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EU should reject flawed Sandbag report - EUROFER

Steel News - Published on Sun, 17 Jul 2011

EUROFER calls on governments to exercise proper skepticism towards misinformation of certain NGO\'s

Europe’s steel industry could be irreparably damaged if EU governments were to pay heed to the recommendations put forward by anti industry pressure group Sandbag in a report launched in the European Parliament on the failings of the EU Emissions Trading Scheme.

The report, Buckle Up, suggests that the EC’s climate change objectives would be more easily attained were the supply of free allocations under the EU ETS to be very substantially reduced. EUROFER calls on this dangerous advice to be rejected on the grounds that it would have the opposite effect, raising the volume of global emissions by weakening the competitiveness of best-in-class EU industries, such as steel.

According to Sandbag, Europe’s energy-intensive industries are undeservedly profiting from the effects of the recent catastrophic financial crisis on the EU ETS. Certainly, the recession did cause emissions to drop, which the EU ETS is designed to reward. But Sandbag ignores the wider context behind the fall in emissions: the enormous financial losses inflicted on industry by loss of production during the crisis, and the fact that the unused emission credits thrown up by the crisis will be dwarfed by the deficit in credits that EU industry will unilaterally face under the EU ETS from 2013, even if Sandbag’s recommendations are not adopted.

EUROFER estimates the EU steel industry will use all its unused allowances by 2014. Claims that this process will take much longer have been based on extremely unrealistic assumptions of production levels.

Sandbag also fails to recognize that EU industry advised against the cap and trade emissions system being adopted and urged instead that an ex post adjustment system should be used to take into account fluctuations in production. Ironically, Sandbag is seeking to scapegoat industry for the consequences of this advice being ignored.

The EU steel industry is more than doing its bit to fight climate change. Its emissions have fallen 50% in the last 40 years and 20% over 1990-2005.

Now, with the withdrawal of allowances for process gas transfers, as is proposed under Phase 3 of the EU ETS from 2013, the goalposts are being moved yet again. This creates uncertainty and makes investment decisions in a long-term industry like steel extremely difficult.

Crucially (and not for the first time) Sandbag ignores the inconvenient truth that the best performers in Europe have already reached the technical limits of what can be achieved. Further emission reductions depend on the successful development and implementation of breakthrough technologies.

This will require tens, if not hundreds, of billions in investment. Loading European industry with additional carbon costs is self-defeating: total emissions will rise as less regulated producers win market share in Europe, while industry’s ability to invest in breakthrough technologies will be further eroded.

Sandbag seems unmoved by the damage its recommendations would cause to the communities that depend on steelmaking in Europe. It is also apparently unaware of the futility of unilaterally penalizing European steel industry emissions: each year China’s steel industry emits about 7 times as much carbon as Europe’s; and every two years the Chinese steel industry’s emissions grow by an amount equivalent to the whole of Europe’s steel industry emissions. A global agreement is required to address this global problem.

Posted By : admin on Sun, 17 Jul 2011
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