most simple approach. However, for installations outside the EU ETS monetary compensations could be considered.
The modalities of the compensation scheme should be harmonized throughout the EU to preserve the level playing field. |
Least important |
Less important |
Important |
Most important |
d) other |
As we do not support an upfront division of the cap between free allocation and auctioning revenues, it is difficult to answer this question. |
The decision to develop a post 2020 carbon leakage framework should accompany the decision on the overall level of ambition of the ETS in the context of the 2030 EU-wide reduction target. The new framework should ensure that CO2 -efficient installations from the most exposed sectors receive allowances that cover their emissions. This principle is reflected throughout our answers, in particular via the following elements:
o There is sufficient regulatory certainty for operators during the 2021-2030 period concerning the protection against carbon leakage
o Free allocation is aligned as much as possible with the actual activity of the concerned installations taking into account reported activity data
o Benchmarks are ambitious but feasible and adapted to technology development
o The level of support is gradually correlated with the exposure to carbon leakage
• Auctioning revenues might also play a role in meeting the investment challenge, for example by a reprise and expansion of the NER-300 program.
|
c) Government institution/regulatory authority |
Ministry of Employment and the Economy |
Aleksanterinkatu 4 Helsinki, Finland P.O. Box 32, Fi-00023 Government +358295047101 santeri.suominen@tem.fi |
a) yes |
1) yes |
a) yes |
This is a matter of international climate negotiations and the results of the negotiations which sets the framework. |
a) yes |
|
a) yes |
This is a matter of great importance to member states like Finland which are at high level of energy intensity. For Finland it is priority that the risk of carbon leakage is mitigated as effectively as possible when it comes to energy intensive industry. |
a) very adequate |
Energy intensive industry represents the majority of Finlands industry. |
b) it largely keeps the incentive |
|
b) quite proportionate |
|
c) a constant share as in 2013-20 |
Please, see Question 3. |
a) a substantially higher share than in Phase 3 |
|
a) yes |
|
d) I don’t know |
|
a) yes |
The importance of succeeding well in the international climate negotiations cannot be underestimated. A comprehensive and legally binding climate agreement would be desired. |
a) the present two groups should remain |
|
a) the present criteria should remain |
|
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
Maintaining the said criteria serves predictability within those fields which are at risk of carbon leakage. |
c) I don’t know |
|
b) longer (please specify) |
A bit longer period would increase the predictability which is necessary for long-term investments. |
d) I don’t know |
|
c) I don’t know |
|
d) I don’t know |
|
b) yes, there should be deviations with higher allowances for installations facing specific hardships |
Although, deviations are likely to increase administrative burden for all participants. |
d) yes, in the form of financial compensation at EU-level |
The view is based on the infrastructure of Finlands industry (high energy intensity). |
Least important |
Important |
Less important |
Most important |
|
d) other |
|
|
c) Government institution/regulatory authority |
Ministry of the Environment of the Czech Republic |
Contact person: Mr. Jan Tuma Ministry of the Environment Vrsovicka 65 Praha 10 110 00 Czech Republic +420267122360 Jan.Tuma@mzp.cz |
c) not relevant |
Ministry of Environment is the Competent Authority |
1) yes |
a) yes |
|
a) yes |
|
a) yes |
(free allocation and compensation scheme pursuant to Art. 10a, respectively 10b, of Directve 2003/87/EC) |
b) quite adequate |
In some cases the protection is not sufficient due to not fuel-specific benchmarks |
b) it largely keeps the incentive |
not "largely" though |
c) quite exaggerated |
|
c) a constant share as in 2013-20 |
This is very much dependent on the actions of the third countries. |
b) the same share as in Phase 3 |
We prefer broader scope of the programme (see Q10). |
a) yes |
|
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
|
c) I don’t know |
This is very much dependent on the outcome of COP21 and commitments of other Parties. |
a) the present two groups should remain |
|
a) the present criteria should remain |
|
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
c) I don’t know |
|
d) in line with the duration of ETS Phase 4 |
For the sake of predictability. |
d) I don’t know |
This is a rather complex issue requiring a longer discussion. |
a) yes (please specify how often) |
Ex ante for every whole trading period. |
c) other (please specify) |
Such distant data are not a good basis. It should be updated (and possibly dynamically). |
d) both b) and c) |
The harmonized allocation rules should be amended. Now, it puts some installations into unfair situations. |
a) no, the present approach should be maintained, i.e. that Member States can provide such compensation based on state aid guidelines |
|
Important |
Less important |
Most important |
Least important |
|
c) from both |
Member States should be free to choose so. |
|
c) Government institution/regulatory authority |
Ministry of the Environment, Poland In co-operation with Ministry of Economy, Poland |
Ministry of the Environment, Poland 52/54 Wawelska St. 00-922 Warsaw, Poland Ministry of Economy Plac Trzech Krzyzy 3/5 00-507 Warsaw, Poland |
c) not relevant |
The Ministry of the Environment is a government institution exercising supervision over the functioning of the EU ETS in Poland. The Ministry of Economy is a government institution dealing with the economy, including the transformation of the economy to a low-carbon pathway. |
1) yes |
b) no |
Depending on the industry, the reduction potential is different. It needs to be clear that the EU ETS covers, inter alia, sectors and installations in which best available techniques have already been implemented and at the moment it is not possible to further reduce greenhouse gas emissions in a manner other than as a result of limiting production or fuel change. |
b) no |
The EU ETS does not seem to be an appropriate tool to improve the energy efficiency of European industry. It was in fact designed as a tool for reduction at the lowest possible cost, and not a tool to support specific technologies (in this case the energy efficiency) by manipulating the price of emission allowances. Administrative activities that affect the price of permits do not create a favourable investment climate in the EU either. It should also be noted that the EU ETS is not functioning efficiently, inter alia, due to the mutual overlap and interaction of different policies, including energy efficiency, renewable energy development, etc. The design of the EU ETS and guidelines concerning public aid results in the formation of intracommunity disparities and unequal burdens for entrepreneurs. Therefore, rather than to improve energy efficiency, the EU ETS can lead to moving the industry beyond the boundaries of the EU. |
a) yes |
The current mechanisms, with the increase in prices for emission allowances may not be sufficient. We suggest that additional mechanisms were introduced to support businesses operating in the EU ETS. In addition, we should also introduce mechanisms of support taking into account unequal treatment of entrepreneurs within the EU, for example, due to the nature of the country (in particular the energy mix), distance from the external border of the EU, or the EU ETS indirect costs such as the price of energy. |
b) quite adequate |
Free allocations are “quite adequate” in the current settlement period. However, the amount of free allowances in the system will decline steadily under the current provisions of the ETS Directive. The situation after 2020 with an unchanged system of allocation will deteriorate systematically, and the phenomenon of carbon leakage – will intensify. Due to the gradual depletion of the pool of free emission allowances associated with the use of cross-sectoral correction factor, the risk of carbon leakage increases in the next settlement period of the EU ETS. Therefore, we need a debate on the designation of new rules to prevent the phenomenon of carbon leakage. |
b) it largely keeps the incentive |
In the sectors at risk of carbon leakage, it is not possible to settle the total issuing of emissions allowances allocated free of charge, e.g. due to the design of benchmarks, as well as the introduction of cross-sectoral correction factor. Theoretically, this could be an incentive to innovative activities but in practice can lead to increased risk of carbon leakage. |
c) quite exaggerated |
In the current settlement period of the EU ETS, reporting of installations covered by the system increased significantly. |
b) a higher share than in 2013-20 |
Because of the situation in global markets, strong competition, differences in the levels of fossil fuel prices, the European installations should continue to be protected to some extent. Possible reduction in the pool of free emission allowances, for example, could be offset by the introduction of burden on products imported from third countries. |
d) there should be no such innovation support post-2020 |
At the current stage of development of CCS technology, it can be assumed that their commercial application does not occur in the fourth settlement period of the EU ETS. Therefore, greater emphasis than in the development of CCS technology should be put on innovation in the field of Clean Coal Technologies whose expected commercialization period is shorter. Further research and support for the development of innovative energy technologies should be based on other sources of funding than the ETS. |
a) yes |
Acceleration of the implementation of innovations requires the use of incentives, including direct financial support. Thus, the implementation of instruments to the EU ETS to encourage emission reduction and efficiency improvement could become an important element in achieving the reduction targets and improvement of the competitiveness of the European economy. One of such solutions could be implementation of Art. 24a of the EU ETS Directive (Domestic Offset Projects). |
c) other types of funding (please specify) |
The ability to implement a financial instrument that fosters the development of low carbon technologies at the national level in the EU ETS, without the use of the EIB. Depending on the manner of implementation of such a solution, it would be beneficial as part of additional measures to reduce greenhouse gas emissions and increase in the competitiveness of national economies, and ultimately the entire EU. However, establishment of funds to support the development of low carbon technologies do not solve the problem of carbon leakage. |
a) yes |
In our opinion, the use of other instruments to protect sectors vulnerable to carbon leakage, apart from those currently in force, is necessary but must be preceded by a thorough analysis. We should consider, inter alia: - the use of different pathways of free allowances depending on the degree of exposure to carbon leakage, - compensation for sectors indirectly exposed to carbon leakage according to the common criteria/ rules for all Member States, - allocation ex-post or in combination with the use of benchmarks fuel - allocation of allowances based on historical data (e.g. on the basis of production or size of emission), - introduction of charges on imported products, - launching Article 24a of the EU ETS Directive and the use of other offset units from the Domestic Offset Project (DOP) in the EU ETS and non-ETS, - establishment of funds for the development of low carbon technologies. |
b) more carbon leakage categories should be defined |
We should consider the distribution of sectors at risk of CL into different groups, depending on the degree of exposure.The mechanism for allocating EUAs would be based on the assumption that the sector will get the more free allowances, the greater its exposure to CL is.Among the factors that increase the risk of CL phenomenon, we should consider the possibilities to reduce emissions in a given sector or geographical location of the installation(proximity to the external border of the EU increases the risk of replacing imports with local production due to low transport costs).Such a solution may be advantageous because the amount of available EUAs in the EU ETS is decreasing, while the list of sectors at risk of CL is very broad. Some sectors have limited reducing capacities and high costs associated with GHG emissions. For these sectors (such as aluminum production, chemical industry, cement), the costs associated with emissions significantly affect the profitability of production. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
The current criteria of eligibility to the list of entities at risk of carbon leakage should be partially modified, among other due to the fact that many important issues were omitted in the quantitative criterion, including: - reduction potential and reduction cost in a given sector, - the possibility of transferring the cost of emissions in the product price to the end user, - inclusion of the Unit Energy Costs (UEC) indicator – energy cost per one unit of added value, - the degree of market concentration, - geographical issues (distance from the EU external border). |
b) other thresholds should be defined. Please specify below |
We should consider modifying current eligibility thresholds for groups of sectors at risk of carbon leakage, for example through the introduction of more flexible solutions such as the definition of exposure to carbon leakage. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
In special cases, a certain degree of discretion in qualifying for the list of sectors at risk of carbon leakage based on qualitative criteria should be maintained. Mainly due to the fact that carbon leakage hazard level in the sector may result from many factors difficult to quantify |
d) in line with the duration of ETS Phase 4 |
The decision in this case should apply during the whole settlement period due to the greater transparency of the EU ETS in terms of long-term investments in businesses covered by the system. |
c) the approach should be less stringent (please specify) |
In the EU ETS, we should consider the possibility of applying fuel benchmarks. Since the type of fuel used, in many cases (despite the use of the most modern production technology) determines the amount of emissions from the installation. |
a) yes (please specify how often) |
Due to technical progress, benchmarks should be updated periodically – for example, every 2-3 years. |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
The data on changes in the volume of production should be taken into account when allocating free emission allowances. Therefore, we should update the base years on the basis of which installations will receive free allowances in the fourth settlement period of the EU ETS. |
d) both b) and c) |
Industrial sectors covered by the EU ETS vary and should not be treated in the same way. The mechanism of free allocation should take into account the factors determining the specificities of the sector (comment to question 13), e.g. such as the reduction potential and the sensitivity of consumers to the product price. When businesses compete primarily with price, the possibility of transferring the cost of CO2 emission on the end-user can be very limited, in such a situation the sector should get relatively more emission allowances. On the other hand, if in a given sector there is great reducing potential and the price competition is small, the allocation of free emission allowances may be relatively lower than in other sectors of the EU ETS. |
c) yes, in the form of additional free allocation |
C or D. Installations that consume large amounts of electricity for industrial production should receive compensation in the form of free EUAs (or financial compensation). The implementation of common rules for the treatment of sectors exposed to indirect carbon leakage (including energy-intensive industries) could cause the alignment of the competitiveness of enterprises operating within different Member States. |
Most important |
Important |
Less important |
Least important |
Innovation is the key to economic development, therefore it should be supported at every stage with different intensity (from building concept to commercial implementation). The amount of grant has to depend on the real needs of the project, as well as the phase of its development; it should be presumed that the later the phase, the relative intensity of financial aid should be lower. The whole process of innovation should be supported – since the inception of the innovative idea, through commercialization and expansion of business in the international markets, but the level of support and preference of the instrument should depend on the risk of the project – the higher the risk (which is characteristic of the phase of study, the higher the level of support intensity and the more preferential the instrument should be). |
d) other |
In general, support for innovative low carbon technologies at the EU level should come from other EU funds than under the EU ETS and the auction pool of allowances. The EC and Member States should increase their commitment in supporting the development of “breakthrough technology”. |
|
c) Government institution/regulatory authority |
Ministry of the Environment, Poland In co-operation with Ministry of Economy, Poland |
Ministry of the Environment, Poland 52/54 Wawelska St. 00-922 Warsaw, Poland Ministry of Economy Plac Trzech Krzyzy 3/5 00-507 Warsaw, Poland |
c) not relevant |
Ministerstwo Środowiska jest rządową instytucją sprawującą nadzór nad funkcjonowaniem systemu EU ETS w Polsce Ministerstwo Gospodarki jest rządową instytucją zajmującą się gospodarką, w tym transformacją gospodarki na ścieżkę niskoemisyjną. |
1) yes |
b) no |
W zależności od branży, potencjał redukcyjny jest różny. Przy czym należy wyraźnie zaznaczyć, że systemem EU ETS objęte są m.in. sektory i instalacje, w których zostały już wdrożone najlepsze dostępne techniki i na chwilę obecną nie ma możliwości dalszego ograniczania emisji gazów cieplarnianych w sposób inny, niż na skutek ograniczania produkcji lub zmiany paliwa. |
b) no |
System EU ETS nie wydaje się być odpowiednim narzędziem do poprawy efektywności energetycznej europejskiego przemysłu. Został bowiem zaprojektowany jako narzędzie służące redukcji po możliwie najniższym koszcie, a nie narzędzie wspierające konkretne technologie (w tym wypadku z zakresie efektywności energetycznej) poprzez manipulowanie ceną uprawnień do emisji . Również administracyjne działania wpływające na cenę pozwoleń nie kreują korzystnego klimatu inwestycyjnego w UE. Należy również zaznaczyć, że system EU ETS nie funkcjonuje wydajnie m.in. ze względu na wzajemne pokrywanie się i współoddziaływanie różnych polityk, w tym efektowności energetycznej, rozwoju OZE, itd. Konstrukcja systemu EU ETS oraz wytycznych ws. pomocy publicznej skutkuje powstawaniem wewnątrzunijnych dysproporcji oraz nierównych obciążeń dla przedsiębiorców. W związku z tym, zamiast do poprawy efektywności energetycznej, system EU ETS może doprowadzić do przenoszenia przemysłu poza granice EU. |
a) yes |
Obecne mechanizmy, przy wzroście cen uprawnień do emisji mogą okazać się niewystarczające. Proponujemy, aby zostały wprowadzone dodatkowe mechanizmy wsparcia dla przedsiębiorstw funkcjonujących w systemie EU ETS. Ponadto, powinny zostać również wprowadzone mechanizmy wsparcia uwzględniające nierówne traktowanie przedsiębiorców wewnątrz UE, np. ze względu na specyfikę danego kraju (w szczególności mix energetyczny), oddalenie od zewnętrznej granicy UE, czy koszty pośrednie EU ETS takie jak cena energii. |
b) quite adequate |
Darmowe alokacje są „quite adequate” w obecnym okresie rozliczeniowym. Niemniej jednak ilość bezpłatnych uprawnień w systemie będzie się systematycznie zmniejszać zgodnie z obecnymi zapisami dyrektywy ETS. sytuacja po 2020 przy niezmienionym systemie alokacji będzie się systematycznie pogarszać, a zjawisko ucieczki emisji – nasilać. W związku ze stopniowym zmniejszaniem się puli bezpłatnych uprawnień do emisji związaną z zastosowaniem międzysektorowego współczynnika korygującego, w przyszłym okresie rozliczeniowym systemu EU ETS wzrasta ryzyko wystąpienia zjawiska ucieczki emisji.W związku z powyższym potrzebna jest debata o wyznaczeniu nowych zasad przeciwdziałania zjawisku carbon leakage. |
b) it largely keeps the incentive |
W sektorach zagrożonych ucieczką emisji występuje brak możliwości rozliczenia całkowitej wielkości emisji uprawnieniami do emisji przyznawanymi bezpłatnie, m.in. na skutek samej konstrukcji benchmarków, a także z powodu wprowadzenia międzysektorowego współczynnika korygującego. Teoretycznie może to być zachętą do działań innowacyjnych, ale w praktyce może prowadzić do zwiększenia ryzyka carbon leakage. |
c) quite exaggerated |
W obecnym okresie rozliczeniowym systemu EU ETS znacznie zwiększyła się sprawozdawczość instalacji objętych systemem. |
b) a higher share than in 2013-20 |
Sytuacja na rynkach globalnych, duża konkurencja, różnice w poziomach cen paliw kopalnych, sprawiają że instalacje europejskie nadal powinny być w pewnym zakresie chronione. Ewentualne ograniczenie puli darmowych uprawnień do emisji mogłoby zostać przykładowo zrekompensowane wprowadzeniem obciążenia (burden) na produkty importowane z krajów trzecich. |
d) there should be no such innovation support post-2020 |
Przy obecnym stopniu rozwoju technologii CCS można przypuszczać, że ich komercyjne zastosowanie nie nastąpi w czwartym okresie rozliczeniowym systemu EU ETS. Dlatego większy nacisk, niż na rozwój technologii CCS należy położyć na innowacje w zakresie Czystych Technologii Węglowych, których oczekiwany okres komercjalizacji jest krótszy. Dalsze badania i wsparcie rozwoju innowacyjnych technologii energetycznych powinno opierać się na innych źródłach finansowania, niż system ETS. |
a) yes |
Przyspieszenie wdrażania innowacji wymaga stosowania bodźców zachęcających, w tym bezpośredniego wsparcia finansowego. Zatem wdrożenie do systemu EU ETS instrumentów zachęcających do redukcji emisji i poprawy efektywności mogłoby się stać istotnym elementem realizacji celów redukcyjnych i poprawy konkurencyjności europejskiej gospodarki. Takim rozwiązaniem mógłby by być m.in. wdrożenie art. 24a dyrektywy EU ETS (Domestic Offset Projects). |
c) other types of funding (please specify) |
Możliwość zaimplementowania do systemu EU ETS instrumentu finansowego, który wspierałby rozwój technologii niskoemisyjnych na poziomie krajowym, bez wykorzystania EIB. W zależności od sposobu implementacji takiego rozwiązania, było by korzystne jako element dodatkowych działań na rzecz ograniczenia emisji gazów cieplarnianych i wzrostu konkurencyjności gospodarek krajowych, a w efekcie całej EU. Jednakże stworzenie funduszy dla wsparcia rozwoju technologii niskoemisyjnych nie rozwiązuje problemu związanego z ucieczką emisji. |
a) yes |
W naszej opinii zastosowanie innych instrumentów do ochrony sektorów zagrożonych ucieczką emisji, poza obecnie obowiązującymi, jest konieczne ale musi być poprzedzone dogłębną analizą. Należy rozważyć m.in.: - zastosowanie różnych ścieżek bezpłatnych przydziałów w zależności od stopnia narażenia na ucieczkę emisji, - kompensacje dla sektorów pośrednio narażonych na ucieczkę emisji wg wspólnych kryteriów/ zasad dla wszystkich państw członkowskich, - alokację ex-post lub w kombinacji z wykorzystaniem benchmarków paliwowych – przydział uprawnień w oparciu o dane historyczne (np. na podstawie wielkości produkcji lub wielkości emisji), - wprowadzenie obciążeń na produkty importowane , - uruchomienie art. 24a dyrektywy EU ETS i wykorzystanie innych jednostek offsetowych z Domestic Offset Project (DOP) w EU ETS i non-ETS, - stworzenie funduszy dla rozwoju technologii niskoemisyjnych. |
b) more carbon leakage categories should be defined |
Należy rozważyć podział sektorów zagrożonych ucieczką emisji na różne grupy,w zależności od stopnia narażenia.Mechanizm przydziału uprawnień do emisji mógłby opierać się na założeniu,że sektor dostanie tym więcej bezpłatnych uprawnień,im większe jego narażenie na ucieczkę emisji.Wśród czynników zwiększających ryzyko wystąpienia zjawiska CL należy rozważyć możliwości redukcji emisji w danym sektorze lub położenie geograficzne danej instalacji (bliskość zew. granicy UE zwiększa ryzyko zastąpienia produkcji miejscowej importem z uwagi na małe koszty transportu).Rozwiązanie takie może okazać się korzystne, gdyż ilość dostępnych uprawnień do emisji w systemie EUETS maleje, natomiast lista sektorów zagrożonych ucieczką emisji jest bardzo obszerna. Niektóre sektory mają ograniczone zdolności redukcyjne oraz duże koszty związane z emisją GHG.W przypadku takich sektorów (m.in.produkcja aluminium, sektor chemiczny, cementowy),koszty związane z emisjami istotnie wpływają na rentowność produkcji. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
Obecne kryteria kwalifikowania do listy zagrożonych ucieczką emisji powinny zostać częściowo zmodyfikowane między innymi ze względu na to, że w kryterium ilościowym pominięto wiele istotnych kwestii, w tym m.in: - potencjał redukcyjny i koszt redukcji w danym sektorze, - możliwości przeniesienia kosztu za emisję w cenie produktu na odbiorcę końcowego, - uwzględnienie wskaźnika Unit Energy Costs (UEC) – koszty energii w przeliczeniu na jednostkę wartości dodanej (energy cost per one unit of value added), - stopień koncentracji rynku, - kwestie geograficzne (odległość od granicy zewnętrznej UE). |
b) other thresholds should be defined. Please specify below |
Należy rozważyć modyfikację dotychczasowych progów kwalifikowania do grupy sektorów zagrożonych ucieczką emisji, na przykład poprzez wprowadzenie bardziej elastycznych rozwiązań takich jak zdefiniowanie stopnia narażenia na ucieczkę emisji. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
W szczególnych przypadkach powinien zostać zachowany pewien stopień uznaniowości przy kwalifikowaniu do listy sektorów zagrożonych ucieczką emisji w oparciu o kryteria jakościowe. Głównie ze względu na fakt, że stopień zagrożenia ucieczką emisji w danym sektorze może wynikać z wielu czynników trudnych do oceny ilościowej. |
d) in line with the duration of ETS Phase 4 |
Decyzja w tej sprawie powinna obowiązywać podczas trwania całego okresu rozliczeniowego, z uwagi na lepszą przejrzystość systemu EU ETS pod kątem długoterminowych inwestycji w przedsiębiorstwach objętych systemem. |
c) the approach should be less stringent (please specify) |
W systemie EU ETS powinno się rozważyć możliwość zastosowania benchmarków paliwowych. Ponieważ rodzaj wykorzystywanego paliwa, w wielu przypadkach (pomimo stosowania najnowocześniejszych technologii produkcji) determinuje wielkość emisji z danej instalacji. |
a) yes (please specify how often) |
Ze względu na postęp techniczny, benchmarki należy okresowo aktualizować – np. co 2-3 lata. |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
Dane o zmianach wielkości produkcji powinny być brane pod uwagę, przy rozdziale bezpłatnych uprawnień do emisji. Dlatego należałoby zaktualizować lata bazowe, na podstawie których instalacje będą otrzymywać bezpłatne przydziały w czwartym okresie rozliczeniowym systemu EU ETS. |
d) both b) and c) |
Sektory przemysłowe objęte EU ETS różnią się między sobą, dlatego nie powinny być traktowane w jednakowy sposób. Mechanizm bezpłatnego przydziału uprawnień powinien brać pod uwagę czynniki określające specyfikę danego sektora (komentarz do pytania 13), m.in. takie jak potencjał redukcyjny i wrażliwość odbiorców na cenę produktu. Jeżeli przedsiębiorstwa konkurują przede wszystkim ceną, to możliwości przeniesienia kosztu za emisję CO2 na odbiorcę końcowego może być bardzo ograniczone, w takiej sytuacji dany sektor powinny dostać relatywnie więcej uprawnień do emisji. Z drugiej strony, jeżeli w danym sektorze istnieje duży potencjał redukcyjny a konkurencja cenowa jest niewielka przydział bezpłatnych uprawnień do emisji może być relatywnie mniejszy niż w innych sektorach EU ETS. |
c) yes, in the form of additional free allocation |
C or D. Instalacje, które do produkcji przemysłowej zużywają duże ilości energii elektrycznej powinny otrzymywać rekompensatę w postaci bezpłatnych uprawnień EUA (lub finansową). Wdrożenie wspólnych zasad traktowania sektorów narażonych na pośrednią ucieczkę emisji (w tym sektorów energochłonnych) mogłoby spowodować wyrównanie warunków konkurencyjności przedsiębiorstw funkcjonujących na obszarach różnych państw członkowskich. |
Most important |
Important |
Less important |
Least important |
Innowacyjność jest kluczem do rozwoju gospodarczego, w związku z tym powinna być wspierana na każdym etapie z różna intensywnością (od budowania koncepcji do komercyjnego wdrożenia). Wysokość dotacji musi być uzależniona od realnych potrzeb danego projektu, jak również od fazy jego rozwoju; należy domniemywać, że im późniejsza faza tym relatywnie powinna być mniejsza intensywność pomocy finansowej. Należy wspierać cały proces powstawania innowacji - od momentu powstania innowacyjnego pomysłu, przez komercjalizację i ekspansję przedsiębiorstwa na rynki międzynarodowe, jednak poziom wsparcia i preferencyjność instrumentu powinna zależeć od ryzyka projektu - im większe ryzyko (którym charakteryzuje się faza badań, tym poziom intensywności wsparcia powinien być wyższy a instrument bardziej preferencyjny). |
d) other |
Zasadniczo wsparcie innowacyjnych technologii niskoemisyjnych na poziomie UE powinno pochodzić z innych środków UE niż wynikające z EU ETS i aukcyjnej puli uprawnień. KE i państwa członkowskie powinny zwiększyć swoje zaangażowanie w działania wspierające rozwój „breakthrough technology”. |
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c) Government institution/regulatory authority |
Országos Környezetvédelmi és Természetvédelmi Főfelügyelőség (National Inspectorate For Environment, Nature and Water) |
1016 Budapest, Mészáros u. 58/a HUNGARY Tel.: +36 1 2249 199 email: livia.vig@oktvf.gov.hu |
c) not relevant |
government institution |
1) yes |
a) yes |
Jelenleg több Üzemeltető választja azt megoldásként, hogy 100%-ban biomassza forrásanyagot használ fel és így próbálja csökkenteni a kibocsátást, de ennek alkalmazása nem biztos, hogy célravezető. |
a) yes |
Azzal, hogy az Üzemeltetők kevesebb kvótát kapnak két utat választhatnak, vagy a kibocsátásukat csökkentik (ami sok esetben már nem biztos hogy lehetséges, legalább is ésszerű költségek mellett, vagy kvótát vásárolnak. |
a) yes |
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b) quite adequate |
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c) it largely compromises the incentive |
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e) I don’t know |
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a) a lower share than in 2013-20 |
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a) a substantially higher share than in Phase 3 |
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a) yes |
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b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
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b) no |
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b) more carbon leakage categories should be defined |
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c) the share of 'carbon costs' in the GVA should be maintained, but 'carbon costs' should be taken into account to the extent that they can't be recuperated in product prices |
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a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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b) no, all criteria should be based on simple metrics and linked to clearly defined thresholds |
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c) shorter (please specify) |
3 year |
a) the present approach of average of the 10% most efficient installations should remain |
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a) yes (please specify how often) |
in every 3 years |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
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d) both b) and c) |
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a) no, the present approach should be maintained, i.e. that Member States can provide such compensation based on state aid guidelines |
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Less important |
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c) from both |
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c) Government institution/regulatory authority |
SUSTAINABLE ENERGY AND WATER CONSERVATION UNIT |
MINISTRY FOR ENERGY AUBERGE DE CASTILLE ST. PAUL'S STREET VALLETTA MALTA simon.scicluna@gov.mt |
a) yes |
1) yes |
a) yes |
ENERGY EFFICIENCY MEASURES |
a) yes |
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a) yes |
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c) quite inadequate |
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c) it largely compromises the incentive |
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e) I don’t know |
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f) I don’t know |
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a) a substantially higher share than in Phase 3 |
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a) yes |
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a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
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c) I don’t know |
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e) I don’t know |
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g) I don’t know |
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c) I don’t know |
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c) I don’t know |
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e) I don’t know |
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d) I don’t know |
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c) I don’t know |
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d) I don’t know |
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e) I don’t know |
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d) yes, in the form of financial compensation at EU-level |
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Important |
Least important |
Less important |
Most important |
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e) I don't know |
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SPECIAL EXEMPTIONS FOR COUNTRIES LIKE MALTA SHOULD B CONSIDERED FOR NER300 FUNDS. DUE TO ITS SIZE MALTA CAN NEVER BENEFIT WITH THE CURRENT RULES |
c) Government institution/regulatory authority |
Thüringer Ministerium für Landwirtschaft, Forsten, Umwelt und Naturschutz |
Beethovenstr. 3 D-99096 Erfurt Deutschland andreas.hirsch@tmlfun.thueringen.de |
c) not relevant |
öffentliche Behörde |
1) yes |
a) yes |
Eine Reduktion von Treibhausgasen bei einem expandierenden Unternehmen kann nur dann gegeben sein, wenn eine wirtschaftliche Kenngröße (z. B. Umsatz finanziell, Einsatz von Ausgangsstoffen) in Relation zu den THG/CO2 im zeitlichen Verlauf verglichen werden kann und eine fallende Tendenz zeigt. |
a) yes |
Der Europäische Emissionshandel kann dazu beitragen, dass bei bestimmten Branchen der Industrie durch technische Aufrüstung bei Produktionsprozessen die Energieeffizienz optimiert wird.Diese OPtimierung muss jedoch keine direkten Auswirkungen auf die Wettbewerbsfähigkeit haben. |
a) yes |
Maßnahmen in einer Übergangsphase können ggf. solange berechtigt sein, bis sich der Europäische Emissionshandel so stabilisiert hat, dass seine vorgesehene Funktion kontinuierlich zum Tragen kommt. |
d) very inadequate |
Gratiszuweisungen als Politikinstrument scheinen nicht angemessen, da durch politische Vorgriffe bzw. nachträglich korrigierende Eingriffe eine nicht vorhersehbare Entwicklung auf dem Gebiet des freien Handels eintreten kann und sie damit einen Störfaktor in den gegebenen Marktmechanismen darstellen. |
d) it absolutely compromises the incentive |
Der Unternehmer steht durch das ETS vor einer Alternative. Entweder investiert er in eine ungenügend funktionierende Technik und ergreift Maßnahmen, um mit seinem Kontingent an Zertifikaten (Verschmutzungsrechten) auszukommen, oder er muss (bei gleich bleibender Produktion) in weitere Zertifikate investieren, ohne die bestehende Technik renovieren zu können. Die Zuweisung darf in diesem Fall nur von der Marktentwicklung abhängen (wie bei Aktien) und nicht von der Zuweisung durch politische Entscheidungsträger abhängig gemacht werden. Würden politische Entscheidungen den Anreiz nicht gefährden, so wäre aktuell eine Korrektur durch das beschlossenen Backloading nicht erforderlich. |
e) I don’t know |
Diese Frage sollte vor allem an Unternehmen gestellt werden, denen bereits ein entsprechendes Konringent an Zertifikaten zugeteilt wurde und die auf entsprechende Erfahrungen zurückgreifen können. |
f) I don’t know |
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e) I don’t know |
Gelder für Förderprogramme sollten nicht überwiegend in die Förderung von Technologien miot fossilen Energieträgern investiert werden, sondern auch in Erneuerbare Energien und in strategische Maßnahmen wie Energiemanagement, um CO2/THG zu reduzieren. |
a) yes |
Kohlenstoffarme Technologien mit fossilen Energieträgern werden auch in Zukunft nmotwendig bleiben. |
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
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b) no |
Das beschlossene Backloading war bereits eine (zusätzliche!) Maßnahme, mit der Einfluss auf die Zuweisung genommen wurde. (Klarstellung: zugewiesene Kontingente sind keine Gratiszuweisungen) |
a) the present two groups should remain |
Die vorgegebene Gruppierung spielt im Zusammenhang mit den Regelungen des Emissionshandels aktuell noch eine wesentliche Rolle. |
g) I don’t know |
Kriterien für die Post-2020-Periode sollten jetzt noch nicht festgelegt, sondern von der weiteren Entwicklung abhängig gemacht werden. |
c) I don’t know |
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c) I don’t know |
Welche Kriterien in Zukunft erhalten bleiben und welche ggf. als Ergänzung hinzugezogen werden sollten, sollte von der weiteren Entwicklung abhängig gemacht werden. |
d) in line with the duration of ETS Phase 4 |
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a) the present approach of average of the 10% most efficient installations should remain |
siehe Antwort zu Frage 15 |
c) I don’t know |
Die Benchmarks sollten bewertet und ggf überarbeitet werden, wenn sich der ETS stabilisiert/etabliert hat. |
d) I don’t know |
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c) yes, there should be deviations with lower allowances for installations enjoying very favourable circumstances |
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a) no, the present approach should be maintained, i.e. that Member States can provide such compensation based on state aid guidelines |
Programme zum Ausgleich/zur Entschädigung sollten von den mitgliedstaaten verwaltet werden, da so die Schwerpunkte der jeweiligen Problemlösung innerhalb der einzelnen Mitgliedstaaten möglichst flexibel gehaölten werden können. |
Less important |
Important |
I don't know |
Least important |
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a) from the Member States' auction budgets |
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c) Government institution/regulatory authority |
UK Government - Department of Energy and Climate Change |
Ben McKie, Head (Acting), EU Emissions Trading System E: ben.mckie@decc.gsi.gov.uk M: +44 (0)7919 626 136 T: +44 (0)300 068 5485 |
1) yes |
a) yes |
Decarbonisation roadmaps have been developed by energy-intensive sector associations at both the European and national level, setting out how emissions reductions can be achieved in a technically feasible and cost-effective manner, to 2020 and beyond. In the UK, the Government is working closely with industry stakeholders to develop decarbonisation roadmaps up to 2050 for the eight most heat-intensive sectors, which will provide a deeper understanding of the abatement potential and barriers faced by each of these sectors. |
a) yes |
The UK is strongly committed to the EU Emissions Trading System, which allows for the achievement of emission reduction goals in the most economically efficient manner. The EU ETS provides flexibility to businesses to decide whether and when to invest in carbon abatement or to purchase allowances. This flexibility enables carbon reduction to be delivered across the EU at the lowest cost, and with least impact on the competitiveness of European industry compared to other more burdensome policy approaches to meet emissions reduction targets. |
a) yes |
The UK recognises the real risk of carbon leakage for certain sectors covered by the EU ETS, and the continued need for measures to minimise it. While there is no robust evidence of carbon leakage having occurred to date, studies - including by Vivid Economics (2014) - suggest that the risk may be significant at higher carbon prices for a limited number of sectors, in the absence of free allocation. |
b) quite adequate |
The best way to address carbon leakage risk would be the development of an international carbon market, which would create a level playing field for industry inside and outside the EU. However in the absence of an international market, the UK supports the principle of free allocation as an instrument for protecting exposed sectors within the EU ETS. Proportionate, focused free allocation provides relief to sectors at significant risk of carbon leakage, without raising barriers to international trade. It is clear, however, that the existing system of free allocation must be improved to ensure that protection is effective, evidence-based, and well-targeted. It is also clear that particular aspects of the current system – such as rules related to partial cessations - may require reform to remove both unnecessary complexity and perverse incentives. |
b) it largely keeps the incentive |
The UK supports the principle of benchmarked free allocation, which rewards the most efficient installations across the EU and provides a strong incentive for other installations to reduce emissions and achieve greater efficiency. Benchmarked free allocation provides an appropriate balance between the dual objectives of maintaining the competitiveness of EU industry and driving industrial decarbonisation. In theory, operators entitled to free allocation of allowances would be expected to consider the opportunity cost of using these allowances for compliance purposes. However experience indicates that this does not happen in reality and so the opportunity cost of free allowances has not provided a strong incentive for operators to decarbonise. There is evidence to suggest that particular rules under the current system of free allocation – for instance in relation to partial cessations - have created perverse incentives for participating companies which may reduce the efficiency of production (Climate Strategies, 2014). The UK calls on the European Commission to consider how existing rules can be reformed so as to minimise such perverse incentives, and to ensure greater alignment with other business drivers. |
b) quite proportionate |
The existing system of free allocation requires minimal administrative work from operators after initial agreement of Member States’ National Implementation Measures, except where installations undergo partial cessations, significant capacity reductions or significant capacity extensions. However we recognise that there are concerns about the administrative burden for companies that have undergone such activity or capacity changes, or are applying for allowances from the New Entrants Reserve. Simple rules and low administrative costs will help EU competitiveness, and as such rules should continue to be reduced or simplified where practicable. The UK has significantly reduced the regulatory burden placed on business by simplifying domestic regulations, and would welcome efforts by the European Commission to consider how carbon leakage provisions, and the EU ETS as a whole, may also be simplified to the extent practicable while managing risks of non-compliance. We will consider carefully the administrative burden of proposals for reform, and whether any increase in administrative requirements is proportionate to any additional benefit of the reform measure. |
f) I don’t know |
The UK believes that decisions on the share of the post-2020 allowance budget cannot be pre-determined. However we are of the view that, in Phase IV, free allocation should be focused on those sectors which evidence demonstrates are at most risk of carbon leakage. We are concerned that such sectors may not be compensated sufficiently in the future unless current EU ETS rules are reformed, as the amount of free allocation available falls under a declining cap. While we recognise the need for free allocation to mitigate the risk of carbon leakage in the short- and medium-term, the UK is committed to moving towards full auctioning in the longer-term, which will increase the efficiency of the system as a whole. As such, we support the principle of a maximum level for free allocation – a ‘manufacturing cap’ - as implemented in Phase III, which also provides certainty on the distribution of allowances under the overall cap. |
The UK does not support hypothecation of auctioning revenues. Continuation of a simplified, refocused NER 300 would require careful consideration. We would welcome further information from the Commission on this. |
The UK is open to considering further financial support for industrial innovation and deployment of new low carbon technologies. However we feel there are other sources of funding that could be used, for example those mentioned in Question 10. |
The UK is of the view that the majority of funding for innovative low carbon technologies should come in the form of risk financing from organisations like the European Investment Bank and grant funding from EU schemes. The European Commission should also examine whether successors to current non-ETS funding streams – Horizon2020; COSME; LIFE+; and the Research Fund for Coal and Steel – could become more focused on industrial innovation with appropriate increases to their spending on energy and decarbonisation projects. Such a focus could include more or expanded Public-Private Partnerships covering cross-industry process efficiency and low carbon substitution (learning from the current SPIRE-PPP), multinational collaborative schemes (learning from the current ERA-NET CoFund model), calls to adequately fund innovation in all sectors of CCS, and industrial sector take up of risk financing initiatives. Any such spending increases would need to take into account the scale of projects required to demonstrate pre-commercial viability. |
a) yes |
The UK recognises that in addition to the direct costs faced by industrial sectors, a number of sectors face high indirect costs as a result of cost-pass through in electricity prices. We are of the view that the existing system of compensation for the indirect costs of the EU ETS at the Member State level should be maintained, so as to support the most electricity-intensive sectors. |
There is evidence to suggest that, in the absence of free allocation, the estimated risk of carbon leakage at different levels of the carbon price would vary considerably across industrial sectors (Vivid Economics, 2014). A more differentiated system may therefore be more reflective of the real nature of carbon leakage risk than the current approach, under which sectors are either deemed to be exposed to such a risk or not. If designed appropriately, such a system may also allow sectors at highest risk to remain sufficiently protected as the amount of allowances available for free allocation declines. In principle, the UK is open to consideration of a more differentiated system of free allocation. However the effectiveness of such a system will be dependent on its design, and in particular the stringency of the assessment applied to determine the level of risk faced by sectors and the level of protection afforded to sectors at different levels of risk. The UK calls on the European Commission to provide further information on how such a system might function within the EU ETS. |
The UK believes that the carbon leakage assessment should be based on sound analysis of the risk and therefore that the criteria for assessment in the post-2020 period should be based on evidence of how risk can be most effectively identified. As such, we support the current focus on carbon costs rather than carbon intensity, as the former is a more accurate indicator of the impact of the EU ETS on sectors than the latter. However it may be appropriate to revise the carbon price assumed for the assessment of carbon leakage to ensure it reflects market forecasts and growth projections. Evidence also suggests that the trade intensity-only criterion may not be an appropriate test of the risk of carbon leakage; research by Vivid Economics and Ecofys (2014), commissioned by the UK Government, found that this criterion could be removed “without a detrimental increase in the total amount of carbon leakage.” It is clear that there is scope for improving the robustness and focus of existing criteria for the post-2020 period. However the UK is keen to ensure that the assessment process maintains an appropriate balance between comprehensiveness and complexity, and continues to be based on criteria for which reliable, recent data is available. |
The UK believes that carbon leakage assessment should be based on sound analysis of the risk, and that free allocation should be focused on those sectors which are at highest risk. Whether under current free allocation rules or a more progressive system, thresholds should be set so as to ensure that such sectors remain protected.
