CEEP calls to the European Commission for reforms of the Emissions Trading Scheme (ETS)

The EU emissions trading scheme (ETS) puts thousands of jobs in the steel, chemical, fertilizer, and refining sectors at serious risk. Europe is losing its global competitiveness, when compared to other industrialised countries, as well as emerging powers. That is why Central Europe Energy Partners (CEEP) has called upon the European Commission to reform the ETS system, in a way that will safeguard the development of industry and prevent its exodus from the European Union.

CEEP represents both the energy and energy-intensive sectors from Central Europe in international forums, and in doing so, has presented to the European Commission proposals of changes in the European emissions trading regulations. According to CEEP’s data, in 2030, an average EU citizen is going to produce only 5 tonnes of emissions, whilst in the United States this level will reach 12 tonnes. “We want to see an ambitious climate policy in the European Union, but this policy must be economically realistic. The current emissions trading system is especially destructive for Central Europe, which – as a result – is not able to advance economically and catch up with the western part of the continent. If the CO2 emission prices are increased, we will experience a further drop in the competitiveness of our industry and an even greater economic division within the European Union,” Marcin Bodio, CEO of CEEP, underlined.

CEEP experts argue that the ETS system not only has failed to reduce emissions, but also has stopped many investments, aimed at raising the efficiency of coal power plants. That is why there is no reason to further increase the prices of CO2 allowances. “The EU’s strategic goal, which is the reduction of emissions by 20% until 2020 (when compared to the levels from 1990), was already reached two years ago. Today, the level of reduction is close to 25%. Yet, our analysis shows that this reduction should be credited to the implementation of new technologies and innovative solutions, which allow industry to raise its energy effectiveness, rather than through the manipulation of the prices of CO2 allowances,” explained Bogdan Janicki, CEEP’s Senior Adviser. For this reason, the association called upon the European Commission to withdraw its plans of implementing the market stability reserve (MSR) mechanism, and the linear reduction factor of 2.2% per year in the period 2020–2030.

In its position paper, presented to the European Commission, CEEP stresses that the current ETS regulations substantially modify the former conclusions of the European Council. In October 2014, the Council guaranteed a derogation from full auctioning for power generation after 2020 in the whole EU. Moreover, a modernisation fund was formed for Member States with a GDP per capita below 60% of the EU average. “The proposals of regulations that we now see on the table seem to ignore the earlier binding decision of the EU’s heads of states. This threatens the stability of the whole market. We may also not agree on the total reformulation of the modernisation fund, with only a limited role for Member States in the investment decision-making process,” CEEP experts declared.

CEEP experts have repeatedly underlined that, in the face of declining competitiveness of the European economy, the key challenge is to prevent the further exodus of industries from the European Union. This refers to the strategic sectors, such as steel, chemical, fertilizer, and refining. as far as generating economic growth and new jobs is concerned. Due to the limitations of the currently available technologies, these industries have minimal chances for further CO2 reduction. That is why CEEP argues that each industrial sector eligible for carbon leakage should receive free allowances up to 2030, to the extent which is necessary to deal with the negative impact of the ETS. Failure to do so will result in the relocation of domestic capacities and jobs outside the EU. This will also be detrimental to the global environment, as EU industry is, on average, considerably more effective in controlling emissions than the rest of the world.

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Copyrights: Central Europe Energy Partners (CEEP).

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