Industry group IFIEC Europe says that EU must shield industry from future CO2 costs

Industry lobby group IFIEC Europe has said that EU must shield industry from costs of complying with emissions regulations before lawmakers agree reforms to the bloc’s carbon market.

The European Commission admits the EU Emissions Trading System (ETS) is failing to drive low carbon investment and wants to reform it with a reserve to set aside surplus permits.

Analysts say the reserve could add 11 euros ($14.72) per tonne to carbon permit prices currently trading at around 6 euros, but tying it to wider 2030 discussions risks the Commission’s goal of getting it agreed by early next year.

The EU ETS regulates around half of Europe’s greenhouse gas output by forcing power plants, factories and airlines to surrender a permit for every tonne of carbon dioxide they emit.

Heavy industries such as chemical companies, steelmakers and cement producers represented by IFIEC receive the vast majority of their permits for free to prevent carbon leakage.

The Commission has yet to propose whether this system should continue beyond 2020 and the issue is being fiercely debated. One senior Commission official has said the list of industries getting free permits should be trimmed.

On the other hand, The International Emissions Trading Association (IETA), representing a mostly different group of companies regulated and participating in the ETS, also wants assurances over carbon leakage but without hampering the reserve’s passage into law.

The reserve proposal has yet to be debated by the European Parliament and is at an early stage of talks between national governments. To pass, a majority of both must agree.