It is not possible to define specific thresholds at this stage for the criteria measuring the risk of carbon leakage, as reform of other aspects of the assessment process and broader free allocation rules may have implications for the appropriateness of particular thresholds. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
We support the principle of applying a qualitative element for the assessment of carbon leakage risk. Our view is that this qualitative element should be focused on circumstances where the quantitative element is not appropriate. We would urge the European Commission to make the qualitative assessment more harmonised, structured, robust and transparent. |
d) in line with the duration of ETS Phase 4 |
The UK recognises concerns that a five-yearly assessment of carbon leakage may create uncertainty for industry with respect to the level of free allocation to which they are eligible. While we are keen to ensure that the carbon leakage list remains reflective of the actual level of risk faced by sectors, on balance, aligning the validity of the carbon leakage list with the duration of ETS Phase IV appears to be appropriate. It is clear however that extending the validity of the carbon leakage list heightens the importance of ensuring that the assessment process is appropriately designed so as to identify industrial sectors at highest risk, in a focused manner. |
The UK supports the principle of basing benchmarks on the average greenhouse gas emission performance of the 10% best performing installations in the EU for a given product. This approach rewards the most efficient installations, and provides a strong incentive for other installations to reduce emissions. However in order to maintain this incentive in the post-2020 period, benchmarks should be updated to reflect advances in technology since their adoption. We are also open to consideration of whether benchmarks should become more ambitious over time. The UK would welcome efforts by the European Commission to consider how the benchmarking process may be simplified for the post-2020 period to the extent practicable while avoiding significant inequity within a sector. We recognise that a balance must be struck in any such system between simplicity and fairness, but consider there to be scope for further simplification in this case. |
a) yes (please specify how often) |
This question has been answered in combination with question 17. |
The UK is of the view that it would be appropriate to use more recent production data for the calculation of Phase IV allocations. However we recognise concerns regarding the administrative burden entailed in the calculation of free allocation entitlements for Phase III, and would support efforts by the European Commission to simplify this process. |
a) no, there should be no deviations |
The UK strongly supports the harmonisation of free allocation rules across the EU, and is opposed to any deviation from these rules. There is a real risk of competitive distortion within the EU if certain industries or Member States were to receive a higher proportion of free allocation than others. The UK is also concerned about the additional complexity that any deviation would add to the EU ETS, and is of the view that such deviation would act in contradiction to broader efforts to simplify the system. |
a) no, the present approach should be maintained, i.e. that Member States can provide such compensation based on state aid guidelines |
The UK supports the existing system of compensation for the indirect costs of the EU ETS, under which financial measures may be undertaken at the Member State level in order to compensate electricity-intensive sectors for additional costs arising from increases in electricity prices. Such financial measures must be designed in accordance with agreed state aid rules, and therefore are already harmonised across the EU. Moreover, the existing system avoids additional complexity associated with an EU-wide approach, for instance due to differences in electricity markets between Member States, or the use of free allocation to compensate for indirect costs. |
The EU’s Strategic Energy Technology Plan and the European Commission’s recent Communication on Energy Technologies and Innovation, make clear that significantly increased investment intensity is required across a broad range of technologies and Technology Readiness Levels (TRLs). This, along with increased efforts on strategic co-ordination between funding streams, will be key to achieving the EU’s 2020 targets and 2050 vision for a significantly decarbonised, competitive and sustainable energy system. |
d) other |
In our view, funding for industrial innovation should be provided by other existing sources at the EU level, and the European Commission should consider how such sources could be more focused on support for energy and low carbon related innovation. |
c) Government institution/regulatory authority |
Walloon Air and Climate Agency from the Walloon Region |
Olivier Kassi olivier.kassi@spw.wallonie.be 0032/81.33.59.69 Stéphane Cools stephane.cools@spw.wallonie.be 0032/81.33.59.51 |
c) not relevant |
Government institution/regulatory authority so we do not represent any sector |
1) yes |
a) yes |
The widely deployment of the current most GHG-efficient -techniques applied in Europe to produce some products, as embodied in the product benchmarks, to all industrial operators in the EU would already bring about a significant emission reduction. As an example of this, we saw a quick deployment of abatement techniques for some non-CO2 emissions that are covered by the ETS as from 2013. Secondly, even for the best-performing industries, the application of more advanced resource and energy-efficiency techniques can further improve the CO2 -efficiency. Ambitious energy-efficiency improvements, product design as well as changes in fuel mix for heat demand have a major role to play. An ambitious innovation strategy is key to develop the technological breakthroughs that are needed to achieve the 2050 emission reduction target. To fuel this innovation and to install the techniques, investments are crucial. The existing reduction potential of the EU industry can help to improve its competitiveness. |
c) I don’t know |
The EU ETS aims to put a price on carbon. Therefore, it can be assumed that ETS operators do take the CO2 price into account for investment decisions. However, the current CO2 -price is too low to have a significant impact on long term investment decisions in CO2 reduction. Another incentive lays in the benchmarking exercise, as individual operators are stimulated to obtain this benchmarking level to preserve their competitiveness. At the moment energy price seems to play a more decisive role in investments. Having said this, the ETS on its own is not enough to stimulate the energy efficiency investments needed to reach our long term climate ambitions. A corresponding innovation strategy is paramount to develop the necessary technological breakthroughs. |
a) yes |
As long as our main competitors around the world don’t have a carbon price comparable to the EU one in their economy, carbon leakage protection for exposed sectors is justified, in particular in relation to the ambition of the EU to maintain and strengthen a strong industrial base. |
b) quite adequate |
In principle, free allocation is an adequate instrument to mitigate the risk of carbon leakage until the development of a worldwide level playing field on carbon price. While free allowances reduce the overall cost for the operator, the incentive to reduce emissions might be compromised because the CO2 -price signal is weakened. Therefore the design of the free allocation scheme is crucial. We are in favor of free allocation based on ambitious but at the same time feasible benchmarks. The free allocation should be aligned as much as possible with the actual activity data. Furthermore, the degree to which a sector can pass on the actual CO2 costs to its customers and the proportion of the GVA (or any relevant criteria) concerned by the carbon leakage, should determine the carbon leakage factor.Next to free allocation for direct emissions, a compensation could be foreseen for indirect costs due to actual CO2 costs incorporated in the electricity price if this constitutes a carbon leakage risk, whilst preventing distortion of the level playing field through harmonized state aid guidelines. For the long term, the CO2 price signal itself should further drive energy efficiency improvements -and thus the competitiveness of the industry. |
e) I don’t know |
Following economic theory, the main ETS incentive for reducing emissions comes from the CO2 -price signal and the benchmarking principle. In practice however, free allocation might compromise the incentive to innovate for reducing emissions as it shields operators partly from the price-signal. |
b) quite proportionate |
The reporting and verification of the necessary actual activity data to determine the allocation data requires a significant effort. However, as the free allocation equals a considerable amount of money, this thorough reporting exercise is justified. Furthermore, an allocation method based on benchmarks will inevitably go hand in hand with an extensive data collection. |
f) I don’t know |
In our view, the new carbon leakage framework should ensure that:
- There is sufficient regulatory certainty for operators during the 2021-2030 period concerning the protection against carbon leakage.
- Free allocation is aligned as much as possible with the actual activity of the concerned installations taking into account reported activity data,
- Benchmarks are ambitious but feasible and adapted to technology development.
- The level of support is gradually correlated with the exposure to carbon leakage.
Are in particular to be taken into consideration: avoiding an unfeasible allocation level through additional correction factors, and preventing distortion of the level playing field through state aid guidelines for indirect carbon leakage compensations.
The appropriate schemes in order to achieve these objectives are to be further examined.
Given that we support a carbon leakage framework based on free allocation that is aligned as much as possible with actual activity data, ambitious but feasible benchmarks and a level of support which is gradually correlated with the exposure to carbon leakage, we think the current carbon leakage budget will normally suffice to preserve an adequate carbon leakage protection.
The cross sectoral correction factor guarantees a repartition of allowances between the industry and the electricity production sector avoiding for example an increase in electricity price which would strongly affect citizens, small and medium-sized enterprises and bigger companies exposed to carbon leakage. It is also a way to ensure the functioning of the ETS, its environmental integrity and its principles like the auctioning. However the application of the cross sectoral factor has come as surprise and has impacted severely some sectors exposed to carbon leakage. That is why avoiding an unfeasible allocation level through additional correction factors should be taken into consideration and further examined while taking into account the purpose of these additional factors. One way to avoid this correction factor would be to have a more targeted list which would take into account actual activity of the concerned installations, the actual CO2 price and to gradually correlate the level of support with the exposure to carbon leakage.
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a) a substantially higher share than in Phase 3 |
While we do think that a substantially higher share than in Phase 3 should be dedicated to innovation, we also think that structural measures should be taken to restore the carbon price and ensure that it is sufficiently robust to provide investment incentives and support innovation. We see the fostering of innovation as a crucial part of the post-2020 climate package. The auctioning revenues from allowances otherwise auctioned by the Member states could serve as funds to stimulate this target. As innovation is a common challenge for all Member States and as the revenues come from allowances which would have been otherwise auctioned by Member States, each member state should be guaranteed projects financed through the innovation fund. Furthermore, where possible an integration of the innovation support with existing programs should be looked at. A third important element is that the list of eligible technologies should be flexible. However, it must be acknowledged that in the end the total amount will not depend only of the shares but also of the carbon price and all the factors that contribute to the creation of that price. |
c) I don’t know |
A focus on the deployment of advanced low carbon technologies in industrial processes may provide advantages for EU competitiveness, be it within the NER300 or through an new or additional scheme.
However a financial support scheme is not the only option. Structural reforms in the ETS still have to be implemented to guarantee a sufficiently robust carbon price able to provide the needed investment incentives and support innovation and technological development, enabling to grasp the associated competitive advantages.
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b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The EU ETS could develop a substantial innovation pillar in order to stimulate the technological breakthroughs which could contribute to preserve long term competiveness of the EU industry while recognizing the competitiveness of the EU is a larger problem that cannot be addressed only by the EU ETS. A part of the auctioning revenues from the Member States could then be used for this purpose. See Q 8, 9. |
a) yes |
Indirect CO2 emissions are a genuine cost for electro-intensive industries and can be the source of carbon leakage. If the indirect costs cannot be passed through, additional measures beyond free allocation for direct emissions might be appropriate |
b) more carbon leakage categories should be defined |
With the current carbon leakage criteria, all sectors which pass the relevant thresholds get the same carbon leakage treatment. A graduated system, in which each sector is assigned a level of free allocation correlated with its carbon leakage risk, seems more appropriate and leads to a more targeted, justified carbon leakage approach. Based on the sectoral scores on the carbon leakage assessment, a categorization of low, medium and highly exposed sectors could be made. |
c) the share of 'carbon costs' in the GVA should be maintained, but 'carbon costs' should be taken into account to the extent that they can't be recuperated in product prices |
When assessing the carbon leakage risk, the part of the carbon cost which cannot be passed through to customers should be well delineated. This proportion of the cost is usually correlated with the trade intensity of a sector. Therefore, we support a combined criterion of carbon costs and trade intensity to assess the carbon leakage risk. A carbon leakage assessment based on a sole criterion such as trade intensity is not appropriate. Furthermore, when estimating the carbon costs, a realistic and actual carbon price, auctioning factor and the emission abatement potential should be taken into account. If data availability permits, the profit margin instead of the GVA seems more adequate to determine relative importance of the carbon cost, as the profit margin is a more determining factor in relocation decisions. |
c) I don’t know |
As put in our previous answer, a combined criterion including a carbon cost and trade intensity threshold seems most appropriate. At the moment we do not have specific quantitative thresholds in mind. However, the thresholds should be based on thorough research, in which the possibility of passing on the cost to customers should be taken into account. A gradual approach, with different thresholds per carbon leakage category, can help to focus the carbon leakage approach and preserve a sufficient protection against carbon leakage for the most exposed sectors. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
We welcome a more transparent and structured approach for the qualitative assessment. We believe that the proposed framework in the former study on carbon leakage is a good starting point. |
d) in line with the duration of ETS Phase 4 |
To optimize the predictability of the EU ETS, in principle a long validity of the list is desirable. However, a revision of the assessment should be made possible in the case of 1) a substantial increase in comparable climate policies on comparable industries in the main regions in competition with the EU (which represent x % of the market share); 2) an actual average carbon price that is judged higher/lower (i.e. define a threshold) than the carbon price used for the assessment. Actually we support a more dynamic allocation and consequently we also support a more dynamic evolution of the carbon leakage list as well as benchmarks. |
a) the present approach of average of the 10% most efficient installations should remain |
This approach should remain as the starting point, however a periodical improvement exercise for the benchmarks based on bottom up peer review of EU benchmarks could be considered. |
a) yes (please specify how often) |
As the current benchmarks are developed on the GHG-efficiency of 2007-2008 in Europe, they are not representative for the period 2021-2030. Close to the start of the post 2020-period the benchmarks should be revised to reflect the recent GHG-efficiency in the EU (i.e. dynamic approach). Furthermore, a periodical improvement exercise for the benchmarks could be considered from a bottom up evaluation. |
c) other (please specify) |
We favor an allocation methodology based on actual activity data, instead of historical production data. This more dynamic allocation would, as opposed to the current methodology, maintain a more correlated carbon leakage protection for operators who increase their production. It provides certainty and predictability for operators considering investments and would lead to a harmonized approach for incumbent installations and new entrants. Secondly, dynamic allocation might reduce a substantial overallocation when operators decrease their production levels.
Notwithstanding these substantial advantages, dynamic allocation would incur an extra administrative effort for MS and operators and extra verification cost. Therefore, the precise design modalities of a more dynamic allocation scheme should be explored, taking into account that full transparency and verifiability are needed and provided on the activity data. Furthermore, the focus should lay on the product benchmarks, for the fall back methods dynamic allocation solutions are possible and need to be investigated. |
a) no, there should be no deviations |
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e) I don’t know |
Indirect CO2 emissions are a genuine cost for electro-intensive industries and can be the source of carbon leakage. If the indirect costs cannot be passed through, additional measures beyond free allocation for direct emissions seem appropriate to mitigate the risk while respecting environmental integrity.
On indirect costs we strongly support a policy that prevents distorting the level playing field. Therefore the following principles for any approach addressing indirect cost should be:
• An EU harmonized approach
• Transparency
• Environmental effectiveness
• Efficiency
• Feasibility
• Reduced administrative cost
• Based on actual CO2 emission factor
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Least important |
Less important |
Important |
Most important |
We also want to reiterate that support should create as much as possible R & D synergies between various stakeholders. |
a) from the Member States' auction budgets |
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The decision on the overall level of ambition of the ETS in the context of the 2030 EU-wide reduction target should be accompanied by a decision to develop a post 2020 carbon leakage framework.
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d) Academic/research institution |
Center for European and Policy Studies (CEPS) |
Andrei Marcu Head, CEPS Carbon Market Forum 1, Place du Congres Brussels 1000 Phone: + 32 47 966 80 61 andrei.marcu@ceps.eu |
a) yes |
1) yes |
a) yes |
The price of carbon and the associated cost of carbon is one factor that will drive increases in efficiency and reductions of emissions. Evidence from studies for Phase 1 and 2 of the EU ETS, from ex – post studies that have been currently been published so far, do not seem to confirm the ex-ante results of modeling which had predicted that significant carbon leakage could take place. This can be attributed to a number of factors, including the effectives of carbon leakage risk mitigation measures that were put in place (free allocation), the low cost of carbon, and the economic recession. However, the answer depends largely on the sector and cannot be generalized. Also, leakage in general can be attributed to many factors, with carbon being one of them. It must be also stated that there are different types of leakage some that may be more difficult to attribute and longer to detect It must be recalled that emissions result from energy production as well as industrial processes. |
a) yes |
The EU ETS provides a carbon price signal, and in that way it is certainly a driver for increased energy efficiency and increased competitiveness. It must be remembered that that is a long-term perspective, but that the realities of the short and mid-term competitiveness cannot be ignored, and must be addressed through concrete measures that allow for growth, profitability and the resulting possibility for investment. While the drive for energy efficiency is always the result of a number of factors, based on its volatility and the current and forecast carbon prices, it is unlikely that the EU ETS can be seen as the main driver. In the drive for increased energy efficiency, an important role is played by the prices of other commodities, especially the cost of energy. The price differential between the EU and some of its competitors has been a significant driver for energy efficiency. |
a) yes |
The EU ETS is a driver that is adding a cost while there are asymmetrical climate change policies in different jurisdictions. This has been addressed through free allocation to 2020, and will need to continue to be examined and addressed in the post 2020 period, while maintaining the EU ETS as an incentive for increased efficiency and reduced emissions. One key question on which industry and the regulator need to come to a common view is whether the measures to support EU ETS covered industries must be seen as “compensation” or as a measure to help with the “transition” to a low carbon economy. For clarity purposes, in the former case, these measures do not have a sunset clause, and should continue as long as the asymmetry in climate policies exists. It should cover cost incurred as a result of the asymmetry. In the latter case, these measures are here to help with the transition and provide assistance, at a declining rate. |
b) quite adequate |
The full answer is quite adequate, for the moment, and with some caveats. Free allocation has worked so far, and is providing relief while ensuring that there is still an incentive to decarbonize to the benchmark. This implies that the benchmarks are realistic and are developed in line with overall technical possibilities and energy availability as well as climate targets. It may also require examination how benchmarks affect different sectors, given that there may a different distributions around the benchmark. Free allocation is well understood and applied in all jurisdictions that currently have carbon-pricing mechanisms. This way it must be seen as help rather than an obstacle to linkages. It must however be remembered that free allocation does not address the whole equation, as there is also a carbon cost emerging indirectly, especially from electricity prices, and that is not covered by free allocation. |
b) it largely keeps the incentive |
Free allocation keeps the incentive to reduce emissions, by getting installations covered by the EU ETS to reach for the sectoral benchmark. This incentive continues to be a function of the price of carbon, and that is currently low and unlikely to represent a true reflection implied in by the 2050 EU goal. The answer to this question needs also to be seen in light of Question 3, whether free allocation is “compensation” or a “transition” provision. If it is compensation, it may not adequately compensate in the future, should production volumes increase, resulting in less profitability and lower capital need for investment. As this is more likely to be seen as “compensation to allow transition” it can be seen as buying time and proving support for a transition to a low carbon economy. The pace of the transition then becomes critical, and the pace of the transitions needs to be commensurate with the way free allocation is provided. |
b) quite proportionate |
The administrative burden is not disproportionate, but that needs to be also seen in the context of the size of the enterprises affected |
c) a constant share as in 2013-20 |
Again, to a large degree, it comes back to the choice between “compensation” and “transition”. A number of issues need to be mentioned and taken into account. A proportion needs to be kept between what is provided for free allocation and what is auctioned, in order to ensure that the hedging needs of the power sector are met, as well as that liquidity is kept in market to ensure good market functioning. There will be choices to be made between the depth and the breath of the free allocation provisions. The question is virtually impossible to answer in isolation as “auction vs. free allocation”. What needs to be taken into account is also how the distribution is made within the free allocation envelope. Different sectors are exposed to different levels of carbon leakage risk, with some sectors being price takers in absolute global price setting mechanisms. |
e) I don’t know |
Innovation is an important element in the continued drive for decarbonization. Funding for innovation is applied at a specific stage of the technology cycle. As such, while the quantity of funding provided is important as it will drive what can be accomplished, what is also important is the stability and accessibility of the resources made available, in light of the stated objectives and expectations that have been created. From this point of view both the UNFCCC Adaptation Fund as well as NER 300 have shown significant deficiencies. If funds originating in the activities in the carbon market are to be used for innovation objectives, they need to be less dependent of the variations in carbon price and their accessibility made less complex. |
c) I don’t know |
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d) I don’t know |
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a) yes |
Free allocation covers direct emissions, and its effectiveness is function of its coverage, and on the way it is applied. That has been discussed in questions above and issues raised include the question how dynamic is the production and how update is the information, the determination of the benchmark, the spread around the benchmark, etc. In addition, we have also mentioned that free allocation is a viable alternative for the short and mid- term, but cannot be considered as an option for the long-term. Given these considerations, beyond measures that are needed to address indirect costs, especially from carbon costs in electricity, we could also consider measures such as access for pure compliance purposes only to international credits for certain disadvantaged sectors. In addition, in the long-term, other international cooperative measures that would recognize the asymmetry in climate change policies may need to be considered. |
b) more carbon leakage categories should be defined |
The current approach, which can be called in/out, or binary, cannot be considered a good reflection of reality in a counterfactual scenario. A risk-based approach, that translates into different levels of carbon leakage risk, with corresponding different levels of free allocation, has been put in place in California, Quebec and Australia. While there is insufficient evidence to make a clear determination on the effectiveness of this approach, it seems promising and would also serve the purpose of focusing the amount of compensation that is given to different sectors, as well as the overall free allocation provided. The levels of risk-based exposure can be determined in thresholds, such as Low, Medium and High, or as a continuous percentage, representing the risk level. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
The current criteria mimic the two factors that have the potential to transform asymmetrical climate change policies into carbon leakage: carbon costs and the ability to pass through carbon costs. Carbon costs are an important criterion to be used as a numerator to calculate one of the criteria. However, a denominator other than GVA may be more appropriate as financial indicator, such as margin. The second criterion used, trade intensity, is a surrogate for the ability to pass through costs. This criterion could be maintained, but its use and thresholds may need to be different. The sense that is emerging from other jurisdictions that have put in place carbon leakage risk mitigation measures is that trade intensity does not carry the same level of weight as the cost of carbon in determining the risk of carbon leakage. As such, when the determination of the risk of carbon leakage is made, a higher threshold for trade intensity may need to be considered. |
b) other thresholds should be defined. Please specify below |
The use of trade intensity as a stand-alone should be examined, or as a minimum, a higher threshold needs to be considered. At 30% it currently qualifies over 115 sectors. In addition, it is possible that trade intensity may simply become a pass/fail test, that is then used in conjunction with different carbon costs ratios, to determine the level of carbon leakage risks. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Qualitative criteria can be criticized as being too subjective and open to political manipulation, or can be seen as a way to recognize that providing for every potential combination of circumstance is impossible. So far, this has not happened in the EU ETS, as few sectors have qualified under this provision. |
d) in line with the duration of ETS Phase 4 |
The stability of the carbon leakage list provides predictability and helps business planning with long investment cycles. As such, it is imperative that the duration of the nominal duration of the CL list be in line with the trading period. However, this does not preclude the possibility of a review when circumstances change for a sector as well as the more frequent update of the information used in the determining the list. |
a) the present approach of average of the 10% most efficient installations should remain |
This needs to be qualified on a number of dimensions. Firstly, at one end of the spectrum we have all sectors with the same benchmark. This may not account for all sectors not being the same in terms of mitigation potential, and not having the same distribution around the benchmark. This could result in very different level of efforts required between sectors. Consequently, at a different end, one could consider different benchmarks for different sectors. However, this can result in a quasi-sectoral approach, which will affect the simplicity of the EU ETS. In addition, depending on how dynamic the allocation is, a tightening of the benchmarks may serve the purpose of continuing to provide an incentive to reduced emissions. |
a) yes (please specify how often) |
Benchmarks and carbon leakage lists should be updated at the same time. Also, see Question 17 above |
c) other (please specify) |
Production data that is now used goes back to a period that is not representative of the current economic cycle and production levels. Among the consequences has been an oversupply in the EUA market, and carbon prices in the EU ETS that cannot be seen as representative of the anticipated scarcity to 2050. Consequently, a more dynamic allocation needs to be considered, one that takes into account more current production data. A number of scenarios are possible. At one end, one can consider using an ex post allocation based on current production data. Close to that, but less dynamic, is the use of a t-2 production data, or a variation of it. In both these case the dynamism is associated with yearly update of production data. Some see this as the right approach, given the fact that it is on the ”compensation mode” and it does not over or under compensate for costs. However, the effort to update on a yearly basis, as well as the effort to obtain timely and accurate confidential inform |
a) no, there should be no deviations |
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d) yes, in the form of financial compensation at EU-level |
This answer needs to be qualified, as the fundamental answer is the need to provide compensation, financial or through free allocation, at the EU level. The key is at the EU level. The current way of addressing the indirect costs is not harmonized and is inconsistently provided by Member States through state aid, creating a significant level of uncertainty, and potentially affecting the single market. The compensation through free EUAs raises a number of obvious questions: which pocket do these EUAs come from (auction or free allocation); can they lead to over or under compensation, depending on carbon prices? There are also significant differences in electricity markets across the EU, which makes a harmonized approach difficult. If compensation is financial in nature, at the EU level, then these funds need to come from auctioning EUAs (with the same questions) or from other financial resources, unconnected to the EU ETS. This may represent a significant drain on the EU budget. |
Important |
Most important |
Less important |
Least important |
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e) I don't know |
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d) Academic/research institution |
Research Institute of the Association of the Austrian Cement Industry |
address: Reisnerstraße 53 phone: 004317146681-59 email: papsch@voezfi.at |
a) yes |
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1) yes |
a) yes |
The Austrian cement industry is fully committed to reducing GHG emissions in line with overall EU policy objectives. This has been proved by measures over the past 15 years which have driven down the specific CO2-emissions per ton cement by 19% between 1997 and 2012. To achieve further reductions, research, innovation and investments are necessary. This requires a stable legal framework with predictable CO2 prices together with a policy framework that promotes the competitiveness of the sector and allows a secure access to raw materials and affordable energy prices. Investments further require a return of investment above the cost of capital. |
b) no |
In the cement industry energy costs cause a very high share of the production costs and therefore energy efficiency is an integral part of manufacturing. The EU-ETS primarily aims to lower CO2-emissions, but in the cement industry CO2-reduction represents a conflicting goal to energy efficiency: For example certain emission abatement technologies cause a higher electricity demand and also the reduction of the clinker-ratio in the cement (reduction of thermal energy input) needs to be balanced with finer cement grinding (increase of electricity demand). |
a) yes |
Climate change needs a global solution and as long as third countries do not put similar efforts into CO2-reduction further measures are needed. To address the risk of carbon leakage, free allocation can be an important measure as long as it is not hampered by other provisions in the ETS. The current approach with the cross sectorial correction factor seriously hampers the protection against carbon leakage. Models show, that even with the carbon leakage status the Austrian Cement Industry will have to buy 48% of their emissions in the year 2030 due to the correction factor, which results from the linear reduction factor proposed by the European Commission for the years from 2021 until 2030. By this, a level playing field cannot be guaranteed and the serious risk of carbon leakage keeps existing. |
b) quite adequate |
Increased free allocation can be a measure to address the risk of carbon leakage as long as it is not hampered by other provisions in the emission trading scheme (like the cross sectorial correction factor - see answer to previous question). Furthermore a compensation for indirect emissions is needed in the cement industry. |
a) it absolutely keeps the incentive |
When allocation is based on a benchmark, the incentive or benefit to reduce emissions is provided by the benchmark itself. To further highlight the effect of the benchmark, we suggest to improve the ETS with a performance based free allocation for direct emissions more closely aligned to recent production without the application of a cross sectorial correction factor. |
b) quite proportionate |
Overall, the administrative burden is quite proportionate but the system is extremely disproportionate for small/trivial combustion sources. In many cases these minor sources were not part of the benchmarking exercise and should not be included in reporting. |
d) there should be no limit to overall free allocation to industry |
Sufficient allowances should be provided for free for the most efficient producers because at present the cross sectorial correction factor has the ability to reduce free allocation beyond what is technically possible. |
e) I don’t know |
There are too many uncertainties on what the post 2020 allowances budget will be for the cement industry to be able to decide what share of the budget should be dedicated to such innovation support. |
a) yes |
The cement industry needs an investment enhancing climate that encourages investments over long term (30 year) cycles in a capital intensive industry. Legal stability and CO2 price predictability are the key to achieve this goal. Policy makers should consider hypothecation (earmarking) of revenues from allowance auctions and direct innovation support to those sectors facing the greatest abatement challenges. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
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a) yes |
We suggest improving the ETS by introducing a performance based free allocation system more closely aligned to recent production without the application of a cross sectorial correction factor. |
a) the present two groups should remain |
The systems should be simple and predictable in a long term perspective. |
a) the present criteria should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential and because of a static indicator of limited validity/conclusiveness. It is based solely on historic data and does not reflect future developments. Therefore the cost intensity criterion is the more important of the current two criteria. The assessment should be based on a forward looking CO2 price. To fully take into account indirect carbon costs, the marginal power plants should be used for calculation. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential and because of a static indicator of limited validity/conclusiveness. It is based solely on historic data and does not reflect future developments. Therefore the cost intensity criterion is the more important of the current two criteria. The assessment should be based on a forward looking CO2 price. To fully take into account indirect carbon costs, the marginal power plants should be used for calculation. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
EU trade and economic data is not always exact and its comparability with the EUITL CO2 data is not always appropriate. Borderline cases might keep existing, therefore the possibility to justify these cases to should remain. |
d) in line with the duration of ETS Phase 4 |
It is essential for the predictability of the system to introduce as little changes as possible in the course of a trading period; hence the validity of the list of sector exposed should be in line with the duration of the ETS phase 4. Currently the revision interval for the carbon leakage list is not coping with the ETS period. The new CL List is valid until 2019 while the ETS period 3 ends 2020. This means a lot of confusion and insecurity for business decisions. |
c) the approach should be less stringent (please specify) |
The benchmark should be calculated in a statistically solid way and be updated periodically to ensure predictability. It should be set at an ambitious but reasonable level and should not be distorted by statistical outliers. This can be achieved by defining percentile (e.g. 10%-percentile) or e.g. the average of a range including the 5% to 15% top performers of specific direct emissions (excluding the extreme outliers between 0% and 5%). Only this way, the benchmarking methodology will achieve sufficient statistical robustness for international application in ETS system. |
a) yes (please specify how often) |
Benchmarks should be updated periodically. It must be ensured that benchmark values can be achieved with a certain technical standard in every country and on every production site. Only then they should be revised in in line with the emission trading periods. In case a relative emission target is implemented benchmark values can also be updated by EUTL data on a more frequent basis. |
c) other (please specify) |
We suggest taking the recent production level into account. By this, equal treatment of installations within an industrial sector can be assured, distortions within the system can be avoided and further importance to the benchmarks can be given. |
a) no, there should be no deviations |
To avoid distrotions within the ETS-System, no deviations should be given. |
c) yes, in the form of additional free allocation |
A Union wide and unique approach is needed. Only by this, distortions within the member states can be avoided. Indirect costs can be compensated for example via financial compensation, in form of free allocation, or by including them in the benchmark. If they are included in allocation no state aid guidelines are needed. |
Less important |
Important |
Most important |
I don't know |
|
a) from the Member States' auction budgets |
The budget for free allocation to industry should not be reduced by allowances for funding low-carbon innovation support. |
|
d) Academic/research institution |
The Grantham Research Institute on Climate Change and the Environment and Centre for Climate Change Economics and Policy, London School of Economics and Political Science |
Chris Duffy | Policy Communications Manager | Grantham Research Institute on Climate Change and the Environment | Centre for Climate Change Economics and Policy a: London School of Economics and Political Science (LSE) | Tower 3 | Clements Inn Passage | London WC2A 2AZ w: www.lse.ac.uk/grantham | www.cccep.ac.uk e: c.j.duffy@lse.ac.uk | t: 020 7107 5442 | mob: 07734467805 |
c) not relevant |
We are a research institute at a leading university. Our response to this consultation summarises the most rigorous academic research in this area. Whether or not the university falls under the scope of the EU ETS (it doesn't) is not relevant to our response. |
1) yes |
a) yes |
We have not yet reached the frontier of energy efficiency. There is still scope for efficiency gains to be made without jeopardising production, although production trends may still be affected by other variables, for example changes in demand. Sector specific low-carbon roadmaps can provide guidance and allow for coordination across firms (see for example Neuhoff et al, 2014). For the cement sector, for instance, several roadmaps (e.g. IEA/WBCSD, 2009; CSI/ECR, 2009; ECA, 2013; MPA, 2012, WWF) have estimated the potential for additional emissions reductions up to 2050. These can be achieved with changes to a range of technologies and practices, like the replacement of fossil fuel by biomass, the substitution of clinker or cement with other materials, more efficient uses of cement, new cement types, improved electric power efficiency, recovery of waste heat, and carbon capture and storage. |
a) yes |
Martin et al (2012) conclude that the EU ETS may have led to abatement in the power sector, but the evidence on other industrial sectors is not conclusive, reflecting the relative absence of a clear and sustained strong price signal. According to Laing et al(2013), existing studies show that the ETS has led to small levels of abatement, but the lack of flexibility in the structure of the ETS cap, and its inability to adjust to altered economic conditions (like the financial crisis), undermine its efficacy in providing incentives for abatement. Currently there is no empirical evidence that the EU ETS has hampered competitiveness. Future, higher EUA prices could have a more visible impact, but may also spur innovation. Calel(2013) suggests that firms have been devoting resources to innovation in preparation for higher EUA prices: low-carbon R&D expenditures of ETS participants increased by about 25% and about half the participants increased their number of low-carbon patents. |
a) yes |
Leakage prevention measures are needed, but only for a very limited number of sectors. This is related to, but distinct from, the need to ‘protect of jobs and profits’ as there may be an impact on these even in the presence of uniform global carbon price. Analysis by the UK Committee on Climate Change finds that the most exposed sectors are iron and steel, refined petroleum products, aluminium, other inorganic chemicals, pulp and paper and rubber tyres, due to high compliance costs and competitive pressure. There is broad evidence to show that free emission permits are currently too generous. This can lead to windfall profits and higher consumer prices, while also blunting the price signal to reduce emissions. Martin et al. (2013) estimate that current free allocation rules results in overcompensation of about €6.7 billion every year. Goulder (2013) finds that only 13.7% of allowances would need to be given out for free to preserve the profits of carbon-intensive industries. |
c) quite inadequate |
Current EU ETS free allocation (FA) rules are inadequate and do not provide robust leakage protection. They are imprecise (some companies have large excess allocation while others have deficit). There is considerable uncertainty around the level of future FA. They create inconsistency in the long term because projected FA (with correction factors) declines faster than the projected sector emissions; hence FA will not fully address leakage. There is also a lack of credibility stemming from growing evidence that current FA rules hinder the efficient low-carbon transition of the affected sectors by:1)failing to deliver a robust carbon price signal 2)providing subsidies that make investments in more carbon intensive technology more attractive 3)creating incentives for excessive new investments that extend the lifetime of inefficient plants 4)creating incentives for excess production. These, reverse improvements in the carbon intensity of cement production and hamper plant rationalisat |
c) it largely compromises the incentive |
There is evidence that free allocation (FA) can have a negative effect on short-term innovation. Martin, Muûls and Wagner (2011) find that firms within the EU ETS that are just below the FA threshold are engaging more strongly in low-carbon product innovation than firms that receive FA's. The study also finds a significant association between the expectations firms hold about the future stringency of permit allocation and low-carbon innovation. Hence the uncertainty surrounding future allocation can deter investment in low-carbon innovation. Industry interviews by Neuhoff et al. confirm that the lack of price predictability and uncertainty about future structural reforms of the ETS, future carbon leakage protection and the political support for long term carbon dioxide emission reduction targets, reduces firms’ interest in emission reduction measures. To deliver required breakthrough technologies in the longer term, much stronger incentives or direct innovation support is needed. |
e) I don’t know |
|
a) a lower share than in 2013-20 |
We interpret this question as ‘percentage of free allowances over total EUAs’. Goulder (2013) estimates that to preserve profits in all of the EU ETS listed carbon-intensive industries, the total allowances needed to accomplish this goal is 13.7% of the total revenues, with the remaining 86.7% available for auctioning. There is currently no evidence that that the EU ETS has had an impact on firms’ competitiveness, in terms of profits and jobs (see e.g. Laing et al, 2013; Bassi, Dechezleprêtre, & Fankhauser, 2013). There is, instead, evidence that some sectors have been overcompensated (see Q.3).This suggests that the share of compensation should be lower than today. More evidence, however, is needed on competitiveness impacts under a high carbon price. The system has not yet been fully tested because there has never been a price that ‘bites’. |
c) a lower share than in Phase 3 |
The NER300 is not an ideal mechanism to provide funding. In fact it is a text book example of the dangers of revenue hypothecation, which is viewed critically in public economics. The variability in the price of EUAs creates uncertainty on the size of funding available, which is likely to deviate from the socially desirable level of CCS support. The value of EUAs in the 1st and 2nd round of the programme was substantially below that anticipated. This, together with difficult economic conditions, meant that the ambition of delivering 12 CCS demonstration projects was not feasible (EASAC, 2013). If ETS auctioning were to contribute towards a fixed-amount fund, the share of allowances would depend on the future value of EUAs. In principle, however, CCS funding should be provided by other sources (and its monetary value should be substantially higher), hence the contribution via auctioning should be lower. A paper on CCS by the Grantham Research Institute is due in autumn 2014. |
a) yes |
Developing new low-carbon technologies is key to meeting long-term carbon reduction targets at least cost. The impact of the EU ETS on the development of new low-carbon technologies, which has been shown to be positive, could be much greater if combined with a technology-push policy. This combination would also vastly reduce the long-term cost of Europe’s climate change policy. Our recent work (Dechezleprêtre, Martin, and Mohnen, 2013) on the extent of knowledge spillovers from clean technologies shows that financial support to innovation in clean technologies is warranted from an economic efficiency point of view. |
c) other types of funding (please specify) |
From a pure economic efficiency point of view, but also from a long-term EU competitiveness perspective, it is clear that EU policies have placed too much emphasis on deployment and too little on support to R&D. In general, an objective should be to divert resources away from deployment and towards R&D, which would favour a better policy mix at constant public cost. An array of policy options is available to support innovation and the most appropriate will vary across sectors. Making the funding of low-carbon innovation dependent on the revenues from auctioning, or the price of carbon in the NER, does not sound reasonable. Carbon price movements bear no relation to the socially desirable amount of low-carbon support. The amount of funding should rather depend on some estimates of the unappropriable benefits from low-carbon R&D. Our research programme seeks seeks to provide such estimates for policy makers. |
a) yes |
Many of the distortions that arise from EU ETS free allocation rules can be addressed by moving towards an output based or dynamic allocation (like California) e.g. avoids large surplus allocation or incentives to produce just above activity level thresholds or other distortions. However, when implemented with a benchmark, although it creates incentives for energy efficiency improvements, it also creates uncertainty about future leakage protection (will it decline too fast to address leakage?). Furthermore, in theory a very small share of carbon costs is passed onto consumers (the difference between actual and benchmark emissions) hence it removes the incentives downstream. In the long run, an additional mechanism to restore the incentives to switch to lower carbon products are likely to be necessary e.g. a consumption charge or inclusion of consumption in the EU ETS (Neuhoff et al 2014). |
d) there is no need for a carbon leakage list, all industrial installations should be treated as not exposed |
The approach used under the EU ETS has encouraged lobbying. Furthermore, the two categories approach provides very little flexibility. The approach used in the Californian ETS is a better model. It classifies sectors as high, medium or low risk and so avoids making a clear cut distinction between exposed and not-exposed, thus provides a flexible way of recognising different levels of potential leakage exposure. In addition, a range of factors need to be considered when assessing the carbon leakage risk. Assessing a sector on the basis of one assessment criterion in isolation should be avoided. In the case of the EU ETS Phase 1-3, most sectors qualified for free allocation on the basis of the trade intensity criteria. A way to avoid this would be to use tests jointly, as in California. |
b) only the share of 'carbon costs' in the GVA should be maintained |
Martin et al (2012) found a strong positive association of vulnerability to future carbon pricing (as stated by managers of EU ETS regulated plants) with carbon intensity, but no statistically significant association with trade intensity or indeed the combination of trade intensity and carbon intensity. Hence, it appears that carbon intensity only is a good predictor of how vulnerable to carbon leakage regulated entities are. |
c) I don’t know |
A move away from the use of thresholds would be preferable. As repeatedly shown in the literature, exposure risk is difficult to define hence a more flexible approach such as that adopted in California (high, medium and low risk categories) with options for different solutions to different groups is likely to be better at addressing carbon leakage risk. |
b) no, all criteria should be based on simple metrics and linked to clearly defined thresholds |
Qualitative criteria should be avoided to keep the rules as simple as possible and to avoid attracting heavy lobbying. A move towards the Californian style – high, medium and low exposure categories – will also avoid having to apply qualitative criteria. |
b) longer (please specify) |
In order to make optimal investment decisions, sectors require clarity on the future of free allocation rules. Given the long investment time frames for most heavy industry, a five year allocation provision guarantee period would seem very short. Similarly, additional support (e.g. for R&D) also needs to be guaranteed for longer periods. The lack of clarity and uncertainty about future rules undermines the ability of the EU ETS to assist the low-carbon transformation of these sectors. The ideal timeframe for the list revision depends on how thoroughly the sectors are identified, but overall we think the revision period should be longer than five years to increase certainty. However, qualitative assessment of the sectors belonging to the list should be updated more regularly. |
d) I don’t know |
Because of excess allocation in most sectors, the benchmarks often failed to induce the desired incentives for energy efficiency improvements during Phase 2. This would in part be addressed by a move towards output based free allocation. However, if benchmarks are to be used in future phases, better data will be required. While defined as 10% best performing installations, in practice, the stringency of the benchmark varied considerably by sector, because of the opaque nature of emissions in some sectors (e.g. steel, largely due to the complex way in which gases are recycled). |
b) no |
In Phase 4, significant carbon intensity improvements are necessary to bring about emissions reductions in heavy industry in line with 2030-2050 objectives. While the benchmark is designed to induce incentives to improve carbon efficiency, research indicates that sectors respond much more to strong carbon prices. Benchmarks are problematic on a number of accounts. A moving benchmark which reflects technology improvements alters the incentive to improve. Also, many energy intensive sectors also operate multiple plants of different carbon efficiency performance, some of which are above the benchmark and some below. This can create perverse incentives i.e. firms are less inclined to invest in their modern plant, which is often easier to upgrade, because it will reduce the number of free allowances they will receive for their whole portfolio of plants. |
c) other (please specify) |
