Energy-intensive industries at risk from ETS, warns the EEF

22nd August 2014

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Eleanor Shaw

The manufacturers' organisation, the EEF, is calling for a radical reform of the EU emissions trading system (ETS), warning that if left in its current form it could drive crucial investment in energy-intensive industries out of Europe.

The call follows the publication of a new EEF report on reforming the ETS and the economic and physical barriers to decarbonising energy-intensive industries, which, the report concludes, policymakers must address as part of the proposed EU 2030 framework for climate and energy policy.

“Reducing our carbon emissions through to 2030 is going to be an enormous challenge with the targets currently on the table representing a tripling of effort from 2020 onwards,” said Gareth Stace, head of climate and environment policy at the EEF. “We cannot hit those targets without support for energy-intensive industries and reforms must ensure we retain these in Europe.”

Reforms to the ETS form a major part of the EU 2030 framework and include measures to reduce the emissions cap by 2.2% per year from 2021, compared with the current 1.7% to 2020. Under the plans, a new market stability reserve will be created to address the surplus of emissions in the system together with mechanisms that allow for automatic adjustments to the supply of auctioned ETS allowances.

Taken together the measures are integral to the European commission’s drive towards a low-carbon economy. But the EEF warns that energy-intensive industries are reaching the limit of their ability to achieve further efficiency and carbon reduction. While the ETS measures will deliver investment in renewable energy and other sectors, it will do little more than reduce EU production in some sectors, such as steel and cement, and drive investment and emissions abroad, says the EEF.

It says a radical overhaul of the ETS is required to ensure European industry remains competitive and companies in energy-intensive sector receive support to deliver decarbonisation. “Between now and 2020 we have the opportunity to take stock and reform the wider policy framework. This will ensure it is fit for purpose and keep our fundamental industries competitive while, at the same time, helping them decarbonise and introduce new technologies,” said Stace.

The European council will meet in October to agree the proposed 2030 energy and climate change framework.

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