EU finalises list of industries eligible for emissions trading support

EU lawmakers yesterday approved a list of industries that will receive free permits to emit carbon dioxide under the next phase of the Emissions Trading Scheme (ETS), effectively ending efforts by green groups to ensure a greater number of firms pay for the carbon they emit.

The hard-fought concession means that the most efficient 10 per cent of installations in sectors such as metals, building materials, textiles and ceramics will be provided with free EU emission allowances (EUAs). The most energy-efficient organisations will be selected via a benchmarking scheme that is to be finalised next year.

However, less energy-efficient firms and those organisations operating in other carbon-intensive sectors not in danger of carbon leakage will still have to purchase 20 per cent of their pollution permits at auction from 2013, rising to 70 per cent in 2020 and 100 per cent in 2027.

A motion had been tabled to reject the list of industries eligible for free permits, but yesterday the European Parliament's environment committee voted down the motion, ensuring that selected industries will receive support to help cope with the cost of the ETS.

The move represents something of a victory for heavy industries that had been arguing that forcing them to purchase EUAs at auction would simply result in carbon leakage whereby businesses locate to countries such as Russia, India and North Africa where they would not be charged to emit carbon.

The European Commission (EC) accepted that about 77 per cent of emissions generated by the manufacturing industry come from sectors judged to be at risk of carbon leakage. Plastics, textiles, plywood and cast iron producers won a fight to be included on the EU list in September, while steel, aluminium, cement and glass were identified in early EU discussions as the main industries that should receive help.

The hope is that the problem of carbon leakage will reduce over time as other regions adopt similar carbon-cutting measures to the EU.

European environment commissioner Stavros Dimas told lawmakers ahead of their vote that the list could be adjusted as soon as other countries agree to emission reduction targets that would remove the incentive for European firms to relocate. "This decision is explicitly subject to review in light of the outcome at Copenhagen," he explained.

But environmentalists were unimpressed by the move, claiming that the EU had moved from a scheme designed to lower emissions to one that would effectively subsidise their increase.