As stated in answer to Q. 4, current free allocation rules that use historic production levels are considered an imprecise way of allocating EUAs for leakage protection. While grandfathering is easy to understand, the experience in EU ETS Phase 1-3 has shown the weakness of this method in a fluctuating economy. While often accepted as a fair allocation method at the beginning of an ETS, it becomes increasingly difficult to justify grandfathering (with updating) over time. Several authors suggest that, despite some drawbacks, output-based allocation is an option worth considering because it reduces carbon leakage (e.g. Quirion, 2009; Fischer & Fox, 2007). Meunier, Ponssard and Quirion (2012) find that, in the absence of border tax adjustments, a combination of output and capacity based allocation is the optimal (second best) policy. |
a) no, there should be no deviations |
There is an argument in favour of having a cap that is more flexible to economic conditions. However, this would not work on an installation level as it could open the system up to lobbying. Therefore, in general, we would not support a deviation from general harmonised allocation rules. Responsiveness to changed economic conditions could be achieved in other ways, for example through a rule-based reserve management mechanism (see e.g. Taschini, 2013). |
d) yes, in the form of financial compensation at EU-level |
The current system creates competitive distortions because only a very limited number of Member States offer compensation for the indirect cost of the EU ETS (e.g. the UK, Germany), while others do not provide any compensation. Harmonising the size and/or mechanisms for compensation at the EU level would help to level the playing field across Member States. |
Less important |
Most important |
Important |
Least important |
It is important to support all stages of technology development and in particular to bridge the ‘valley of death’ but since the lion’s share of public support has been targeted at deployment policies so far (commercialisation stage) it looks like direct support to the conception stage is currently most needed. |
d) other |
The amount of funding dedicated to low carbon innovation should be determined by the market failures associated with low carbon innovation (extent of knowledge spillovers, other unappropriable benefits, unpriced carbon externality, etc) rather than predetermined by a fixed amount of free allowances or dependent on the market price of a given share of auctioned permits. Our research programme seeks to provide guidance to policy makers on funding requirements. |
Word count restrictions meant we were not able to provide full references for academic papers in our responses to all of the questions. These can be made available on request. |
e) Non-governmental organisation |
Association for District Heating of the Czech Republic |
1/7 Partyzánská Praha 7 Prague 170 00 CZECH REPUBLIC Telephone number: (+420) 266751206 Email: tscr@tscr.cz, vecka@tscr.cz Identification number in the Transparency register: 169439010937-02 |
a) yes |
1) yes |
b) no |
According to UNFCCC and EEA data, EU-28 already lowered GHGs emission in 2012 by 21% compared to baseyear 1990. in 2013 EU industry already lowered since 2005 (start of EU ETS) its GHGs emissions by 13,4 %, so most of the reduction potential in the covered industry is already tapped. Main reduction efforts should be targeted at sectors currently outside the EU ETS scope, where potential for cost effective GHGs savings still exists. |
b) no |
EU ETS introduced new externality – “price of carbon” to industrial production and thus lowered competitiveness of EU industry (covered by EU ETS) compared to regions/countries without such a tool. |
a) yes |
As long as there will be no worldwide carbon market, there is a need for addressing competitiveness distortions caused by the tool. Special attention should be also paid for “internal carbon leakage” and accompanied competitiveness disadvantages of EU ETS installations (e.g. heat market and position of EU ETS heat installations compared to ones outside the scope). |
a) very adequate |
Instrument (free allocation) should be also in the future (after 2020) focused on sectors not deemed to be exposed to risk of carbon leakage but still facing competition disadvantages on respective markets such as district heating. |
a) it absolutely keeps the incentive |
Instrument (free allocation) does not interfere with incentive to innovation because it is driven by competition. Incentive for innovation is compromised by different approaches to climate change issues worldwide. |
b) quite proportionate |
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d) there should be no limit to overall free allocation to industry |
Carbon leakage and competitiveness budget should not be administratively limited, number of free allowances should be derived from number of relevant installations and their production data. |
c) a lower share than in Phase 3 |
Innovation support via NER300 (or similar mechanisms) should be limited in next Phase. These approaches were proven not to be most effective mainly thanks to fluctuating price of carbon/subsidy. |
a) yes |
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b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
|
b) no |
|
b) more carbon leakage categories should be defined |
There is urgent need for new category which should cover internal carbon leakage such as heat production sector where installations within EU ETS and outside EU ETS compete. GHGs emission limits imposed just to one segment of the heat market leads to unfair competitiveness distortions. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
Current criteria could be maintained for current two categories of sectors. For new category there should be only criterium incurred carbon costs compared to competitors on same market – e.g. carbon costs for district heating installations included in EU ETS compared to heat installations outside the scope of EU ETS, excessive carbon costs for EU ETS installations should be compensated by free allocation. |
b) other thresholds should be defined. Please specify below |
Current criteria could be maintained for current two categories of sectors. For new category there should be no minimum (threshold) for inclusion to “endangered sectors” category. Until alternative approach for covering GHGs emissions for sectors outside EU ETS will emerge (e.g. “Carbon tax” etc.), EU ETS installations with proven excessive carbon costs (in comparison with competitor on the same market) should be compensated by free allocation. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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d) in line with the duration of ETS Phase 4 |
Validity of the list should be liked with Phase duration in order not to change the rules in the middle of the period. |
c) the approach should be less stringent (please specify) |
Approach should be less stringent in terms of increasing the percentage from 10% to at least 20% of best performing installations in the EU for a given product to cover higher variability among installations thanks to development since 2008 – increasing share of RES, energy efficiency measures, more variety in technological solutions etc. |
b) no |
However approach to benchmark should be revised in order to take into account more variety in technological solutions (see above). |
a) no, the same baseline period chosen for allocation in Phase 3 should be maintained also for post 2020 (Phase 4) allocation |
Phase 4 allocation should be derived from same historical production data (2005-2008 or 2009-2010 period) in order to keep continuity in legislative tools in respective Directive. Historical production levels already determined allocation also for Phase 4 in certain sectors (such as district heating). |
b) yes, there should be deviations with higher allowances for installations facing specific hardships |
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d) yes, in the form of financial compensation at EU-level |
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Less important |
Least important |
Important |
Most important |
|
a) from the Member States' auction budgets |
Innovation support (if any) should be funded from Member States’ auction budgets not from free allocation, which serves as a remedial tool for competition distortions. |
ETS should be complemented by carbon tax for non-ETS installations in order to provide for level playing field on internal EU market between large and small installations. Current setting where carbon price is paid only by large installations disadvantages district heating, CHP and other low carbon technologies. |
e) Non-governmental organisation |
Association of Hungarian District Heating Enterprises |
H-1116 Budapest, Barázda street 20-30 +36 1 700 5700 mataszsz@mataszsz.hu |
a) yes |
1) yes |
a) yes |
|
a) yes |
|
a) yes |
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b) quite adequate |
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b) it largely keeps the incentive |
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c) quite exaggerated |
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b) a higher share than in 2013-20 |
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a) a substantially higher share than in Phase 3 |
|
a) yes |
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b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
|
b) no |
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b) more carbon leakage categories should be defined |
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c) the share of 'carbon costs' in the GVA should be maintained, but 'carbon costs' should be taken into account to the extent that they can't be recuperated in product prices |
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a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
d) in line with the duration of ETS Phase 4 |
|
c) the approach should be less stringent (please specify) |
The enlarging of the efficient district heating and cooling support the growing of the renewable energy share and the increasing of the energy efficiency. Thus the district heating sector significantly contributes the climate, the environment and the energy policy measures of the European Union. In order to the develop of the efficient district heating and cooling as an effective climate- and energy tool needs a less stringent approach. |
a) yes (please specify how often) |
Yes, the benchmarks sholud be revised Phase by Phase. |
c) other (please specify) |
The two highest production data of the ETS Phase 3. should be taken into account as basis years. |
d) both b) and c) |
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c) yes, in the form of additional free allocation |
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Most important |
Less important |
Important |
Least important |
|
a) from the Member States' auction budgets |
|
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e) Non-governmental organisation |
Austrian Association for Building Materials and Ceramic Industries, Austrian Economic Chamber , Legal representative |
Cornelya Vaquette Austrian Association for Building Materials and Ceramic Industries 1045 Vienna, Wiedner Hauptstraße 63 T +43 (0)590 / 900 3529 | F +43 (0)1 / 505 62 40 E steine@wko.at | W www.Baustoffindustrie.at | wko.at |
a) yes |
1) yes |
c) I don’t know |
Reducing energy-related emissions is marginally possible but doing so without reducing industrial production is increasingly difficult. Theoretically there is still a potential for emissions reduction from fuels by initiating a fuel switch towards renewables to reach zero emissions. It is the question if availability of supply, efficiency, quality of the product are guaranteed and if pollution in the air and contamination during the production process can be handled. Certainly, industry in Austria is not able to reduce process emissions, which are significant in our sector and are inevitable. Process emissions cannot be reduced as they are related to the mineralogical properties of raw materials. Austrian ceramic industry has reduced its emissions wherever it makes sense technologically and financially. The abatement potential has become very narrow and further marginal reductions will be very expensive. Reductions are only achievable by reducing industrial production as such or by t |
b) no |
The ETS is meant to reduce CO2 emissions in a cost efficient way. It is not about energy efficiency in a first place. There is no contribution in increasing competitiveness. In fact, a CO2 target and energy efficiency target are often contradicting each other. For example pore forming agents used in the clay block industry can contribute to a lower fuel consumption, however could raise the CO2 output. More generally, the impact of the ETS on industry’s competitiveness can be appreciated only if one considers all the relevant elements. A global commitment is absolutely mandatory to create a shared burden of CO2 emissions reduction. The proposed - 40% target for CO2 has the potential to threaten industrial production in Europe until 2030. Especially SME's are under threat despite the carbon leakage protection system. |
a) yes |
One element of a substantial support for industry is the continuation of the Carbon Leakage List post 2020 but it is not the only measure needed. A substantial reform of the ETS is needed. The fixed -40% CO2 reduction target should be replaced by a flexible relative target (i.e. emissions/output). A global agreement should be the condition for further European commitment. Therefore, the carbon leakage measures are appropriate from an environmental and economic point of view. Post 2020 carbon leakage measures must be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 requires an increased and not a decreased protection against carbon leakage. |
a) very adequate |
Free allocation is in principle an adequate instrument to reduce cost distortions between the EU and competing economies. However, its real effectiveness in achieving such result depends on the details of the technical rules. In particular, free allocation has to be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter new investments. Free allocation shall be done in a dynamic form based on current production levels. That way increased free allocation will be automatically granted to installations/sectors in economic growth. The risk of carbon leakage could be minimized by an international agreement on CO2 reduction targets. |
b) it largely keeps the incentive |
The current free allocation system is based on ambitious benchmarks set at the level of the average emissions of the 10% most performing installations. Taking this average into account, and considering also the cross sectoral correction factor, virtually all installations will have to purchase allowances. Moreover, it should be reminded that free allocation does not primarily aim at creating incentives for reducing emissions, but at preventing the risk of carbon leakage in the industry If industry can rely on sufficient free allocation for an adequate period of time, investment decisions will trigger improvements in a long term run. Review processes shall be adapted to decision cycles in investment intensive industries and adequate financing instruments shall be available. The currently foreseen 5 years interval for a periodic update of the carbon leakage list is definitely too short to guarantee investment and planning reliability. |
c) quite exaggerated |
Especially for SMEs the constant changes of the rule settings creates an administrative overhead that they cannot handle any more. SMEs need to be released from inefficient and overcharged processes that do not justify the output. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage its share should be sufficient to achieve such objective. Post 2020 carbon leakage measures have to be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 requires increased and not decreased protection against carbon leakage. An efficient producer in the EU should not have any competitiveness disadvantage compared to his competitors in third countries. Therefore, its free allocation should not be subject to any reduction. If there is a relative target and a dynamic allocation system in place, no extra limitation in any way is needed. Free allocation can only address the risk of carbon leakage when it is not limited by other provision in the system (like the cross sectorial correction factor). |
e) I don’t know |
ETS is an instrument that must curb emissions at the lowest cost for participants. Dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects in Europe. Moreover, sectors characteristics have to be taken into account. Other technologies than CCS should be promoted as well. |
a) yes |
The primary objective of the EU ETS should remain the reduction of emissions in the most cost-efficient way. Provided that this objective is preserved, the EU ETS can be a tool for the development of low-carbon technologies. However, this must not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the complementarity with existing instruments like Horizon 2020 Framework should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. 100% from the auctioning revenues must be used as a support for industry. This should be a binding requirement for every single member state. It should not be left open as an option of choice for member states. |
a) yes |
As underlined above, the current free allocation system does not address indirect costs related to carbon prices passed on to the industry through electricity prices. Those costs should be addressed for all industries that are at risk of carbon leakage, including those that are currently not included in the ETS State Aid Guidelines Annex II. Other policy measures such as the inclusion of imports in the ETS, should also be explored. In the current system free allocation is heavily impaired by the cross sectorial correction factor. As long as such a limitation is in place, further measures are needed to address the risk of carbon leakage. |
e) I don’t know |
|
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
Besides of trade intensity and direct carbon costs also indirect carbon costs from electricity should be taken into consideration. Access to free allocation should be provided by being on a list of sectors which is created using the cumulative combination of a direct plus indirect carbon cost intensity criteria and a trade exposure metric. |
b) other thresholds should be defined. Please specify below |
The current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, a third set of criteria should be a trade intensity ≥ 5% combined with a carbon intensity ≥ 10%. As there have been changes at NACE-Code Level 4 lower thresholds are needed. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to carbon leakage for a specific industry sector. They do not enable to have a comprehensive picture of the complexity of reality and of the real situation of a sector. For instance, they do not take into account the technological limits of the sector, nor its ability to pass-through the CO2 costs. Therefore, it is very important to leave the possibility of qualifying through qualitative assessments, in particular in case of distortion of competition between products in the construction sector which fall under the EU ETS. |
e) I don’t know |
Currently the revision interval for the Carbon Leakage List is not coping with the ETS period. The new CL List is valid until 2019 while the ETS period 3 ends 2020. This means a lot of confusion and insecurity for business decisions. This has to be avoided to create a investment friendly environment in Europe. Decisions and rules are not to be changed in between and have to be adapted to usual industrial investment time cycles. |
d) I don’t know |
The benchmark approach is an adequate method to set a level that can be reached in reality. It is important for industry to promote an image that they do everything possible in a realistic technical frame. However, the benchmark of the 10% best performing installations is used only to calculate the preliminary free allocation, while the final free allocation is affected also by the cross sectoral reduction factor. Rules on free allocation should be adjusted so that the cross sectoral reduction factor is not applied. |
c) I don’t know |
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d) I don’t know |
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e) I don’t know |
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d) yes, in the form of financial compensation at EU-level |
Implementing an EU-wide financial compensation scheme would avoid distortion of competition within the EU. There should be a unique EU-wide compensation scheme for indirect costs. The compensation should be granted for every installation independently from the member state where it is situated. The current approach, where only some member states provide compensation for specific installations, leads to distortions and has to be avoided. |
Less important |
Most important |
Important |
I don't know |
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a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. 100% from the auctioning revenues must be used as a support for industry. |
Effective measures to address the risk of carbon leakage are needed. Full free allocation can only be an option, if it is not hampered, limited or reduced by other provisions like the cross sectorial reduction factor. |
e) Non-governmental organisation |
Bellona Europa |
Bellona Europa aisbl Rue d’Egmont 15 1000 Brussels Belgium Phone: +32 (0)2 648 31 22 Email: jonas@bellona.org and teodora@bellona.org |
c) not relevant |
The Bellona Foundation is an independent non-profit organisation that aims to meet and fight the climate challenges, through identifying and implementing sustainable environmental solutions. We work towards reaching a greater ecological understanding, protection of nature, the environment and health. Bellona is engaged in a broad specter of current national and international environmental questions and issues around the world. |
1) yes |
a) yes |
Bellona recognises the value of enhancing energy efficiency and renewable energy production in combating climate change, but believes that sufficient emission reductions can only be obtained with CCS in place. If all large factories and coal and gas power plants are equipped with CCS, about half of global CO2 emissions can be eliminated. For many industrial sectors CCS is the only available technology, which allows for deep CO2 reductions. Bellona, therefore, strongly promotes CCS for industry as it can enable the reconciliation of the EU’s climate change mitigation and re-industrialisation objectives. In addition, the need for carbon negative emissions by means of Bio-CCS has been acknowledged in the 5th Assessment Report of the IPCC. The failure to act now will mean Europe will miss its objective to decarbonise by 80-95% by 2050, while damaging its competitiveness and missing out on hundreds of thousands of jobs. |
b) no |
The low EUAs price has failed to incentivise sufficient energy efficiency improvements. Curing the EUAs price requires comprehensive ETS reform to send a strong signal to investors. Bellona recommends the establishment of a discretionary price-based adjustment mechanism to adjust the overall supply of EUAs available at auctions in the market. Bellona advocates for the permanent cancellation of these allowances as opposed to their temporary deposition in a reserve. Establishing a price collar would directly increase the current EUAs price, which in turn would incentivise energy efficiency improvements. A maximum price would address concerns of a too high EUAs price and subsequently those of carbon leakage. Although theoretically beneficial, the introduction of benchmarking came too late at a time when the EUAs price was too low, and thus had only a minimal effect in terms of improving energy efficiency and safeguarding industrial competitiveness. |
a) yes |
In the absence of an international agreement and a level playing field between the EU and its major trading partners, EU industry needs to be provided with transitional measures to protect its industrial competitiveness. Bellona’s position with regards to what the optimal transitional measures would be to address competitiveness disadvantages and carbon leakage is outlined in the section below. |
c) quite inadequate |
Free allocation has resulted in an EUAs oversupply and depressed their price, thereby undermining incentives for efficiency improvements needed to safeguard competitiveness. It has also lead to lowered production and earlier than planned installation closure. To address this, Bellona calls for more stringent closure rules, requiring withdrawal of EUAs where production is dramatically lowered or installations closing. The low EUAs price has resulted in windfall profits to power companies who have passed on the cost of EUAs through product prices. Investment in low-carbon technologies, such as CCS, can be an effective measure, however, only in the long-run. Due to the limited effectiveness and practicability of alternatives to free allocation, Bellona calls for a revision of the largely inadequate carbon leakage list eligibility criteria. Substantial policy reforms are needed to address carbon leakage more directly in the long-run. Free EUAs could be linked to CCS deployment. |
d) it absolutely compromises the incentive |
Free allocation has resulted in an oversupply of allowances in the market which has subsequently depressed the EUAs price to a level insufficient to provide the necessary incentives to installations covered by the ETS to innovate and invest in abatement technologies. |
b) quite proportionate |
There seems to be no major evidence of the administrative burden being overly disproportionate. However, the administrative burden of ensuring free allocation via the implementation of benchmarking should always be minimised to the extent possible. Particular effort should be put into minimising administrative burden for new entrants. |
a) a lower share than in 2013-20 |
Bellona believes that in the long term, free allocation should be abolished and that more comprehensive policy reforms should be introduced to address carbon leakage directly. On the other hand, Bellona would favor increasing the share of the allowance budget dedicated to supporting large-scale demonstration of CCS projects and innovative renewable energy for the purpose of addressing carbon leakage. Bellona welcomes alternative approaches to addressing carbon leakage, such as targeted support for CCS technologies which are optimal for obtaining significant emission reductions while allowing for industrial production to continue and therefore limiting carbon leakage. The next section further elaborates this point. |
a) a substantially higher share than in Phase 3 |
This substantially higher share of the post-2020 allowance budget should be dedicated in particular to the support of large-scale CCS demonstration projects. For the smooth establishment of this expanded NER300 programme Bellona urges the EC to consider these recommendations: ensure greater flexibility in criteria setting and implementation; adapt eligibility criteria per sector; ensure evaluation decisions in consortium with all relevant DGs and stakeholders beyond industry; avoid delays in implementation of the expanded NER300; the programme should be open and rolling with calls for proposals and awards every 2 years; ensure a higher share of eligible cost per project is covered by the EC, in particular in the cases concerning projects with community-wide benefits. However, any projects should require a substantial financial or in-kind commitment from industry, and in cases of high community support share, stipulation should be added to safeguard against project non-delivery. |
a) yes |
Bellona urges the establishment of a CCS fund to drive the development of shared projects and infrastructure of EU relevance. Investors in CCS need a stable, predictable pathway for deployment. The fund should, therefore, cover both capex and opex to ensure CCS plants are dispatched and first movers are compensated for taking the lead in CCS deployment. An adequate financial support scheme for large-scale integrated CCS demonstration projects would drive down abatement costs significantly, thereby reducing the risk of carbon leakage. It is imperative that this fund is established sooner than 2020 to avoid delays in the much needed support to innovation and demonstration. Bellona calls for the EU to draw on the experience of CCS financing overseas, where we have observed ongoing government- and state-level support towards CCS development. While this is not based on carbon emissions trading it shows that it is possible to deliver innovation provided an effective incentive framework. |
c) other types of funding (please specify) |
Funding could come from the following sources: free EUAs from the NER non-allocated in 2020 and those allocated to plants that will close before 2020 (under the IED regulation); part of the 2014-2020 budget; 'Smart or Inclusive Growth' or the 'Sustainable growth: Natural Resources' lines of the Multiannual Financial Framework 2014-2020; Structural funds, Coal and Steel Research Fund, H2020, Connecting Europe Facilities and the tax on financial transactions. In order to ensure an optimised use of EU funds, it is essential to come up with a solution allowing ETS-covered installations to benefit from Structural Funds over 2014-2020. |
a) yes |
As outlined in our response to question 9, Bellona recommends the establishment of a CCS fund to provide extra support to first movers to drive the development of shared projects and infrastructure of EU relevance. An adequate financial support scheme for large-scale integrated CCS demonstration projects has the potential to drive down abatement costs significantly, thereby reducing the risk of carbon leakage in energy intensive sectors in the ETS. Moreover, as discussed in our response to question 4, Bellona believes that in the long term, substantial policy reforms may be needed to address carbon leakage more directly rather than relying on compensation through free allowances. New solutions to reduce carbon leakage should also be encouraged, such as for instance the linking of free allocations to the deployment of low- carbon technologies such as CCS. |
a) the present two groups should remain |
Introducing multiple categories of exposure could result in situations where the largest share of free EUAs is granted to EU industrial sectors whose economic competitiveness vis-à-vis major trading partners is most threatened or already diminished. This entails a risk of allocating free EUAs into industrial sectors whose decline in Europe is likely to continue as a result of factors other than the EUAs price. Moreover, having multiple categories in place and therefore differentiated treatment for each would add administrative burden and could entail implementation issues. Nevertheless, it is necessary to revise the existing carbon leakage criteria as well as to define additional ones, in order to ensure that the sectors categorized as exposed to carbon leakage have been detected on the basis of objective criteria which provide a comprehensive picture of the level of exposure of each sector. Bellona’s position regarding revision of eligibility criteria is elaborated below. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
The calculation of carbon costs has been overestimated due to misleading assumptions. It should instead be based on an average of recent years’ prices or forward market prices. The use of the trade intensities criterion fails to directly address the question of increased CO2 emissions. This may be addressed by using weighted measures of trade, where the weights equal the relative CO2-intensity of the trading partner. The trade-intensity criterion is only a proxy indicator of the potential for foreign producers to make up any shortfall in EU production. Foreign producers may be capacity-constrained and have a limited ability to expand in the market. Additional factors to consider are companies’ ability to pass through carbon costs; price elasticity of demand, the degree of competition within the sector, and carbon abatement opportunities. It is important to note the potential for factors to evolve over time following changes in transport costs, and the appearance/exit of firms. |
b) other thresholds should be defined. Please specify below |
The EC’s rationale behind the three routes to qualification and the thresholds used in each has been unclear. Currently, it is possible to qualify entirely through trade-intensity criterion, even if the industry emits zero CO2 emissions. And indeed, most sectors presently on the carbon leakage list have qualified through the trade intensity criterion. Bellona believes that the combination of the carbon costs and trade intensity criteria, and in particular the trade intensity criterion on its own, does not provide an accurate assessment of carbon leakage exposure. Only the combination of both the cost intensity, taking into account abatement opportunities, and inside-outside firm market shares, together with information on market conditions and customer price elasticity, is able to provide a full picture. It is important that when assessing the carbon leakage exposure of a firm one looks at the carbon costs incurred in combination with the firm’s ability to pass on this cost. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The existing quantitative criteria do not provide an adequate assessment of the carbon leakage exposure of a given sector. Therefore, maintaining qualitative criteria is necessary. However, it is important to note that the usage of qualitative assessments can be problematic because national data on electricity usage, as well as other variables, are not available for all Member States, thus forcing the EC to rely on private surveys. This could undermine the transparency of the process. Despite these issues, qualitative criteria are needed to complement quantitative criteria in order to provide the full picture of carbon leakage exposure. Further qualitative criteria which would improve the assessment of carbon leakage exposure include projected production investments within and outside the EU, and the contribution of each sector and product to the EU economy taking into account the whole value chain, and including the transportation and recycling of the products. |
c) shorter (please specify) |
Free allocation is not the optimal policy measure for addressing carbon leakage in the long run. The validity of the carbon leakage list should therefore be shortened in the post-2020 period with aim to abolish it completely in the long-run. Bellona sees innovation and investment in low-carbon technologies, such as CCS, as the most effective means to address carbon leakage concerns in the post-2020 period. CCS is an essential technology for mitigating CO2 emissions from large-scale fossil fuel use and is also the only decarbonisation option available for many industrial sectors. Bellona also welcomes the design of new mechanisms to address concerns of industries exposed to high international competition and to limit carbon leakage. The validity of the carbon leakage list should be shorter in order for allow the EU to respond to potential far reaching emission reduction commitments from major trading partners and avoid locking itself into certain levels of protection. |
b) the approach should be more stringent (please specify) |
The introduction of benchmarking in the third trading period was welcomed by Bellona. Benchmarking rewards the most efficient installations with the highest share of free allowances which in turn incentivises improvements in energy efficiency and boosts Europe’s industrial competitiveness. Nevertheless, it is important to note that the ‘historical dimension’ which has been criticised in grandfathering remains in benchmarking too, with the use of historical production activity levels in the calculation of allowance entitlement. Despite this departure from predominance of grandfathering to benchmarking, the concept of grandfathering remains, however, now being associated with production level rather than emission level. The use of historical reference levels is associated with the same problems of grandfathering. Bellona welcomes the employment of benchmarking based on the last 2 years of production. |
a) yes (please specify how often) |
It is necessary for benchmarks to be revised to reflect the technological state of the art, but it is important that this revision is not undertaken too regularly to ensure predictability and certainty for investors. Bellona welcomes the employment of benchmarking based on the last 2 years of production. |
c) other (please specify) |
The current allocation methodology employed in the ETS is based on historical production data and does not take into account market dynamics, production changes over time or the future production outlook of installations. This means that the amount of free allowances will remain unaffected irrespective of changes in production. Output-based allocation would be an effective means to reduce the carbon cost per unit of output and can prevent situations of over-allocation in times of economic recession. However, an output-based approach raises concern over removed direct incentives for efficiency, as installations would be provided with perverse incentives to emit more CO2 in order to receive more allowances in future. Output-based allocation also relates to transparency and availability of installation-specific information on production activities. As a result, Bellona is not in favor of an output-based approach but believes allocation needs to reflect the recent economic reality. |
a) no, there should be no deviations |
There should be no deviations for individual installations in order to guarantee fair competition between companies and production sites. In the very exceptional case of installations facing specific hardships, the situation of the entire sector should be investigated, so that potential adjustment measures applied to that site does not distort fair competition. In general, however, Bellona does not favor granting a higher share of allowances to installations facing special hardship as this would trigger a competition among installations in trying to prove their eligibility for deviation and would undermine the objective of the scheme. Moreover, providing deviations goes against the objective of decreasing the share of free allocation and eventually abolishing it completely. |
b) no, and there is no need for financial compensation by Member States, either |
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Least important |
Important |
Less important |
Most important |
This is the case in particular for innovation support to CCS technologies. |
c) from both |
|
During the first two trading periods we have observed a low and volatile EUA price which has failed to incentivise sufficient abatement efforts and investment in clean technologies. The EC's proposal to establish an MSR, however, does not address this problem directly. Instead it aims to address the existence of a large allowance surplus by adjusting the short-term auction supply without affecting the long-term cap. Bellona believes that the ambiguous design features of the envisaged MSR will undermine its ability to stabilise the EUA price and ensure a well-functioning ETS. Bellona doubts the ability of the ETS to deliver the EUA price of EUR 35-40/tonne necessary for CCS deployment and therefore calls for the provision of support and transitional measures to facilitate the deployment of low-carbon technologies. Bellona in particular regards CCS as a crucial technology which could allow EU industry to increase its competitiveness while attaining necessary CO2 emission reductions. |
e) Non-governmental organisation |
Carbon Market Watch / Nature Code |
Carbon Market Watch Nature Code - Centre of Development & Environment Rue d'Albanie 117 B-1060 Brussels, Belgium Tel =32 2 335 36 66 email: info@carbonmarketwatch.org |
c) not relevant |
Carbon Market Watch is an environmental NGO |
1) yes |
a) yes |
At this moment, EU’s energy intensive industries are operating under economically unfavorable circumstances in which the growing markets are situated in upcoming economies like China and India and resources prices are increasingly volatile. In this situation, European industries benefit from becoming more efficient and innovative than the rest of the world because it helps them to gain a competitive advantage. Policies that promote energy efficiency and low-carbon innovations will also reduce greenhouse gas emissions in industry. Reducing greenhouse gas emissions and maintaining European industrial production are therefore two sides of the same coin. |
b) no |
At this moment, the EU ETS fails to help EU industry to become more energy efficient. Weak targets and an overgenerous use of offsets have led to a large surplus and a low carbon price. This means that European industry does not receive a sufficient price signal to produce more efficiently. European industry is therefore at risk of falling behind in deploying low-carbon and state-of-the-art technologies compared to their competitors abroad. For example, the most efficient cement production currently occurs in Asia, particularly in India and China. Also in the steel sector, the European installations often perform worse than the global average. |
b) no |
In a world where an increasing number of countries are implementing climate policies that put a price on carbon there is little need for special measures to support EU industry to address non-existing competitiveness disadvantages. It would be better for the EU to provide support for the frontrunners that want to invest in low-carbon innovations in Europe, instead of subsidizing the least efficient industries to continue polluting. |
d) very inadequate |
Free allocation has failed as a policy instrument to address the risk of carbon leakage as carbon-intensive industries have still passed through the opportunity cost of the CO2 allowances to their consumers even when receiving these allowances for free (CE Delft, 2010). In order to keep and stimulate investment in Europe, it might be better to shift from production to investment support (e.g. from free allocation to an innovation fund). |
d) it absolutely compromises the incentive |
Free allocation has significantly reduced the incentives to innovate in order to reduce emissions. By receiving an overgenerous amount of free allocation, often much more than needed to cover the industry’s emissions, there is very little incentive to become more efficient or innovative. European industry is therefore at risk of falling behind in deploying low-carbon and state-of-the-art technologies compared to their competitors abroad. Currently, the most efficient cement production occurs in Asia for example, particularly in India and China. In the steel sector, the European installations often perform worse than the global average. |
e) I don’t know |
|
e) there should be no free allocation post-2020 |
Full auctioning reflects the polluter-pays-principle, is the most transparent allocation method and rewards efficiency and climate-friendly investments. |
a) a substantially higher share than in Phase 3 |
In order to leverage investments in efficient, clean and pioneering industrial and renewable technologies in the EU, companies should be entitled to receive financial support for innovation, R&D and deployment of safe and sustainable low-carbon technologies. The current NER300 programme only provided specific support for the energy sector, while post-2020 there should also be support for breakthrough technologies for the industrial sectors. More of this type of innovation support is necessary in the transition to a low-carbon society. |
a) yes |
To maintain competitive advantage, investments in innovation and policies driving innovation are needed. In order to leverage innovation investments in industrial sectors, a portion of the ETS auctioning revenues should replenish an industrial innovation fund dedicated to energy savings and renewable production processes (e.g. magnesium-based cement production, coke-free steel production). Complementary regulations, such as CO2 standards and phase-out pathways for high-carbon production must be introduced, to ensure finance is followed by performance. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
|
b) no |
The Carbon Leakage Evidence Projected, commissioned by DG CLIMA, found that during 2005-2012 there were no occurrences of carbon leakage. Even so, during part of this time industrial sectors received more free pollution permits than the amount of CO2 they emitted, as highlighted in the Commission’s Impact Assessment accompanying the Backloading proposal. Ex-post evidence hence shows that there is no need for additional measures to address the risk of carbon leakage, in contrast, the current provisions should be significantly reduced. |
d) there is no need for a carbon leakage list, all industrial installations should be treated as not exposed |
Full auctioning is the most cost-efficient, simplest, fairest, and most transparent way to allocation allowances, fully reflecting the polluter-pays-principle. After 2020, full auctioning should be obligatory for all ETS sectors. In order to prevent carbon leakage for a limited number of sectors genuinely at risk of carbon leakage, these sectors should be entitled to receive financial support for innovation, R&D and deployment of low-carbon technologies. This also helps keeping investments within Europe. |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
The methodology to identify sectors being prone to a risk of carbon leakage is deeply flawed. The current methodology is based unrealistic parameters like the 30 euro carbon price assumption while comparable efforts undertaken by global players are completely ignored. The criteria for the post-2020 period, to identify sectors that will receive innovation support, should only look at the combination of the share of carbon costs and trade intensity. The carbon costs should use a realistic carbon price, for example the average carbon price of the three years before, and take into account ex-post evidence on the amount of carbon costs that were passed on through to consumers (e.g. carbon costs should be taken into account to the extent that they can’t be recuperated in product prices). Also, trade intensity should exclude trade with countries that have taken comparable climate efforts, including countries participating in the 2015 global climate deal. |
b) other thresholds should be defined. Please specify below |
Only the combination of several criteria (e.g. carbon costs and the trade intensity) should be maintained to identify sectors that are deemed to be exposed to carbon leakage risk and entitled to receive innovation support. However, the current threshold should be made more strict, e.g. sectors should only be identified to be exposed to a carbon leakage risk in case both the trade intensity and the carbon costs in their GVA are above 40% as a minimum. |
b) no, all criteria should be based on simple metrics and linked to clearly defined thresholds |
The assessment of the exposure of sectors to the risk of carbon leakage should be made in the most transparent, democratic and objective way possible. In case the quantitative criteria are deemed to be insufficient, these criteria should be reviewed and revised in a co-decision procedure. |
c) shorter (please specify) |
The sectors deemed to be exposed to a risk of carbon leakage should be identified using the most up-to-date information. The criteria and data used should be regularly reviewed and updated taking into account a realistic (historic) carbon price parameter and exclude third countries that have taken or will take in the near future comparable climate efforts. The validity of the post-2020 carbon leakage list should therefore be limited to two years or less. |
b) the approach should be more stringent (please specify) |
Currently, European industry is at risk of falling behind in deploying low-carbon technologies compared to their competitors abroad. To address this risk, the product specific benchmarks should be defined on the basis of the most efficient installations worldwide, not only those in Europe, post-2020. From 2021 onwards, the benchmarks should hence be set at the level of the best available (in terms of greenhouse gas emission performance) product on the (global) market, similar to the top-runner approach in Japan. |
a) yes (please specify how often) |
The benchmark should be regularly reviewed and updated to reflect the technological state of the art and be revised at least every two years. |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
The allocation for the post-2020 phase should be based on the most recent data available. Production levels in 2016-2018 (or 2016-2019) could hence be the basis for post-2020 allocation. |
c) yes, there should be deviations with lower allowances for installations enjoying very favourable circumstances |
Up to now, industrial sectors often received more free pollution permits than the amount of CO2 they emitted. During 2008-2011, the steel sector was able to build up a surplus of more than 300 million CO2 allowances, while the cement sector received 200 million allowances more than needed (according to the EC’s impact assessment accompanying the Backloading proposal). In order to avoid overcompensation of industry at the expense of taxpayers, installations enjoying very favorable circumstances, should be allocated less allowances. The ex-post data on the surplus accumulated in the sector could be used to lower the future allocation of free allowances with an equivalent amount. |
b) no, and there is no need for financial compensation by Member States, either |
In order to keep the incentive for industry to switch to low-carbon energy sources, they should not be compensated for indirect costs. Innovation support could be directed to enable certain industrial sectors with relative high indirect costs to become more efficient. |
Most important |
Less important |
Important |
Least important |
|
a) from the Member States' auction budgets |
Free allocation shields industrial sectors for any carbon price and therefore reduces their incentive to invest in innovative, low-carbon technologies. At the same time, free allocation does not properly address investment leakage. In contrast, using auctioning revenues will better help investments in low-carbon solutions within Europe and helps to address both production and investment leakage. |
The Commission should regularly assess the amount of windfall profits of industry, as well as the monetary value of their surplus allowances, and make this information publicly available, so that European citizens are aware of the size of the transfer of money from taxpayers to industry. |
e) Non-governmental organisation |
CEMBUREAU, the European Cement Association |
Mrs Claude Loréa, Deputy Chief Executive & Industrial Policy Director 55 rue d'Arlon - 1040 Brussels - Tel: +32 2 234 10 55 - Email: c.lorea@cembureau.eu |
a) yes |
1) yes |
a) yes |
The cement industry is fully committed to reducing GHG emissions in line with overall EU policy objectives.This has been demonstrated by investments over the past 20 years which have driven down CO2 emissions from clinker production and by our roadmap to go much further in the coming decades. To achieve this, industry needs to innovate and invest.This requires a return on investment above the cost of capital and a policy framework that promotes the competitiveness of the sector and allows for a secure access to raw materials and affordable energy prices.The cement industry in Europe needs a stable legal framework with predictable CO2 prices in order to justify and allocate scarce investment funds to realize CO2 emission reduction ambitions. 2030 targets have to take into account each sector specific roadmap. Differentiated levels of efforts are needed for different sectors (manufacturing industry, power, building, and transport) based on the ability to pass the cost on to the end user. |
b) no |
Measures to decrease energy consumption & improve resources efficiency will de facto reduce CO2 emissions.Some industries like cement have very high energy costs as a proportion of GVA or profit which means that energy efficiency is an integral part of manufacturing.EU ETS emphasis is GHG efficiency & in this regard it does put pressure on businesses to become more GHG efficient. In doing so EU ETS places CO2 costs on power generators & these costs are passed on to electricity consumers.There are limitations to which added costs act as a driver for efficiency before imports become more attractive.Furthermore, the cement & lime industry are unique due to the fact that the majority of GHG emissions are not caused by energy use from fuel combustion but come from the raw materials themselves.Around 60% of total CO2 emissions from clinker production are released directly from limestone.On the other hand, energy efficiency & CO2 reduction represents conflicting goals when looking eg: at CCS. |
a) yes |
The EU has aspirations of leading on CC policy but globally unequal carbon pricing has the ability to shift trade patterns. In order to direct investments to growth and jobs in Europe, the cement industry needs a global level playing field, including imports and exports: climate change is a global problem that needs a global solution. EU policy can only incentivise companies to aggressively work on further emissions reduction if there is predictability in and equality in carbon prices and if it is part of an overall industrial policy ensuring companies to be competitive in the international arena. This also applies to energy costs. For cement, energy costs are especially important representing 30 % of operational costs with European costs being substantially higher than in the US, Russia and plants in North Africa. Transitional measures are needed to bridge the gap between the EU and other countries. Free allocation is the most effective transitional mechanism. |
b) quite adequate |
As long as emissions do not have the same cost in different countries, a level playing field can be achieved most effectively by equalising measures such as free allocation. The limited evidence of leakage and empirical studies demonstrates (see the report by Vivid Economics last June), in part, that free allocation is working. However, it should not be assumed that free allocation is insulating operators from all of the ETS costs as it does not mean ‘full free allocation’ because of the CSRF and as some operators will face higher costs than others depending on the allocation base year activity. Furthermore, the indirect costs of ETS have not been selected for compensation for cement in the Commission guidelines creating a distortion of competition with competitors. So, not only does the cement industry face the full indirect costs of ETS but competing construction sectors are able to be compensated for their additional costs related to indirect CO2. |
a) it absolutely keeps the incentive |
With free allocation based on benchmark, the incentive to invest is provided by the benchmark. The magnitude of the residual incentive is a function of carbon costs as a proportion of GVA. Cement has one of the highest CO2 costs/GVA of any industrial sector so the residual effort is greater than in most sectors. In its search for a legal framework that fosters a competitive environment, CEMBUREAU has considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The EU cement industry has a relatively flat benchmark curve indicating that there is a narrow gap between the best and the worst performers; this limited level of abatement potential makes the task of emissions reduction more difficult in the cement sector compared to many other sectors. |
b) quite proportionate |
Overall, the administrative burden is quite proportionate but the system is extremely disproportionate for small/trivial combustion sources. In many cases these minor sources were not part of the benchmarking exercise and should not be included in reporting. |
d) there should be no limit to overall free allocation to industry |
There should be free allocation if there isn’t an international agreement which places all competing manufacturers on an equal footing. Until certain conditions can be met with regard to the veracity of the schemes within other countries then transitional arrangements need to be maintained. Free allocation is the most effective transitional arrangement. The share of allowances dedicated to free allocation should be sufficient to avoid carbon leakage. To uphold this principle that carbon leakage should be minimized, the cross sectoral correction factor should be replaced by an adjustment to the auctioned amount to maintain the cap trajectory. That does not mean “a free ride for industry” but it would mean that sufficient allowances are provided for the most efficient producers because at present the CSCF has the ability to reduce free allocation beyond what is technically possible. |
e) I don’t know |
There are too many uncertainties on what the post 2020 allowances budget will be for the cement industry to be able to decide what share of the budget should be dedicated to such innovation support. The EU ETS does not encourage investment in new technology. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) yes |
