EU Lawmakers Clash Over Carbon-Leakage List for Industry

A draft European Union measure listing industries that should be protected from relocating to regions without greenhouse-gas curbs caused a rift among members of the European Parliament’s environment committee before a vote this afternoon.

Bas Eickhout, a Dutch member of the Greens group in the EU legislature, is leading a push to block the measure, known as a carbon-leakage list, in a ballot to be held in the environment panel after 3 p.m. in Brussels. The proposed regulation, which was already approved by European governments and is now undergoing scrutiny in the EU Parliament, gives 175 industries a bigger share of free carbon permits than other emitters.

“It is our duty to object and ask the commission to come forward with a new carbon-leakage list,” Eickhout told the environment committee during a discussion on the draft. “It is fundamental for good policy making.”

Eickhout and five other members sponsoring the objection said the list drafted by the European Commission ignores the EU executive’s own price assessment. The European People’s Party, the biggest political group in the EU Parliament, said it was going to defend the proposed regulation.

“We would be sending a wrong signal to companies,” said Peter Liese, a German member of the EPP. “This is about promoting innovation. We don’t want companies who invested in state-of-art technology to be penalized.”

Draft Measure

To assess the risk for industries, the commission used data from 2009-2011 and assumed a carbon price of 30 euros a metric ton, according to the draft measure. EU emission permits for December delivery rose 1.6 percent to 5.76 euros on the ICE Futures Europe exchange in London today. The recommendation in the commission’s unpublished impact assessment was to assume a carbon price of 16.50 euros in the proposal, according to Eickhout’s motion to object the carbon-leakage list.

“I can sympathize with Bas’s position,” said Matthias Groote, a German member of the Socialists and Democrats group, the second-biggest in the EU Parliament. “Who is going to foot the bill for the benefits that are going to be granted to some companies? Who is going to pay for the windfall profit?”

The S&D group will meet to discuss the proposal before the vote later today, he said.

To block the draft measure, its opponents would need to muster majority in today’s ballot on the resolution proposed by Eickhout and in a plenary vote to be held in the next stage.

Key Tool

The EU emissions-trading system covers about 12,000 installations owned by manufacturers and utilities and is the region’s key tool to reduce greenhouse gases, which scientists blame for global warming. In the current trading phase that started last year, the system is moving toward selling a greater share of emission permits at auctions.

The draft carbon-leakage list would replace the existing regulation that gives more free permits to 164 industries through 2014. It extends the provisions for industries including manufacturers of steel, lime, cement and refined petroleum products. Producers of aluminum, precious metals, zinc and tin were also kept on the planned list, which according to EU legislation needs to be reviewed every five years.

In 2015-2019, the list of industries particularly exposed to global competition and liable to move production abroad would also include sectors such as production of dietetic food and manufacturers of non-electric domestic appliances.

‘Legally Correct’

The data that the commission used in its proposal was “legally correct,” its representative told members of the environment committee today. The price assumptions are justified as the price of carbon is expected to be “more strongly driven by mid- and long-term emission reductions” in the future, the EU’s regulatory arm said in May, when the proposal was presented.

Members of various political groups in the environment committee, including the Greens, the EPP and S&D and the Alliance of Liberals and Democrats for Europe, agreed that the measure was subject to strong lobbying efforts by the industry.

“I’ll definitely vote in favor of the objection,” said Gerben Jan Gerbrandy, Dutch member of the ALDE group. “Let’s force the commission to come up with a new list that is based on science and not on political deal-making.”

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE