EU firms insist carbon caps have not damaged competitiveness

The EU's high-profile emission trading scheme (ETS) has had "minimal" impact on businesses' competitiveness and, in some cases, has delivered commercial benefits, according to nine of the largest companies affected by the cap-and-trade scheme.

That is the conclusion of a report carried out by The Climate Group think-tank and commissioned by the German Marshall Fund of the United States lobby group, which is likely to be seized upon by US environmental campaigners currently attempting secure support for a proposed US cap-and-trade scheme modelled on the EU ETS.

The study, entitled The Effects of EU Climate Legislation on Business Competitiveness: a Survey and Analysis, was based on interviews with executives at blue chip firms that combined account for five per cent of the emissions covered by the ETS. It found that, to date, initial fears that the scheme would damage the competitiveness of European firms, contribute to job losses, and encourage some carbon-intensive businesses to leave the EU have proved unfounded.

The firms interviewed, which included energy giant Centrica, an unnamed global steel manufacturer, a global aluminium producer, and large purchasers of energy such as Tesco and Johnson & Johnson, said that they had not relocated their operations, reduced their workforce, or lost market share as a result of carbon pricing.

A number of executives also said that the introduction of the ETS had been " positive" for their business as the need to measure and report on carbon emissions had allowed them to identify cost-effective energy efficiency measures.

Some respondents did voice concerns that the limited impact of the scheme had been a result of the relatively low price of carbon allowances during the early phases of the scheme. They also warned that the imminent lowering of the emission caps from 2013 could encourage some businesses to relocate operations to regions without carbon constraints, particularly if main competitor countries fail to implement their own carbon-pricing mechanisms.

However, the report found that all of the companies interviewed, including those more carbon-intensive companies, were broadly in favour of the scheme.

Mark Kenber, international policy director of The Climate Group and the report's co-author, said that the survey provided a valuable counter to those groups in the US lobbying against the proposed Waxman-Markey climate bill on the grounds that they believe the adoption of a cap-and-trade scheme would lead to a loss of market share and soaring costs for businesses.

"Companies with operations in Europe have made some adjustments since the introduction of the EU ETS and EU climate policies," he said. "But concerns about loss of competitiveness have to date either not materialised or have been alleviated through policy design."