To date, the NER 300 has been ineffective at stimulating novel CO2 reduction projects in the cement industry. The power generation sector which is passing on investment costs has benefitted most from the NER 300. The cement sector is not experiencing the same level of investment de-risking. The cement industry needs - an investment enhancing climate should encourage investments over long term (30 y) cycles in a capital intensive industry. Legal stability and CO2 price predictability are key to achieve this goal - Safeguards against price fluctuations in market based policy instruments; which objectives, if kept, should be clearly defined and not be prone to abuse for speculation purposes - an innovation policy which provides clear incentives for breakthrough technologies in a cost-effective way. Policy makers should consider hypothecation (earmarking) of revenues from allowance auctions and direct innovation support to those sectors facing the greatest abatement challenges. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Given the high costs associated with breakthrough technologies, funding from auctioning revenues should account for both capital and operational cost of projects. There should in addition be a ring fenced fund for the manufacturing industry. |
a) yes |
In its search for a legal framework that fosters a competitive environment, CEMBUREAU has considered an improved ETS with a performance based free allocation for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions cost impacts. In order to protect “carbon leakage” sectors’ competitiveness, the system could foresee either an adjustment to the overall cap to the auction amount or a sectoral cap with the inclusion of importers. However, a carbon pricing mechanism which is market-based and prone to wide fluctuations militates against effective investment. CEMBUREAU is ready to explore mechanisms which deliver price stabilization and global carbon price convergence. Some of the initial reflection is further elaborated in the annex to this paper and CEMBUREAU is ready to engage in a thorough reflection of a climate policy and energy policy that is fully integrated in a single industrial growth policy. |
a) the present two groups should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. One should consider a special treatment for process emissions e.g. full free allocation as those emissions are not linked to energy efficiency and are irreducible by their very nature. |
a) the present criteria should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. Nevertheless, as a static indicator trade intensity is of limited validity/conclusiveness. It is based solely on historic data and does not reflect future developments, i.e. resulting from changing cost patterns, at all. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria e.g. a complete loss of 30% of GVA is normally economically not acceptable for any industry or sector. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
EU trade and economic data is not always exact and its comparability with the EUITL CO2 data not always appropriate so there will always be a need to hear special cases. |
d) in line with the duration of ETS Phase 4 |
It is essential for the predictability of the system to introduce as little changes as possible in the course of a trading period; hence the validity of the list of sector exposed should be in line with the duration of the ETS phase 4. |
c) the approach should be less stringent (please specify) |
The benchmark would be calculated in a statistically solid way and be updated periodically to ensure predictability. It should be set at an ambitious but reasonable level and should not be distorted by statistical outliers. This can be achieved by defining percentile (e.g. 10%-percentile) or e.g. the average of a range including the 5% to 15% top performers of specific direct emissions (excluding the extreme outliers between 0% and 5%). Only this way, the benchmarking methodology will achieve sufficient statistical robustness for international application in ETS system. |
a) yes (please specify how often) |
Benchmark should be updated between two trading periods depending on what has been achieved but not during one trading period. One should consider a special treatment for process emissions e.g. full free allocation as those emissions are not linked to energy efficiency and are irreducible by their very nature. |
c) other (please specify) |
In its search for a legal framework that fosters a competitive environment, CEMBUREAU has considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The historic activity level (HAL) should be more closely aligned to recent production to avoid surplus allocation e.g. the average of the preceding 3 years. In this context, CEMBUREAU considers the recently released EcoFys study (Dynamic allocation for the EU Emissions Trading System, Enabling sustainable growth, 20 June 2014) and its allowances allocation reserve as an interesting step forward. However, a more recent HAL has its potential downsides for installations that have extended shutdowns or breakdowns, provision will be necessary to deal with exceptional HAL circumstances. |
a) no, there should be no deviations |
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c) yes, in the form of additional free allocation |
CEMBUREAU believes that EU Compensation should be granted for indirect emission impact where carbon leakage vulnerability is a combination of direct plus indirect emission cost. There is no need for two state aid guidelines and the compensation for indirect costs could be internalized in the ETD by providing free allocation for indirect CO2. |
Less important |
Important |
Most important |
I don't know |
CEMBUREAU regrets the focus on carbon capture and storage and believes that carbon capture and re-use should be equally considered. CEMBUREAU believes that funding should be technology neutral. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) from the Member States' auction budgets |
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See full CEMBUREAU position papers in Annex (Doc 4354 & 4396) - Post 2020 Climate and Energy Legislation - The cement industry's reflections on a post-2020 climate policy & Post 2020 Climate and Energy Legislation proposal by the European Cement Industry. In addition, CEMBUREAU believes that the debate on the MSR should not be carried out in isolation from the broader ETS structural reform. |
e) Non-governmental organisation |
Cement Manufacturers Ireland |
Mark McAuley Ibec Confederation House 84/86 Lower Baggot Street Dublin 2 Direct: +353 1 605 16 52 Email: mark.mcauley@ibec.ie Web: www.ibec.ie |
a) yes |
1) yes |
a) yes |
The cement industry will reduce GHG emissions in line with overall EU policy objectives. Investment by the industry has driven down emissions and the industry needs to innovate and invest more. To do this, there needs to be an economic return for the industry and a policy framework that promotes the competitiveness of the sector and allows for a secure access to raw materials and affordable energy prices. The cement industry in Ireland needs a stable legal framework with predictable CO2 prices in order to justify and allocate scarce investment funds to realize CO2 emission reduction ambitions. 2030 targets have to take into account each sector specific roadmap. Differentiated levels of efforts are needed for different sectors (manufacturing industry, power, building, and transport) based on the ability to pass the cost on to the end us |
b) no |
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a) yes |
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b) quite adequate |
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a) it absolutely keeps the incentive |
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b) quite proportionate |
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d) there should be no limit to overall free allocation to industry |
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e) I don’t know |
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a) yes |
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b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
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a) yes |
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a) the present two groups should remain |
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a) the present criteria should remain |
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a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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d) in line with the duration of ETS Phase 4 |
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c) the approach should be less stringent (please specify) |
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a) yes (please specify how often) |
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c) other (please specify) |
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a) no, there should be no deviations |
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c) yes, in the form of additional free allocation |
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Less important |
Important |
Most important |
I don't know |
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a) from the Member States' auction budgets |
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e) Non-governmental organisation |
Central Europe Energy Partners (CEEP) is a Central European organisation, comprised of energy and energy-intensive companies and scientific institutions .It was established in June 2010, and now has 23 members from 5 countries, representing more than 300,000 employees, and an overall revenue of Euros 50 billion. CEEP is very active at the EU level (see the activities of CEEP on the website: www.ceep.be ). |
Central Europe Energy Partners (CEEP) Rue Froissart 123-133, Etterbeek (B-1040 Brussels). Transparency Register number: 87738563745-94 tel.no.+3228807297 e-mail:brussels@ceep.be |
a) yes |
1) yes |
b) no |
This question is not precise enough. We think that there will be some industries where there is still a possibility to decrease CO2 emissions without a major detrimental effect for them, but there are many industries where further decreases are not possible as all technological possibilities are exhausted. Here, one can quote the examples of the refinery, steel ,power and chemical industries where BAT technologies are deployed. Of course we cannot exclude new technologies in future but they have to be adopted by some players on the EU and world markets. That is why when discussing CO2 reduction we have to refer to each sector of industry separately and calculate the level of reduction which will be possible to gain.That is why the ETS system should be adequately restructured, based on benchmark principles, to allow industries the chance to develop and reduce CO2 emissions, but to the extent which is technologically possible. |
b) no |
The question combines two things: first, technological progress and secondly, CO2 emissions. Technological progress means better, more efficient and competitive products fulfilling the needs of the demand. In the majority of cases, technological progress is combined with the more efficient use of energy, which means less CO2 emissions. Many world economies support such a model of development, which in the case of CO2 reduction means that if such a reduction is "natural" it is acceptable and not harmful to the economy. The best example is the US emitting 17.0 tonnes per capita, yet in the EU, the average emissions are 7.5 tonnes per capita. Obama's programme declares a 30% reduction by 2030, whereas the US emits today 56% more that the EU. The competitiveness of the EU has decreased in the last 5 years versus the non- EU economies. Why? We have to invest in new technologies not applied in other countries. These are extra costs at $ 600 per tonne. So, how can we be competitive ? |
a) yes |
If there is no possibility to change the ETS system (as suggested in the answer to Q. No. 1) based on benchmarks for different sectors of industry, then definitely derogation (transitional measures) covering 100% of them should be introduced for the whole 10 year period (2020-2030). At the same time more funding should be provided for development of new technologies leading to a CO2 decrease. The new proposal of a linear 2.2% yearly decrease is absolutely not acceptable as it is not based on any realistic technological approach, but is bureaucratic, which has nothing to do with science. |
b) quite adequate |
Free allocation seems to be one of the solutions, if it covers 100% of the needs of energy and energy- intensive sectors and is not subjected to a 2.2% Linear Reduction Factor. We need of course, a special benchmark for each sector, as the refinery industry has, which describes the limits of the CO2 emissions. If the limits are transgressed, then the particular company has to buy the EUA on the market. Anyhow, 2.2% has to be deleted from the ETS. |
a) it absolutely keeps the incentive |
According to CEEP, a driving force for the industry is its competitiveness ,as we said in answer to Q No. 2. That is why the companies should invest primarily in their effectiveness ,which means a decrease of CO2 emissions as a natural effect. Free allocations give industry the chance to save its funds for investments connected with their effectiveness, which anyhow leads to the CO2 decrease. A very good example is that of new coal power plants, which are more effective in comparison to older ones by more than 15%, which translates into a decrease of CO2 emissions by more than 30%. At the same time, power plants save 15% of coal and their entire production of power is cheaper (more competitive). |
d) absolutely exaggerated |
It should be a simplified system prepared for each sector of energy and energy-intensive industry, revised in 5 year intervals as technological progress should be taken into consideration. In this system, special attention should be paid to indigenous sources of energy and those companies which are importing for example: coal or gas from outside the EU, should have the their benchmark decreased by 10% to 15%. This will boost usage of the UE's resources. Refineries should be exempted from this system as they have their own already prepared benchmarking system. |
d) there should be no limit to overall free allocation to industry |
No restrictions should be applied nor bureaucratic limits (e.g. CSCF system) as concerns the volume of the EUA at the market. We should remember that the ETS is not an autonomous system, as many stock exchange players would see it, but it should perform a passive role to measure CO2 emissions only. The EU should discuss at two yearly intervals how to solve running problems of competitiveness, unemployment and industrial development. A 10 year perspective is really too long a distance to tackle such problem solving. More CO2 reduction results in the price of CO2 coming down even to zero Eur. Lower prices means the system concerning CO2 emissions is working more efficiently as we are now witnessing. The budget should not be profiting from the malfunctioning of the industry but supporting it and finding funds from other sources, if necessary. Please note that Australia whilst combating CO2 emissions has resigned from its ETS as it is detrimental for its economy. |
e) I don’t know |
Really, it is very difficult to answer this question , as we see fundamental differences in understanding the main approach to CO2 emissions. According to us, new developments concerning a decrease of CO2 emissions should be supported starting from power production efficiency, no matter if it is based on coal , gas or other sources of energy such as RES and the utilisation of CO2 (CDU). We should eliminate CO2 emissions by supporting fossil fuels, which are the cheapest and quickest way of reducing CO2. NER does not allow it. CCS is still too expensive a method. Funds should be effectively invested because it is an economic, practical matter and not a philosophic/bureaucratic one .Less money from the allowances is better but this money gathered should be put into a CO2 emissions decrease, without any restrictions (fossil fuels, RES, etc.), whichever is the most effective for any particular country. |
b) no |
The concept of NER 300 , which is based on market pricing, will incur a lot of contradiction. According to this concept, a higher EUA price means that it is better for this concept because there will be more funds and everything will be done to keep the EUA price at the highest possible level and a bureaucratic CSCF will be applicable. Such an administrative approach ignores market forces. The lowest EUA prices are better for development and competitiveness of the EU’s industry. New funds should be based on other sources which will not create unnecessary tensions. |
c) other types of funding (please specify) |
Firstly, we should define what "low carbon technologies” means. A definition should cover all technologies leading to a CO2 emissions decrease, no matter it is ETS or non- ETS sector. In the overall ETS sector, the energy industry, including energy- intensive, should be covered. In such a system, there should be diversified funding, including NER300, an extended Horizon 2020, the EU budget , SET programmes, etc. The EIB should play its role as well, no matter what the source of energy (RES or fossil fuels) including energy- intensive industries (chemical, steel, refineries) ,and so on. |
a) yes |
From today’s perspective, to be competitive the EU’s energy- intensive industry should be given the same chances as competitors from outside the EU. It seems that free allowances, are not a guarantee for further investment in the EU and limitation of carbon leakage. We suggest excluding energy and energy -intensive industry from the ETS until the end of 2030, and introducing carbon duties, which will create for these industries, an equal platform for international competition. Exclusion from the ETS does not mean that industry will stop investing into CO2 reduction, as explained in the answer to Q. no. 2. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Unfortunately,the EU has been losing its competitiveness in the last few years despite becoming a world leader in combatting CO2 emissions.The CO2 emissions per capita in the US is 17.0 tonnes,whereas in the EU it's 7.5 tonnes.It's estimated that a decrease of 1 ton of CO2 emissions costs $ 600.We in the EU have spent much money decreasing emissions and, as a result, became uncompetitive producing 28 million unemployed people.This situation concerns not only companies which are on the carbon leakage list but also those which are not.The major example is the energy sector where generated power should be affordable,due to fossil fuels and RES.More money for R&D means development of the EU’s industry,competitiveness,and a decrease in unemployment and CO2 emissions.Positive results will come thanks to market forces and not bureaucratic decisions.Moreover,we should protect the EU’s market by imposing carbon duties,to provide a level playing field to EU companies in international competition |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
The concept of carbon leakage is to give chances for those sectors which are on the carbon leakage list to survive and develop using very complicated criteria. Our main criteria should allow further development of industry by creating benchmarks for particular sectors, taking into account a given number of companies The number of companies as a base for determination of CO2 emissions will vary from sector to sector. According to us, the EU’s industry should be free from any restrictions unless they are imposed by associations of the sector ( for. ex. chemical, refinery, steel, power industries) or by the EU, to elaborate suitable benchmarks different for each sector. We should not be more stringent than other countries ,but we should spend more money on R&D. |
b) other thresholds should be defined. Please specify below |
Please go to our answer to Q no. 13. Any threshold limiting free development of the industry is detrimental to the EU’s industry. A key question is why a threshold of 30% is applicable, but not 35% or 25% ? That is why, we advocate deletion of any barriers except sectorial benchmarks, but by the end of 2030, even such barriers should be suspended to allow for the revival of the industry. |
b) no, all criteria should be based on simple metrics and linked to clearly defined thresholds |
See our answers to Q no. 13 and 14. |
b) longer (please specify) |
There should be no limits for the EU’s industrial development as concerns CO2 restrictions, unless imposed by sectorial approval. If we have no such system, then carbon leakage should be applicable till the end of 2030, comprising all sectors as now and fossil fuel power plants. |
c) the approach should be less stringent (please specify) |
A benchmark of 10% for the most efficient installations cannot be applicable to each sector. For ex. it probably should be suitable for the refinery industry, though some specialists are of the opinion that it should be 20% , including some refineries from outside of the EU. Not every industry is so uniform as the refinery industry. For ex. for chemical, steel, fossil fuel power plants, 10 % should be too low a criteria and international sectors should be taken into consideration to make the benchmark more balanced. |
a) yes (please specify how often) |
The benchmark should be revised every 5 years, but it should not be applicable to existing industry, which has already started its investments, but to new industry only. The ”old” industry should have derogation for its activities for the normal period of depreciation acceptable in its sector. Anyhow, derogation should not be longer than 25 years. The point of the start of investment should be defined separately. |
c) other (please specify) |
We do not know what the production levels will be in 2016-2018, and what will be the final criteria. We should not wait for any criteria, as we have to invest now, not to lose the competitive edge. It seems to be very risky. That is why, anyone investing today and not fulfilling the future requirements, should be granted the derogation period until full depreciation of the investment. This concerns investments in fossil fuel power plants as well. |
b) yes, there should be deviations with higher allowances for installations facing specific hardships |
These deviations with higher allowances which help industry are expected and should be normal. The ETS, as we said above, should not be the regulator but should only measure CO2 emissions. If some installations enjoy a very favourable situation, it is probably due to R&D achievements or heavy investments. Let’s leave them to enjoy the fruits of their activity and not deprive them. Do not create a system of backloading, as it is detrimental to the entrepreneurial approach. |
c) yes, in the form of additional free allocation |
Member states’ compensations should be kept to a minimum. This is better as the system should be unified for the whole EU. First of all, we are not agreeable with the existing solutions incorporated in the ETS, as it should be fundamentally reformed and derogation for the whole of industry should be introduced and last till the end of 2030. If we really want to encourage development of the EU’s industry making it more competitive and decreasing unemployment, we should remove the existing barriers. If this is not possible, the ETS should be based on the sectorial benchmarks, and the yearly coefficient of 2.2% should be repealed, as it is artificial and bureaucratic. The backloading system should also be repealed ,due to its bureaucratic and anti-market principles. In case the ETS is not satisfactorily reformed, we should provide opportunities for free allocations, for which the member states are entitled to take decisions based on sectorial benchmarking. |
Important |
Less important |
Most important |
Least important |
As we represent different sectors of industries starting from energy through to energy-intensive (e.g. refinery, chemical, steel), it is very difficult to prioritise at which stage the process of innovation should be strengthened. This should be discussed sector by sector starting from concepts up to the commercial scale. |
b) from free allocation |
The innovation support should be based on free allocations granted by a particular Member State for at least five years. These allocations should be unlimited, but based on sectorial criteria, the same as for the whole of the EU. |
The questionnaire seems not to have been prepared in a very objective way and questions are not exhaustive, suggesting support for a new ETS (2020-2030). We should first reform the ETS, and then Carbon Leakage as “a security valve” to the ETS. We fundamentally do not accept: 1. Exclusion of the fossil power industry from carbon leakage, which as in Germany and Poland is very effective in CO2 reduction. The price of power should be affordable and competitive, but it is at least twice as much as that of non-EU competitors; 2. Re-industrialization implies more CO2 emissions, and we should count emissions in tonnes per capita, as they vary from country to country. A decrease by percentage is not justified. 3. A LRF of 2.2% as it is artificial and not based on scientific and technological principles; 4. The same point (3) concerns MSM, as the ETS is not for stock-exchange players, but should measure CO2 emissions in the EU helping the regulators decide how to develop the EU’s industry. |
e) Non-governmental organisation |
Change Partnership |
Sanjeev Kumar Founder, Change Partnership 26 Rue d'Edinbourg 1050 Brussels |
b) no |
1) yes |
a) yes |
There is no direct correlation between GHG abatement and a reduction in industrial production. The benchmarking process highlighted numerous instances of GHG abatement using current technology. The power sector has many clean- carbon options and roadmaps produced by industry also accept the potential for abatement. Abatement can also be achieved through the consumption of clean energy. |
b) no |
EU ETS helps energy efficiency only when industry is exposed to the carbon price for its emissions. In the meantime, additional measures such as energy efficiency regulation for industry is required to ensure that they reduce their exposure to energy. Reducing risk of exposure to GHG emissions will make EU industry more competitive as other key trading partners increase their GHG abatement legislation. |
a) yes |
measures to support investment in abatement is acceptable. Compensation is not unless the victims of climate change are also compensated financially. Support should come in the form of targeted investments in capacity. If the carbon price is not apply to all installations the incentive to abate is also removed reducing the cost-effectiveness of support. |
d) very inadequate |
There is no 'free' allocation. Subsidies are given to polluters to continue polluting at the cost of lives and livelihoods. Subsidising polluters perverts the 'polluter pays' principle and undermines the effectiveness of the market to incentivise abatement. There is no case for increased subsidised allocation without a full assessment of actual and shadow carbon prices, market structure and concentration, trade flows, substitution potential and historic investment patterns. |
d) it absolutely compromises the incentive |
subsidised allocation removes the incentive to reduce GHG emissions. Companies have passed on the opportunity cost for this subsidised allocation which encouraged profiteering from polluting activities. The closure rules also encourage companies to run plant so that they can receive their full allocation of allowances which further highlights the perverse nature of subsidised allocation. |
d) absolutely exaggerated |
auctioning is the most cost-efficient, transparent, burden-less and fair way of distributing allowances. Current benchmarks were gamed by allowances installations the ability to select the baseline from which the benchmarks commence. |
e) there should be no free allocation post-2020 |
Until the case for the existence or possible threat of leakage is proven it is impossible to discuss whether there is a need for support. Modelling should take into account key trading dynamics - market structure and concentration, nature, structure and concentration of demand, cost pass-through, historic investments, EU market and investment trends compared against global market and investment trends and GHG abatement legislation in other countries relative to their purchasing power. Once this has been established consideration of potential support can be discussed. |
a) a substantially higher share than in Phase 3 |
The allowances should come from a combination of a 'haircut' on the Market Stability Reserve (MSR) together with a dedicated fund of allowances. This should replace any 'new entrants reserve'. Importantly, allowances should not be monetised but used as collateral to leverage additional funding. |
a) yes |
A new NER300-type mechanism can be extended to cover the commercial-scale demonstration of industrial products provided: i) allowances are used for collateral and do not return to the market for at least 30 capital lifetime ii) tenders are made on a competitive basis supporting key technologies that require commercial-scale demonstration iii) there is a clear market pull-regulation commitment for technologies developed through this mechanism iv) Intellectual property rights are partly owned by the EU with a view to making them publicly accessible to speed up innovation v) a claw-back facility is applied where demonstration projects are not delivered. |
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
An NER300-type mechanism is optimal provided it is based on the following criteria: i) allowances are used for collateral and do not return to the market for at least 30 capital lifetime ii) tenders are made on a competitive basis supporting key technologies that require commercial-scale demonstration iii) there is a clear market pull-regulation commitment for technologies developed through this mechanism iv) Intellectual property rights are partly owned by the EU with a view to making them publicly accessible to speed up innovation v) a claw-back facility is applied where demonstration projects are not delivered. |
b) no |
First the threat of leakage needs to be modelled taking into account key trading dynamics - market structure and concentration, nature, structure and concentration of demand, cost pass-through, historic investments, EU market and investment trends compared against global market and investment trends and GHG abatement legislation in other countries relative to their purchasing power. Once this has been established consideration of potential support can be discussed. |
d) there is no need for a carbon leakage list, all industrial installations should be treated as not exposed |
Note that this question covers installations whilst other questions relate to sectors. Only genuine installations should receive subsidy on the condition that it accompanies an investment plan to upgrade and improve its GHG intensity |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
The main criteria should ensure that that the impact of the ETS on GVA together with geographic location, access to market from third countries, market structure and concentration, demand, substitution and historic investment trends to isolate assets that are being sweated, are analysed. Support should not be for a sector but installations which have a high geographical propensity to adverse competition. Subsidies should be conditional on investment plans. Research from FTI Consulting (The impact of the ETS exemptions for sectors at risk of carbon leakage on EU competitiveness, 2014) indicates that greater degrees of sophistication are needed to understanding sectors. For example, the steel sector consists of blast furnace and electric arc furnace production technology. Blast furnace have low indirect emissions but high emissions which is the opposite for electric arch furnaces. The same study identifies feedstock issues having greater impact on the chemical sectors than the ETS |
b) other thresholds should be defined. Please specify below |
There is considerable difference between the possibility of 'leakage' and the legal definitions in the ETS directive. The 30% trade intensity criteria was introduced to artificially protect the cement sector. There is no justification for this especially as the two largest market players are in the process of merging leading to further concentration. |
b) no, all criteria should be based on simple metrics and linked to clearly defined thresholds |
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c) shorter (please specify) |
Globe Europe assessed that 186 countries have some form of climate legislation in place. More countries are legislating at present. As this is the key determinant for carbon competitiveness the list needs to be reviewed at least once prior to 2030. The more optimal solution would be to update the list automatically as more key competitor counties finalise GHG abatement legislation. |
b) the approach should be more stringent (please specify) |
The 10% threshold is ineffective for some sectors as they have a flat line in terms of GHG intensity of production. Additional factors should be used to drive investment in inefficient installations such as a more stringent threshold or updating of the benchmark with the latest global technological advancements such as CCS in the US, Algeria, Brazil as well as the China, with particular emphasis in industrial sectors. |
a) yes (please specify how often) |
Yes, but this should not lead a to full-scale revision of current benchmarks. In particular, the study should not the development of operational CCS in the US and the demonstrations in industry and power generation in China. |
c) other (please specify) |
A two-year baseline is sufficient and should continue to be based on verified emissions. 2016-2020 does not fit this criteria. Either 2013-2014 or 2014-2015 should be used to enable legislation be agreed in 2016 at the earliest. Agreeing ETS legislation early is important for market confidence. |
a) no, there should be no deviations |
Deviations add additional confusion and market distortions and should be avoided. |
b) no, and there is no need for financial compensation by Member States, either |
Subsidising energy consumption removes the abatement signal from the EU ETS. Subsidies cannot be harmonised at an EU level because there is no single European energy market and in some instances, energy prices are regulated. Therefore, prior to any subsidy, which should be no more than the actual ETS component of electricity prices, should be accompanied by a mandatory annual, independent energy efficiency audit and a clear plan for investments in savings measures. This should be conducted by National Administrations. |
Important |
Less important |
Most important |
Least important |
Commercial demonstration must be supported as other funds are available for research and small-prototyping. Additional consideration must be given to worker skills and regional initiatives for low-carbon industrial hubs. Furthermore, financial support should be targeted towards regions and workers were high-carbon capacity is closed down. |
c) from both |
There should be a combination of sources used to build and replenish the fund. Allowances should be taken from member state auction budgets, a 'haircut' to the Market Stability Reserve so that when the Reserve holds 500 million allowances, excess allowances are transferred to the innovation and just transition fund. Subsidised allocation should be reduced to allow for more allowances to be used as collateral to access private finance. |
Specific support is needed for workers and regions which are at the forefront of the low-carbon transition. Additional financing is needed to assist the transformation of regions as well as supporting workers into low-carbon employment. The funds being proposed should be used to support these activities. |
e) Non-governmental organisation |
CIROM- the Romanian Association of the Owners from the cement industry and other mineral products for constructions |
Dracea Marinela- Executive Director Str. Barbu Vacarescu nr. 80, Etaj 2, Sector 2, Bucuresti, Romania Tel/Fax: + 40 21 230 01 50 Mobile: + 40 752 095 935 marinela.dracea@cirom.ro |
a) yes |
1) yes |
a) yes |
The cement, lime industry from Romania is fully committed to reducing GHG emissions in line with overall EU policy objectives. This has been demonstrated by Investments over the past 20 years which have driven down CO2 emissions from clincher production. To achive this, Industry needs to innovate and invest. The Industry in Europa needs a stable legal framework with predictable CO2 prices in order to justify and allocate scarce investent funds to realize CO2 emission reduction ambitions. 2030 targets have to take into account each sector specific roadmap. Differentiated levels of effort are needed for different sector (manufacturing Industry, power, building and transport) based on the ability to pass the cost on to the end user. |
b) no |
Measures to decrease energy consumption and improve resources efficiency will de facto reduce CO2 emissions. Some industries like cement have very high energy costs as a proportion of GVA or profit which means that energy efficiency is an integral part of manufacturing. The EU ETS emphasis is GHG efficiency and in this regard it does put pressure on businesses to become more GHG efficient. In doing so EU ETS places CO2 costs on power generators and these costs are passed on to electricity consumers. There are limitations to which added costs act as a driver for efficiency before imports become more attractive. Furthermore, the cement and lime industry are unique due to the fact that the majority of GHG emissions are not caused by energy use from fuel combustion but come from the raw materials themselves. Around 60% of total CO2 emissions from clinker production are released directly from limestone. On the other hand, energy efficiency and CO2 reduction represents conflicting goals when |
a) yes |
The EU has aspirations of leading on CC policy but globally unequal carbon pricing has the ability to shift trade patterns. In order to direct investments to growth and jobs in Europe, the cement industry needs a global level playing field, including imports and exports: climate change is a global problem that needs a global solution. EU policy can only incentivise companies to aggressively work on further emissions reduction if there is predictability in and equality in carbon prices and if it is part of an overall industrial policy ensuring companies to be competitive in the international arena. This also applies to energy costs. For cement, energy costs are especially important representing 30 % of operational costs with European costs being substantially higher than in the US, Russia and plants in North Africa. Transitional measures are needed to bridge the gap between the EU and other countries. Free allocation is the most effective transitional mechanism. |
b) quite adequate |
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a) it absolutely keeps the incentive |
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b) quite proportionate |
Overall, the administrative burden is quite proportionate but the system is extremely disproportionate for small/trivial combustion sources. In many cases these minor sources were not part of the benchmarking exercise and should not be included in reporting. |
d) there should be no limit to overall free allocation to industry |
There should be free allocation if there isn’t an international agreement which places all competing manufacturers on an equal footing. Until certain conditions can be met with regard to the veracity of the schemes within other countries then transitional arrangements need to be maintained. Free allocation is the most effective transitional arrangement. The share of allowances dedicated to free allocation should be sufficient to avoid carbon leakage. To uphold this principle that carbon leakage should be minimized, the cross sectoral correction factor should be replaced by an adjustment to the auctioned amount to maintain the cap trajectory. That does not mean “a free ride for industry” but it would mean that sufficient allowances are provided for the most efficient producers because at present the CSCF has the ability to reduce free allocation beyond what is technically possible. |
e) I don’t know |
There are too many uncertainties on what the post 2020 allowances budget will be for the cement industry to be able to decide what share of the budget should be dedicated to such innovation support. |
a) yes |
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b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Given the high costs associated with breakthrough technologies, funding from auctioning revenues should account for both capital and operational cost of projects. |
a) yes |
In its search for a legal framework that fosters a competitive environment, CIROM has considered an improved ETS with a performance based free allocation for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions cost impacts. In order to protect “carbon leakage” sectors’ competitiveness, the system could foresee either an adjustment to the overall cap to the auction amount or a sectoral cap with the inclusion of importers. |
a) the present two groups should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. One should consider a special treatment for process emissions e.g. full free allocation as those emissions are not linked to energy efficiency and are irreducible by their very nature. |
a) the present criteria should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. Nevertheless, as a static indicator trade intensity is of limited validity/conclusiveness. It is based solely on historic data and does not reflect future developments. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria e.g. a complete loss of 30% of GVA is normally economically not acceptable for any industry or sector. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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d) in line with the duration of ETS Phase 4 |
It is essential for the predictability of the system to introduce as little changes as possible in the course of a trading period; hence the validity of the list of sector exposed should be in line with the duration of the ETS phase 4. |
c) the approach should be less stringent (please specify) |
The benchmark would be calculated in a statistically solid way and be updated periodically to ensure predictability. It should be set at an ambitious but reasonable level and should not be distorted by statistical outliers. This can be achieved by defining percentile (e.g. 10%-percentile) or e.g. the average of a range including the 5% to 15% top performers of specific direct emissions (excluding the extreme outliers between 0% and 5%). Only this way, the benchmarking methodology will achieve sufficient statistical robustness for international application in ETS system. |
a) yes (please specify how often) |
Benchmark should be updated between two trading periods depending on what has been achieved but not during one trading period. One should consider a special treatment for process emissions e.g. full free allocation as those emissions are not linked to energy efficiency and are irreducible by their very nature |
c) other (please specify) |
In its search for a legal framework that fosters a competitive environment, CEMBUREAU has considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The historic activity level (HAL) should be more closely aligned to recent production to avoid surplus allocation e.g. the average of the preceding 3 years. In this context, CIROM considers the recently released EcoFys study (Dynamic allocation for the EU Emissions Trading System, Enabling sustainable growth, 20 June 2014) and its allowances allocation reserve as an interesting step forward. However, a more recent HAL has its potential downsides for installations that have extended shutdowns or breakdowns, provision will be necessary to deal with exceptional HAL circumstances. |
a) no, there should be no deviations |
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c) yes, in the form of additional free allocation |
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Less important |
Important |
Most important |
I don't know |
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a) from the Member States' auction budgets |
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e) Non-governmental organisation |
Climate Action Network Europe (CAN Europe). Transparency Register number: 55888811123‐49 CAN Europe is Europe's largest NGO coalition working on climate and energy issues. With over 120 member organisations in more than 25 European countries, CAN Europe works to prevent dangerous climate change and promote sustainable climate and energy policy in Europe. |
Contact for this consultation reply: Julia Michalak EU Climate Policy Officer Climate Action Network (CAN) Europe asbl Rue d'Edimbourg 26 1050 Brussels, Belgium Telephone: +32 (0) 2 894 46 88 E-mail address: julia@caneurope.org |
c) not relevant |
CAN Europe does not represent any industrial sector. |
1) yes |
a) yes |
In the last years many industrial sectors (e.g. chemical, cement production) were very successful in improving efficiency and decreasing CO2 intensity. It is therefore reasonable to expect that this trend will be maintained, especially that a wide range of technological options to reduce emissions remains unexploited. Beside improvements in total factor productivity (resource efficiency, energy efficiency, heat recovery, increased recycling) and fuel and materials substitution, a number of breakthrough innovative technologies may become economically viable within the next decades (e.g coke-free steelmaking process, magnesium- based cement production, alternative ammonia production from renewable electricity for nitrogen fertilisers and others). Also cross-industry optimisation can lead to significant efficiency improvements and further emission reductions. Source: Technology Innovation for Energy Intensive Industry in the United Kingdom, The Centre for Low Carbon Futures, 2011. |
a) yes |
In principle the EU ETS represents an important incentive for energy savings. It helps the EU industry to become more energy efficient provided that: • Carbon price signal is strong enough to encourage energy efficiency improvements in a long-term perspective. • Benchmarks are ambitious and regularly reviewed to reflect technological progress. • Carbon leakage protection measures are well designed and do not encourage operation of inefficient installations. An adequate policy framework, including a robust EU’s carbon market, is necessary to deliver significant energy efficiency improvements (through enhanced recycling rates, investments in energy saving technologies and process improvements) in paper, steel and chemical sectors. Source: Overview of Energy Efficiency measures of European Industry, DG for Internal Policies, Policy Department A, Economic and Scientific Policy, requested by the European Parliament's ITRE Committee, 2010. |
a) yes |
A limited number of sectors and subsectors, competing globally and proven to be exposed to a risk of carbon leakage, should be entitled to targeted support for innovation. Financial and regulatory assistance for low-carbon R&D, pilots and deployment should be applicable only to a very limited number of sectors and subsectors identified on the basis of fact-based independent assessment and strict, realistic and transparent criteria. At the same time to improve the competitive position of its industries the EU should be actively working towards reaching a meaningful global climate agreement in Paris. According to the European Commission 2030 Impact Assessment achieving the global climate agreement would significantly strengthen EU industries' position on the global market. |
d) very inadequate |
Free allocation proved to be an ineffective measure with numerous side-effects. It resulted in misuse of public assets, increased overall costs of climate policy and failed to stimulate investments in emission reductions and innovative technologies. In some cases rules governing free allocation discouraged asset rationalisation and energy efficiency improvements, as to obtain the maximum level of free allowances some producers kept using less efficient installations or spread production over several factories. It cannot be concluded that free allocation was the decisive factor for preventing carbon leakage: while up to now there is no evidence that carbon leakage occurred, there is evidence that in ETS Phase I and II energy intensive industries passed on carbon costs to consumers. Sources: Carbon Leakage Evidence Project, Ecorys, 2013; Staying with the leaders, Climate Strategies, 2014; Does the energy intensive industry obtain windfall profits through the EU ETS? CE Delft, 2010. |
d) it absolutely compromises the incentive |
Free allocation does not provide a direct and meaningful financial incentive to innovate for reducing emissions. Free allocation incentives status quo as installations receiving free allowances are not stimulated to search for innovative ways to reduce their emissions and cut direct costs of purchasing ETS allowances. So far there is no evidence that free allocation in the Phase I and II led to increased innovation and corresponded emission reductions. |
e) I don’t know |
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e) there should be no free allocation post-2020 |
Full auctioning is the most cost-efficient, simplest, fairest, and most transparent way to allocate emission allowances. With no evidence of carbon leakage occurring in the ETS Phases I and II and no evidence of free allocation being an effective measures protecting European energy-intensive industry from being disadvantaged due to EU carbon pricing policies, free allocation should be abandoned from 2020 onwards. |
a) a substantially higher share than in Phase 3 |
After 2020 the number of sectors benefiting from financial support under the innovation programme(s) should increase and a pace of technological improvement should be accelerated. In order to successfully support low-carbon innovative solutions in both power and energy-intensive sectors, as well as to deliver a level of funding necessary to effectively boost research and demonstration projects, a significantly higher share of allowances should be dedicated to support post-2020 innovation mechanism(s). |
a) yes |
To promote industrial innovation and deployment of low-carbon technologies in energy-intensive sectors, a new financial mechanism should be established as post-2020 carbon leakage protection measure. Access to the fund should be guaranteed for a limited number of sectors and subsectors classified as being exposed to a risk of carbon leakage. |
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
A new system supporting low-carbon industry innovation should be transparent, operated by an independent institution, and separated from the NER300 mechanism to avoid competition between power and carbon-intensive sectors. While designing the new financial tool the EU should build on its expertise in governing the NER300, integrating lessons learned and adjusting the mechanism to specific features characterising long and high risk investments in carbon-intensive industries. |
b) no |
As the question above suggests that ‘free allocation and EU-level innovation support’ are the right tools to address the risk of carbon leakage in energy intensive industries, CAN Europe stresses that we do not consider free allocation to be an effective measures shielding EU industry against carbon leakage (please see our reply to questions number 4 and 5). |
a) the present two groups should remain |
For a sake of simplicity the two categories of sectors – those deemed to be exposed and those not deemed to be exposed to the risk of carbon leakage - should remain, however the criteria to define those exposed to the risk of carbon leakage should be significantly modified. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
• The current criteria combining the share of carbon costs AND the trade intensity should be maintained and complemented by assessment of sectors’ abatement potential and possibility to pass on carbon costs to consumers. Carbon price parameter and trade patterns must be regularly reviewed and updated to reflect real carbon price and developments of regional and national climate and energy policies in third countries. • The current stand-alone risk assessment based solely on ‘trade intensity’ or on ‘additional cost’ should be abolished. |
b) other thresholds should be defined. Please specify below |
After 2020 the current stand-alone criteria, together with corresponding 30% thresholds, should be abolished. Sectors should not be any longer classified as exposed to the risk of carbon leakage only because of > 30% share of 'carbon costs' in their GVA or > 30% trade intensity with third countries, at these stand-alone criteria do not at all reflect what is an impact of EU climate policies on sectors' competitive position on the global market. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
From 2021 onwards qualitative assessment should be applicable not only to add to the carbon leakage list additional sectors not qualifying according to the quantitative criteria, but also to deduct from the list those sectors that due to significant abatement potential, ability to pass carbon costs on in market prices and high profit margins are not exposed to the risk of carbon leakage even if they meet quantitative thresholds. |
e) I don’t know |
Validity of the post-2020 list of sectors deemed at risk of carbon leakage should be decided after COP21 Climate Summit in Paris. It should be correlated with duration of the EU ETS Phase IV and decisions on key features of the global climate agreement (duration of the commitments period, reviews). At the same time the European Commission should be entitled to periodically review and update the list in case of major changes in crucial parameters taken into account to develop the list i.e. carbon price, trade patterns, technology breakthrough and introduction of climate change policies in third countries. |
b) the approach should be more stringent (please specify) |
From 2012 onwards product specific benchmarks should be defined to reflect the average emission performance of the most efficient installations WORLDWIDE. Data required to establish global benchmarks can be collected in the context of UNFCCC climate negotiations, with support of the IEA and UNIDO. Global benchmarks would effectively stimulate technological innovation necessary in the EU to successfully compete with its major trade partners. |
a) yes (please specify how often) |
After 2020 the benchmarks should be regularly reviewed to reflect global technological progress. Improvements in GHG efficiency should be reflected in regular upfront adjustments while commercialisation of breakthrough technologies should lead to one-off upgrades. |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
If free allocation is maintained post-2020 the most recent production data should be used to determine allocation level. More than decade old 2005-2008 and / or 2009-2010 baselines would not be suitable to define free allocation from 2021 onwards. Similarly to benchmarks production data should be periodically revised. |
a) no, there should be no deviations |
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b) no, and there is no need for financial compensation by Member States, either |
The current system of compensation for indirect CO2 costs to be decided by individual Member States exacerbates risk of intra-EU competition distortion. It proved to be greatly misused with energy-intensive sectors demanding compensation even if no increase of power prices due to EU climate policies has occurred. With other carbon leakage protection measures in place indirect cost compensation should be abolished as a support measure post-2020. |
Important |
Less important |
Most important |
Least important |
At all stages of the innovation process public support should remain complementary to private investments made by companies and installations’ operators. |
b) from free allocation |
Allowances dedicated to support post-2020 innovation mechanism should come from free allocation (if maintained after 2020). That would be the fairest solution as revenues gained through sale of these allowances would benefit carbon-intensive industries. Moreover such a design would not affect Member States revenues and would not result in additional pressure on other sectors covered by the EU ETS. |
CAN Europe would like to express its concerns about the proposal from several stakeholders to introduce system of ‘dynamic allocation’, based on the real production levels, as of 2021 onwards: • Dynamic allocation would remove an incentive for emission reductions through innovation and modernisation of production facilities, increased efficiency, improved recycling and product and material substitution; • It is unclear how monitoring, reporting and verification of emission data would be secured in case of dynamic allocation with market players likely to be reluctant to share sensitive information about real production level; • Dynamic allocation may discourage asset rationalisation and incentivise increase in production in order to obtain more free allocation; |
