Emissions trading clouds chemical future

The European Chemical Industry Council (Cefic) claims that continued uncertainty about the financial impact of the next phase of the European Union’s Emission Trading System (ETS) will hamper investment by the industry in Europe.

’When planning investment, chemical companies need to know precisely what the regulatory and financial framework will be,’ said Alain Perroy, Cefic director-general. ’At the moment chemical companies do not know yet whether they will have to pay for CO₂ emission certificates when the new ETS comes into effect in 2013.’

The industry’s worries about the next phase of the ETS, whose basic framework was agreed by EU legislators last year, comes only a few weeks after the European Commission recommended that a large proportion of the chemical industry should be protected from the full cost of the scheme.

Under the new programme, power generators and other energy intensive operators will have to pay an auction price for carbon dioxide emission allowances, which can be bought and sold on the open ETS market.

But facilities in 13 chemical sectors (including pesticides, fertilisers, organic and inorganic basic chemicals, dyes and pigments, basic pharmaceuticals, and man-made fibres) and 151 other sectors can receive emission certificates free of charge despite being high energy users. In order to receive free permits they will have to comply with benchmarked levels of emissions based on the best performing technologies.

The charge-free sectors have been selected because they are deemed to be exposed to the risk that production could be relocated outside Europe where emission standards are less onerous.

The list may be revised by the Commission in light of an international climate change agreement due to be reached at the UN climate change conference in Copenhagen in December. The Commission argues that a deal might reduce these risks to facilities in certain sectors, thus reducing their need for free certificates. 

Furthermore, the exact levels at which the benchmarks for free permits will be fixed will not be decided until the end of next year. The Commission is due to publish proposals for calculating the benchmarks within the next few weeks for consultation.

’Without details of what the benchmarks will be, we don’t know what proportion of chemical plants within a sector will be allocated free certificates,’ Mr Perroy said at Cefic’s annual meeting in Lisbon. ’Around 50 per cent or even more may have to pay an auction price.’

Christian Jourquin, Cefic’s president and Solvay’s chief executive, pointed out that facilities failing to meet the benchmark were in danger of losing out to competition, or having their activities relocated to areas with less stringent emissions requirements. ’They will have to invest a lot of money to prevent exposure to competition from products from regions outside Europe where there are no CO₂ restrictions,’ he said.

Sean Milmo