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MEPs must pick between progressive and regressive wings of the cement sector in Wednesday’s vote on the Emissions Trading Scheme, writes James Nix.

 

James Nix is former director of Green Budget Europe, an organisation working to shift taxation away from labour to pollution and non-renewables. 

 

The background to Wednesday’s (15 February) vote on the reform of Europe’s Emissions Trading Scheme (ETS) is stark. Fourteen months have passed since the signing of the Paris Agreement, with significant setbacks in the US since then. If MEPs reject a reform of Europe’s flagship climate initiative, it will deal another blow to the Paris Agreement.

 

The vote on Wednesday is essentially to bring the ETS more into line with the commitments the EU made in Paris. The ETS applies to large-scale industrial process such as electricity generation and cement-making, and covers about 40% of all emissions across the EU.

 

The aim of putting a price on emissions is to boost investment in low-emission production. Instead of continuing with business as usual, companies embrace energy saving technology, source renewable energy, and leave fossil fuels behind. That’s the theory.

 

The reality of the ETS has sadly been different. As production contracted during the recession, companies realised they had far more emission allowances than they needed. Weighed down by massive oversupply, the ETS price crashed and continues to languish around €5 per tonne.

 

To spur investment in energy saving and renewables, the price needs to be more than €20 per tonne, and above €35 – €40 to deliver a more substantial shift. In internally appraising its own projects, Shell assumes it will cost €37 ($40) to emit a tonne of carbon in the future.

 

The ETS price is currently ineffective. On top of that, there is – as yet – little faith European lawmakers will fix the problem. For example, respected analysts Thomson Reuters estimate that the ETS price will average no more than €14 between 2017 and 2030.

 

The ETS proposal MEPs will vote on this Wednesday is a compromise agreed late last year by the environment sub-committee of the European Parliament (ENVI committee). Made up of MEPs from across the parties, its proposals are essentially based on the level of competition faced by European industries covered by the ETS.

 

The cement sector faces a far lower level of competition from imports compared to industries such as chemicals and steel. Expressed as a percentage of total EU production, cement imports amount to less than 1.3%, according to 2014 data. “Cement is a relatively shielded sector that has limited competition from non-EU countries”, according to consultants CE Delft in a report for the EU Commission.

 

As modest as the threat from imports is, the ENVI committee proposes to counter-act it. From 2021 imported cement would pay a Border Adjustment Measure – a charge or tax – that makes non-EU producers pay for carbon emissions at the same rate as their EU counterparts.

Source:euractiv