1. VIEWS FROM THE ENERGY INTENSIVE INDUSTRIES
2nd European Climate Change Programme (ECCP II)
VIEWS FROM THE ENERGY INTENSIVE INDUSTRIES
Stakeholder Conference 24 October 2005
By Dr. Jean-Marie Chandelle – CEMBUREAU Chief Executive

2. WHAT DID WE EXPECT FROM ECCP?
A policy that would effectively reduce globally CO2 emissions
A policy that would reduce CO2 emissions in a cost effective manner
A policy built on fairness and equity between sectors, industries and regions/countries
A policy that would not impair the competitiveness of the European manufacturing industry

3. WHAT DID WE GET? Emission Trading Directive EU ETS
Will it effectively reduce emissions?
Does it work in a fair and equitable manner?
What does it do to our competitiveness?

4. WILL IT EFFECTIVELY REDUCE CO2 EMISSIONS?

5. WILL IT WORK IN AN EQUITABLE MANNER?
Distortions of trade between sectors, between Member States and between competitors
In NAPs I best performers are not rewarded; they are penalised
Rationalisation to improve CO2 efficiency across Europe is penalised under NAPs
Discrepancies between and/or within different sectors
Process CO2
Technological potential to reduce emissions
Technically linked activities belonging to different Annex I industries
Sensitivity to CO2 prices and affordability
Ability to pass through cost
CO2 from aviation
Electricity prices

6. DISTRIBUTIONAL EFFECTS OF EU ETS
What was expected
The overall direct impact of EU ETS was thought to have limited distributional effects on key industry sectors within and outside the scope of ETD

7. The overall impact of ETS is limited …..€
The overall impact of ETS is limited …..
but there are severe distributional effects
on key sectors.
Compliance costs (buying allowances)
Real costs added to electricity (marginal pricing system)
Sectors covered by the ETS: lime, cement, glass, paper,…
Sectors not covered by the ETS Non-ferrous metals, chemicals
Power sector

8. DISTRIBUTIONAL EFFECTS OF EU ETS
What happened?
There are severe distributional effects on key industry sectors within and outside the scope of ETD

9. The overall impact of ETS is limited …..
Compliance costs (buying allowances)
The overall impact of ETS is limited …..
but there are severe distributional effects
on key sectors
Real costs added to electricity (marginal pricing system)
Non accepted costs added to electricity (opportunity costs resulting from ETS + marginal pricing system)
Sectors covered by the ETS: lime, cement, glass, paper,…
Sectors not covered by the ETS Non-ferrous metals, chemicals
Power sector

10. CAN WE SURVIVE?
Plants are being closed down as a result of excessive energy prices
Capacity in EU reduced even when demand increase in the EU – CAP on growth
Exports are reduced
Imports from non carbon constrained economies increase
Investment patterns show fear of uncertainty
Added costs along the supply chain
Increasing raw material prices (biomass)

11. WHAT TO DO?
All options including dropping the EU ETS should be considered as soon as possible
Develop another approach:
Develop scheme(s) equitable worldwide
On a sectoral basis
Be flexible in solution and policy
Give a chance to negotiated voluntary initiatives
We remain committed to reduce CO2 emissions

12. WHAT TO DO IN THE MEANTIME?
Recognise domestic projects
Make it easier for JI and CDM to work
No cap on conversion of credits in EAUs
Prevent windfall profits in energy sector