EU countries seek to protect more industries from ‘carbon leakage’

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EU member states will today convene in Brussels to debate a new list of 175 energy-intensive sectors that could be «protected» from the costs associated with climate change policies.

On Monday the European Commission unveiled the list, which proposes financial assistance to help a growing number of sectors that are considered to be at risk from relocating overseas to countries with less stringent climate policies.

Currently, 164 industries receive so-called «carbon leakage» support through the EU, but the new list includes an additional 11 sectorsthat could be eligible for protection from 2015 to 2019. Additions to the list include manufacturers of assembled parquet floors and food preparation firms.

Representatives from member states will gather to discuss the list for the first time today, with a final vote expected to take place before the summer break. The Commission said it hoped to adopt the new list by the end of the year.

The Commission confirmed financial assistance would primarily be made available by issuing eligible industries with free tradable carbon allowances under the EU’s emissions trading scheme (ETS). «Installations operating in these sectors and sub-sectors will receive a higher share of greenhouse gas emission allowances free of charge in 2015 to 2019 than other sectors», the Commission said in a statement.

The current list was adopted in 2009, and includes manufacturers of steel, lime, cement, refined petroleum products and aluminium. It was developed in response to industry fears that some manufacturers would seek to avoid the cost of carbon allowances and other climate policies by relocating to countries without binding carbon targets, such as China and India.

However, a study for the EU published late last year found that no business in Europe has relocated to another country without greenhouse gas restrictions since the ETS was launched in 2005. UK energy and climate change secretary Ed Davey has also warned that the EU risks «low-carbon leakage», whereby clean tech firms could move overseas if the bloc fails to deliver ambitious carbon-reduction policies for 2030.

The study sparked fresh calls from environmental campaigners for governments to reduce the level of financial support handed to carbon-intensive firms, amid fears that free allowances and tax breaks are diluting the impact of climate policies designed to encourage industrial firms to invest in more energy-efficient and low-emission technologies.

However, the debate over the proposed extension of the list of industries qualifying for financial support again demonstrates the EU’s willingness to accommodate carbon-intensive sectors that fear high energy costs could put them at a competitive disadvantage. It follows the publication last month of draft State Aid guidelines that seek to formalise the extent to which governments can provide financial assistance to carbon-intensive firms – proposals that effectively endorsed the German government’s strategy of providing financial support to its manufacturing base and theUK government’s proposal for £7bn of support for manufacturers through to 2020.

It may anger some environmental campaigners, but the EU’s strategy of «decarbonising without de-industrialising» means carbon-intensive firms can expect to enjoy free carbon allowances and financial assistance for years to come.

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Date / Fecha: 01/05/14

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