Industry warns emissions trading will affect competitiveness

A coalition of power intensive industries has warned that emissions trading will serve as an excuse to raise electricity prices, affecting industry's international competitiveness.

The group, supported by the International Federation of Industrial Energy Consumers (IFIEC), says that the absence of any real competition in the European power market will allow the electricity companies to charge the extra cost of acquiring allowances in the ETS on to the consumer.

“The problem is that, as power prices are set on the basis of marginal cost, which is normally determined by fossil fuelled production, the market price will include the cost of CO2 allowances. As power prices will be the same for all sources even if generated from non-CO2 or a CO2 neutral source, windfall profits will be generated,” the coalition statement says.

If this is to happen, power intensive industries are worried they will see their competitiveness severely impaired as the prices of their products are generally set in a global, not just European, market place.

The coalition has proposed a solution to the problem by separating the electricity market from the CO2 market as is the case for renewable energy.

The Competitiveness Council has recognised the problem and has called for an extended impact assessment with a specific focus on the effect of the EU-ETS on the competitiveness of European industry.

The European Commission has said it will monitor electricity prices at appropriate regional, national and European levels to ensure prices are reflective of economic fundamentals, and are not subject to manipulative price-setting by the supply-side.

The coalition is made up of alloys, cement, ceramics, chlor-alkali, glass, iron and steel, lime, non-ferrous metals and paper industries.

By David Hopkins

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