Brussels, 14 December 2016 – The European Parliament Environment Committee (ENVI) is scheduled to vote on 15 December on the revision of EU Emissions Trading System (EU ETS). The European Steel Association (EUROFER) acknowledges the compromise and believes there is work to be done to develop a robust, evidence-based fourth EU ETS trading period (2021-30).
“EUROFER recognises some improvements achieved in the negotiations between MEPs over the Commission proposal – however there is still progress to be made. Policy makers must not undermine the ability of industry to retain jobs or invest in process and product innovation”, said Axel Eggert, Director General of EUROFER.
Negotiations to reach a compromise were challenging as the political groups had struggled to agree on key facets of the proposal, such as the amount of carbon permits to be removed from the market and the so-called ‘linear reduction factor’. EUROFER holds that no linear reduction flat rate should be applied to benchmarks as it cuts free allocation below technically and economically feasible levels.
“Benchmarks must be based on facts and actual technological progress and use real data and actual emissions from the 10% most efficient plants”, said Mr Eggert. “At least at the level of the 10% best performing steel installations, there must be no direct or indirect costs resulting from the system. Jobs and investment will continue suffer if even the best steel plants in Europe cannot meet the target.
Positive elements in the draft text include the flexibility in the distribution of allowances between auctioning and free allocation, which is essential to provide more carbon leakage protection to the whole industry’s value chain, and the exemption from the ‘cross sectoral correction factor’ for sectors most exposed to international competition. On the downside, the text maintains the artificial flat rates on benchmarks, and does not provide any structural solution for the issue of indirect costs as it introduces a very limited harmonised scheme which puts further at stake the competitiveness of EU electro-intensive industries in a period where carbon prices are forecasted to be much higher than today. Also, the level of ambition has been raised at a time when priority should be given to implementation of the 2030 package.
“Altogether, although the original Commission proposal has been improved upon there would still be a significant shortage for the 10% best performing plants, and on average a 25% shortage in allowances for the steel sector as a whole in phase four”, added Mr Eggert.
“The charged nature of the debate surrounding the EU ETS reform highlights more than ever the importance of rational, reasoned and fact-based discussion and decision-making. EUROFER has contributed to this by promoting studies on the impact of EU ETS on the steel sector as well as the exposure of our industry to international competition”, emphasised Mr Eggert.
Mr Eggert concluded, “The EU steel industry is a frontrunner in R&D in low carbon breakthrough technologies, but we need an EU ETS framework that enables the industry to continue to invest and innovate sustainably”.
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A PDF of this Press Release is available: here
The ECOFYS report – the one of the first of its kind released for industries affected by the EU ETS and undertaken specifically for the steel industry – was conducted by ECOFYS, a leading environment and energy consultancy. The report was revealed yesterday in view of next week’s debates on EU ETS at the Environment Council and European Parliament Environment Committee. The study, which transparently examines the steel industry’s EU ETS impact, updates some parameters of the previous publication, such as production growth rates, the list of installations under its scope and the number of countries granting financial compensation for indirect costs.
The updated base case scenario confirms the key findings of last November’s publication. With the Commission proposal, around half of direct and indirect carbon costs borne by the steel sector would not be covered by free allocation or financial compensation in 2030. Over the next trading period 2021-2030 such costs remain at €34 billion and the impact per tonne of crude steel by 2030 is still €28.
With this study the steel industry demonstrates its transparency as a sector and looks forward to comparing this analysis with those from other sectors. EUROFER hopes other sectors will publish similar impact assessments and data so that it becomes possible to develop policy that is based on full sectoral impact and data transparency.
- Refines the parameters of the ECOFYS model and adds a sensitivity analysis to respond to third party concerns.
- Confirms the main findings and robustness of November 2015 ECOFYS study: Over the next trading period in 2021-2030, costs of €34 billion and impact per tonne of crude steel by 2030 of €28.
- Adds an assessment of the cumulative impact over the second and third trading periods: By 2020 an equivalent of around 350 Mt CO2 not be covered by financial compensation or free allocation.
The ECOFYS report can be found on the EUROFER website at: www.eurofer.eu
EUROFER is located in Brussels and was founded in 1976. It represents the entirety of steel production in the European Union. EUROFER members are steel companies and national steel federations throughout the EU. The major steel companies and national steel federations in Switzerland and Turkey are associate members.
The European steel industry is a world leader in innovation and environmental sustainability. It has a turnover of around €170 billion and directly employs 320,000 highly-skilled people, producing on average 170 million tonnes of steel per year. More than 500 steel production sites across 24 EU Member States provide direct and indirect employment to millions more European citizens. Closely integrated with Europe’s manufacturing and construction industries, steel is the backbone for development, growth and employment in Europe.
Steel is the most versatile industrial material in the world. The thousands of different grades and types of steel developed by the industry make the modern world possible. Steel is 100% recyclable and therefore is a fundamental part of the circular economy. As a basic engineering material, steel is also an essential factor in the development and deployment of innovative, CO2-mitigating technologies, improving resource efficiency and fostering sustainable development in Europe.