EU Should Adjust Carbon Handout at Year End, BusinessEurope Says

The amount of free carbon permits the European Union hands out to factories should be adjusted at the end of each year to match industrial output, according to BusinessEurope, the Brussels-based employers’ federation.

Granting emission rights based on historical activity would be one way to prevent a build-up of unused permits and help maintain Europe’s competitiveness, Alexandre Affre, who oversees industrial policy at the lobby group, said today. The group representing companies in 35 countries, wrote to European Commission President Jose Manuel Barroso yesterday seeking “realistic” targets in this month’s 2030 climate proposals.

EU member states have supported a measure to temporarily withhold the sale of some carbon permits in an effort to drain a surplus that dragged prices in the world’s biggest cap-and-trade emissions market to a record low. The current phase of the trading program runs until 2020, when a global climate agreement is due to come into force.

“We would like to have the allocation of free allowances much better linked to real production,” Affre said. “We think those provisions for some free allowances should remain while there’s no global climate deal.”

ArcelorMittal, the world’s biggest steelmaker, received free allowances in 2012 worth 651 million euros ($884 million) based on an average price of 7.49 euros a ton. It received 73 percent more allowances than needed for the year, European Commission data show.

BusinessEurope includes 41 business federations ranging from Germany’s Bundesverband ver Deutschen Industrie eV to the Confederation of British Industry, according to the lobby group’s website.

Permit Allocation

The EU’s emissions-trading system hands out for free or auctions permits to polluters, which must surrender enough to match their carbon output or pay fines. The program currently allocates allowances in advance and doesn’t adjust the amount.

EU lawmakers should consider linking factories’ permit allocation to production after 2020 to ensure the region doesn’t miss out on investment that may be at risk from costly climate-protection policies and high energy prices, Affre said. Only emitters with the most efficient carbon-reduction technology should get all their allowances for free, he said.

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