EU ETS in need of ‘ambitious’ revamp, MEPs warn

The European Union (EU) has been urged to revamp its Emission Trading System (ETS) to allow for free allowances to be given to the industries that need them most, even though it was revealed that struggling Tata Steel has received £700m from the ETS since 2008.

The EU’s Assembly of Regional and Local Representatives (CORs), has today (11 April) released a skeleton report outlining the recommended changes that should be made to the ETS in order to create “a more ambitious and forward-looking approach”.

CORs has outlined the reforms that would see a progressive increase in allowances across all sectors and the ability to claim 20% of ETS financial gains in order to combat climate change. MEPs including Britain’s Ian Duncan will work to put a formal report to the EU in the autumn.

“Many of the factories and installations within the ETS are vital to local economies, employing hundreds if not thousands of people,” Duncan said. “It is important to remember that this reform will have a bearing on local and regional authorities. I will continue to work closely with the European Committee of the Regions as the ETS reform progresses.”

The new recommendations, which would come into effect in 2020, would allow sectors such as the maritime and steel industries to adopt a carbon pricing set at international level, which allows them to promote innovation, greater energy efficiency and economic competitiveness.

Steel crisis

The EU’s ETS has been heavily criticised in recent weeks with many arguing that it is suspect to fluctuations and speculations. Theo Henrar, chairman of the much-maligned industrial company Tata Steel, went so far as to claim that the ETS has put his company at a “competitive disadvantage”.

But new research, published by consultants CTDelft, has revealed that Tata Steel actually benefitted from more than £700m in free allowances from the ETS, while British businesses as a whole pocketed around £2.5bn since 2008.

With COR stating that the ETS covers around 45% of the EU’s carbon emissions and the steel industry struggling to cope with the UK’s carbon price floor, EEF the manufacturers’ organisation has published their take on the situation regarding energy costs and their impact on the steel sector.

In a new briefing document, EEF states that the UK’s electricity prices were 89% higher than the EU average, although the crashing fossil fuel prices and increased renewables mix should reduce this disparity.

Juggling policies

But the main stumbling point for the steel industry has been the Government’s inability to juggle policies – of which there are six in total – that impact electricity bills, which EEF claims effects industry bills by 30%.

The report states: “Over the past five years, the Government has acted to reduce the impact of climate change costs – it is regrettable that this aid has taken so long to arrive, but with the measures almost all in place for steel producers we must now move forward and consider what further steps can be taken to reduce costs and improve the competitiveness of the sector.”

While the UK Government has provided £60m in compensation to the steel industry, EEF estimates that the sector has contributed £335m to energy and climate policy costs. Even with the introduction of the renewables compensation package, the Government will still be spending in the region of £330m, on top of the £13bn that ETS causes in lost revenues.

As the Government launches a consultation on energy cost relief which could save the industry £390m a year, edie last week investigated four potential green solutions for the struggling steel industry.

EEF: Energy Costs and the Steel Sector

Regulatory Challenges at edie Live

From May 17-18, the edie Leaders Theatre at edie Live will explore policy regulations and drivers, and what is on the policy horizon in regards to green policy and business sustainability.

One of the edie Leaders seminars will examine the importance of long-term guidance when complying to carbon regulations.

View the full edie Live agenda here.

Matt Mace

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