EPP hearing: ETS reform post 2020 Position essenscia, May 4th 2016 Els Brouwers Head of Climate and Energy

The European climate objectives require a strong industry R&D priorities of the EU CO2-neutral buildings Renewable energy Sustainable transport http://www.energypost.eu/eu-still-struggling-agree-energy-rd-priorities/ Manufacturing industry

The chemical, plastics and life science industry Innovative solutions to tackle the climate challenge Materials to increase battery efficiency Improved insulation for sustainable buildings Ultra light materials for lower fuel consumption in transport Better performance of household applications Innovative lubricants and coatings CO2 as resource for the production of mattresses

The ETS reform: principles Environmental measure to tackle greenhouse gas emissions Carbon leakage protection Free allocation is an economic measure to protect internationally competing industries How to safeguard the EU investment climate and competitiveness of its industry, without compromising the environmental objectives? How to avoid corrections down on free allocation through the application of irrealistic benchmarks, correction factors or tiered exposure grade, especially upfront before any need for correction has been proven?

-1%/year reduction of the extra correction factor Realistic benchmarks for manufacturing industry without correction factors are key Birkeland-Eyde electric arc method -1%/year reduction of the benchmark Haber-Bosch synthesis Steam reforming natural gas extra correction factor Source: Fertilizers Europe, essenscia

ETS Phase 3 (2013-2020) Auctioning MSR 1.900 mio Allocation Available allowances Linear reduction factor -1,74% Initial level of Free allocation (historic activity levels and 10% best performers) MSR 1.900 mio Auctioning Free allocation level with CSCF Allocation 2013 2020

ETS 2021-2030: Commission proposal MSR phase 4 1.650 mio (87%) Linear reduction factor -2,2% extra correction factor MSR Phase 3 1.900 mio 57% Auctioning share Free allocation 43% Allocation share 2021 2026 2030 Reserve for new installations and higher production 250 mio (13%)

ETS 2021-2030: essenscia proposal MSR phase 4 52% LRF -2,2% MSR Phase 3 1.900 mio 52% Auctioning 48% Allocation 2021 2030 48% Industry reserve

ETS Reform: solutions are at reach… Creation of robust reserve for allocation Make a correct calculation of the auctioning share Use MSR of Phase 3 to fuel economic growth Recycle unused allocation for later years Carbon leakage protection following the dynamic of economic cycles Realistic benchmarks Free allocation based on real activity levels A correct carbon leakage protection is the catalyst for sustainable production and growth in Europe

essenscia Federation of the chemical industry and life sciences VZW Contact: Els Brouwers Head of Climate and Energy T +32 2 238 97 08 ebrouwers@essenscia.be www.essenscia.be