e) Non-governmental organisation |
EUROPEAN COUNCIL FOR AN ENERGY EFFICIENT ECONOMY (ECEEE) |
European Council for an Energy Efficient Economy (eceee) Sveavägen 98, 4tr 113 50 STOCKHOLM Sweden Phone: +46 8 673 11 30 'nils@eceee.org' |
c) not relevant |
Eceee is Europe's largest energy efficiency NGO, membership-and knowledge-based, devoted to promoting energy efficiency at all levels of policy-making and implementation. |
1) yes |
a) yes |
The recent eceee Industrial Summer Study presented a large number of scientific peer-reviewed papers that gave considerable supporting evidence to the fact that there is today a large cost-effective energy savings potential in most industrial sectors, and in some sectors a very large potential http://www.eceee.org/industry According to eiif.org, the savings potential for industrial insulation alone is 37Mt Co2 per year or 4% of total industrial emissions.. But more than the current emissions allowance price is needed to realise this potential. Innovative technology support schemes, tax incentives for energy efficiency investments, mandatory audits and implementation requirements are also necessary, e.g..Article 8 in the EED (ENERGY EFFICIENCY DIRECTIVE) |
a) yes |
While EU ETS does provide an incentive to increase energy efficiency and thereby reduce GHG emissions, especially CO2, the low market prices for allowances—around 5 euro now—due to a very large imbalance following the economic recession, and the generous provision to industries of free leakage allowances, this effect is not strong. It would be better to remove the surplus of allowances, using back-loading and early use of the proposed stability reserve as much as possible. Also, remove most industries from the EU ETS system and provide them instead with innovative technology support, and allow or promote fiscally-incentivised voluntary energy efficiency agreements between industry and MS Governments. If these are linked to binding sectoral energy savings and emissions reductions targets that are monitored and measured, they will help provide the stable and long-term investment environment needed to ensure adequate investments in the different sectors. |
a) yes |
Until there is a global harmonised ETS agreement in place, the EU must provide innovative technology support, including MS Government-sanctioned voluntary agreements to improve energy efficiency and reduce emissions, using clearly interpreted provisions in the new State Aid Rules, with e.g. energy and environmental tax rebates for documented and monitored improved energy efficiency, could be a possibility. Also, legislation to require mandatory implementation of recommendations from the mandatory audits carried out by larger enterprises under Article 8 of the EED would help to keep industry competitive. A whole, EU long-term framework of energy efficiency targets, measures and policies is necessary to complement the EU ETS, even after there is a global ETS system in place. |
c) quite inadequate |
Because a very large share of EU ETS industry is on the leakage list, and because the method for selection of sectors to be on the list is not very dynamic in that it fails to adequately reflect changing circumstances, the leakage list and system of free allowance allocations obviously has its shortcomings .However, it seems currently to be the best way to handle leakage, unless industry is removed from ETS and given other, even stronger incentives, policies and measures to reduce energy consumption and emissions, while improving competitiveness. This possibility should be considered in the upcoming ETS reform. |
c) it largely compromises the incentive |
Because of the current surplus of allowances in the ETS, and the imbalance between supply and demand, the use of free allocations serves mainly to perpetuate a system that is not working properly. Ina transitional phase, free allowances may be necessary to prevent carbon leakage, but with a complete reform, other incentive structures of a more sectoral nature would be more effective. These could include financial support for implementation of recommendations from the mandatory audits for large enterprises in Article 8 of EED, for example. The long-term nature of the new post 2020—and even earlier- phase of ETS needs to ensured to ensure investments. Moreover, the natural complementarities between energy efficiency policies and measures on the one hand, and the ETS on the other, need to be re-affirmed. They need to be carried out in parallel with each other, not as competing frameworks. |
b) quite proportionate |
Based on information obtained from a number of involved enterprises, once learned, it is not much of a burden. |
d) there should be no limit to overall free allocation to industry |
As long as the concept of free allowances is used for the sole purpose of preventing carbon leakage, it would not make sense to limit it. However, once a better system of preventing carbon leakage is developed, using e.g. technology innovation support, voluntary tax rebate -incentivised schemes, etc, and other mandatory, voluntary and flanking policies and measures, the concept of free allowances can be done away with. |
a) a substantially higher share than in Phase 3 |
CCS is not a proven technology and should not be automatically linked to EU ETS, even if it does in theory seem to allow the use of more cheap coal without increasing CO2 emissions. If linked to ETS, NER300 programmes should include more renewables and energy efficiency, including non-ETS, such as energy efficiency in low-energy buildings and integrated renewables in low-energy buildings.This would of course require a major reform of the EU ETS, also allowing recycling of ETS auctioning revenues to non ETS-covered installations. These ETS installations should also be allowed to receive credit for investments in non-ETS, or downstream sectors. An example of this could be if insulation manufacturers could receive credit for installing thermal insulation in buildings and crediting the saved CO2 for the estimated lifetime of the building. |
a) yes |
Recycling of EU ETS auctioning funds is an important source of co-financing. It and other financing schemes should be expanded considerably, across sectors, and include non-ETS sectors such as buildings. As mentioned above, this will require a major reform of the ETS system, breaking down the silos between energy end-use, such as in buildings and non-ETS industries, and those installations covered by ETS. The system needs to made much more fungible. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
See answer above. Recycling of ETS funds is a key source of financing and needs to be made mandatory and earmarked. It should also be allowed to cover non-ETS sectors, including building renovations, and crediting should be allowed against ETS obligations. |
a) yes |
The question of imbedded CO2 in imported goods, raw materials and semi-manufactured goods needs to be addressed soon, why not now? This is the backside of the carbon leakage coin. It is difficult to do this without global harmonisation, but that is what the WTO is for, isn’t it? This imbedded carbon could then be taxed according to global norms when it is imported. |
b) more carbon leakage categories should be defined |
Until the concept of the carbon leakage list, free allowances and other forms of support for technical innovation are reformed completely, it is necessary during a transitional period to allow more categories to receive either credits or free allowances, including for investments in the non-ETS sectors, especially end-use energy savings, such as in building renovation, where vast quantities of CO2 mitigation are possible. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
Trade intensity, as well as non-recuperable carbon costs should be maintained. (Even the recuperable carbon costs for certain green products should be taken into account because of their negative societal costs, e.g., the higher cost of green products and the impact on CO2 in the end-use phase.) In addition, new criteria should be introduced, in the form of credit allowed for ETS installations with a positive downstream footprint for the products they produce when these products are used in the end-use phase. This would require a number of new categories in Question 12, above. Such sectors producing products where the application of the product in the use phase saves as much as twenty-five, fifty or a hundred times the CO2 generated in the manufacture of the same quantity of the product. One example of this in insulation material. These criteria would require both a technical and a market assessment and some simplifications to obtain a manageable number of categories. |
b) other thresholds should be defined. Please specify below |
The assumptions behind the 30% are not all that clear and would require more transparency, perhaps even revision. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The criteria need to be complemented with the above-mentioned criteria for those industries producing green products that when the products are applied or used, they have a very positive CO2 footprint downstream, i.e., the carbon-mitigating products manufacturing sector, or green , low-carbon end use technologies. |
b) longer (please specify) |
Each phase is 8 years. The list should be changed at the same time as the phase, i.e, having the same lifetime, allowing for special circumstances, such as new entrants. |
a) the present approach of average of the 10% most efficient installations should remain |
At the same time, since the EU ETS is soon up for a major reform, this opportunity should be used to see if another approach, such as a cost-optimal level of CO2 emissions can be developed and used in a competitive market. |
a) yes (please specify how often) |
Because some foreign markets may soon be ahead of the EU in developing their decarbonisation technology, some consideration should also be given to non-domestic producers of such future imports. These products may be well below (i.e. better) than the state of the art in the EU. Therefore, not only revision of benchmarks based on EU technology, but globally to a certain extent.. |
c) other (please specify) |
The actual rather than the historical production level should be used, i.e. a dynamic allocation method, provided confidentiality can be assured. If historical data must be used, it would be better to use a moving average of the most recent three years, also in the interest of having a more dynamic system. |
e) I don’t know |
This is part of the core dilemma of the whole EU ETS: Can ETS function without intervention as a “true” market-based system, or will it often need correcting from outside? Answering this question should be one of the main objectives of the impact assessment for the upcoming ETS reform. |
d) yes, in the form of financial compensation at EU-level |
For internal market reasons, the compensation system needs to be more harmonisded, and the State Aid rules evenly applied. However, as the theory of the ETS impact on end-use savings was to take place through the rising prices of electricity and other energy carriers due to decarbonisation, it shows that the ETS is not really consistent or coherent. This also needs to be looked at closely in the impact assessment before the upcoming reform. To be taken into account is also the indirect effect of having electricity price increases included in the calculation of the benchmark. |
Less important |
Important |
Least important |
Most important |
A useful concept to consider for innovation support is called “technology procurement” or publically-funded specification of new applications to solve new problems. It has been applied with considerable success in a number of countries, including Sweden. |
c) from both |
A coherent and mutually-reinforcing system for funding and financing is required, with ear-marked funds from MS auctioning, and guarantees of public co-financing from whatever sources are available. ) |
A.The reformed ETS needs a well defined role: to help allocate optimally low-carbon investments, not to replace the EU framework of policies, measures and targets for energy efficiency and renewables. ETS is a natural complement to energy efficiency and RES, not a competitor. B. An automatic mechanism is needed--- through the stability reserve?---to adjust available allowances --- and thus their market price --- in tact with falling energy consumption. ETS should not be used to determine the scope of energy savings and RES targets, on the contrary. C.Excluding industry from EU ETS, and covering only the energy sector, is worth considering. .If better ways than ETS are developed to ensure t EU industry is kept competitive and transitions to a low-carbon economy, this should be assessed in the upcoming reform of ETS, despite the desire to expand the scope of ETS. Impacts of focussing on the power sector to ensure investments there, and perhaps the transport sector, and providing industr |
e) Non-governmental organisation |
European Dairy Association (EDA) |
Avenue d’Auderghem 22-28, 1040 Brussels, eda@euromilk.org |
a) yes |
1) yes |
a) yes |
The dairy industry has already done a lot to reduce emissions, and the speed of reducing greenhouse gas emissions is slowing down Further reduction of fossil energy will only be possible with a technology breakthrough. |
b) no |
Not in the Current Design. The cost effect is too low. Despite this, most potential for energy efficiency and energy reduction are already implemented for economic reasons. The tax is not fed directly back as an incentive to the industry. Moreover, ETS represents added costs only to the EU industry, decreasing de facto its competitiveness. |
a) yes |
The Goal of carbon leakage is precisely to compensate for the economic disadvantages compared to third countries. Third countries with less ambitious climate policies will not be raising taxes on its industries, but neither does this help with Climate Change. The EU should plan to incentivise industries to reduce their energy intensity, which will help with Climate Change. Special measures are needed in order to address potential competitiveness disadvantages vis-à-vis third countries with less ambitious climate policy. These measures must not be transitional but stable until a level playing field of climate policy costs will be achieved. |
b) quite adequate |
Free allocation is only adequate in the current structure of a tax burden. It does not achieve forward movement. A more proactive approach where industry is assisted, or nudged, to be competitive will achieve the same outcome. Free emission allowances, thanks to the establishment of the CL list, limits the costs of the EU ETS, thus limiting the negative impact on our international competitiveness. Without free allocations, CL would first result in a decline in investments in EU countries due to the uncertainty of the EU climate policy and carbon market. The allocation of free allowances is of particular importance for energy-intensive processes that have already achieved most of the possible improvements in energy-efficiency and in the reduction of their relative emissions. But if it is one of the necessary tools to address CL, it should be completed with other relevant tools to encompass all effects of carbon costs like indirect emissions and low carbon price effects. |
b) it largely keeps the incentive |
Free allocation does not harm innovation. The cap contributes to innovation. |
b) quite proportionate |
Protecting the EU food industry competitiveness means keeping jobs and investments in the EU. Any measure which helps to protect the competiveness of the EU industry should be implemented. The excuse of "administrative burden" is in our view not appropriate to question a tool which is efficient. |
b) a higher share than in 2013-20 |
The dairy industry exports will increase (especially after the end of the quotas) and competition globally will increase, therefore a higher share is necessary. |
b) the same share as in Phase 3 |
EDA is against CCS. The efficiency of this method is much too low. There should not be funding for CCS, but instead funding should be driven aggressively towards renewables, renewable energy storage, and the hydrogen economy. These technologies are developing at a rapid pace, and represent the EU’s sustainable future. EDA does not support CCS for the simple reason that it is hiding the real problem. The burning of fossil fuels needs to be drastically reduced. CCS continues the status quo, but attempts to bury the output (carbon dioxide). If funding is continued with fossil sources, this should be aimed at improving efficiencies, reducing energy need in the first place, and lastly lower carbon intense options (gas). |
a) yes |
ETS money should be used to support innovation, but innovation is of broader public interest and would need additional support and founding as well. |
c) other types of funding (please specify) |
ETS money should be used to support innovation, but innovation is of broader public interest and would need additional support and funding as well. Otherwise it will come to a point where the ETS system must pay innovations in companies that have nothing to do with ETS. Auctioning could be also part of the solution. |
a) yes |
Innovation support in itself is helpful. The base for innovation lies in knowledge development, and Europe’s institutions contain increasing amounts of cutting edge knowledge. But it is essential that this is enabled to be brought to the market place by a carefully managed knowledge transfer system. That knowledge needs to help Europe maintain its sustainable industries, but is too easily exported by a lack of opportunity in the EU to translate the innovation into reality. Additional measures must include free allocation for indirect emissions and no cross-sectorial correction factor for sectors exposed to carbon leakage. |
a) the present two groups should remain |
If there is an ETS, then there should be a carbon leakage list, to create a level playing field for the considerable amount of products going out of Europe. |
a) the present criteria should remain |
Ideally any manufacturing company subject to ETS must be protected against carbon leakage. Nonetheless if a carbon leakage list is to be maintained the present criteria should remain. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
For reasons of simplicity and full understanding by all, those thresholds should not be changed. |
c) I don’t know |
The continuation of an already complex system needs review. It would probably not benefit from further complexity? If a carbon leakage list is to be maintained a qualitative assessment should be possible for some sectors. |
a) five years |
Five years are necessary as a minimum to give stability, and the framework needs to be unchanged over this period. |
a) the present approach of average of the 10% most efficient installations should remain |
The current rules, even if very demanding, should be maintained. But there should be no cross sectorial correction factor that circumvents the levels of the benchmarks by reducing the allocation below. |
b) no |
Analogous to the BREF process. Technology continues to change. However, it needs to be recognised that there are at least 3 levels of capacity within industry to be considered. The first level is what is technically possible given state of the art technological improvements. But, this may be cost prohibitive, or the technology still immature, and so the infrastructure for provision and maintenance may not be available. So the second level is what is financially possible, given current accounting and capital flow regulations and options. There is also a third practical level, which reflects real conditions in industries in Europe. To keep the approach of the 10% most efficient installations, it may be advisable to ascertain benchmarks based on the future financially possible technologies, rather than absolute state of the art. Legislative predictability is very important to keep industry investing in the EU. |
c) other (please specify) |
Take the most current phase close to (just before) the writing down to the rules (e.g. 2013/14 if written down now). |
a) no, there should be no deviations |
Harmonised rules must be kept in order to avoid any case of competition distortion. |
c) yes, in the form of additional free allocation |
Free allocations for indirect emissions will help to avoid the current situation of diverging national approaches leading to competition distortion. |
Most important |
Least important |
Less important |
Important |
When providing innovation support, the first key area is always to get the project from the laboratory (or academic solution) to reality (the small scale prototype). Support is important all through the project, but most innovation fails finally at the “Valley of Death”, so called because external funding only moves in when it is obvious customers are using the technology. It is very difficult to persuade end-users to invest in a technology, even if a large scale pilot is successful, when no-one else has yet purchased and implemented it. Support to bridge that gap is essential for the innovation to finally break through and succeed. |
d) other |
A combination of resources would be necessary (cf. also II. 9 and 10). ETS money should be used to support innovation, but innovation is of broader public interest and would need additional support and founding as well. Auctioning founds could be also part of the solution. |
The upcoming reform of the ETS and the CL-rules is a good opportunity to optimise the system for the dairy companies, whose purpose is not energy consumption (or conversion or supply), but the production of high quality products for human nutrition and well-being. Motivation of energy savings are in the design of optimal and economic processes and a high awareness of the responsibility for our environment. The reform should take into account the efficiencies of various systems and technologies - a link with the BREF process would be helpful. Key to reducing climate impact is reducing carbon output. If an industry is to be allowed to sustainably expand in Europe (e.g. to meet export requirements for a growing world population) the first step has to be to concentrate on conversion efficiency or ratio intensity. The second step needs to approach reuse or recycling of energies and the use of lower carbon technology. Finally technology to reduce energy requirement at source must be develope |
e) Non-governmental organisation |
Gewerkschaft ver.di, vereinte Dienstleistungsgewerkschaft Mitglied im Deutschen Gewerkschaftsbund DGB trade union representing about 100 000 menbers/workers in the energy companies (Stadtwerke as well as big cenergy companies) |
Dr. Reinhard Klopfleisch ver.di-Bundesvorstand Head of Department Energy- Water- and Waste Policy Paula-Thiede-Ufer 10 D- 10179 Berlin phone ++493069561752 mobile ++491717603561 reinhard.klopfleisch@verdi.de |
a) yes |
1) yes |
a) yes |
there is a big potential for energy Efficiency in the EU industry sector that must be activated by political initiatives |
a) yes |
but only if ETS is working - nowadays we see a continuous crisis indicated by a minimal CO2 Price that induces practically no improvement of energy efficiency |
a) yes |
Problem of carbon leakage |
d) very inadequate |
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c) it largely compromises the incentive |
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a) absolutely proportionate |
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a) a lower share than in 2013-20 |
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d) there should be no such innovation support post-2020 |
CCs in our view is no Option to reducing C02 emissions substantially; there are a lot of tecnical probelms, cost Problems (installling a totally new infrastructure) and of course there is a lot of public resistance against CCS, not only in Germany but in teh wohole EU |
a) yes |
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b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
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b) no |
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a) the present two groups should remain |
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a) the present criteria should remain |
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a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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b) no, all criteria should be based on simple metrics and linked to clearly defined thresholds |
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c) shorter (please specify) |
there should be a Monitoring process in a ttwo or three year-rhythm |
a) the present approach of average of the 10% most efficient installations should remain |
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a) yes (please specify how often) |
a five-year rhythm should work |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
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a) no, there should be no deviations |
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b) no, and there is no need for financial compensation by Member States, either |
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Most important |
Less important |
Important |
Least important |
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a) from the Member States' auction budgets |
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e) Non-governmental organisation |
Greenpeace European Unit asbl-vzw. Transparency register number: 9832909575-41. Greenpeace European Unit is part of the international Greenpeace network, active in over 40 countries worldwide and with three million supporters. Based in Brussels, we monitor and analyse the work of the EU institutions, expose deficient EU policies and laws, and challenge EU decision-makers to implement progressive solutions. We value our independence and do not accept donations from governments, the EU, business |
Joris den Blanken, EU climate policy director Greenpeace European Unit Rue Belliard 199 1040 Brussels Direct line: +32 2274 1919 E-mail: joris.den.blanken@greenpeace.org |
c) not relevant |
Greenpeace European Unit asbl-vzw is a non-governmental organisation with a direct interest in the environment and nature protection. |
1) yes |
a) yes |
EU industry has a significant potential for further reducing emissions and increasing efficiency by process changes (e.g. shifting BOF to EAF in the steel sector), heat recovery and product and material substitution. Moreover, there is a number of breakthrough technologies that can reduce emissions 80-100% in e.g. the paper, cement and steel industry (CE Delft (2010, Technological developments in Europe: a long-term view of CO2 efficient manufacturing). Europe is falling behind in deploying low-carbon and efficient technologies, compared to competitors elsewhere. For the production of olefin (a chemical industry product) European installations use 20% more energy than their Asian counterparts (UNIDO (2010), Global industrial Energy Benchmarking. An Energy Policy Tool; IEA (2007), Tracking industrial energy efficiency and CO2 emissions). The most efficient cement production currently occurs in Asia, in particular in India and China. (Climate Strategies (2014), Staying with the leaders). |
a) yes |
In principle the ETS can (complementary to an energy savings target and policies) help energy efficiency and increase competitiveness. However, due to a large surplus of emissions allowances, the CO2 price in the ETS has been too low to give a meaningful incentive to investors. The surplus was created by the large inflow of international credits (JI, CDM) and reduced industrial output as a result of the economic downturn. The 2014 Thomson Reuters Point Carbon Survey shows that 40% of the respondents perceive that the ETS hasn’t caused their company to reduce any emissions. Moreover, generous free allocation (without investment conditions attached) has prevented a clear incentive for more energy efficiency. 97% of industrial emissions qualify for the carbon leakage criteria due to imprecise selection criteria and the use of a €30 carbon price assumption. Furthermore, some of the sectors included in the carbon leakage list have passed on their carbon costs to consumers (CE Delft, 2010). |
a) yes |
The current carbon leakage provisions have been ineffective, untargeted and costly. In the event certain major economies would fail to take meaningful climate action after 2020, other types of carbon leakage provisions (see answers below) should be developed in collaboration with international partners for a limited number of (sub) sectors. The carbon leakage measures should be targeted, strictly limited in scope and should be linked to binding investment and innovation requirements. The identification of (sub) sectors should be based on an independent economic assessment, following strict selection criteria. |
d) very inadequate |
Free allocation has failed as a policy instrument: 1. Free allocation has been costly. EU member states missed billions of ETS auctioning revenues. 2. Free allocation did not encourage investments. Firms receiving a significant financial asset in the form of free allowances were not legally required to make additional investments in innovation, energy efficiency or clean production technologies. 3. Companies have spread production over several installations in order to maximise free allowance allocation, leaving the ETS to subsidise additional emission and inefficient production. E.g. cement production facilities in Southern Europe have been overproducing in order to remain at historic activity levels that entitle them to a maximum level of free allocations. |
d) it absolutely compromises the incentive |
When a company is required to buy all its emission allowances on the market it has a direct financial incentive to assess its full emission reduction potential and to reduce its emissions where cost-efficient (the scale of reductions depends on the level of carbon price). But when a company receives its allowances for free, it does not receive a direct financial incentive, only under certain conditions it receives an indirect incentive considering emission allowances not used for compliance can be sold on the market. However, with the possibilities purchase international carbon credits by co Today, a big group of ETS participants can comply with the ETS without additional investments in reducing emissions. Many companies can comply using freely allocated emission allowances, or use international offset credits to cover additional emissions. |
e) I don’t know |
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e) there should be no free allocation post-2020 |
A limited number of industry subsectors under the ETS may be exposed to carbon leakage after 2020, in case third countries would lack meaningful climate and energy policies from 2020 onwards. Therefore the EU should develop with international partners in the context of the 2015 international negotiations a package of measures that could be activated in case certain governments would fail to implement meaningful emission reduction policies. The package should be developed jointly with international partners that are establishing a domestic emission trading scheme, or other effective domestic climate and energy policies. Such a ‘last resort’ package could include the inclusion of imports in the ETS and financial support for (sub) sectors exposed to a significant risk of carbon leakage. The financial support must be strictly earmarked for investments in low-carbon industrial innovation and deployment. |
a) a substantially higher share than in Phase 3 |
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a) yes |
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a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
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a) yes |
Greenpeace does not support free allocation post-2020. We do support, in the event certain major economies would not take meaningful climate action after 2020, carbon leakage measures developed jointly with international partners. These measures could include the inclusion of imports in the ETS and financial support for a limited group of (sub) sectors with a significant risk of carbon leakage. The financial support must be strictly earmarked for investments in low-carbon industrial innovation and deployment. |
a) the present two groups should remain |
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e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
In case certain major economies would fail to take meaningful action post-2020, sectors exposed to a risk of carbon leakage should be identified on the basis of a fact-based assessment, using strict, realistic and transparent criteria. The criteria should take into account both carbon costs in GVA, trade intensity, carbon prices (and shadow carbon prices) of global, regional and national climate and energy policies in third countries. Moreover, a realistic EU ETS carbon price parameter must be applied. New measures must also consistently take into account the cost-efficient potential to increase efficiency of production (and reduce related energy costs) and the potential for material and product substitution. |
b) other thresholds should be defined. Please specify below |
Stand-alone criteria should be discontinued. Accounting only for the share of 'carbon costs' in the gross value added (GVA) is pointless when the goods produced are not traded globally. Similarly, measuring the intensity of trade with third countries alone cannot give any meaningful information on the impact of the EU ETS legislation. Therefore, the current (30%) stand-alone criteria are unfit to measure the real risk of carbon leakage and must be abolished. A strict threshold should be defined for a combination of criteria: - Carbon costs in GVA - Trade intensity - Carbon price (or shadow carbon price) in third countries - Cost-efficient energy efficiency potential - Production and material substitution potential |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The current practice of reverting to qualitative criteria only if a sector is NOT found to be exposed to a significant risk of carbon leakage is likely to lead to the highest number of sectors on the list but not necessarily fully reflecting the real level of exposure. This leads to competitive distortions when subsectors at low risk of carbon leakage within a sector of generally significant risk become part of the carbon leakage list. The EU Commission should therefore adopt a balanced approach and also apply qualitative criteria in case a sector is initially found at risk of carbon leakage in order to avoid “false positives” on the list. In practice, we can support the methodology presented in the research developed by Öko-Institut for the European Commission (http://ec.europa.eu/clima/policies/ets/cap/leakage/docs/carbon_leakage_list_en.pdf), with a proposal for a harmonised framework for qualitatively assessing the risk of carbon leakage with a tiered approach in 3 steps. |
e) I don’t know |
The validity of the carbon leakage list must take into account the developments in the context of the 2015 agreement (length of the international commitment period, revision dates, etcetera). |
b) the approach should be more stringent (please specify) |
The benchmark (if free allocation is continued) must also take into account international performance information. Europe is at risk of lagging behind in energy efficiency and clean production compared to other countries. International performance data can be acquired by consulting e.g. IEA and UNIDO and information exchange in the context of the 2015 international climate agreement implementation. |
a) yes (please specify how often) |
The ETS Directive clearly recognises that the benchmarks based on performance in the years 2007-2008 were a “starting point”. This indicates that, over time, benchmarks have to take into account (new) technological improvements in the GHG-efficiency of production. If free allocation is continued post-2020, benchmarks for free allocation should be revised to reflect global technological develpoments by introducing an upfront “technological evolution factor”. |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
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a) no, there should be no deviations |
For administrative simplicity, effectiviness, transparancy and fairness of the ETS no deviations on general harmonised allocation rules should be allowed. The ETS is a market-based instrument and provides as such adequate flexibility for specific circumstances. |
b) no, and there is no need for financial compensation by Member States, either |
In case certain major economies would fail to take meaningful action post-2020, (sub) sectors exposed to a risk of carbon leakage should be identified on the basis of a fact-based assessment, using strict, realistic and transparent criteria. This should also apply to electro-intensive sectors exposed to carbon costs passed on in the electricity price. However, financial compensation (without investment criteria attached) is not a targeted way of addressing a potential risk of carbon leakage. Financial compensation should be replaced by financial support for increased energy efficiency and investments renewables-based electricity production. |
Important |
Less important |
Most important |
Least important |
Innovation support must be linked to performance requirements (such as an emission performance standard) in particular in the large-scale pilot and commercialisation stage. In all phases, and in particular in the commercialisation and large-scale pilot stage, public support should only complement a significant level of private investment by the operator. It must be taken into account that the investment will generate energy costs savings, first mover advantages and potentially other benefits for the operator. |
b) from free allocation |
The allowances should be deducted from free allocation (if free allocation is maintained after 2020) and set aside in a system similar to NER300. The rationale is that industrial sectors (those currently benefiting from free allocation) would benefit from the innovation support. |
Greenpeace would like to express its concern about the proposal from several stakeholders to move towards an ex-post allocation system: - It is unclear how the wish to protect commercially sensitive (production) data would be consistent with the need for equal access by all ETS market players and the public (including NGOs, journalists and experts) to timely, measurable, verifiable and reportable allocation and emission information. - A system of ex-post allocation would not give an incentive for emission reductions through production process changes (e.g. EAF replacing BOF steel production) or product and material substitution (e.g. using less steel in a car, or replacing steel with a different material). - Ex-post allocation is complex and could potentially create a significant administrative burden for member states. |
e) Non-governmental organisation |
Grupa Ozarów S.A. ul. Ks.I.Skorupki 5 00-950 Warszawa |
Andrzej Ptak, Managing Director ul. Ks.I.Skorupki 5 00-950 Warszawa tel: 15 839 11 06 e-mail:andrzej.ptak@ozarow.com.pl |
a) yes |
1) yes |
a) yes |
At the moment reduction potential in cement sector is very limited by technology and production process conditions but The cement industry is fully committed to reducing GHG emissions in line with EU policy objectives. This has been demonstrated by investments over the past 20 years which have driven down CO2 emissions from clinker production and by our roadmap to go much further in the coming decades. To achieve this, industry needs to innovate and invest. This requires a return on investment above the cost of capital and a policy framework that promotes the competitiveness of the sector and allows for a secure access to raw materials and affordable energy prices. The cement industry in Europe needs a stable legal framework with predictable CO2 prices in order to justify and allocate scarce investment funds to realize CO2 emission reduction. 2030 targets have to take into account each sector specific roadmap. Differentiated levels of efforts are needed for different sectors. |
b) no |
EU ETS is not a key factor in investments decisions. Lack of predictability of economic conditions even hampers any investments. Mesures to decrease energy consumption and improve resources efficiency will reduce CO2 emissions. Cement industry have very high energy costs as a proportion of GVA or profit which means that energy efficiency is an integral part of manufacturing. The EU ETS emphasis is GHG efficiency and in this regard it does put pressure on businesses to become more GHG efficient. In doing so EU ETS places CO2 costs on power generators and these costs are passed on to electricity consumers. Furthermore, the cement and lime industry are unique due to the fact that the majority of GHG emissions are not caused by energy use from fuel combustion but come from the raw materials themselves. Around 63% of total CO2 emissions from clinker realised from limestone. The only way to reduction of these emissions is reduction of production. |
a) yes |
The EU has aspirations of leading on CC policy but globally unequal carbon pricing has the ability to shift trade patterns. In order to direct investments to growth and jobs in Europe, the cement industry needs a global level playing field, including imports and exports: climate change is a global problem that needs a global solution. EU policy can only incentivise companies to aggressively work on further emissions reduction if there is predictability in and equality in carbon prices and if it is part of an overall industrial policy ensuring companies to be competitive in the international arena. This also applies to energy costs. For cement, energy costs are especially important representing 30 % of operational costs with European costs being substantially higher than in the US, Russia and plants in North Africa. Transitional measures are needed to bridge the gap between the EU and other countries. Free allocation is the most effective transitional mechanism. |
b) quite adequate |
As long as emissions do not have the same cost in different countries, a level playing field can be achieved most effectively by equalising measures such as free allocation. The limited evidence of leakage and empirical studies demonstrates (see the report by Vivid Economics last June), in part, that free allocation is working. However, it should not be assumed that free allocation is insulating operators from all of the ETS costs as it does not mean ‘full free allocation’ because of the CSRF and as some operators will face higher costs than others depending on the allocation base year activity. Furthermore, the indirect costs of ETS have not been selected for compensation for cement in the Commission guidelines creating a distortion of competition with competitors. So, not only does the cement industry face the full indirect costs of ETS but competing construction sectors are able to be compensated for their additional costs related to indirect CO2. |
b) it largely keeps the incentive |
With free allocation based on benchmark, the incentive to invest is provided by the benchmark. The magnitude of the residual incentive is a function of carbon costs as a proportion of GVA. Cement has one of the highest CO2 costs/GVA of any industrial sector so the residual effort is greater than in most sectors. In its search for a legal framework that fosters a competitive environment, European cement industry has considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The EU cement industry has a relatively flat benchmark curve indicating that there is a narrow gap between the best and the worst performers; this limited level of abatement potential makes the task of emissions reduction more difficult in the cement sector compared to many other sectors. |
b) quite proportionate |
Overall, the administrative burden is quite proportionate but the system is extremely disproportionate for small/trivial combustion sources. In many cases these minor sources were not part of the benchmarking exercise and should not be included in reporting. |
d) there should be no limit to overall free allocation to industry |
There should be free allocation if there isn’t an international agreement which places all competing manufacturers on an equal footing. Until certain conditions can be met with regard to the veracity of the schemes within other countries then transitional arrangements need to be maintained. Free allocation is the most effective transitional arrangement. The share of allowances dedicated to free allocation should be sufficient to avoid carbon leakage. To uphold this principle that carbon leakage should be minimized, the cross sectoral correction factor should be replaced by an adjustment to the auctioned amount to maintain the cap trajectory. That does not mean “a free ride for industry” but it would mean that sufficient allowances are provided for the most efficient producers because at present the CSCF has the ability to reduce free allocation beyond what is technically possible. |
e) I don’t know |
There are too many uncertainties on what the post 2020 allowances budget will be for the cement industry to be able to decide what share of the budget should be dedicated to such innovation support. The EU ETS does not encourage investment in new technology. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) yes |
To date, the NER 300 has been ineffective at stimulating novel CO2 reduction projects in the cement industry. The power generation sector which is passing on investment costs has benefitted most from the NER 300. The cement sector is not experiencing the same level of investment de-risking. The cement industry needs - an investment enhancing climate should encourage investments over long term (30 y) cycles in a capital intensive industry. Legal stability and CO2 price predictability are key to achieve this goal - Safeguards against price fluctuations in market based policy instruments; which objectives, if kept, should be clearly defined and not be prone to abuse for speculation purposes - an innovation policy which provides clear incentives for breakthrough technologies in a cost-effective way. Policy makers should consider hypothecation (earmarking) of revenues from allowance auctions and direct innovation support to those sectors facing the greatest abatement challenges. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Given the high costs associated with breakthrough technologies, funding from auctioning revenues should account for both capital and operational cost of projects. There should in addition be a ring fenced fund for the manufacturing industry. |
a) yes |
In its search for a legal framework that fosters a competitive environment, European cement industry has considered an improved ETS with a performance based free allocation for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions cost impacts. In order to protect “carbon leakage” sectors’ competitiveness, the system could foresee either an adjustment to the overall cap to the auction amount or a sectoral cap with the inclusion of importers. However, a carbon pricing mechanism which is market-based and prone to wide fluctuations militates against effective investment. European cement industry is ready to explore mechanisms which deliver price stabilization and global carbon price convergence. Some of the initial reflection is further elaborated in the annex to this paper and cement industry is ready to engage in a thorough reflection of a climate policy and energy policy that is fully integrated. |
a) the present two groups should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. |
a) the present criteria should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria e.g. a complete loss of 30% of GVA is normally economically not acceptable for any industry or sector. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
EU trade and economic data is not always exact and its comparability with the EUITL CO2 data not always appropriate so there will always be a need to hear special cases. |
d) in line with the duration of ETS Phase 4 |
It is essential for the predictability of the system to introduce as little changes as possible in the course of a trading period, hence the validity of the list of sector exposed should be in line with the duration of the ETS phase 4. |
c) the approach should be less stringent (please specify) |
The benchmark would be calculated in a statistically solid way and be updated periodically to ensure predictability. It should be set at an ambitious but reasonable level and should not be distorted by statistical outliers. This can be achieved by defining percentile (e.g. 10%-percentile) or e.g. the average of a range including the 5% to 15% top performers of specific direct emissions (excluding the extreme outliers between 0% and 5%). Only this way, the benchmarking methodology will achieve sufficient statistical robustness for international application in ETS system. Benchmarks cannot be lower than process emissions. Measures should take into account scale of plants (access to adequate share of biomass, additives, alternative raw materials). |
a) yes (please specify how often) |
Benchmark should be updated between two trading periods depending on what has been achieved but not during one trading period. |
c) other (please specify) |
In its search for a legal framework that fosters a competitive environment, European cement industry has considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The historic activity level (HAL) should be more closely aligned to recent production to avoid surplus allocation e.g. the average of the preceding 3 years. In this context, European cement industry considers the recently released EcoFys study (Dynamic allocation for the EU Emissions Trading System, Enabling sustainable growth, 20 June 2014) and its allowances allocation reserve as an interesting step forward. However, a more recent HAL has its potential downsides for installations that have extended shutdowns or breakdowns, provision will be necessary to deal with exceptional HAL circumstances. |
a) no, there should be no deviations |
A more recent HAL e.g. preceding 3 years average, has its potential downsides for installations that have extended shutdowns or breakdowns, provision will be necessary to deal with exceptional HAL circumstances. |
e) I don’t know |
European cement industry believes that EU Compensation should be granted for indirect emission impact where carbon leakage vulnerability is a combination of direct plus indirect emission cost. There is no need for two state aid guidelines and the compensation for indirect costs could be internalized in the ETD by providing free allocation for indirect CO2. Scheme should not be fully harmonized. It should include regional fuel mix to be correlated with regional average electricity price. |
Less important |
Important |
Most important |
Least important |
European cement industry regrets the focus on carbon capture and storage and believes that carbon capture and re-use should be equally considered. Industry believes that funding should be technology neutral. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) from the Member States' auction budgets |
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Carbon leakage sectors must have secured free allowances for process emissions in case they are still included in post 2020 period |
e) Non-governmental organisation |
Industriegewerkschaft Metall (Identification Number in the register) 757195013270-80. |
IG Metall Vorstand Angelika Thomas Wilhelm-Leuschner-Straße 79 60329 Frankfurt phone: 00 49 (0) 69 6693 2259 email: angelika.thomas@igmetall.de |
a) yes |
1) yes |
a) yes |
In general terms, there are possibilities for the industry to improve its “climate efficiency“, i.e. reduce greenhouse gas emissions without this necessarily resulting in a reduction in production. There are existing potentials not only in the form of the diffusion of known solutions but also in the form of genuine innovations. An emissions trading system can contribute to the exploitation of diffusion and innovation potentials. The EU ETS is a system that has been exclusively restricted to Europe up to now. If climate efficiency is to be improved, the European ETS needs to be so organized that no transfer takes place to countries that do not have climate protection on their agenda, the result being job losses in the European industry. Savings should be made differentiated according to branches and the problem of increased process-related emissions in some industrial segments, e.g. the steel industry, should also be taken into account. |
b) no |
In principle, increased energy efficiency is possible in the European industry by consistently modifying the installations. However, even the best technology that is available in many industrial branches cover the direct and additional costs incurred due to the EU-ET at most. A long-term improvement of the competitiveness can only be achieved if the savings potentials are much higher than the additional costs incurred due to the EU-ETS. The European industry is in international competition, in which regions providing competition (e.g. USA) reindustrialise to new – partially controversial – energy generation methods and reduced energy prices. This makes the prospect of increasing competitiveness for the European industry even more difficult. |
a) yes |
As explained in questions 1 and 2, the regional restriction of the EU ETS paired with a strong foreign trade interdependency of the EU resulted in a costs disadvantage caused by the ETS that can result in migration (and in turn to carbon leakage). The requirement for the meeting of the ETS target: climate protection is therefore the prevention of migration. As long as we do not have globally binding climate protection measures, there needs to be rules for the European industry that provide for an offsetting of the competition terms in relationships with the industries outside Europe. |
a) very adequate |
Please also refer to question 3: free allocation is a specific instrument that can serve to prevent migration. As long as there are no globally binding climate protection instruments in place, free allocation is an effective instrument that can serve to offset the massive disadvantages that the European industry suffers under the ETS, and thereby prevent job losses. |
b) it largely keeps the incentive |
Incentives for the reduction of glasshouse gas emissions remain, e.g. due to the fact that installation operators need to reduce the use of energy sources that cause greenhouse gas emissions on the basis of the energy costs. An ongoing checking of product and process-related savings potentials is of utmost importance in order to ensure that the European industry and especially the industry segments that are very energy intensive do not continue to lose their global market shares. Free allocation does not result in a reduction of the incentive to lower energy costs. |
b) quite proportionate |
The administrative burden is especially high for smaller companies. Consideration should be given to suitable measures that aim to reduce the administrative processes. In some special cases, the ETS has caused a problematically high burden: this especially affects (very) small companies and branches or sole traders that do not fit in with the ETS well, resulting in their categorisation only having been possible with a high burden in the direction of the competent authorities (this especially concerned the special carbon black process, the production of oil shale ash and the combined manufacturing of zinc and iron in a furnace). An even greater problem is the form of the carbon leakage rules as the combination of free allocation, benchmarks and basis periods does not always result in a prevention of carbon leakage. |
d) there should be no limit to overall free allocation to industry |
In order to not place the competitiveness of the European industry that is subject to the EU ETS at a risk, it is necessary for free certificates to be issued – even after 2020 –. There have not been any signals to date that the emerging countries intend participating in a binding global emissions trading system. Free allocation is vital as long as we do not have any globally binding rules and instruments in place. |
d) there should be no such innovation support post-2020 |
Should there be a requirement for the supporting of CCS technologies, such support should not be provided within the scope of the EU ETS. The EU ETS should generally speaking be kept as transparent as possible so that no secondary objectives that can be better achieved with specialized instruments should be integrated in the ETS. In more specific terms, a support in the form of certificates does not do justice to technological support as there is not a reasonable and reliable support amount due to the fluctuating certificate prices. |
b) no |
