Climate Change agreement reached at COP21 on 12 December 2015. World leaders have put their signature to a landmark agreement to cap carbon emissions in an unprecedented effort to keep global temperature rises below 2° Celsius by the end of the century. CEFIC and Petrochemicals Europe support this agreement but demand policy makers to reform the EU ETS in a fair and sustainable way.
ETS and climate change
What is it about?
Mankind is increasingly influencing the climate by burning fossil fuels and farming animals. This adds enormous amounts of greenhouse gases to those naturally occurring in the atmosphere, increasing the greenhouse effect and global warming.
The EU tries to fight climate change by reducing Green House Gas (GHG) emissions. The main element of the EU's policy for reducing greenhouse gas emissions cost-effectively is the EU emissions trading system (EU ETS) that was set up in 2005. The EU ETS works on the 'cap and trade' principle. A cap is set on the total amount of certain greenhouse gases that can be emitted by installations covered by the system. The cap is reduced over time so that total emissions fall. Within the cap, companies receive or buy emission allowances which they can trade with one another as needed.
The European Commission presented in July 2015 a legislative proposal to revise the EU ETS for the period after 2020. This is necessary to achieve the EU's target to reduce greenhouse gas emissions by at least 40% domestically by 2030 in line with the 2030 climate and energy policy framework and as part of its contribution to the Paris Agreement agreed in 2015.
CEFIC and Petrochemicals Europe congratulate world leaders for the COP21 landmark agreement in Paris to cap carbon emissions and to keep global temperatures rises below 2° Celsius by the end of the century. The European (petro-) chemicals industry helps to achieve this target by continuing reducing its own Green House Gas (GHG) emissions and by enabling other industries to become greener.
The European chemicals industry has a strong record in cutting its GHG emissions: From 1990 to 2014, a reduction of 58% of GHG emissions was achieved despite a 78% chemicals production increase. This means that the European chemicals industry was able to decouple its GHG emissions from the production.
Furthermore, the European (petro-) chemical industry is the key enabler industry to allow other industries to reduce their proper carbon footprint. Products derived from petrochemicals enable downstream users to innovate and to enhance the capabilities of their products so that they can meet the Paris challenge: No windmill, no solar panel, no insulation material and no electric car would be possible without petrochemicals.
Based on these outstanding performances, the European (petro-) chemicals industry participates strongly in the discussions on the future of the European Union’s Emissions Trading System (EU ETS). In July 2015, the European Commission published its proposal to reform the EU ETS for the period 2021 – 2030. Petrochemicals Europe welcomes this initiative because a market based mechanism like EU ETS delivers reduced carbon emissions at the lowest possible cost. However, the EC proposal, and the current discussions in the European Parliament and the Council of ministers do not incorporate the needs of the European (petro-) chemicals industry.
In particular, the so called “tiered approach”, a proposition that would reserve free allowances for some sectors at the expense of others, goes in the wrong direction. The European (petro-) chemicals industry is an energy intensive industry that competes on price in global commodity markets. It is highly exposed to carbon, investment and employment leakage. It is therefore of the highest importance that policymakers provide a global level playing field for the (petro-) chemicals industry. The actual discussions on the EU ETS reform do not take these problems into account but discriminate the (petro-) chemicals sector.
Focus on petrochemicals:
Petrochemicals Europe is in line with CEFIC’s position. According to some plans, the “tiered approach” would cost the European petrochemicals industry ca. 400 – 500 million Euros per year from 2021 onwards. Petrochemicals Europe considers that this is unacceptable because any “tiered approach” has neither an economic nor environmental logic and would only reserve free allowances for some industrial sectors at the expense of others. Hence, Petrochemicals Europe and CEFIC urge EU policymakers to base the reform of the EU ETS on the following elements:
- EU ETS ensures carbon emission reduction “at the lowest possible cost”
- Free allowances are critical to preserve the competitive position of industry
x No tiering of carbon leakage exposure
- CEFIC supports the position of the European Parliament’s industry committee (ITRE)
x Benchmark installation should have no additional carbon cost
- No benchmark hair cut beyond technological realities
x Outcome should not be worse than ITRE position
- No fixed minimum auctioning percentage
- Avoid a cross sectorial correction factor
Current status: The European Parliament's Environment committee (ENVI) adopted its position on the revision of the EU Emissions trading system (EU ETS) on December 15. CEFIC welcomed the result because ENVI endorsed reasonable levels of free allocation for industry but voted against the so-called "tiered approach", a proposition that would reserve free allowances for some sectors at the expense of others. Please find more information on the webpage of CEFIC.