As explained in question 8, the EU ETS should be kept as transparent as possible and not be overloaded with secondary objectives. The general view of the use of revenues from the auctioning off of certificates does not make it discernible that competencies at EU level are necessary – especially when one considers that a redistribution between the member states is to be expected in this case, for which there is no substantiation in the scope of this instrument (see above: the non-inclusion of secondary objectives in the instrument). What might be conceivable would be a greater obligation of the member states to increasingly invest revenues gained from the auctions in climate protection projects and in order to provide social compensation for the burdens caused by the ETS. |
c) other types of funding (please specify) |
Should there be a requirement for the supporting of low carbon technologies at EU level, this should be on the basis of the established instruments or if necessary, others should be created that aim at this. The financing could then be in the form of a redistribution of funds and by increasing the funds earmarked for this in the EU budget. The EU ETS should not include such secondary objectives (please also refer to the answers to questions 8 and 9). |
a) yes |
As already explained above (especially in the answers to questions 6-8), an appropriate rule is required that prevents migration and provides incentives for improving climate efficiency. If this cannot be achieved within the scope of the ETS, consideration should be given to suitable alternatives (e.g. an exclusion of the industry from the ETS). |
a) the present two groups should remain |
The current categories are well established. A wider differentiation can result in additional administrative hurdles. The efficiency of the measures goes hand in hand with a binding international implementation. |
a) the present criteria should remain |
The system should not be changed as the companies will no longer have planning reliability otherwise. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
b) no, all criteria should be based on simple metrics and linked to clearly defined thresholds |
Please refer to the answers provided for questions 13 and 14. |
d) in line with the duration of ETS Phase 4 |
A validity of the carbon leakage list post-2020 should remain the same as that in the 4th trading period. A reviewing of the list at a shorter interval would result in increased administrative burden and costs, resulting in a worsening of the competitive position due to there not being another comparative system globally. |
a) the present approach of average of the 10% most efficient installations should remain |
The benchmark of 10% most efficient installations should not be changed. This should be reviewed every five years. |
a) yes (please specify how often) |
The benchmarks should be reviewed every five years. |
c) other (please specify) |
The basis period should be adapted as there will otherwise be a divergence between the allocation and the economic situation of the installation operator. The adaptation should result in a basis period that is to comprise `normal years´ where possible – both with regard to the branch and to the installation operator. When taking the installation operator into consideration, the formation of a median or a mean value in combination with deleted years are procedures that could serve to absorb the individual deviations from normal years. When taking branches and the industry as a whole into account, a period should be selected that corresponds to the normal years. This decision cannot be made yet as regards periods that have not been completed (such as 2014-2016). An additional argument for determining a basis period that has already past is that installation operators are no longer able to use their adaptation strategies. |
b) yes, there should be deviations with higher allowances for installations facing specific hardships |
A rule that makes provision for hardships is advisable for cases in which the application of the ETS rules would result in undue hardship. Should such a rule not exist (this being the case to date), this can result in the ETS excessively interfering with the installation operator´s fundamental rights (refer to case T-630/13 before the ECJ). No matter how good they are, general rules are unable to exclude hardships from occurring in individual cases. |
d) yes, in the form of financial compensation at EU-level |
Generally speaking, it does not make a fundamental difference to the industry whether a pressure to migrate is caused by the ETS directly (cost of the certificate) or indirectly (energy costs). Both of these effects are to be treated the same in economic terms if carbon leakage is to be reliably prevented. |
I don't know |
Important |
Less important |
Least important |
In general terms, it is our opinion that this is not relevant in connection with the task of shaping the ETS. The adoption of a specific innovation policy should not be a secondary objective of the ETS when it comes to ensuring transparency. |
d) other |
As already stated in questions 8-10, no specific innovation support should be provided from ETS revenues at EU level. |
|
e) Non-governmental organisation |
Magyar Távhőszolgáltatók Szakmai Szövetsége (Association of Hungarian District Heating Enterprises) |
1116 Budapest, Barázda u. 20-30. HUNGARY Tel: +36 20 221 3247 Email: porban@mataszsz.hu |
a) yes |
1) yes |
a) yes |
|
a) yes |
|
a) yes |
|
b) quite adequate |
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b) it largely keeps the incentive |
|
c) quite exaggerated |
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b) a higher share than in 2013-20 |
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a) a substantially higher share than in Phase 3 |
|
a) yes |
|
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
|
b) no |
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b) more carbon leakage categories should be defined |
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c) the share of 'carbon costs' in the GVA should be maintained, but 'carbon costs' should be taken into account to the extent that they can't be recuperated in product prices |
|
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
d) in line with the duration of ETS Phase 4 |
|
c) the approach should be less stringent (please specify) |
A hatékony távfűtés és távhűtés európai szinten történő jelentős bővülése eredményesen járul hozzá a megújuló energiaforrások részarányának növekedéséhez és az energiahatékonyság fokozásához. Ezáltal a távhőszektor érdemben járul hozzá az Európai Unió klíma-, környezet- és energiapolitika célkitűzéseinek a megvalósításához. A távhőellátásnak, mint hatékony klíma- és energiapolitikai eszköznek a támogatása érdekében szükséges kevésbé szigorú megközelítés. |
a) yes (please specify how often) |
Kereskedési időszakonként. |
c) other (please specify) |
A 3. kereskedési időszak 2 legnagyobb termelési adatával rendelkező évét kellene figyelembe venni a bázisidőszak szempontjából. |
d) both b) and c) |
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c) yes, in the form of additional free allocation |
|
Most important |
Less important |
Least important |
Important |
|
a) from the Member States' auction budgets |
|
|
e) Non-governmental organisation |
Mineral Products Association |
Dr Richard Leese Gillingham House, 38-44 Gillingham Street, London, SW1V 1HU, Richard.Leese@mineralproducts.org 00447870 179758 |
a) yes |
1) yes |
a) yes |
Investments by the UK cement industry to date have led to a 21% reduction in CO2 per tonne cement since 1998. The MPA GHG strategy (published 2013) set out how absolute emissions could be reduced by 81% on 1990 by 2050. To achieve this, not only is secure access to raw materials and affordable energy required, but also a stable legal and political framework with predictable CO2 price in order to justify and allocate scarce investment funds to CO2 reductions. The cement industry has a high proportion of process emissions and requires the 2030 targets to account for reductions that are technically possible. Furthermore, different levels of effort are required by different sectors (manufacturing, power, building, transport) based on the ability to pass on cost. The EU will only reduce GHG emissions without de-industrialization with equivalent protection provided to match the future EU ETS carbon price, which is providing the unequal balance that advantages importers. |
b) no |
The cost of energy for energy intensive industries can be 40% or more of Gross Value Added.As a result energy efficiency has to be an integral part of business management to remain competitive.The EU ETS emphasis on GHG efficiency pressurizes businesses to become more GHG efficient. In doing so EU ETS places CO2 costs on power generators which are passed on to electricity consumers. There are limitations to which added costs act as a driver for efficiency before imports become more attractive. The cement and lime industries are unique as the majority of GHG emissions are not caused by energy from fuel combustion but from raw materials (process emissions). Significant reductions in CO2 require both a reduction in process emissions and increased efficiency in combustion of fuel. Energy efficiency and CO2 efficiency are related but distinctly different policy aims, GHG reduction could lead to improvements in energy efficiency but not all GHG reduction measures are energy efficient e.g.CCS |
a) yes |
The EU has aspirations of leading on Climate Change policy but globally unequal carbon pricing has the ability to shift trade patterns, competitively inhibit domestic producers and ultimately introduce irreversible structural change in material supply chains. Emissions reduction should not be met by exporting local production as this undermines GHG efficiency, damages the economy and makes global emissions reduction more difficult. EU policy can only incentivise companies to further reduce emissions if there is predictability and equality in carbon prices and if it is part of an overall industrial policy ensuring companies remain internationally competitive. This also applies to energy costs with EU costs being substantially higher than in the US, Russia and North Africa. Until there is a global solution, transitional measures are needed to bridge the gap between the EU and countries without an equivalent carbon price signal. Free allocation is the most effective transitional mechanism |
b) quite adequate |
As long as emissions do not have the same cost in different countries, a level playing field can be achieved most effectively by equalising measures such as free allocation. The limited evidence of leakage and empirical studies (e.g. report by Vivid Economics, June 2014) demonstrate, in part, that free allocation is working. However, free allocation in Phase III EU ETS has been undermined by the Cross Sectoral Correction factor (CSCF), which prevents vulnerable operators from receiving ‘full free allocation’. Furthermore, free allocation does not protect against the considerable indirect costs of ETS. Although a compensation scheme is available in some member states for a few sectors, it is currently distorting competition in the construction market as some sectors are receiving compensation for the additional costs related to indirect CO2 while the cement industry faces the full indirect costs of ETS. |
a) it absolutely keeps the incentive |
The incentive to invest is provided by the benchmark used to determine free allocation. The magnitude of the residual driver is a function of carbon costs as a proportion of GVA plus the incentive to operate better than the benchmark to sell EUA overachievement. Cement production has one of the highest CO2 costs/GVA of any industrial sector so the residual effort is greater than in most sectors. MPA believe ETS could be improved by using a performance based free allocation system for direct emissions that is more closely aligned to recent production and compensation granted for the cost impact of indirect emissions. The EU cement industry has a relatively flat benchmark curve indicating that there is a narrow gap between the best and the worst performers; this limited level of abatement potential makes the task of emissions reduction more difficult in the cement sector compared to many other sectors. |
b) quite proportionate |
Overall, the administrative burden is quite proportionate but the system is extremely disproportionate for small/trivial combustion sources and operators that are small emitters. Many minor sources were not part of the benchmarking exercise and should not be included in reporting. Small emitters should be excluded from the scheme. |
d) there should be no limit to overall free allocation to industry |
Until there is an international agreement which places all competing manufacturers on an equal footing, it is vital that vulnerable sectors are protected against carbon leakage. These sectors should receive allowances to cover 100% of their benchmarked emissions to maintain the driver for all operators to perform as the best 10% but without penalizing them in a market without equal carbon pricing. Once a global climate deal is made, free allocation should remain as a transitional measure until certain conditions are met regarding the veracity of schemes in other countries. The share of allowances for free allocation should be sufficient to avoid carbon leakage. To ensure that carbon leakage is minimized, the CSCF should be replaced by an adjustment to the auction amount to maintain the cap trajectory. This would ensure sufficient allowances are provided for the most efficient producers and that features like the CSCF don’t reduce free allocation beyond what is technically possible. |
e) I don’t know |
There are too many uncertainties on what the post 2020 allowances budget will be for the cement industry to be able to decide what share of the budget should be dedicated to such innovation support. However, support for innovation is important. The current rules on accessing the NER discourage investment in new technology because there will always be uncertainty in the post-commissioning plant performance. Furthermore, frequent changes to the EU ETS policy, such as backloading interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) yes |
To date, the NER 300 has been ineffective at stimulating novel CO2 reduction projects in the cement industry. The power generation sector, which is passing on investment costs to consumers, has benefitted most from the NER 300. The cement sector is not experiencing the same level of investment de-risking. The cement industry is capital intensive and requires legal stability and CO2 price predictability in order to encourage the long term investment (around 30 years) required to innovate. An innovation policy is required which provides clear incentives for breakthrough technologies in a cost-effective way. This will need to include safeguards against price fluctuations in market based policy instruments. Furthermore, policy makers should consider hypothecation (earmarking) of revenues from allowance auctions and direct innovation support to those sectors facing the greatest abatement challenges, particularly those sectors with a high proportion of process emissions |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Given the high costs associated with breakthrough technologies, funding from auctioning revenues should account for both capital and operational cost of projects. The hypothecation of auction revenues to innovative low carbon technologies should be made a priority for EU ETS to meet its full potential in reducing greenhouse gas emissions. This hypothecation should include a ring fenced fund for the manufacturing industry to ensure that technologies such as carbon capture and storage are deployed as soon as possible in sectors with high process emissions. |
a) yes |
ETS could be improved by using a performance based free allocation for direct emissions that is more closely aligned to recent production. In addition, compensation should be granted to protect vulnerable sectors against the cost impact of indirect emissions. The protection offered by free allocation is currently undermined by the Cross Sectoral Correction Factor. This must be corrected post-2020 e.g. through an adjustment to the auction allowances rather than the number of free allowances allocated. The Commission proposal for a market-based carbon pricing mechanism is prone to wide fluctuations that could deter effective investment. |
a) the present two groups should remain |
The current system is simple, predictable and understood and should remain largely unchanged post-2020. However, more emphasis should be put on the cost intensity criterion as this is the most important of the current two criteria. Trade intensity is largely a function of production cost differential and is therefore less important in determining carbon leakage risk. The carbon leakage assessment should be based on a forward looking CO2 price, as currently, and be carried out at the product level used for benchmarking to ensure consistency. Once sectors have been determined as vulnerable to carbon leakage there may be some potential to provide differentiated protection depending on the level of exposure. |
a) the present criteria should remain |
The system has to remain simple and predictable. Cost intensity is the most important assessment criterion and should not be replaced or removed from the assessment. The assessment should be based on a forward looking CO2 price and carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
A complete loss of 30% of GVA is normally economically not acceptable for any industry or sector. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price to match the long term nature of investment decisions. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
EU trade and economic data is not always exact and its comparability with the EUITL CO2 data is not always appropriate so there will always be a need to consider cases based on qualitative information. |
d) in line with the duration of ETS Phase 4 |
The investment cycles for large energy intensive businesses can be considerably longer than 5 years, a cement plant is typically operational for 30-40 years. It is essential for the predictability of the system to introduce as little change as possible in the course of a trading period, hence the validity of the list of exposed sectors should be in line with the duration of phase 4 of ETS. |
c) the approach should be less stringent (please specify) |
The benchmark should be calculated in a statistically sound way and be updated periodically (no more than once per trading period) to ensure predictability. It should be set at an ambitious but reasonable level and should not be distorted by statistical outliers. This can be achieved by defining percentile (e.g. 10%-percentile) or e.g. the average of a range including the 5% to 15% top performers of specific direct emissions (excluding the extreme outliers between 0% and 5%). This will ensure that the benchmarking methodology will achieve sufficient statistical robustness for international application in the ETS system. |
a) yes (please specify how often) |
The benchmark should be updated after every two trading periods/phases. This will give enough time for technology changes to have an effect and will be less burden than having to undertake a benchmarking exercise between every phase. |
c) other (please specify) |
ETS could be improved through the use of a performance based free allocation system for direct emissions that is more closely aligned to recent production and inclusion of a scheme to compensate for the cost impact of indirect emissions. The historic activity level (HAL) should be more closely aligned to recent production to avoid surplus allocation e.g. the average of the preceding 3 years. In this context, the recently released EcoFys study (Dynamic allocation for the EU Emissions Trading System, Enabling sustainable growth, 20 June 2014) and its allowances allocation reserve provides a good starting point for further discussion. However, a more recent HAL has its potential downsides for installations that have extended shutdowns or breakdowns and provision will be necessary to deal with such exceptional HAL circumstances. |
a) no, there should be no deviations |
Harmonised rules should remain. The use of a more recent HAL e.g. preceding 3 years average, could be introduced to a harmonized scheme to ensure an ongoing appropriate level of allocation. Such a proposal does have disadvantages for installations that have extended shutdowns or breakdowns. If such a change was made to ETS, provisions will be necessary to deal with exceptional HAL circumstances. |
c) yes, in the form of additional free allocation |
EU Compensation should be granted for indirect emission impact where carbon leakage vulnerability is a combination of direct plus indirect emission cost. The current system whereby there are two guidelines for state aid in the EU, one specifically related to EU ETS and another for environmental and energy state aid, is unnecessary. The compensation for indirect costs could be internalized in the ETD by providing free allocation for indirect CO2. |
Less important |
Important |
Most important |
I don't know |
Carbon capture and re-use should receive a similar level of consideration as carbon capture and storage. Funding should be technology neutral to ensure that the highest emissions reductions can be achieved in the most appropriate way for each particular industry. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) from the Member States' auction budgets |
|
In order to design a workable post-2020 ETS, it is vital that the scheme is approached as a whole and not each individual element separately. The debate on the MSR should not be carried out in isolation from the broader ETS structural reform and discussions on carbon leakage protection. |
e) Non-governmental organisation |
MINING CHAMBER OF INDUSTRY AND COMMERCE |
UL. KOŚCIUSZKI 30 40-048 KATOWICE POLAND biuro@giph.com.pl |
a) yes |
1) yes |
a) yes |
|
c) I don’t know |
WE HAVE TICKED THE ANSWER C - "I DON'T KNOW", BUT WE WISHED TO TICK BOTH "YES" AND "NO". JUSTIFICATION: "YES" IN THE CONTEXT OF OPTIMUM UTILIZATION OF ENERGY FOR PRODUCTION PURPOSES BY THE APPLICATION OF ENERGY EFFECTIVE MACHINES AND TECHNOLOGIES; "NO" IN THE CONTEXT OF COMPETITIVENESS DECREASE OF UE GOODS BEARING IN MIND THE INCREASE OF EXPENDITURES ASSOCIATED WITH ITEM "A'. |
a) yes |
|
a) very adequate |
|
b) it largely keeps the incentive |
IN GENERAL THE INNOVATIVE ACTIVITY WILL EXERT AN IMPACT ON EMISSIONS REDUCTION WHAT WILL BE CONNECTED WITH LOWER COSTS OF INDUSTRIAL PRODUCTION VIA IMPLEMENTATION OF BENCHMARKING PRINCIPLES PROPORTIONALLY TO THE TARGETS. |
b) quite proportionate |
|
c) a constant share as in 2013-20 |
|
d) there should be no such innovation support post-2020 |
|
a) yes |
|
a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
|
a) yes |
|
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
|
a) the present criteria should remain |
|
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
|
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
|
d) in line with the duration of ETS Phase 4 |
|
a) the present approach of average of the 10% most efficient installations should remain |
|
a) yes (please specify how often) |
EVERY 5 YEARS. |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
|
d) both b) and c) |
|
c) yes, in the form of additional free allocation |
|
Most important |
Less important |
Important |
Least important |
|
c) from both |
|
|
e) Non-governmental organisation |
Polish Cement Association |
Jan Deja Chief Executive ul. Lubelska 29 30-003 Krakow, Poland. biuro@polskicement.pl (+48) 12 423 33 55 |
a) yes |
1) yes |
a) yes |
At the moment reduction potential in cement sector is very limited by technology and production process conditions but The cement industry is fully committed to reducing GHG emissions in line with overall EU policy objectives. This has been demonstrated by investments over the past 20 years which have driven down CO2 emissions from clinker production and by our roadmap to go much further in the coming decades. To achieve this, industry needs to innovate and invest. This requires a return on investment above the cost of capital and a policy framework that promotes the competitiveness of the sector and allows for a secure access to raw materials and affordable energy prices. The cement industry in Europe needs a stable legal framework with predictable CO2 prices in order to justify and allocate scarce investment funds to realize CO2 emission reduction ambitions. 2030 targets have to take into account each sector specific roadmap. Differentiated levels of efforts are needed for different |
b) no |
EU ETS is not a key factor in investments decisions. Lack of predictability of economic conditions even hampers any investments. Measures to decrease energy consumption and improve resources efficiency will de facto reduce CO2 emissions. Some industries like cement have very high energy costs as a proportion of GVA or profit which means that energy efficiency is an integral part of manufacturing. The EU ETS emphasis is GHG efficiency and in this regard it does put pressure on businesses to become more GHG efficient. In doing so EU ETS places CO2 costs on power generators and these costs are passed on to electricity consumers. There are limitations to which added costs act as a driver for efficiency before imports become more attractive. Furthermore, the cement and lime industry are unique due to the fact that the majority of GHG emissions are not caused by energy use from fuel combustion but come from the raw materials themselves. Around 63% of total CO2 emissions from clinker producti |
a) yes |
The EU has aspirations of leading on CC policy but globally unequal carbon pricing has the ability to shift trade patterns. In order to direct investments to growth and jobs in Europe, the cement industry needs a global level playing field, including imports and exports: climate change is a global problem that needs a global solution. EU policy can only incentivise companies to aggressively work on further emissions reduction if there is predictability in and equality in carbon prices and if it is part of an overall industrial policy ensuring companies to be competitive in the international arena. This also applies to energy costs. For cement, energy costs are especially important representing 30 % of operational costs with European costs being substantially higher than in the US, Russia and plants in North Africa. Transitional measures are needed to bridge the gap between the EU and other countries. Free allocation is the most effective transitional mechanism. |
b) quite adequate |
As long as emissions do not have the same cost in different countries, a level playing field can be achieved most effectively by equalising measures such as free allocation. The limited evidence of leakage and empirical studies demonstrates (see the report by Vivid Economics last June), in part, that free allocation is working. However, it should not be assumed that free allocation is insulating operators from all of the ETS costs as it does not mean ‘full free allocation’ because of the CSRF and as some operators will face higher costs than others depending on the allocation base year activity. Furthermore, the indirect costs of ETS have not been selected for compensation for cement in the Commission guidelines creating a distortion of competition with competitors. So, not only does the cement industry face the full indirect costs of ETS but competing construction sectors are able to be compensated for their additional costs related to indirect CO2. |
b) it largely keeps the incentive |
With free allocation based on benchmark, the incentive to invest is provided by the benchmark. The magnitude of the residual incentive is a function of carbon costs as a proportion of GVA. Cement has one of the highest CO2 costs/GVA of any industrial sector so the residual effort is greater than in most sectors. In its search for a legal framework that fosters a competitive environment, European cement industry has considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The EU cement industry has a relatively flat benchmark curve indicating that there is a narrow gap between the best and the worst performers; this limited level of abatement potential makes the task of emissions reduction more difficult in the cement sector compared to many other sectors. |
b) quite proportionate |
Overall, the administrative burden is quite proportionate but the system is extremely disproportionate for small/trivial combustion sources. In many cases these minor sources were not part of the benchmarking exercise and should not be included in reporting. |
d) there should be no limit to overall free allocation to industry |
There should be free allocation if there isn’t an international agreement which places all competing manufacturers on an equal footing. Until certain conditions can be met with regard to the veracity of the schemes within other countries then transitional arrangements need to be maintained. Free allocation is the most effective transitional arrangement. The share of allowances dedicated to free allocation should be sufficient to avoid carbon leakage. To uphold this principle that carbon leakage should be minimized, the cross sectoral correction factor should be replaced by an adjustment to the auctioned amount to maintain the cap trajectory. That does not mean “a free ride for industry” but it would mean that sufficient allowances are provided for the most efficient producers because at present the CSCF has the ability to reduce free allocation beyond what is technically possible. |
e) I don’t know |
There are too many uncertainties on what the post 2020 allowances budget will be for the cement industry to be able to decide what share of the budget should be dedicated to such innovation support. The EU ETS does not encourage investment in new technology. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) yes |
To date, the NER 300 has been ineffective at stimulating novel CO2 reduction projects in the cement industry. The power generation sector which is passing on investment costs has benefitted most from the NER 300. The cement sector is not experiencing the same level of investment de-risking. The cement industry needs - an investment enhancing climate should encourage investments over long term (30 y) cycles in a capital intensive industry. Legal stability and CO2 price predictability are key to achieve this goal - Safeguards against price fluctuations in market based policy instruments; which objectives, if kept, should be clearly defined and not be prone to abuse for speculation purposes - an innovation policy which provides clear incentives for breakthrough technologies in a cost-effective way. Policy makers should consider hypothecation (earmarking) of revenues from allowance auctions and direct innovation support to those sectors facing the greatest abatement challenges. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Given the high costs associated with breakthrough technologies, funding from auctioning revenues should account for both capital and operational cost of projects. There should in addition be a ring fenced fund for the manufacturing industry. |
a) yes |
In its search for a legal framework that fosters a competitive environment, European cement industry has considered an improved ETS with a performance based free allocation for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions cost impacts. In order to protect “carbon leakage” sectors’ competitiveness, the system could foresee either an adjustment to the overall cap to the auction amount or a sectoral cap with the inclusion of importers. However, a carbon pricing mechanism which is market-based and prone to wide fluctuations militates against effective investment. European cement industry is ready to explore mechanisms which deliver price stabilization and global carbon price convergence. Some of the initial reflection is further elaborated in the annex to this paper and cement industry is ready to engage in a thorough reflection of a climate policy and energy policy that is fully integrated. |
a) the present two groups should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. |
a) the present criteria should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria e.g. a complete loss of 30% of GVA is normally economically not acceptable for any industry or sector. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
EU trade and economic data is not always exact and its comparability with the EUITL CO2 data not always appropriate so there will always be a need to hear special cases. |
d) in line with the duration of ETS Phase 4 |
It is essential for the predictability of the system to introduce as little changes as possible in the course of a trading period, hence the validity of the list of sector exposed should be in line with the duration of the ETS phase 4. |
c) the approach should be less stringent (please specify) |
The benchmark would be calculated in a statistically solid way and be updated periodically to ensure predictability. It should be set at an ambitious but reasonable level and should not be distorted by statistical outliers. This can be achieved by defining percentile (e.g. 10%-percentile) or e.g. the average of a range including the 5% to 15% top performers of specific direct emissions (excluding the extreme outliers between 0% and 5%). Only this way, the benchmarking methodology will achieve sufficient statistical robustness for international application in ETS system. Benchmarks cannot be lower than process emissions. Measures should take into account scale of plants (access to adequate share of biomass, additives, alternative raw materials). |
a) yes (please specify how often) |
Benchmark should be updated between two trading periods depending on what has been achieved but not during one trading period. |
c) other (please specify) |
In its search for a legal framework that fosters a competitive environment, European cement industry has considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The historic activity level (HAL) should be more closely aligned to recent production to avoid surplus allocation e.g. the average of the preceding 3 years. In this context, European cement industry considers the recently released EcoFys study (Dynamic allocation for the EU Emissions Trading System, Enabling sustainable growth, 20 June 2014) and its allowances allocation reserve as an interesting step forward. However, a more recent HAL has its potential downsides for installations that have extended shutdowns or breakdowns, provision will be necessary to deal with exceptional HAL circumstances. |
a) no, there should be no deviations |
A more recent HAL e.g. preceding 3 years average, has its potential downsides for installations that have extended shutdowns or breakdowns, provision will be necessary to deal with exceptional HAL circumstances. |
e) I don’t know |
European cement industry believes that EU Compensation should be granted for indirect emission impact where carbon leakage vulnerability is a combination of direct plus indirect emission cost. There is no need for two state aid guidelines and the compensation for indirect costs could be internalized in the ETD by providing free allocation for indirect CO2. Scheme should not be fully harmonized. It should include regional fuel mix to be correlated with regional average electricity price. |
Less important |
Important |
Most important |
Least important |
European cement industry regrets the focus on carbon capture and storage and believes that carbon capture and re-use should be equally considered. Industry believes that funding should be technology neutral. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) from the Member States' auction budgets |
|
Carbon leakage sectors must have secured free allowances for process emissions in case they are still included in post 2020 period |
e) Non-governmental organisation |
Polish Lime Association |
Ms Ada Poszelezny - Secretary General Stowarzyszenie Przemysłu Wapienniczego / Polish Lime Association ul. Toruńska 5, 30-056 Kraków, Poland phone +48 12 626 18 76 fax +48 12 626 28 87 info@wapno-info.pl |
a) yes |
1) yes |
b) no |
The reply concerns lime production sector only: the emission reduction potential is practically depleted, due to the fact that about 70% of total emission is a process emission coming from the calcination of calcium carbonate (a raw material for lime production) and this part of emission is not possible to avoid. Only ~30% of emission comes from fuel. Deeply modernised lime kilns and recent technology have reached the highest possible energy efficiency. Localisation of burning installation close to the geological deposits of limestone limits application of fuel mix. Any further reductions of emission must result by the production decrease. |
b) no |
In the world wide economy and trading of goods the ETS has really a negative impact on many important issues, like: • decreases the competitiveness of the European industry; • have a negative impact on economic growth of the EU countries. • slows down the development of emerging economy countries, • in the scope of global CO2 emission - import of goods from the outside of ETS generates a higher global CO2 emission if they have been produced in EU. |
a) yes |
Polish Lime Association considers, that the most concerned industries (as lime industry, cement, fertilisers etc.) that are affected by the ETS negative impact should be given as much free emission allowances as they need, to guaranty the production on the market demand level. Energy intensive industries should also be extra compensated (at least partly) for the increase of energy price resulted by ETS. It can be realized by the tax reduction or by granting (subventions). |
b) quite adequate |
The allocation of free allowances for industrial sectors covered by the ETS, is considered to be absolutely necessary in order to: • keep the production on the market demand level • keep the European competitiveness • enable the owners of installations making decisions concerning modernisation of installation and new construction (based on low or emission-free technologies, if possible) The benchmark supported method of granting allowances we consider quite sufficient to force emission reduction by ETS covered industries. |
a) it absolutely keeps the incentive |
Benchmark based rules of free allowances strongly forces the rational and complex actions oriented to implementation of the innovative and best available technologies. Nonetheless it should be noted that: - lime installations are expensive with payback period of ~30 years - the modernisation is enforced not only because of the CO2 reduction but mainly by reduction of burning energy consumption cost for ~40% of total production cost - all kilns erected in last 25 years use the advanced technologies of energy recuperation, resulting with high energy efficiency and minimising of CO2 emission - lime kilns have to be located close to the deposits of the raw material, and as a result, in many cases, far from the gas network. Benchmark based on the natural gas only, penalises the fuel mix composed of other accessible fuels - some customers need for their obsolescent technologies the lime with “higher emission” level - we have to respect their needs. |
c) quite exaggerated |
Lime production is strongly affected by the ETS restrictions. About 70% of CO2 emission are process emissions that are absolutely not possible to avoid as they are resulting from thermal decomposition of calcium carbonate into calcium oxide and CO2: CaCO3 => CaO + CO2 Implementation of the current rules of granting free allowances made their quota close to the level of process emission. Any further reductions of emission must result in production decrease. This is the reason why, in our opinion, it is necessary to exclude the process emission from the ETS. The benchmarks should include the fuel mix – now they are based only on natural gas as a less emissive fuel . The benchmark allocation system based on the current conditions will be a huge burden for the lime industry, by limiting the production and paralysing any development of the lime sector. |
d) there should be no limit to overall free allocation to industry |
The amount of free CO2 allowances granted to the industry after 2020, must absolutely ensure and remain the competitiveness of the European industry, provide conditions for economic growth, and development of infrastructure for all EU countries. The scope of EU climate politics has to be adequate and proportional with pro-climatic activity of all other countries being the biggest CO2 emitters. |
e) I don’t know |
Polish Lime Association does not fell competent to take a position concerning the development of CCS, nor to allocate funds for this purpose. However, we share the widespread concern that: • CCS implementation will drastically decrease efficiency of conventional energy production systems, which will result in significant energy price increase • CCS could be installed only for the several biggest CO2 emitters - the biggest thermal power plants, but never for the industry. • the progress and fast development of renewable energy, could affect the CCS installations that will not be efficient (capital-intensive with very long pay-back, and expensive during exploitation). We consider it reasonable to support the development of renewable energy. Polish Lime Association suggest to not engage NER for supporting the CCS. |
a) yes |
We consider incentive supporting of low emission and low carbon technologies as the best way to decrease the negative climate changes. Financial support could be ensured by country governments with revenues of allowances auctioning. It is necessary to protect by the EU regulation the minimal % ratio of auctioning revenues to be dedicated for this goal. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The same comment as to Question 9: We consider incentive supporting of low emission and low carbon technologies as the best way to decrease the negative climate changes. Financial support could be ensured by country governments with revenues of allowances auctioning. It is necessary to protect by the EU regulation the minimal % ratio of auctioning revenues to be dedicated for this goal. |
a) yes |
Polish Lime Association considers fully reasoned the need to exclude process emission from the ETS for those industries where process emissions appear i.e.: lime, cement, chemistry - fertilisers, glass, steel. Process emissions are defined as those emissions that are not deriving from fuel and are not possible to avoid regardless technology and investments. The process emissions are predictable, easy to monitor and report. For lime industry process emissions coming from calcination of raw material account about 70% of total emission. |
a) the present two groups should remain |
Polish Lime Association considers the current system of Carbon Leakage risk classification as fully adequate. The only reservation is the mode of classification of sectors accordingly to the NACE 4 Eurostat classification, as it would be better, more adequate and representative to go one step deeper i.e. PRODCOM 6. Currently lime production is deeply threatened by Carbon Leakage risk as it is classified with plaster sector which is indifferent to Carbon Leakage. |
a) the present criteria should remain |
As mentioned in question 12 – the current rules may remain with reservation of Eurostat classification the sectors dimmed on Carbon Leakage risk. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
See comments to questions 12 and 13 |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
We consider indispensable to maintain a certain level of discretion within the system in appropriate cases. |
d) in line with the duration of ETS Phase 4 |
It is absolutely essential that the rules concerning Carbon Leakage risk exposure as well as all other substantial ETS regulations remain unchanged for at least 10 years, in order to ensure clear and stable conditions of running business and enable making rational investment decisions. |
c) the approach should be less stringent (please specify) |
Polish Lime Association considers reasonable to: • to exclude process emission from ETS (see comments to question 1,6,11,24) • to base the “fuel part” of benchmark on the fuel mix and not only on the natural gas. Lime burning installations has been located close to the stone deposit, very often far from the gas network. |
a) yes (please specify how often) |
Revision and eventual update of product benchmarks could take place simultaneously with the revision and update of BAT/BREF, i.e. each 10 years . It is to note that the benchmark has to be achievable and reflect realistic production conditions. |
c) other (please specify) |
It seems that the proposal of “Dynamic allocation of free allowances” presented by ECOFYS, if introduced: • will enable to correlate the allocations with the substantive needs of allowances for each installation; • at the same time will push through reduction of emission; • will restrict the speculation with allowances by the third person not directly implemented to ETS. |
a) no, there should be no deviations |
Polish Lime Association suggests to exclude process emission from ETS as it is the part of CO2 emission that is impossible to avoid (see comments to questions 1,6,11,17,24) |
d) yes, in the form of financial compensation at EU-level |
Lime sector in Poland supports common initiative of all European energy intensive industries to be financially compensated (at least partly) due to the increase of the energy costs caused by ETS restrictions. Such compensation would be paid from auctioning revenues |
Less important |
Important |
Most important |
I don't know |
|
a) from the Member States' auction budgets |
Free allowances by definition have to be free of any charge otherwise it would be a kind of extra tax. |
Production of lime is the most, from the entire manufacturing industry, threatened by the ETS restrictions due to the fact that production of 1 tonne of lime generates ~0,95 t up to 1,6 t of CO2. Additionally, about 70% of CO2 emission is absolutely not possible to avoid as it comes not from fuel but from calcination of carbonates. This part of the emission is called process emission. Lime is an irreplaceable product widely used in environment protection (flue gas treatment in conventional energy production, water and sludge treatment), in construction, civil engineering, steel industry, metallurgy, chemistry, paper, glass, in agriculture for optimizing the pH of soils and in cattle farming. We suggest to consider the exclusion of process emission from ETS. We also strongly suggest to base the “fuel part of benchmark” on fuel mix, as otherwise the market competition conditions might be threatened. |
e) Non-governmental organisation |
Sandbag Climate Campaign is a non-governmental organisation (NGO) that campaigns for effective carbon budgets and carbon markets, with a special focus on the EU Emissions Trading Scheme (ETS). If emissions trading can be implemented correctly, it has the potential to help affordably deliver the deep cuts in carbon emissions the world so badly needs to prevent the worst impacts of climate change. |
Sandbag Climate Campaign is a not-for-profit enterprise registered as a Community Interest Company under UK Company Law. Company No. 6714443 Registered Address: BWB Secretarial Ltd, 2-6 Cannon Street, LONDON, EC4M 6YH// Trading Address: 28 Leman Street, Aldgate, London, E1 8ER EU Transparency Register: 94944179052-82
Email : info@sandbag.org.uk // Web: www.sandbag.org.uk |
b) no |
1) yes |
a) yes |
In each EU ETS sector, there are large differences in carbon intensity between different plants. This demonstrates that most plants are not using best available technologies and that industrial emissions could fall dramatically if they did. Innovation could increase the reduction potential even further. Attracting investment to Europe to recapitalise aging infrastructure is, however, a key challenge especially in markets where there is global competition. If the EU wishes to combine steep reductions in emissions with steady or ideally increasing industrial production it will have to ensure it has a holistic climate and industrial strategy and policy package that attracts investment.
Generous free allocations to industrial sectors to date have insulated them from a carbon price and offsetting has delivered a low carbon price overall. Though this has provided a way for companies to supplement their cash flow it appears to have failed to stimulate significant investment. |
b) no |
In theory, increasing the cost of energy by internalising a carbon price increases investment in efficiency. However, through its allocation methodologies, the EU ETS currently creates incentives which reward reduced emissions irrespective of production levels. This means that even the most efficient installation is more rewarded by the scheme for reducing its production (by selling freely allocated spare EUAs) than for increasing it’s output or keeping it constant. Those investing in genuine improvements in efficiency may find themselves disadvantaged relative to companies who choose to offshore production. |
b) no |
Industry covered by the ETS will in the future, as the cap tightens, face a choice between investing in emissions abatement or reducing production. There are many options available for reducing emissions by adopting ‘best available technologies’, however, companies need to feel confident in their position in the market to justify investment. The EU needs to develop a holistic long-term industrial strategy that seeks to commercialise low carbon technologies capable of replacing fossil fuel use in industry. Previous energy and climate packages have neglected this in favour of focusing on renewable technology support that has been successful in bringing about transformation in the power sector but failed to provide a decarbonisation pathway for industry. |
d) very inadequate |
Free allocation is, in principle, an adequate means of protecting against carbon leakage; however, free allocation based on current rules (benchmarked against historical production fixed baseline years) is very inadequate to address the risk of carbon leakage.
Let’s take the example of a firm owning two plants equally competitive, of which one is in the EU and is given free EUAs. The firm would make more profit from selling the EU plant’s EUAs and producing the same goods at its (potentially more polluting) plant outside the EU, than from producing at the EU plant. This is carbon leakage in action. |
d) it absolutely compromises the incentive |
Free allocation is intended to cushion industry from having to pay the full carbon price for the emissions they are responsible for, however, it creates a perverse incentive to reduce emissions by reducing production, which is probably the least innovative solution to the problem. Company innovation is stimulated where there is confidence in securing a growing share of the market coupled with available capital to invest in R&D and deployment. Fears of reduced competitiveness and little or no reward for innovation undermine these conditions. |
e) I don’t know |
As non-participants it is difficult to assess the administrative burden. In considering the potential additional administrative requirements of moving to a production based allocation methodology it should be noted that there is already a set of requirements relating to reduced production, which triggers reductions in allocations. |
f) I don’t know |
This is considering the issue from the wrong perspective. Rather than trying to second guess the level of free allocation required by industry the EU should consider policy changes that address (and possibly reverse) carbon leakage, by adjusting allocation to trade-exposed industries ex-post based on their latest (not historical) production levels. A benchmark could be set as the X% most efficient plants for each sector, so that any plant inside this X% would end up receiving more allowances than they need for each unit produced, while the rest would receive too few allowances.
For the avoidance of doubt, overall allocation should never exceed the cap, so that any increase in allocation due to increased production should be compensated by fewer auctioned allowances. This is made possible by the large number of allowances which are assigned for auction every year. If this number was to decline to zero (which could only happen in the event of an industrial production increase of about 100%), then no more allowances should be distributed.
With such an allocation method post-2020, if industrial production was low, allocation would be low, so the allowance budget dedicated to carbon leakage would probably be lower than in 2013-20. Conversely, if industrial production rose, allocation would rise and the allowance budget dedicated to carbon leakage would probably be higher than in 2013-20. Any loss of revenue to Member States arising from fewer auctioned allowances would be compensated for by more traditional tax receipts related to increased GDP. |
d) there should be no such innovation support post-2020 |
This question is framed in too narrow a way. Support for innovation need not be limited to instruments that are created from within the ETS policy. Energy efficiency policies and renewables policies exist as separate policy instruments within the broader EU climate and energy package. Support for low carbon innovation in industrial sectors should be given a much higher profile and dedicated policies introduced that work alongside the ETS.
The NER 300 has dramatically underperformed relative to expectations due to the crash in EUA values in part caused by continued over-allocation to industry. A more holistic industrial support strategy working in tandem with the ETS would provide a higher degree of investor confidence. |
b) no |
We support the introduction of dedicated policies to support deployment of non-renewable industrial low and zero carbon technologies. However it is too constraining to assume that innovation funding must be necessarily derived from the sale of ETS allowances. Allowance-based funding (as opposed to for example providing funding from public finances) introduces an unnecessarily uncertain method of raising finance which has proved to be unsuccessful to date. |
c) other types of funding (please specify) |
If an output-based allocation method were in place within the cap, efficient industries could fund themselves by selling the excess allowances saved thanks to their low-carbon production. They can already do so of course, however, the cheapest form of abatement to date has been offsetting and reduced production which has distorted investment signals. If allocation were dynamic this would reward genuine gains in carbon efficiency. |
a) yes |
There is a question of how to compensate rising costs due to higher energy bills where there are indirect emissions attracting a carbon price. The post 2020 carbon leakage policy should consider ways to harmonise compensation payments as a replacement for the current state aid provisions, which are subject to national variation. |
e) I don’t know |
In practice virtually all sectors are qualifying and the concept of the binary list has therefore been devalued. There are also questions about the methodology used, which does not appear to be calibrated in a way to distinguish between highly exposed industries and those facing a more theoretical risk. |
g) I don’t know |
c) I don’t know |
c) I don’t know |
a) five years |
No significant design elements of the ETS should persist for longer than 5 years, including the duration of Phase 4. |
d) I don’t know |
The top 10% rule for assessment of initial allocations should remain, however, the existing benchmarking rules create very few ‘winners’ as ex ante assessments of need can easily be rendered inaccurate solely through changes in production. An attempt to address this has been introduced through the use of production thresholds that, once passed, trigger reductions in allocations. Changes to the way in which such triggers work should be introduced to a) reward increases in production with ex post allocation of more allowances b) make the triggers for reductions in allowances more fine grained. |
a) yes (please specify how often) |
Production-based allocation as described above should use benchmarks based on the X% most efficient plants, which will change as more efficient installations come on line. An updated benchmark level should follow the (likely increasing) efficiency of European plants. |
c) other (please specify) |
Recent production data should be used to grant an initial allocation ex ante, and final allocation should be adjusted ex post according to actual production levels, as long as overall allocation never exceeds the cap. |
e) I don’t know |
c) yes, in the form of additional free allocation |
One way of harmonising compensation for indirect carbon costs would be to make additional allowances for indirect emissions available to energy intensive industries in an ex poste adjustment to initial benchmarked allocations. This would, however, significantly reduce the volume of allowances available to auction. This would not have any significant impact on price, however, it would reduce auction revenues to MSs, though doing so would reduce the pressure to provide compensation payments from the auction receipts as is already currently implemented in a number of countries. If such a system were introduced the state aid provisions for compensation for indirect costs would need to be removed.
A key test of whether such a change should be implemented is gaining support from industry for a significant reduction in the current surplus of allowances through cancellation, since they would then be insulated from the effects of any resulting price increases. |
Least important |
Least important |
Most important |
Important |
As most of the technologies needed for tackling climate change are already available, setting the right incentive to deploy these technologies should be the number one priority and this can be achieved best through aligning the incentives created in industry through allocation. Innovation support would still however be important for breakthrough technologies that will be needed to reduce emissions to nearly zero in all sectors by 2050.
If a ‘promising’ emission reduction technology was unable to attract private investments, public investment could be considered. The stage of development considered for public funds should then be the stage of development where private capital is missing for the technology. |
d) other |
As previously stated we support the introduction of dedicated policies to support deployment of non-renewable industrial low and zero carbon technologies. It is too constraining to assume that innovation funding must be necessarily derived from the ETS. Allowance based funding (as opposed to for example providing funding from public finances) introduces an unnecessarily uncertain method of raising finance which has proved to be unsuccessful to date. |
When considering climate policy for trade-exposed industries, the EU should not only think about the negative effect of carbon leakage but also the positive effect of the reverse phenomenon where it would become more attractive for a firm to efficiently produce in Europe than to produce less efficiently outside Europe. Such ‘efficiency infiltration’ (reversed carbon leakage) could be achieved by an allocation mechanism which would reward efficient plants for increasing, but never for reducing, their production.
Our responses to this consultation are made on the basis that we expect significant improvements to the ETS post 2020, including a significant reduction in the surplus of allowances that has accrued, and will continue to accrue this decade, and a challenging reduction target for the traded sector in 2030. We believe the power sector now has the potential to decarbonise at a relatively rapid rate but that insufficient attention has been paid to the need to stimulate genuine investment in abatement in the industrial sector. The ETS has thus far rewarded reduced production at the expense of longer-term investment strategies. The 2020 package failed to put in place sufficient technology support mechanisms to commercialise industrial decarbonisation. The 2030 climate and energy package must not make the same mistake. |
e) Non-governmental organisation |
The Danish Ecological Council |
Blegdamsvej 4B, 2200 Copenhagen N, Denmark, +45 33150977, info@ecocouncil.dk Contactperson for this survey: Søren Dyck-Madsen +45 33181939 soeren@ecocouncil.dk |
b) no |
|
1) yes |
a) yes |
A wide range of technological options to reduce greenhouse gas emissions remain available, including in energy-intensive sectors. The energy effeiciency road to reduce emissions from industry has proven quite innovative, good for competitiveness and very costeffective in Denmark. Lots of energy savings with very short pay back times are found in Danish industries. Also for the more energy intensive secto the steel sector reducing energy consumption thus also reducing GHG. This would not hamper the Europeancompetitivenes - on the other hand energy efficiency (and resource efficiency in general) will help keeping the EU industries competitive in a global market where smartnes and effectiveness have to be the key word for the EU. |
b) no |
Both yes or now. In principle the idea should help, but bad constructions of the ETS hampers the efficiency. It is simply needed to introduce an automatic adaptation for the amount of emission allowances to the actual emission level. Not as today in an almost impossible political unamity process but in a simple automatic process that keeps the price for emission alloawances as a relevant level - higher than 40 Euros per ton. If this is not possible it will be more cost- and climate effective to go for at strong binding energy savings target in 2030 rather than continuing with a weak and not really functioning ETS. So the answer is, that the ETS could have helped if correctly constructed, but in the present state it is a NO. |
b) no |
Again it will be a yes and a no. If the ETS stays at the present not functional state, the far too low and not costeffective price for emission allowances will not help nor hamper the covered industries. But if real political ambitions should be possible on the climate issue in the Eu and the ETS should be fixed - with a carbon price not less than 40 Euros per ton there might be a need for some compensation measures. But it has not to be free allowances - at least not without adding strong energy savings and innovation demands to the granting of (some and short) free emmission allowances agreement. |
d) very inadequate |
The result of the over-generous acceptance policy of the carbon leakage list is that 60% of industrial sectors, representing 95% of EU industrial GHG emissions now qualify for free pollution permits. Across trading phases, the sectors concerned will continue to have a net surplus of emission allowances until after 2020. This is particularly worrying, given the evidence of unintended consequences from the current policy design: • Between 2005 and 2012 some companies have passed through at least part of the costs of emissions pricing – despite not having to actually pay that cost themselves. During the first two phases of EU ETS, the chemical, oil and steel sectors alone may have made windfall profits of some €14 billion. |
d) it absolutely compromises the incentive |
A recent FTI Consulting report showed that closing exemptions would deliver more benefits than costs; including overall net GDP gains of €13-16bn and 137,000- 234,000 more jobs. A large proportion of these society-wide benefits can be attributed to the recycling of ETS auctioning revenue. If the EU ETS really worked and set a relevant price on Carbon it would be factored in to company level decision-making. At the moment this is not the case, at least not on the scale that is required to impact either the types of capital projects needed to meet the long-term targets that the EU has set out, or to incentivise the type of innovation required to bring down the cost of meeting these targets. In any case, the speed and scale at which carbon prices can drive this switch in innovation and investment depends on the strength of the price signal created, and free allocation of emission allowances clearly undermines the required price signal. |
b) quite proportionate |
If the carbon price was correct the ETS would have been a good instrument for energy savings, innovation, job creation, competitiveness thus being relevant for the introduction of an administrative burden. But the recent functioning and pricing in the ETS that do not have any large positive effect for EU companies might not be worth the administrative burden. |
f) I don’t know |
The most recent European Competitiveness Report confirmed that for the EU economy as a whole, increasing productivity and resource efficiency is the most effective way of maintaining and/or increasing competitiveness in the face of relatively high energy prices. In particular, it suggests a long-term industrial policy targeted at the development of ‘clean’ products and technologies could form the basis of a major industrial policy initiative. The EU ETS offers an excellent opportunity to mainstream climate policy into industrial policy to build a cleaner, more innovative and competitive future. But supplements are needed. Investments have to be taken and funds for this have to be available. A high ETS allowance price of more than 40 Euroes per ton of carbon and the abolishement of free allowances could make sufficient amounts for the transformation of the EU industrial sector. Here the amount might be more important than the share of action revenue. |
d) there should be no such innovation support post-2020 |
There should be no support for CCS, since this technology is not the EU answer to the climate problem. Nor is nuclear. Energy efficiency on the other hand would leave the fossil fules in the ground - which is by far the cheapest and most intelligent way to go forward. This means that the ETS system must never be a blocer for ambitious and costeffective energy efficiency obligation - 40 % in 2030 at least are in several surveys being highlighted as costeffective on the way to the EU target in 2050. Here investments are needed, and funds also from revenues from ETS actions should be directed. |
a) yes |
There is a need for this in the industry sector. Though many industries really will positively benefit from investments in energy and ressource efficiency not having need for support. Not every "low carbon technonlogy" should be supported. The focus of this support scheme should be on skills, development, research, and innovation in renewable energy and energy saving technologies, including in energy-intensive sectors. A significant portion of auctioning revenues from the fully reformed EU ETS should be centrally earmarked for this purpose. The aim is to shape a European carbon market that delivers long-term benefits for society and the environment. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS auctioning revenues from a reformed system with carbon prices well over 40 Euroes per ton are the most suitable source of funding for renewable and energy saving technologies in industrial sectors. These revenues could be channelled through a new dedicated scheme - but again not all low carbon technologies should be supported. |
a) yes |
Free allocation is not needed as the understanding of it is today in the recent ETS system. But yes - if the ETS is reformed and the price lifted to an adeqaute level there will be need for support in the form of returning (part of) the ETS revenue in a smart way to the industry sectors in ned of support to increase energy efficiency, to innovate, to chance proces or just to be more competitive. Free allocation without additional demands for effeiciency and innovation is not the way forward. |
b) more carbon leakage categories should be defined |
While offering simplicity, the current binary (in-out) approach to define sectors at risk of carbon leakage is unlikely to match the real situation of the very diverse structure of European industries. A factor that defines the share of carbon leakage risk for a limited amount of high emitting sectors and subsectors sould be evolved. The qualitative criteria expressed in question 15 should serve as a basis for development of this risk factor. But again it is important to point out that a defined risk for carbon leakage should not automatically trigger free allowances. But it could trigger the right to get funded the best and most costeffective innovations and energy and ressource efficiencies. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
A limited number of sectors and subsectors proven to be exposed to a risk of carbon leakage should be identified on the basis of a fact-based assessment, using strict, realistic and transparent criteria. These criteria should take into account trade patterns and global, regional and national climate and energy policies in third countries as well as a realistic carbon price parameter. New measures must take into account qualitative factors such as the possibility for industries to pass on carbon costs to consumers, as well as the potential to increase efficiency of production and reduce energy costs. Finally, the criteria should include an assessment of potential product substitution between (energy intensive) sectors, and technological development (product specific benchmarks should be defined on the basis on the most efficient installations worldwide) |
b) other thresholds should be defined. Please specify below |
Accounting only for the share of 'carbon costs' in the gross value added (GVA) is pointless when the goods produced are not traded globally. Similarly, measuring the intensity of trade with third countries alone cannot give any meaningful information on the impact of the EU ETS legislation. Therefore, the current (30%) stand-alone criteria are unfit to measure the real risk of carbon leakage and must be abolished. Potential for improving energy efficiency, ressource efficiency must be taken into account. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The current practice of reverting to qualitative criteria only if a sector is NOT found to be exposed to a significant risk of carbon leakage is likely to lead to the highest number of sectors on the list but not necessarily fully reflecting the real level of exposure. This leads to competitive distortions when subsectors at low risk of carbon leakage within a sector of generally significant risk become part of the carbon leakage list. The EU Commission should therefore adopt a balanced approach and also apply qualitative criteria in case a sector is initially found at risk of carbon leakage in order to avoid “false positives” on the list. |
a) five years |
A validity of 5 years could be acceptable in order to ensure a stable regulatory framework, as long as the review of the list is thorough and reality-based. The European Commission should endeavour to get a clear legal mandate to update the parameters when the list of sectors is reviewed. A repeat of the experience with the proposed 2015-2019 carbon leakage list is unacceptable. In this way there is a severe risk that the ‘polluter pays’ principle is being ignored in the context of political deal making. |
b) the approach should be more stringent (please specify) |
Adequate European ETS benchmarks can be a major driving force towards a profitable, innovative and greenhouse-gas efficient manufacturing industry in Europe and promote and reward early action and innovation in manufacturing. Adaptation of the benchmarks is an opportunity to reinstate and reinforce Europe’s climate and technological leadership in the world. The Commission should focus on developing credible product benchmarks and avoid fall-back options such as heat and fuel benchmarks which are, on average, more generous. |
a) yes (please specify how often) |
The current practice of applying a 12-13 year old technological benchmark up to 2020 does not make sense. In order to avoid benchmarks becoming obsolete, they should be revised to reflect technological adjustments by introducing an upfront “technological evolution factor”. |
d) I don’t know |
Companies have found it in their self-interest to choose the period with higher production levels, as higher production multiplied by a given benchmark translates into more free allowances. The European Commission had to correct for the bias by applying a cross sectoral reduction factor since allowing each installation to make this choice has resulted in an inflated aggregate production level for allocation purposes. It is therefore important not to overestimate the future production of industrial installations since this will lead to renewed overallocation in the EU ETS after 2020. It is very normal for industry to go through economic cycles. As history shows, if operators are allowed to exclude the year with the lowest production from their reference period when calculating the free allocation, it would automatically lead to an overestimation of historic and future production. This must not happen again. |
a) no, there should be no deviations |
There should be no deviations -> quantitative and qualitative criteria are providing sufficient level of detail, and this ensures relative regulatory simplicity |
b) no, and there is no need for financial compensation by Member States, either |
The framework under which Member states may compensate some electro-intensive users for part of the higher electricity costs expected to result from the EU ETS has several problems. Firstly, also in electro-intensive sectors EU carbon pricing has not led to measurable carbon leakage and cannot be confirmed by empirical evidence. Some sectors saw increasing imports or decreasing exports. These changes were driven mainly by global demand developments and input price differences. Secondly, by allowing Member States to decide if they issue compensation or not, the framework opens the door for competitive distortions inside the EU. In this context the framework for financial compensation by Member States after 2020 should not be continued. Instead the EC should work closely with member states to ensure that a significant proportion of the ETS auctioning revenues are earmarked for innovation in renewable energy and energy saving technologies, including in electro-intensive industries. |
Most important |
Least important |
Less important |
Important |
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a) from the Member States' auction budgets |
As stated above, there is no need to continue the issuance of free emission allowances after 2020, and it is strongly recommended to apply the ‘polluters pay’ principle by 100% auctioning of emission allowances after 2020. This will also guarantee a reliable and significant revenue stream from auctions to Members States’ budgets, by which the support for innovative renewable and energy saving technologies can be maximised by creating a dedicated fund and/or expanding the current NER300 scheme. And it will adjust the revenues by the cost of allowances in order to get more funding possibilities when the cost of carbon emission reach an adequate price of not less than 40 Euroes per ton. |
The main points are: Get the ETS fixed or don't let it stand in the way for ambitious cost efficient energy efficiency obligations of at least 40 % in 2020. No free allowances should allowed unlees the free allowances are followed by very strict demands for energy and ressource efficiency and general innovation. Investment support schemes are needed not only for energy intensive industries since energy savings and by that emissions reductions can be found anywhere with a very short investment pay back time. Risk for leakage should be treated real sharp in order to limit the list of sectors and the involved companies as much as possible. Lots of companies are getting free allowances today even they are not really exposed. |
e) Non-governmental organisation |
TONDACH GLEINSTÄTTEN AG |
A-8443 Gleinstätten, Graschach 38; +43/664/6107934; konrad.bernhard@tondach.at |
a) yes |
1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constra |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such im |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
a) very adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross- sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy- efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. This would limit the list to sectors really exposed and would eliminate the risk of a carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
As explained above, all energy intensive sectors as defined in the Energy Taxation Directive should be considered as exposed to the carbon leakage risk. As an alternative, trade and carbon intensity criteria should be used considering the following elements. First, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS. Second, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon in |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
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Important |
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a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
e) Non-governmental organisation |
WWF European Policy Office EU Transparency Register ID: 1414929419-24 |
168 avenue de Tervurenlaan Box 20 1150 Brussels Belgium Contact for this consultation reply: Sam Van den plas Tel. +32 (0)2 740 0932 Fax: +32 (0)2 743 8819 svandenplas@wwf.eu |
b) no |
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1) yes |
a) yes |
The EC’s impact assessment accompanying the 2030 framework Communication assesses a -50% greenhouse gas emission reduction scenario in the context of global efforts to stick to 2 degrees in which EU energy intensive industries grow. Also beyond this timeframe, a wide range of technological options to reduce greenhouse gas emissions remain available, including in energy-intensive sectors. In the steel sector, recycling as well as different retrofit measures can significantly improve the energy efficiency of production. Most of the available options to decrease energy intensity are cost‐ negative, meaning that the investments pay themselves back within the lifetime of the improvements that were made. In the longer‐term, new technologies such as the “Hisarna” coke‐free steelmaking process or use of magnesium‐based clinker in the cement sector are likely to reach market maturity before 2030. These options can contribute to delivering 80 to 95% emission reductions by 2050. |
a) yes |
With its current setup, the EU ETS framework fails to deliver a meaningful pollution price signal that could steer Europe towards cleaner production and consumption. However, a stronger EU carbon price and accelerated rate of green investments will play an important role in stimulating innovation and boosting demand for products from industrial sectors. For instance, increased demand for renewable energy technologies could significantly increase demand for steel (one windmill = 320-440 cars). The most recent European Competitiveness Report confirms that for the EU economy as a whole, increasing productivity is the most effective way of maintaining and/or increasing competitiveness in the face of relatively high energy prices. In particular, it suggests a long-term industrial policy targeted at the development of ‘clean’ products and technologies could form the basis of a major industrial policy initiative. |
b) no |
A handful of influential big polluters have repeatedly convinced EU policymakers that they need generous exemptions to the carbon price signal, including the free allocation of emissions allowances and the potential for state-aid compensation by Member States. The current measures represent a significant transfer of wealth from Member State budgets to industry. In 2013, this hand-out amounted to about 840 million free allowances, worth nearly €4 billion. Adding to this amount is the potential for state-aid to electro-intensive industries to be decided by member states. In Germany and the UK alone, the annual potential support may add up to more than €650 million. Both the value involved and the measure’s impact on greenhouse gas emission reductions cuts mean that a continuation after 2020 is unacceptable, unless boundary criteria are very carefully drawn. It is crucial for the credibility of the EU ETS that support measures are focused in order to be effective and meaningful. |
d) very inadequate |
The result of the over-generous acceptance policy of the carbon leakage list is that 60% of industrial sectors, representing 95% of EU industrial GHG emissions now qualify for free pollution permits. Across trading phases, the sectors concerned will continue to have a net surplus of emission allowances until after 2020. This is particularly worrying, given unintended consequences from the current policy design. Firstly, some companies have passed through at least part of the costs of emissions pricing – despite not having to actually pay that cost themselves. Secondly, evidenced in the cement sector, companies have intentionally spread production over several installations in order to maximise free allowances. This has led to overproduction of cement in Southern Europe, which then had to be exported – leaving the ETS to subsidise additional pollution, and overproduction. |
d) it absolutely compromises the incentive |
There is some anecdotal evidence that the EU ETS is being factored in to company level decision-making, but not on the scale that is required to impact either the types of capital projects needed to meet the long-term targets that the EU has set out, or to incentivise the type of innovation required to bring down the cost of meeting these targets. In any case, the speed and scale at which carbon prices can drive this switch in innovation and investment depends on the strength of the price signal created, and free allocation of emission allowances clearly undermines the required price signal. The public benefits of abolishing the allocation of free emission allowances are equally clear. A recent FTI Consulting report showed that closing exemptions would deliver more benefits than costs; including overall net GDP gains of €13- 16bn and 137,000-234,000 more jobs. A large proportion of these benefits can be attributed to the smart recycling of ETS auctioning revenues. |
e) I don’t know |
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e) there should be no free allocation post-2020 |
As stated above, we disagree with the statement that free allocation is the best and only way to address carbon leakage and competitiveness concerns. European society cannot afford distraction from efforts to maintain and grow a sustainable industrial base in Europe by focusing on the region’s comparative advantages. Long-term industrial policy targeted at the development of ‘clean’ products and technologies could form the basis of a major industrial policy initiative. Such an initiative would grasp the opportunities already present in EU’s comparative advantages of innovation and high-tech manufacturing. The EU ETS offers an excellent opportunity to mainstream climate policy into industrial policy to build a cleaner, more innovative and competitive future. Free allocation of pollution permits will undermine these objectives. |
a) a substantially higher share than in Phase 3 |
The European Commission should build on the experience gathered under the current NER300 programme run by the European Investment Bank to significantly expand the programme and focus support on demonstrating renewable energy and energy savings deployment at scale. |
a) yes |
The focus of this support scheme should be on skills development, research, and innovation in renewable energy and energy saving technologies, including in energy-intensive sectors. A significant portion of auctioning revenues from the fully reformed EU ETS should be centrally earmarked for this purpose. The aim is to shape a European carbon market that delivers long-term benefits for society and the environment. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Funding for renewable and energy saving technologies in industrial sectors should also be supported through the ETS auctioning revenues. These revenues could be channelled through a new dedicated scheme and/or an expanded system similar to NER300. Complementary regulations, such as CO2 standards and phase-out pathways for high-carbon production must be introduced, to ensure finance is followed by performance. |
a) yes |
The EU in general and the European External Action Service in particular needs to strongly engage in a high-level global diplomatic effort to reach out to key countries to stress the need to urgently reach agreements that increase pre- 2020 reduction of greenhouse gas emissions, and also generate new post-2020 commitments from key countries that are consistent with science and equity. Mechanisms to ratchet up ambition over time should also be included. Achievement of a global agreement under the UNFCCC in 2015 would significantly strengthen the competitive position of the EU industries. In addition, the European Commission should pro-actively monitor development of emerging climate policies for energy intensive sectors in other jurisdictions. This will help to understand when the risk of carbon leakage for trade with these countries is de facto non-existent if pollution-control policies are comparable. |
b) more carbon leakage categories should be defined |
While offering simplicity, the current binary (in-out) approach to define sectors at risk of carbon leakage is unlikely to match the real situation of the very diverse structure of European industries. We therefore support the development and application of a factor that defines the share of carbon leakage risk for a limited amount of high emitting energy-intensive sectors and subsectors. The qualitative criteria expressed in question 15 should serve as a basis for development of this risk factor. Sectors that are found to be exposed to the risk of carbon leakage should not receive any free allocation of emission allowances, but instead become entitled to receive targeted support for further emission reductions through innovative renewable and energy saving technologies (see above). |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
A limited number of sectors and subsectors proven to be exposed to a risk of carbon leakage should be identified on the basis of a fact-based assessment, using strict, realistic and transparent criteria. These criteria should take into account trade patterns and global, regional and national climate and energy policies in third countries as well as a realistic carbon price parameter. New measures must also consistently take into account qualitative factors such as the possibility for industries to pass on carbon costs to consumers, as well as the potential to increase efficiency of production and reduce energy costs. Finally, the criteria should include an assessment of potential product substitution between (energy intensive) sectors, and technological development (product specific benchmarks should be defined on the basis on the most efficient installations worldwide). |
b) other thresholds should be defined. Please specify below |
Accounting only for the share of 'carbon costs' in the gross value added (GVA) is pointless when the goods produced are not traded globally. Similarly, measuring the intensity of trade with third countries alone cannot give any meaningful information on the impact of the EU ETS legislation. Therefore, the current (30%) stand-alone criteria are unfit to measure the real risk of carbon leakage and must be abolished. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The current practice of reverting to qualitative criteria only if a sector is NOT found to be exposed to a significant risk of carbon leakage is likely to lead to the highest number of sectors on the list but not necessarily fully reflecting the real level of exposure. This leads to competitive distortions when subsectors at low risk of carbon leakage within a sector of generally significant risk become part of the carbon leakage list. The EU Commission should therefore adopt a balanced approach and also apply qualitative criteria in case a sector is initially found at risk of carbon leakage in order to avoid “false positives” on the list. In practice, we can support the methodology presented in the research developed by Öko-Institut for the European Commission (http://ec.europa.eu/clima/policies/ets/cap/leakage/docs/carbon_leakage_list_en.pdf), with a proposal for a harmonised framework for qualitatively assessing the risk of carbon leakage with a tiered approach in 3 steps. |
a) five years |
A validity of 5 years is acceptable in order to ensure a stable regulatory framework, as long as the review of the list is thorough and reality-based. The European Commission should endeavour to get a clear legal mandate to update the parameters when the list of sectors is reviewed. A repeat of the experience with the proposed 2015-2019 carbon leakage list is unacceptable. Instead of updating the carbon leakage list valid for 2013-2014 the Commission stated in its Communication on a 2030 policy framework for climate and energy that it intends to maintain the current criteria and existing assumptions in the 2015-2019 list. WWF expresses serious concern that the ‘polluter pays’ principle is being ignored in the context of political deal making. In addition, we regret that the European Commission disregarded our earlier input to its stakeholder consultation on assumptions to be used for the second EU ETS carbon leakage list 2015-2019. |
b) the approach should be more stringent (please specify) |
Adequate European ETS benchmarks can be a major driving force towards a profitable, innovative and greenhouse-gas efficient manufacturing industry in Europe and promote and reward early action and innovation in manufacturing. Adaptation of the benchmarks is an opportunity to reinstate and reinforce Europe’s climate and technological leadership in the world. From 2021 onwards, the benchmarks should hence be set at the level of the best available (in terms of greenhouse gas emission performance) product on the (global) market. The Commission should focus on developing credible product benchmarks and avoid fall-back options such as heat and fuel benchmarks which are, on average, more generous. In its determination of the ETS cross sectoral reduction factor, the Commission admitted that the generosity of the fall-back approach also contributed to a higher overall free allocation to European industry than anticipated. |
a) yes (please specify how often) |
The ETS Directive clearly recognises that the benchmarks based on performance in the years 2007-2008 were a “starting point”. This indicates that, over time, benchmarks have to take into account (new) technological improvements in the GHG-efficiency of production. The current practice of applying a 12-13 year old technological benchmark up to 2020 does not make sense. In order to avoid benchmarks becoming obsolete, they should be revised to reflect technological adjustments by introducing an upfront “technological evolution factor”. |
c) other (please specify) |
Since each installation could choose between two baseline periods, companies have found it in their self-interest to choose the period with higher production levels, as higher production multiplied by a given benchmark translates into more free allowances. The European Commission had to correct for the bias by applying a cross sectoral reduction factor since allowing each installation to make this choice has resulted in an inflated aggregate production level for allocation purposes. When updating the reference period the EC must take care this does not lead to another round of overallocation of free emission allowances. One important issue is that new entrants take over production from existing installations. This reduces the capacity utilisation of existing installations. In order to address this problem, the European Commission should exclude the highest year of production from the chosen reference period. |
a) no, there should be no deviations |
The proposed quantitative and qualitative criteria outlined in our replies above would provide sufficient level of detail, while ensuring relative regulatory simplicity. If deviations would be considered by the Commission, there should be full consideration of the ex-post data on the surplus accumulated in the relevant sector and the non-surrendered amount of free allowances issued to installations in trading phase 2 and 3 must be taken into account. |
b) no, and there is no need for financial compensation by Member States, either |
The framework for compensation for some electro-intensive users for part of the higher electricity costs expected to result from the EU ETS is fraught with several problems. Firstly, also in electro-intensive sectors EU carbon pricing has not led to measurable carbon leakage and cannot be confirmed by empirical evidence. Some sectors saw increasing imports or decreasing exports, but these changes were driven mainly by global demand developments and input price differences. Secondly, by allowing Member States to decide if they issue compensation or not, the framework opens the door for competitive distortions inside the EU. In this context we see no need to continue the framework for financial compensation by Member States after 2020. Instead the EC should work closely with member states to ensure that a significant proportion of the ETS auctioning revenues are earmarked for innovation in renewable energy and energy saving technologies, including in electro- intensive sectors. |
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a) from the Member States' auction budgets |
As stated above, we see no need to continue the issuance of free emission allowances after 2020, and strongly recommend application of the ‘polluters pay’ principle by 100% auctioning of emission allowances after 2020. This will also guarantee a reliable and significant revenue stream from auctions to Members States’ budgets, by which the support for innovative renewable and energy saving technologies can be maximised by creating a dedicated fund and/or expanding the current NER300 scheme. |
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f) Citizen |
Anna Wydrzyńska-Czosnyka |
anna.wydrzynska.czosnyka@gmail.comWarszawa, ul. Bialy Kamien 5/67+48 606 466702 |
b) no |
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1) yes |
a) yes |
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a) yes |
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a) yes |
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b) quite adequate |
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b) it largely keeps the incentive |
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c) quite exaggerated |
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c) a constant share as in 2013-20 |
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b) the same share as in Phase 3 |
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a) yes |
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b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
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a) yes |
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a) the present two groups should remain |
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a) the present criteria should remain |
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c) I don’t know |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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a) five years |
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a) the present approach of average of the 10% most efficient installations should remain |
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b) no |
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a) no, the same baseline period chosen for allocation in Phase 3 should be maintained also for post 2020 (Phase 4) allocation |
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a) no, there should be no deviations |
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a) no, the present approach should be maintained, i.e. that Member States can provide such compensation based on state aid guidelines |
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Least important |
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Important |
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a) from the Member States' auction budgets |
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f) Citizen |
Boudet Maelle citizen |
Boudet Maëlle 29 avenue louise France |
c) not relevant |
i am a citizen |
1) yes |
a) yes |
Solving global problems requires a global commitment. It is time to stop thinking that the environment will fit in a system, we have to adapt the system to reality. We need the civil societies and governments, and all International organization on climate change and environment, and others, to create the pressures for WTO members to grant flexibilities to countries engaging seriously with the climate change. (WTO agreements have provisions on the respect of the environment). Carbon leakage is responsible for lowering the targets and undermining the Polluter pay principle, countries should be able to use special measures to shield their domestic industries from unfair competition (competition between polluting industries - and industries paying the cost of transition to clean production) in case of risk for the industry. |
c) I don’t know |
There are an incredible amount of loopholes that could actually be used to purposes absolutely contrary to the directives... more pollution, maybe somewhere else, or by lack of guarantee on the quantity of carbon captured through Clean development mechanism. |
a) yes |
Well that's what I said in the first question. They do. But again some are allocated for free (still today, at least those "exposed to carbon leakage" (exposed to ... is the legislator considering them as victims?) they are the most polluting historically and they must improve their efficiency and reduce their emissions. I would require as a citizen that, because the cost is already being internalized in the products, that the cost of funding their transition be completely private. Using again public money, is just de-responsibilizing the private sector, if it had to be used, the policy should then be drastic, and accountability above reproach. |
d) very inadequate |
Free allocations are granted to the biggest polluters, moreover, provided they continue to pollute significantly, we try to retain them on our territory by granting them financial advantages. That is absolutely non-sense, that is just good to multiply the number of units on a new international market, units that have a quite fictive value, at least for non initiated citizens, to create more crisis, like there is in all financial markets. That is NOT the way. The Market is selfish. The tragedy of the common puts it simply, serving one's self-interest contribute to deplete common wealth. expect of a few, the same, the usual, that is the unanimous feeling in civil society, government should be really alarmed about that. |
e) I don’t know |
It shouldn't be an incentive, but a duty. They receive for free what are paying, they must be accountable to use the benefit they could take from it in order to actually improve. Providing them financial gift should allow them to be quicker. Control is needed, and assistance maybe. |
e) I don’t know |
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a) a lower share than in 2013-20 |
It is evident that allocation should be lower. The solution isn't in allocation : allocation doesn't reduce pollution. The voluntary principle of solidarity isn't innate to all, therefore all allowances should reduce, and the free ones, be EXCLUSIVELY EMPLOYED TO IMPROVE THEIR ENERGY EFFICIENCY and reduce their emissions. |
e) I don’t know |
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c) I don’t know |
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b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
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a) yes |
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d) there is no need for a carbon leakage list, all industrial installations should be treated as not exposed |
What is innovative is this vocabulary "exposed to carbine leakage" when it means tempted / forced to relocalize in a country with laxer or no environmental constraint to continue to pollute without paying , as if we were not all gonna pay in the end. |
g) I don’t know |
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c) I don’t know |
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c) I don’t know |
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e) I don’t know |
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d) I don’t know |
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c) I don’t know |
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d) I don’t know |
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e) I don’t know |
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e) I don’t know |
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Least important |
Most important |
Less important |
Important |
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a) from the Member States' auction budgets |
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f) Citizen |
Citizen ! No organization ! |
hizostudio@gmail.com |
c) not relevant |
Citizen... I don't represent any sector. |
1) yes |
b) no |
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a) yes |
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a) yes |
|
e) I don’t know |
I don't understand the question. My mother tongue is french. It's a shame that your public consultations are not translated at less in the 4 main languages (EN, DE, FR, IT) of EU main (funding) members. I thought it was on the Treaty of the EU. |
e) I don’t know |
I don't understand the question. My mother tongue is french. It's a shame that your public consultations are not translated at less in the 4 main languages (EN, DE, FR, IT) of EU main (funding) members. I thought it was on the Treaty of the EU. |
e) I don’t know |
I don't understand the question. My mother tongue is french. It's a shame that your public consultations are not translated at less in the 4 main languages (EN, DE, FR, IT) of EU main (funding) members. I thought it was on the Treaty of the EU. |
b) a higher share than in 2013-20 |
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b) the same share as in Phase 3 |
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a) yes |
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a) It should be funded under a system similar to NER300 with extended scope to cover greenhouse gases reduction technologies in the industry |
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b) no |
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a) the present two groups should remain |
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a) the present criteria should remain |
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a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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c) I don’t know |
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a) five years |
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d) I don’t know |
Translate into french... There's no democracy without the respect of different langages... |
c) I don’t know |
Translate into french... There's no democracy without the respect of different langages... |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
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d) both b) and c) |
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a) no, the present approach should be maintained, i.e. that Member States can provide such compensation based on state aid guidelines |
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Most important |
Important |
Less important |
Least important |
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e) I don't know |
Translate into french... There's no democracy without the respect of different langages... |
Translate into french... There's no democracy without the respect of different langages... |
f) Citizen |
Jean Marc Moulinier |
128 avenue du général de Gaulle 94160 Saint mandé jeanmarc.moulinier@free.fr |
c) not relevant |
i'm a citizen |
1) yes |
a) yes |
I worked on ETS in France from 2004 to 2008 and i had to word on many points of the ETS mecanism including this subject |
b) no |
This is a double sided question first : energy efficiency second : competitiveness I answer yes to the first side of the question no to the second |
a) yes |
I think we need a permanent measure to adress this question |
a) very adequate |
The reduction of emission need a 2 sided mecanism 1) reduction of carbon emissions during production 2) reduce consumption of products with an important carbon content and make promotion of substitutes for the first point a mecanism of free allocation output based (with ex post adjustment) for EU industries, using benchmark is optimal but such a mecanism do not increase the price of product with regard of carbon contend and consequently do not adress the second point so I suggest to complet this mecanism with an obligation of restitution of ETS allowances (with no free allowances) when products belonging to the list of production with a risk of carbon leakage are sold on EU market independently of the contry of production. EU productions expoorted outside EU should not restitute ETS allowances This second mecanism had been studied by WTO http://www.wto.org/english/res_e/booksp_e/trade_climate_change_e.pdf |
b) it largely keeps the incentive |
It keeps the incentive on the production side it absolutely compromises the incentive on the consumption side |
a) absolutely proportionate |
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d) there should be no limit to overall free allocation to industry |
No limit for industry but limit for consumption with no free allowances |
e) I don’t know |
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a) yes |
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c) other types of funding (please specify) |
EU budget funding because this policy is a long term policy and should not vary in regard of carbon price on ETS |
a) yes |
as exposed on question N° 4 a mecanism of free allocation output based (with ex post adjustment) for EU industries, do not increase the price of product with regard of carbon contend and consequently do not impact the price of such products so I suggest to complet this mecanism with an obligation of restitution of ETS allowances (with no free allowances) when products belonging to the list of production with a risk of carbon leakage are sold on EU market independently of the contry of production. EU productions expoorted outside EU should not restitute ETS allowances This second mecanism had been studied by WTO http://www.wto.org/english/res_e/booksp_e/trade_climate_change_e.pdf |
a) the present two groups should remain |
The comission decision is founded on two criterias intensity of trade of the product with third contries carbon content (direct and indirect) these criteria are pertinents |
a) the present criteria should remain |
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a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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a) five years |
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a) the present approach of average of the 10% most efficient installations should remain |
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a) yes (please specify how often) |
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c) other (please specify) |
I think that output based allocation is best suth allocation has no impact on price ; because of that the carbon content of the product has to be adressed by a second mecanism obligation of restitution of allowances when the product is sold in the EU market with no regard of the contry of production the restitution has to use the same benchmark used for free allocation Thus : export production support only output based free allocation remaining incentive for firms to use the best technics, but with limited impact on price and consequently limited impact on exports consuption support restitution of allowances with no free allocation and consequently include in the price the carbon content value with respect of WTO rules this mecanism work in a world with differents carbon prices |
a) no, there should be no deviations |
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c) yes, in the form of additional free allocation |
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Most important |
Important |
Less important |
Least important |
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d) other |
from EU budget |
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f) Citizen |
Johannes Daul |
Guggenbergerstr. 24/4, A-3021 Pressbaum, Austria |
a) yes |
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1) yes |
c) I don’t know |
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b) no |
|
a) yes |
One element of a substantial support for industry is the continuation of the Carbon Leakage List post 2020 but it is not the only measure needed. A substantial reform of the ETS is needed. The fixed -40% CO2 reduction target should be replaced by a flexible relative target (i.e. emissions/output). A global agreement should be the condition for further European commitment. Therefore, the carbon leakage measures are appropriate from an environmental and economic view point. Post 2020 carbon leakage measures must be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 requires an increased and not a decreased protection against carbon leakage. |
a) very adequate |
Free allocation is in principle an adequate instrument to reduce cost distortions between the EU and competing economies. However, its real effectiveness in achieving such result depends on the details of the technical rules. In particular, free allocation has to be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter new investments. In general, it is a matter of fact that any carbon price incentive can only lead to an abatement measure if the relevant technology is available. As long as this is not the case, the money has to be spent for R & D rather than to pay for certificates. |
b) it largely keeps the incentive |
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c) quite exaggerated |
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d) there should be no limit to overall free allocation to industry |
There should be free allocation if there isn’t an international agreement which places all competing manufacturers on an equal footing. Until certain conditions can be met with regard to the veracity of the schemes within other countries then transitional arrangements need to be maintained. Free allocation is the most effective transitional arrangement. The share of allowances dedicated to free allocation should be sufficient to avoid carbon leakage. To uphold this principle that carbon leakage should be minimized, the cross sectoral correction factor should be replaced by an adjustment to the auctioned amount to maintain the cap trajectory. That does not mean “a free ride for industry” but it would mean that sufficient allowances are provided for the most efficient producers because at present the CSCF has the ability to reduce free allocation beyond what is technically possible. |
e) I don’t know |
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a) yes |
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b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
|
a) yes |
|
a) the present two groups should remain |
|
a) the present criteria should remain |
|
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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d) in line with the duration of ETS Phase 4 |
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c) the approach should be less stringent (please specify) |
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a) yes (please specify how often) |
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c) other (please specify) |
An improved ETS needs a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The historic activity level (HAL) of today's scheme is not at all linked to actual production levels and therefor causes gaps between allocation and real needs. A new ETS should be more closely aligned to recent production to avoid surplus allocation. The recently released EcoFys study (Dynamic allocation for the EU Emissions Trading System, Enabling sustainable growth, 20 June 2014) and its allowances allocation reserve as an interesting step forward. |
a) no, there should be no deviations |
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d) yes, in the form of financial compensation at EU-level |
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Less important |
Important |
Most important |
I don't know |
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a) from the Member States' auction budgets |
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Effective measures to address the risk of carbon leakage are needed. Full free allocation can only be an option, if it is not hampered, limited or reduced by other provisions like the cross sectorial reduction factor. |
f) Citizen |
Marek Kucharski Bełchatów |
email:Marek.Kucharski@gkpge.pl |
a) yes |
|
1) yes |
b) no |
Experience gained in the last two billing periods ETS show that the costs associated with reducing CO2 emissions successively charged to industrial production of the EU, and the search for a cheap source of energy is related to the relocation of production. A special case is the Polish economy, which is 95% based on the combustion of fossil fuels, and thus leakage and energy-consuming. It is not enough funding for the introduction of new and innovative technologies such as the use of innovative low-carbon emission boilers, or build a so-called clean nuclear power plants. There is concern about price increase of manufactured products and the loss of competitiveness on world markets, which may limit industrial production in the EU. Further greenhouse gas emissions reduction is not possible without a decrease in industrial production in the EU and without the support of innovative projects for low carbon technologies, CCS, RES, etc. |
b) no |
Retention of the system is so large that the effect of long-term competitiveness is not an strong enough incentive or encouragement for investors. It helps only European countries which currently receive most of the energy from nuclear and renewable sources. The funds obtained from the sale of ETS (emission) allowances allow to invest ininnovative technologiesthat ultimately result in the production of devices with low power consumption. Many factorshave an impact on the market and the energy consumption, and the European ETS system is one but not the dominant factor in reducing energy consumption. |
a) yes |
4. Support should primarily affect those members of the EU, which entered the EU in the last 10 years, and those who still aspire to EU membership. Industrial sectors with high energy consumption and CO2 emission due to the high operating costs associated with the purchase of emission allowances or purchase of electricity which include the price of allowances, may lose competitiveness against producers from third countries. Consequently the appropriate support system to prevent this is needed. |
b) quite adequate |
In the absence of the instrument in the form of free limits the level of carbon leakage risk would be larger due to the high direct and indirect costs incurred by the sectors likely to escape. |
b) it largely keeps the incentive |
Elaboration and implementation of innovative solutions is a long term and high-volume process and free limits are relief. Companies are required to bring innovation or limiting production, as granted free limits are not sufficient to operate at the current level. Free CO2 emission allowances reduce costs of the company connected with a potential purchase of emission allowances. At the same time investments in new technologies may be covered from avoided costs to invest in new technologies. |
c) quite exaggerated |
In relation to the current declared level of limits, the administrative burden require the preparation of a number of documents necessary for the final receipt of free allowances are too large and often require the involvement of many departments in their development. |
b) a higher share than in 2013-20 |
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a) a substantially higher share than in Phase 3 |
Very high costs of implementation unprofitable CSS technologies and innovative renewable energy sources for companies listed on the stock exchangemanaged by maximizing the market value, can not be justified for them to bear. Therefore it is necessary funding in the form of non-repayable funds in 100% for non-commercial technologies. |
a) yes |
It is necessary to define a system of financial support, which will improve the planning and implementation of investments. At the same time greater choice of new technologies will improve competitiveness. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
NER300 program provides funding to 50% of eligible costs of the project, while the innovative technologies of carbon dioxide which have a permanently unprofitable nature, should be funding up to 100% of eligible costs. For this reason, it is appropriate to create a new, outside NER300, or with altered conditions of the funding system of NER300 program. |
a) yes |
Additional preferences in field of acquired financial instruments (grants, loans) for conducting primary production and operating activities for the industry at risk of carbon leakage. Very high cost of implementation of innovative technologies unprofitable for companies listed on the stock exchange guiding to maximize the market value, justify funding mechanisms in the form of non-repayable funds to 100% of eligible costs. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Due to the geographic location of some EU countries including Poland, carbon leakage the escape of emissions associated with the energy sector should be kept in mind. |
g) I don’t know |
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c) I don’t know |
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b) no, all criteria should be based on simple metrics and linked to clearly defined thresholds |
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d) in line with the duration of ETS Phase 4 |
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c) the approach should be less stringent (please specify) |
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a) yes (please specify how often) |
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a) no, the same baseline period chosen for allocation in Phase 3 should be maintained also for post 2020 (Phase 4) allocation |
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d) both b) and c) |
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d) yes, in the form of financial compensation at EU-level |
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Important |
Least important |
Less important |
Most important |
We should focus on financing for commercial checking of selected low carbon technologies of CO2. |
c) from both |
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In the sent questionnaire, the possibility of conducting a special support policy for the European industry under the ETS plan is considered,so that it lived up to the potential problems associated with maintaining competitiveness against countries engaged in a less restrictive climate policy. Maintaining the allocation of free allowances to industrial installations (excluding electricity production) will cause that with "attractive" prices of powers and the high price of energy, the allowances will be sold and the production will be moved out of the zone where ETS is in force. It should be emphasized that at present support for `green` energy is already included in the price of energy and an additional increase in the price of the costs of purchasing allowances for CO2 emissions will cause that production in Europe will be unprofitable. Therefore, after 2020 we should maintain such support for the installations bound up with the production of electricity. |
f) Citizen |
not applicable |
anonymous contribution |
c) not relevant |
Reaction as a private citizen, not linked to any industry or sector. No specific knowledge of ETS mechanisms/rules, so a layman's view. |
1) yes |
a) yes |
There are probably still energy efficiency (EE) measures themselves, albeit maybe not in 2-3 years time (but investments in industrial production plants generally don't pay off that quickly, so why should the criterion be more stringent for EE? |
a) yes |
* More EE: yes * Increasing competitiveness: question mark (only if energy prices elsewhere in the world later also increase to the same level?) |
a) yes |
Should they only be transitional? Shouldn't they last as long as the energy prices have not risen to the levels elsewhere in the world? |
d) very inadequate |
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e) I don’t know |
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e) I don’t know |
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a) a lower share than in 2013-20 |
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a) a substantially higher share than in Phase 3 |
In as far as these funds remain reserved for innovative technologies, they are future oriented investments that are critical for further cost effective progress |
a) yes |
In addition, funds should also be allocated to structural EE progress, which equally contributes to GHG-emission reductions as CCS and RE. Example: wood pellet gasification with combined cycle power production (instead of direct pellet combustion and simple Rankine cycle) |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The x% should be as large as possible. |
c) I don’t know |
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e) I don’t know |
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g) I don’t know |
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c) I don’t know |
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c) I don’t know |
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e) I don’t know |
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d) I don’t know |
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a) yes (please specify how often) |
Annually, so that continuous evolution is achieved |
c) other (please specify) |
Allocations should be given a posteriori for each period, based on effective production/output (eg tonnes of steel) period by period |
d) both b) and c) |
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d) yes, in the form of financial compensation at EU-level |
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Least important |
Less important |
Most important |
Important |
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e) I don't know |
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It is unclear why CCS & RE have been supported under ner300 and not EE although it constitutes a parallel, complementary path that can redouble GHG-emission reductions in a cost competitive manner. |
f) Citizen |
P. Tjan |
ptjan@yahoo.com |
c) not relevant |
response as private citizen |
1) yes |
b) no |
- At the current carbon prices, industry will pay for the allowances rather than invest - the current carbon leakage arrangements are too generous for many sectors - many industries have accumulated allowance reserves due to over-generous allocation - it could even make economic sense to buy allowances now, bank them and sell them later |
b) no |
No, it does not for the reasons given above (low carbon price) It could if ETS were restructured and carbon prices increased/allowance allocation reduced but this is unlikely to happen prior to 2020 |
a) yes |
Yes for some, but the current system of carbon leakage is far too generous. |
d) very inadequate |
|
c) it largely compromises the incentive |
|
b) quite proportionate |
as usual, the admin burden is small for large companies, more burdensome for smaller, but that is nothing that cannot be fixed |
a) a lower share than in 2013-20 |
It is not about a share since there are too many variables. It will depend on the definition of carbon intensive industries, their future share of the economy and a realistic assessment of the carbon burden, which will vary with the real carbon price. Under the current circumstances the share is bound to be lower. |
d) there should be no such innovation support post-2020 |
CCS is dependent on euro's rather than a pot of allowances with a variable value. More importantly CCS is dependent on MS commitments, which are largerly missing. A much better approach would be to reward low carbon energy, irrespective of what sources have been used (Coal/CCS, gas/CCS, REN, nuclear etc) with an effective phase-out mechanisms to ensure that technology innovation is stimulated. It would also help security of supply considerations. For industrial CCS a fund may be required, probably in combination with CCS infrastructure funding |
a) yes |
see above Q9 |
c) other types of funding (please specify) |
linking it to EUAs makes the value uncertain. Irrespective of where the money comes from, which may well be EUA related, the project funding should be euro's rather than a quantity of EUAs |
b) no |
Not necessarily additional measures but measures replacing those currently in place |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
The system needs a thorough review: - the criteria are too generous in a number of instances - the threat of leakage is very dependent on the carbon price - if we give support to low carbon projects, then those projects would no longer require (full) carbon leakage support: not pay twice - import duties within international rules should be considered - the competition assessment should need to reflect where the competition comes from. Not every exporting country is the same and compensation or penalties should reflect that |
b) only the share of 'carbon costs' in the GVA should be maintained |
- carbon costs should reflect actual cost rather than "hoped for" levels (20-30 euro/T) - we should treat competition from developed countries differently from those from developing |
b) other thresholds should be defined. Please specify below |
benefits should reflect real penalties |
b) no, all criteria should be based on simple metrics and linked to clearly defined thresholds |
|
d) in line with the duration of ETS Phase 4 |
the certainty required is to have access to compensation of the real damage, not to a fixed amount during an arbitrary number of years |
a) the present approach of average of the 10% most efficient installations should remain |
|
a) yes (please specify how often) |
every 5 years |
c) other (please specify) |
use actual numbers not historical ones. history is a poor basis for predicting the future |
a) no, there should be no deviations |
the credibility of the system is undermined by introducing exceptions and even worse if these exceptions are delegated to local authorities the industry wants predictability so let hem have that. Government budgets would become more predictable too |
a) no, the present approach should be maintained, i.e. that Member States can provide such compensation based on state aid guidelines |
until we have a common EU energy policy, I'm afraid we have to rely on MS |
Least important |
Less important |
Most important |
Important |
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c) from both |
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- The effectiveness of the ETS re-structuring is critical to answering these questions, but they will only impact post 2020 - CoP Paris could change the need for compensation - the carbon leakage system is flawed and a political monster but no one will dare to kill it. So if we have to live with it then make it more targeted |
f) Citizen |
private |
design@adlitteram.eu |
b) no |
|
1) yes |
a) yes |
|
b) no |
Any “trade” is subject to incidents unconnected to climate goals. Regulation should be direct, sustainable and enforceable. |
a) yes |
|
d) very inadequate |
emissions should be addressed directly wherever feasible |
c) it largely compromises the incentive |
|
e) I don’t know |
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e) there should be no free allocation post-2020 |
|
a) a substantially higher share than in Phase 3 |
A substantially higher share to go to innovative energy |
a) yes |
|
d) I don’t know |
|
a) yes |
|
b) more carbon leakage categories should be defined |
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e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
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c) I don’t know |
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b) no, all criteria should be based on simple metrics and linked to clearly defined thresholds |
|
c) shorter (please specify) |
in line with science progress |
b) the approach should be more stringent (please specify) |
hear the scientists |
a) yes (please specify how often) |
at least annually and in any case as soon as science requires |
c) other (please specify) |
Allocation should use state of the art science, not just convenience |
e) I don’t know |
|
e) I don’t know |
does this address emissions as such? |
Least important |
Important |
Less important |
Most important |
All are important parts of a process which needs reliable support |
e) I don't know |
|
|
f) Citizen |
retired private citizen, an ex-industrial executive |
5. kvetna 275, Cesky Krumlov Czech Republic josef.zboril@gmail.com |
c) not relevant |
Since I am retired, but the former sector is covered by the EU ETS |
1) yes |
b) no |
Further to my analyses, unfortunately, the EU climate policy has a too little effect on the emissions reduction. The fundamental reductions, until now, have resulted from (1) restructuring the industries in the beginning of 90ties and (2) profound industrial and economic downturn from 2008 on! The EC should thoroughly analyse the major drivers involved in the emission reduction and, as a matter of fact, the best indicator is carbon intensity (kgs CO2/tonne of production (MWh in case of electricity), and the effects of climate policy or other factors (power prices) would be visible quite easily. The Bloc CC policy leads, very clearly, to investment leakage! |
b) no |
As stated above, there are surely other drivers in force already and cost of energy (in energy-intensive industries is a factor that needs day-to-day attention. Actually, a blueprint of the EU ETS, the US Acid rain emission trading was designed to optimise costs of the transition and not to mitigate emissions, strictly speaking. The EU ETS was installed the cornerstone of the mitigation efforts just before the Copenhagen COP entirely disregarding fundamental functional preconditions (1: (1) being applied on a pollutant, (2) applied in homogenous economic environment (the power sector only) and (3) having mitigation technologies available! From this point of view, if at least the optimisation effect could be attained, the EU ETS should be limited on power sector only! |
a) yes |
Since there is no will to admit the policy mistakes and straighten them, it is at least essential to reflect physics and render unconditionally free allocation to all energy-intensive industries that in most of the cases operate at their technology limits (without breakthrough technology inventions). There are bottom carbon intensities that must be respected! |
c) quite inadequate |
Something at least, see above |
b) it largely keeps the incentive |
The EU ETS, because of the factors mentioned above, does not have any innovation potential, The sooner the EC realises the true role of this system, the better. Free allocation just eliminates wasting money on the cost side. |
b) quite proportionate |
|
d) there should be no limit to overall free allocation to industry |
|
d) there should be no such innovation support post-2020 |
The concept is vague and money uncertain! |
b) no |
As stated above, the system as it is now is just circulation of money without any significant mitigation effect. Extension of the system beyond the cost optimisation role is doomed for failure beyond recovery. |
c) other types of funding (please specify) |
Since the EU ETS is a system which presents itself a wrong ball on the wrong field, its role should be reconsidered in great extent, and the EC should focus at a different concept - obviously a carbon levy offers such an alternative. The problem is that EU administration would not be allowed to set "challenging" targets instead of hard working on real and realistic mitigation measures! |
a) yes |
Complete change of the EU climate change policy based on the global carbon levy. We should also start talking about investment leakage (see stats on Business Investment Rate in the EU - Horror reading)! |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Again, a concept of investment leakage should be introduced, and it threatens many more sectors and entire value chains! We should be aware of the looming, extremely high risk of collapse of the Cap-and-Trade framework of the post-Kjoto climate deal. |
f) both the current criteria should be replaced and other criteria should be used instead (please specify) |
If the EU ETS remains to stay after 2015, then a bottom-up revision is to be taken based on the newly defined purpose, schope and allocation technique! It mus, first of all, serve a realistic purpose, not just to political wishful thinking |
b) other thresholds should be defined. Please specify below |
free allocation for the market participants if the EU ETS is resuscitated again! |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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d) in line with the duration of ETS Phase 4 |
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c) the approach should be less stringent (please specify) |
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a) yes (please specify how often) |
it differs sector by sector, in the most cases, there are operations very close to their reasonably attainable carbon intensity! |
c) other (please specify) |
We have BATs in the most of the energy intensive industries - they are showing pretty good picture of their carbon intensity. |
d) both b) and c) |
Life is not black or white, nonetheless, there is a golden rule of management: KISS - keep it simple, silly! |
d) yes, in the form of financial compensation at EU-level |
Well, you see what a monster the EU ETS is now and what could evolve following implementation of such measures - does anybody think of this system attractive globally? |
Less important |
Most important |
Important |
Least important |
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c) from both |
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How long do you see the EU can purue its CC policy disregarding the concepts and ways of action of the real global key players? |
g) Other |
European Automobile Manufacturers' Association – ACEA |
Peter Kunze Environmental Policy Director Avenue des Nerviens 85 | B-1040 Brussels | T +32 2 738 73 41 pk@acea.be |
a) yes |
1) yes |
a) yes |
Yes. The automotive industry has a strong track record on reducing emissions and improving energy efficiency, and will seek to deliver further improvements ahead. The level of ambition will be crucial to understanding the competitive impact of further emissions reductions. The level of ambition must be set in a global framework, understanding the high degree of international competition between automotive manufacturers and suppliers across the world. |
a) yes |
Given the right targets the EU ETS can help improve energy efficiency, which can in turn help improve the sectors competitiveness. Given the need to improve competitiveness and the myriad of policy measures on energy efficiency, determining the exact impacts of the EU ETS can be difficult. Industry would like to see EU ETS targets reflect global levels of ambition and for a simplification on the number of measures designed to encourage energy efficiency, understanding that EU ETS should be at the cornerstone for EU policy. EU ETS recognizes participants vulnerable to carbon leakage to protect their competitiveness and should continue to do so post 2020. |
a) yes |
The carbon leakage provision should continue post 2020. The industry believes that the environmental and industrial policy should be aligned to ensure economic growth and environmental sustainability. |
b) quite adequate |
Given the high degree of trade intensity in the automotive sector, to ensure international competitiveness free allocation of allowances is important. The scheme does encourage innovation and investment to reduce emissions and improve efficiency, but a balance must be struck between costs to comply and enabling industry scare resource – financial and human – to tackle the real issue at hand of improving efficiency. Unused NER should be auctioned, and funds used to invest in innovations for sectors covered by the EU ETS. Those sectors could tender projects for funding. |
b) it largely keeps the incentive |
ACEA continues to support free allocations as the optimal way of ensuring operators receive adequate level of allowance to remain competitive. Companies covered by the scheme are likely to be high energy users with significant pressure to reduce costs and already looking at innovative ways to reduce emissions especially so after the ‘low hanging fruits’ have been taken. |
b) quite proportionate |
The burden is appropriate, given the importance of allocations to ensure the competitiveness of the sector. In some European countries such as UK there was a protracted approach, whereby participants had to submit two versions of the ETS300 which was used to assess allocations. The EC should adopt a harmonised approach across member states to ensure a level playing field and no single member state tries to gold-plate their approach. |
d) there should be no limit to overall free allocation to industry |
Whatever the appropriate level to be allocated, once the methodology has been applied, to ensure the competitiveness of EU industry. |
e) I don’t know |
|
a) yes |
Yes. It would be very supportive of the scheme to use funds raised from participants to be used to supportive innovative new technologies or efficiency measures which could actually help improve the competitiveness of the EU industry. This would link industrial and environmental activity and help create a more sustainable business. Unused NER should be used to fund such activities. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
|
a) yes |
Free allocations, coupled with measures to support innovation, would help support sectors at risk of carbon leakage, but also encourage and enable energy efficiency measures to be developed and adopted. At the same time the EC should look to ensure other countries are also signing up to and delivering upon energy targets comparable to those set out at a European level. This will help create a level playing field at a global level. If an international agreement is not approved the Commission should look at additional measures. |
a) the present two groups should remain |
The definition of carbon leakage will be very important here. Sectors such as automotive are growth areas highly exposed to international competition. In principle there could be a sliding scale of exposure, better linking need to allocation. |
a) the present criteria should remain |
|
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
Determining support through qualitative measures (eg abatement potential, profits) could be explored, but is likely to create considerable administrative burden and possibly require the release of confidential data, or information that could be used by competitors if publicly released. |
a) five years |
The validity should remain at least five years, to give industry suitable planning certainty. |
d) I don’t know |
Not applicable as we use fuel and heat benchmark as product bench marking is not feasible in our sector. |
c) I don’t know |
See question 17. |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
The three years closest to the start of the target period should be used, to ensure the most up-to-date data is used. This should ensure allocation is most closely related to need. Given the distortions from the recession, it may be necessary to build-in some planned review of the data to ensure certain sectors performance is not unduly adversely affected by any recent or future downturn in demand. Potentially a continuous rolling baseline could be used to better match allocations to need, however, we understand this may create uncertainty for business and create additional administrative burden. |
a) no, there should be no deviations |
|
d) yes, in the form of financial compensation at EU-level |
Ideally policies, and so compensation schemes, should be harmonised to ensure a level playing field. However, this assumes a level playing field in energy markets and member states not implementing local policies, however, compensation on the EU scheme should be agreed at an EU level. For example in some countries like UK there is an additional financial burden on businesses through the carbon floor price, and then compensation packages around that. This means that in these countries businesses pay higher carbon costs, which undermines their competitiveness. |
Most important |
Important |
Less important |
I don't know |
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a) from the Member States' auction budgets |
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It is noted that the current carbon leakage list shows a NACE code of 29.10 for the auto sector, we believe that 29.2 and 29.3 should also be included within the carbon leakage list (so in effect 34.10, 34.20 and 34.30 under the old NACE code list are included within 29.1). The fundamental purpose of the EU ETS must remain that of delivering emissions reductions at least cost. It should not be a means of delivering a pre-determined carbon price to drive investment in a pre-determined list of technologies. Small sources must be removed from ETS. Operators that are small emitters should be allowed to voluntarily exclude themselves from ETS. The industry is cautious over the use of a Market Stability Reserve (MSR) in conjunction with other necessary reforms to the system of free allocation. A MSR should not penalise over performance due to decarbonisation measures. The Commission should deter Member States from supplementing or enhancing carbon costs e.g. carbon floor price. |
g) Other |
KOTOUČ ŠTRAMBERK, spol. s r.o. Štramberk 500 742 66 Štramberk Czech republic |
KOTOUČ ŠTRAMBERK, spol. s r.o. Štramberk 500 742 66 Štramberk Czech republic tel. 00420556873501 email: podatelna@kotouc.cz |
a) yes |
1) yes |
b) no |
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b) no |
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a) yes |
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a) very adequate |
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c) it largely compromises the incentive |
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c) quite exaggerated |
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d) there should be no limit to overall free allocation to industry |
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b) the same share as in Phase 3 |
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a) yes |
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c) other types of funding (please specify) |
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a) yes |
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a) the present two groups should remain |
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e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
criteria should be the same for worldwide |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
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b) longer (please specify) |
min. ten years |
a) the present approach of average of the 10% most efficient installations should remain |
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b) no |
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c) other (please specify) |
same as in 2009-2010 |
b) yes, there should be deviations with higher allowances for installations facing specific hardships |
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d) yes, in the form of financial compensation at EU-level |
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Most important |
Important |
Least important |
I don't know |
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b) from free allocation |
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g) Other |
Magyar Kereskedelmi és Iparkamara (Hungarian Chamber of Commerce and Industry) |
1054 Budapest, Szabadság tér 7. HUNGARY Tel: 06-1-474-5191 Fax: 06-1-474-5197 Email: kovacs.judit@mkik.hu |
c) not relevant |
A kérdéssort a elsősorban vállalatok válaszolták meg, de volt a válaszadók között iparági szövetség és felsőoktatási/kutató intézmény is. A vállaltok legnagyobb része nem tartozik az EU ETS hatálya alá. |
1) yes |
a) yes |
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a) yes |
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a) yes |
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b) quite adequate |
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c) it largely compromises the incentive |
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c) quite exaggerated |
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b) a higher share than in 2013-20 |
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a) a substantially higher share than in Phase 3 |
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a) yes |
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b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
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a) yes |
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b) more carbon leakage categories should be defined |
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a) the present criteria should remain |
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a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
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b) no, all criteria should be based on simple metrics and linked to clearly defined thresholds |
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a) five years |
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a) the present approach of average of the 10% most efficient installations should remain |
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a) yes (please specify how often) |
3 évente. |
b) yes, production levels in 2016-2018 should be the basis for post 2020 (Phase 4) allocation |
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b) yes, there should be deviations with higher allowances for installations facing specific hardships |
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c) yes, in the form of additional free allocation |
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Important |
Less important |
Least important |
Most important |
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c) from both |
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g) Other |
Verband Österreichischer Ziegelwerke |
DI Gerhard Koch koch@ziegel.at 1100 Vienna, Wienerbergstraße 11 +43 (1) 5873346 |
a) yes |
1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improvement |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. This would limit the list to sectors really exposed and would eliminate the risk of a carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
As explained above,all energy intensive sectors as defined in the Energy Taxation Directive should be considered as exposed to the carbon leakage risk. As an alternative, trade and carbon intensity criteria should be used considering the following elements. First, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the GOS. On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS. Second, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced. |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
g) Other |
Verein Deutscher Zementwerke e.V. (VDZ) |
Manuel Mohr, Head of Political and Economic Affairs, Verein Deutscher Zementwerke e.V., Kochstraße 6-7, 10969 Berlin, manuel.mohr@vdz-online.de, Phone.: +49 30 280 02 210 |
a) yes |
1) yes |
a) yes |
The cement industry is fully committed to reducing GHG emissions in line with overall EU policy objectives. This has been demonstrated by investments over the past 20 yrs. which have driven down CO2 emissions from clinker production and by our roadmap to go much further in the coming decades. To achieve this, industry needs to innovate and invest. This requires a return on investment above the cost of capital and a policy framework that promotes the competitiveness of the sector and allows for a secure access to raw materials and affordable energy prices. The cement industry in Europe needs a stable legal framework with predictable CO2prices in order to justify and allocate scarce investment funds to realize CO2 emission reduction ambitions. 2030 targets have to take into account each sector specific roadmap. Differentiated levels of efforts are needed for different sectors (manufacturing industry, power, building, and transport) based on the ability to pass the cost on to the end user |
b) no |
Measures to decrease energy consumption and improve resource efficiency will de facto reduce CO2 emissions. Some industries like cement have very high energy costs as a proportion of GVA or profit which means that energy efficiency is an integral part of manufacturing. The EU ETS emphasis is GHG efficiency and it does put pressure on businesses to become more GHG efficient. In doing so EU ETS places CO2 costs on power generators and these costs are passed on to electricity consumers. There are limitations to which added costs act as a driver for efficiency before imports become more attractive. Furthermore, the cement and lime industry are unique due to the fact that the majority of GHG emissions are not caused by energy use from fuel combustion but come from the raw materials themselves. Around 60% of total CO2 emissions from clinker production are released directly from limestone. On the other hand, energy efficiency and CO2 reduction represent conflicting goals (e.g. CCS). |
a) yes |
The EU has aspirations of leading on CC policy but globally unequal carbon pricing has the ability to shift trade patterns. In order to direct investments to growth and jobs in Europe, the cement industry needs a global level playing field, including imports and exports: climate change is a global problem that needs a global solution. EU policy can only incentivise companies to aggressively work on further emissions reduction if there is predictability in and equality in carbon prices and if it is part of an overall industrial policy ensuring companies to be competitive in the international arena. This also applies to energy costs. For cement, energy costs are especially important representing 30 % of operational costs with European costs being substantially higher than in the US, Russia and plants in North Africa. Transitional measures are needed to bridge the gap between the EU and other countries. Free allocation is the most effective transitional mechanism. |
b) quite adequate |
As long as emissions do not have the same cost in different countries, a level playing field can be achieved most effectively by equalising measures such as free allocation. The limited evidence of leakage and empirical studies demonstrates (see the report by Vivid Economics last June), in part, that free allocation is working. However, it should not be assumed that free allocation is insulating operators from all of the ETS costs as it does not mean ‘full free allocation’ because of the CSRF and as some operators will face higher costs than others depending on the allocation base year activity. Furthermore, the indirect costs of ETS have not been selected for compensation for cement in the Commission guidelines creating a distortion of competition with competitors. So, not only does the cement industry face the full indirect costs of ETS but competing construction sectors are able to be compensated for their additional costs related to indirect CO2. |
a) it absolutely keeps the incentive |
With free allocation based on benchmark, the incentive to invest is provided by the benchmark. The magnitude of the residual incentive is a function of carbon costs as a proportion of GVA. Cement has one of the highest CO2 costs/GVA of any industrial sector so the residual effort is greater than in most sectors. In its search for a legal framework that fosters a competitive environment, the European cement industry has considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The EU cement industry has a relatively flat benchmark curve indicating that there is a narrow gap between the best and the worst performers; this limited level of abatement potential makes the task of emissions reduction more difficult in the cement sector compared to many other sectors. |
b) quite proportionate |
Overall, the administrative burden is quite proportionate but the system is extremely disproportionate for small/trivial combustion sources. In many cases these minor sources were not part of the benchmarking exercise and should not be included in reporting. |
d) there should be no limit to overall free allocation to industry |
There should be free allocation if there isn’t an international agreement which places all competing manufacturers on an equal footing. Until certain conditions can be met with regard to the veracity of the schemes within other countries then transitional arrangements need to be maintained. Free allocation so far is the most effective transitional arrangement. The share of allowances dedicated to free allocation should be sufficient to avoid carbon leakage. To uphold this principle that carbon leakage should be minimized, the cross sectoral correction factor should be replaced by an adjustment to the auctioned amount to maintain the cap trajectory. That does not mean “a free ride for industry” but it would mean that sufficient allowances are provided for the most efficient producers because at present the CSCF has the ability to reduce free allocation beyond what is technically possible. |
e) I don’t know |
There are too many uncertainties on what the post 2020 allowances budget will be for the cement industry to be able to decide what share of the budget should be dedicated to such innovation support. The EU ETS does not encourage investment in new technology. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) yes |
To date, the NER 300 has been ineffective at stimulating novel CO2 reduction projects in the cement industry. The power generation sector which is passing on investment costs has benefitted most from the NER 300. The cement sector is not experiencing the same level of investment de-risking. The cement industry needs - an investment enhancing climate should encourage investments over long term (30 y) cycles in a capital intensive industry. Legal stability and CO2 price predictability are key to achieve this goal - Safeguards against price fluctuations in market based policy instruments; which objectives, if kept, should be clearly defined and not be prone to abuse for speculation purposes - an innovation policy which provides clear incentives for breakthrough technologies in a cost-effective way. Policy makers should consider hypothecation (earmarking) of revenues from allowance auctions and direct innovation support to those sectors facing the greatest abatement challenges. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
Given the high costs associated with breakthrough technologies, funding from auctioning revenues should account for both capital and operational cost of projects. There should in addition be a ring fenced fund for the manufacturing industry. |
a) yes |
In its search for a legal framework that fosters a competitive environment, the European cement industry has considered an improved ETS with a performance based free allocation for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions cost impacts. In order to protect “carbon leakage” sectors’ competitiveness, the system could foresee either an adjustment to the overall cap to the auction amount or a sectoral cap with the inclusion of importers. However, a carbon pricing mechanism which is market-based and prone to wide fluctuations militates against effective investment. |
a) the present two groups should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. One should consider a special treatment for process emissions e.g. full free allocation as those emissions are not linked to energy efficiency and are irreducible by their very nature. |
a) the present criteria should remain |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. Nevertheless, as a static indicator trade intensity is of limited validity/conclusiveness. It is based solely on historic data and does not reflect future developments, i.e. resulting from changing cost patterns, at all. |
a) the present threshold (30% for the stand-alone criteria and lower values for the combination of several criteria) should be maintained |
The system has to remain simple and predictable. Trade intensity is largely a function of production cost differential therefore the cost intensity criterion is the most important of the current two criteria e.g. a complete loss of 30% of GVA is normally economically not acceptable for any industry or sector. The assessment should be carried out at the relevant product level i.e. in line with ETS implementing measures. The marginal power plants should be used to calculate the indirect carbon cost. The assessment should be based on a forward looking CO2 price. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
EU trade and economic data is not always exact and its comparability with the EU-CITL CO2 data not always appropriate so there will always be a need to hear special cases. |
d) in line with the duration of ETS Phase 4 |
It is essential for the predictability of the system to introduce as little changes as possible in the course of a trading period; hence the validity of the list of sector exposed should be in line with the duration of the ETS phase 4. |
c) the approach should be less stringent (please specify) |
The benchmark would be calculated in a statistically solid way and be updated periodically to ensure predictability. It should be set at an ambitious but reasonable level and should not be distorted by statistical outliers. This can be achieved by defining percentile (e.g. 10%-percentile) or e.g. the average of a range including the 5% to 15% top performers of specific direct emissions (excluding the extreme outliers between 0% and 5%). Only this way, the benchmarking methodology will achieve sufficient statistical robustness for international application in ETS system. |
a) yes (please specify how often) |
Benchmark should be updated between two trading periods depending on what has been achieved but not during one trading period. One should consider a special treatment for process emissions e.g. full free allocation as those emissions are not linked to energy efficiency and are irreducible by their very nature. |
c) other (please specify) |
In its search for a legal framework that fosters a competitive environment, the European cement industry has considered an improved ETS with a performance based free allocation system for direct emissions more closely aligned to recent production with periodically updated benchmark and compensation granted for indirect emissions carbon cost impacts. The historic activity level (HAL) should be more closely aligned to recent production to avoid surplus allocation e.g. the average of the preceding 3 years. In this context, the recently released EcoFys study (Dynamic allocation for the EU Emissions Trading System, Enabling sustainable growth, 20 June 2014) and its allowances allocation reserve may be considered as an interesting step forward. However, a more recent HAL has its potential downsides for installations that have extended shutdowns or breakdowns, provision will be necessary to deal with exceptional HAL circumstances. |
a) no, there should be no deviations |
A more recent HAL e.g. preceding 3 years average, has its potential downsides for installations that have extended shutdowns or breakdowns, provision will be necessary to deal with exceptional HAL circumstances. |
c) yes, in the form of additional free allocation |
VDZ believes that EU Compensation should be granted for indirect emission impact where carbon leakage vulnerability is a combination of direct plus indirect emission cost. There is no need for two state aid guidelines and the compensation for indirect costs could be internalized in the ETD by providing free allocation for indirect CO2. |
Less important |
Important |
Most important |
I don't know |
VDZ regrets the focus on carbon capture and storage and believes that carbon capture and re-use should be equally considered. Funding should be technology neutral. The rules for accessing NER allowances discourage investment due to the uncertainty of the post-commissioning plant performance. Frequent changes to the EU ETS policy, such as backloading type interventions do not provide policy clarity that is needed for large scale industrial investment. |
a) from the Member States' auction budgets |
|
For further information see full CEMBUREAU position papers "Post 2020 Climate and Energy Legislation - The cement industry's reflections on a post-2020 climate policy" & "POST 2020 CLIMATE AND ENERGY LEGISLATION PROPOSAL BY THE EUROPEAN CEMENT INDUSTRY". In addition, VDZ believes that the debate on the MSR should not be carried out in isolation from the broader ETS structural reform. |
g) Other |
ZIEGLERVERBAND |
GF Rudi Ecklmayr r.ecklmayr@zieglerverband.at 4020 Linz, Anastasius Grün Str. 20 +43 664 4019337 |
a) yes |
1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improvemen |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised. |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. This would limit the list to sectors really exposed and would eliminate the risk of a carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
As explained above, all energy intensive sectors as defined in the Energy Taxation Directive should be considered as exposed to the carbon leakage risk. As an alternative, trade and carbon intensity criteria should be used considering the following elements. First, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS. Second, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
g) Other |
ZIEGLERVERBAND Ö |
GF Rudi ECKLMAYR r.ecklmayr@zieglerverband.at 4020 Linz, Anastasius Grün Strasse 20, +43 664 4019337 |
a) yes |
1) yes |
a) yes |
In recent decades, the European ceramic industry has invested heavily to reduce emissions wherever it is technologically and economically feasible. Consequently, the remaining abatement opportunities are either incremental or require significant investment in new processes, technologies and equipment. In recent years, emissions have reduced because many businesses have decreased or ceased production. Consequently, continued reduction will become more difficult as the economy recovers and production levels increase. Furthermore, process emissions, which are significant in several ceramic subsectors, are unavoidable and cannot be reduced since they are inherent in the raw materials. The Ceramic Industry Roadmap 2050 provides an analysis of the key technologies which could be applied across the sector. The document shows that breakthrough technologies are essential and that access to low carbon energy sources is constrained by feedstock availability, technical and cost constraints. |
b) no |
The primary objective of the EU ETS is to reduce GHG emissions cost-effectively. A CO2 target and energy efficiency target can be contradicting each other. For instance, pore forming agents used in the clay block industry can contribute to a lower fuel consumption but could raise the CO2 output. The full impact of EU ETS on the competiveness of industry can only be judged if all elements are considered. In the medium-long term, EU ETS entails a stringent cap, very limited free allocation (if any), a high carbon price and indirect costs on electricity prices. In the absence of an international agreement with comparable burdens on competitors in third countries, such unilateral costs will further jeopardise the competitiveness of EU industry, Ceramic production is energy-intensive. This coupled with high energy prices naturally provides a strong incentive to maximise energy efficiency. Other policy measures and requirements are already in place to further incentivise such improvement |
a) yes |
EU ETS creates costs for European industry and thus creates a risk of relocation to countries with less ambitious (or no) climate policy. The resulting loss of manufacturing not only costs EU jobs but can also give rise to an increase in global energy use and emissions through the use of inferior production processes, more carbon-intensive electricity and greater transportation of goods. In the absence of a legally binding agreement (with truly comparable effort from competing countries) it is essential that mitigation measures for industry covered by the EU ETS is forthcoming. Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased level of ambition towards 2030 should lead to increased (and not decreased) protection against carbon leakage. |
b) quite adequate |
Free allocation is (in principle) an adequate policy instrument to reduce the risk of carbon leakage. However, its effectiveness depends on the technical rules determining free allocation. In future, free allocation must be based on realistic benchmarks and the rules on extended capacity and new entrants should be sufficiently flexible not to deter increased production levels and new investments. Finally, the current system of free allocation does not address the issue of indirect costs that are passed-through in electricity prices. |
a) it absolutely keeps the incentive |
The current free allocation system fully preserves the incentive to innovate because it is based on ambitious benchmarks, which are set according to the average from the top 10% most carbon efficient installations in the sector. Taking this and the subsequent application of the cross-sectoral correction factor into account means that virtually all installations will have to purchase allowances. Consequently, this provides an incentive for all installations to reduce emissions. In addition, it must also be noted that measures which increase the cost of carbon emissions actually reduces the capacity of these industries to invest in alternative, low-carbon and energy-efficient technologies. Finally, it should be remembered that free allocation is not aimed at creating incentives for reducing emissions, but at preventing carbon leakage for ‘at risk’ sectors. |
c) quite exaggerated |
The harmonised allocation rules are extremely complex, error-prone and require extensive guidance. The difficulty comprehending the rules is particularly acute for SMEs, which represent the majority of ceramic installations under EU ETS. The rules for new entrants and capacity extension also make it difficult for installations to calculate the free allocations they are entitled to, thus hindering the predictability of investments. In addition, the existing rules contain a number of design flaws, such as over-allocation in times of recession, under-allocation in the case of growth, incentives to lower production and impediments to increase production. The national equivalent opt-out for small installations has been exercised by very few Member States. The possible future revision of benchmarks would be a complex exercise, as was the case when the existing benchmarks were established in 2010. |
d) there should be no limit to overall free allocation to industry |
Since free allocation is the main instrument to avoid carbon leakage, the share of free allowances should be sufficient to meet this objective. Post 2020 carbon leakage measures should be in line with the adopted level of ambition and not subject to an arbitrary ceiling. It naturally follows that an increase in ambition level towards 2030 should lead to an increase in protection against carbon leakage (and not to a decrease). Carbon-efficient producers in the EU should not face any competitive disadvantages compared to their competitors in third countries and therefore, their free allocation should not be subject to any reduction. As a result, the rules on the industry cap and cross-sectoral correction factor should be adjusted accordingly. |
d) there should be no such innovation support post-2020 |
EU ETS must curb emissions at the lowest cost for participants. Providing this objective is preserved and measures to improve industrial competitiveness are implemented beforehand, support for a range of low carbon technologies can be envisaged. However, NER 300 is very limited in the scope of technologies supported, does little to help industry decarbonise and is inadequate to finance uncompetitive technologies and research programs. In the first instance, dedicated funds, independent from the price of carbon, should be put in place to promote research and innovation projects (e.g. Horizon 2020). Other tools already exist to support RES in member states. Moreover, sectors’ characteristics should be taken into account. For instance, the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries. Rather than spending more on NER300, there should be one innovation scheme that supports a wider range of technologies |
a) yes |
As stated above, the EU ETS could be a tool for the development of a wide range of low-carbon technologies (including those identified in the Ceramic Industry Roadmap 2050) provided the goal of emissions reduction at lowest cost is maintained and measures for maintaining industrial competitiveness and increasing industrial activity in Europe have been put in place. If not, higher carbon prices will impose higher costs for the industry and potentially increase the risk of carbon leakage rather than increasing the capacity of manufacturing industry to invest in new technologies. The introduction of a support scheme for industrial innovation should not be done at the expense of free allocations for the industry or by arbitrarily manipulating the carbon price though policy interventions. Furthermore, the interaction with complementary instruments (e.g. Horizon 2020) should be assessed and optimised |
b) It should be funded through a new dedicated scheme financed by the revenues from auctioning (e.g. x% of the auctioning revenues); |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
a) yes |
As outlined above, the current free allocation system does not address the indirect costs resulting from emissions associated with electricity generation that are passed onto industrial consumers through increased electricity costs. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. Other policy measures, such as the inclusion of imports into EU ETS should also be explored. |
c) there is no need for a carbon leakage list, all industrial installations should be treated as exposed |
Post 2020 carbon leakage measures should be in line with the adopted level of ambition. Logically, an increased ambition level towards 2030 should lead to increased and not decreased protection against carbon leakage. Therefore, at least all energy-intensive sectors as defined in the Energy Taxation Directive (i.e. energy costs>3% of production value), should be considered as exposed to the risk of carbon leakage until a global auctioning system is established. This would limit the list to sectors really exposed and would eliminate the risk of a carbon leakage exposure for these sectors, thereby giving industry regulatory certainty to facilitate long term planning and investments. Furthermore, a very selective carbon leakage list could distort fair competition on the EU internal market between sectors on the list and sectors not on the list (for example between competing construction products), paradoxically favouring the most CO2 emitting sectors. |
e) additional criteria should be defined (please specify which current criteria should be maintained and which additional criteria should be defined) |
As explained above, all energy intensive sectors as defined in the Energy Taxation Directive should be considered as exposed tAs an alternative, trade and carbon intensity criteria should be used considering the following elements. First, GVA is not an appropriate indicator to reflect the impact of CO2 costs on the competitiveness of the ceramic industry. Indeed, GVA consists of both labour costs and the Gross Operating Surplus (GOS). On average, labour costs represent up to 70% for some ceramic sectors. Therefore, using the GVA is misleading and the real impact of ETS-related costs can be better estimated if it is compared with the GOS. Second, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced |
b) other thresholds should be defined. Please specify below |
As explained in the reply to question 13, the current criteria enable either to have a trade intensity ≥ 30%, or a carbon intensity ≥ 30%, or a trade intensity ≥ 10% combined with a carbon intensity ≥ 5%. Following this logic, the current thresholds should be maintained and a third set of criteria (i.e. trade intensity ≥ 5% combined with a carbon intensity ≥ 10%) should be introduced. |
a) yes, it is important to maintain a certain level of discretion in the system for justified cases |
The quantitative criteria are too narrow and do not take into account all the factors that can contribute to the risk of carbon leakage. As such, they do not enable a comprehensive picture of the complex market situation for a given sector to be established. For instance, they do not take into account the technological limits of the sector, its ability to pass-through carbon costs or of profit margins which can act as a potential indicator of investment capacity. Furthermore, quantitative assessments are solely backward looking, whereas qualitative analysis can add the necessary forward looking elements. It is important that each sector or subsector is judged on merit and not subject to an artificial limit on the number of qualifying sectors. Therefore, it is vitally important that qualitative risk tests are maintained. |
d) in line with the duration of ETS Phase 4 |
The ceramic sector is a capital-intensive industry with long-term investment cycles. A ceramic production plant typically has a lifetime of over 40 years. As a result, the sector needs a stable and predictable legal framework in order to underpin continued investment in Europe. Consequently, the validity period for the carbon leakage list should be extended (at least) be for the entire duration of phase 4. |
c) the approach should be less stringent (please specify) |
Benchmarks are set according to the average from the top 10% most carbon efficient installations in the sector and are used to calculate the preliminary free allocation. The final free allocation received by installations is also affected by the cross-sectoral correction factor. As a result of the application of this factor means even the most carbon efficient ‘benchmark’ installations within the sector face a shortage of free allowances and thus an increased risk of carbon leakage. Consequently, the rules on free allocation should be adjusted so that the cross-sectoral correction factor is not applied. |
b) no |
A revision of the benchmarks is not necessary and would have a limited impact as major breakthrough technologies are not available yet since the reference period of the first benchmarks. Furthermore, the revision of the benchmark would entail a major administrative burden, in particular for sectors with a high number of installations like ceramics. |
c) other (please specify) |
Allocation should be based on as most current production data available since outdated ex-ante / historic allocation may act as a barrier to industrial growth, particularly during a period of economic recovery. The reference period used to determine free allocation must reflect economic reality. As a result, a dynamic system based on more recent years should be explored. This system would have the advantage of avoiding the complex allocation rules which are needed to cope with differences between historical and the actual production levels. However, the increased bureaucracy for participants and confidentiality concerns associated with throughput disclosure would also need to be addressed. |
a) no, there should be no deviations |
Applying harmonised rules would ensure the certainty and predictability of the legal framework. |
d) yes, in the form of financial compensation at EU-level |
As outlined above, the current free allocation system does not address the indirect costs of EU ETS to industry. These indirect costs should also be mitigated for all sectors that are at risk of carbon leakage, including those that are currently not listed on Annex II of the EU ETS State Aid Guidelines. There should be a harmonised EU-wide support for the indirect costs in order to avoid distortion of competition within the EU. This should be achieved by implementing an EU-wide financial compensation scheme. |
Most important |
Important |
Less important |
Least important |
|
a) from the Member States' auction budgets |
The ETS Directive already suggests spending at least 50% of the auctioning revenues for this purpose. This provision should be adjusted so that it can be fully implemented. |
It is imperative that investment leakage is also evaluated since this will provide a longer-term, forward looking estimate of carbon leakage. Carbon leakage studies conducted to date have tended to focus on analysing production levels and trade flow patterns retrospectively. However, the impact of the EU ETS on EU competitiveness is much broader since it also impacts on decisions for new investments and capacity increases. Consequently, for investments made today, the impact on production levels and trade flow patterns will not become evident until the future. Hence it is essential that investment leakage is also evaluated. |
9
600
600
120
3
11
1
False
False