Why the EU cement industry opposes an import inclusion scheme

01/02/2017

Why the EU cement industry opposes an import inclusion scheme as suggested by the European Parliament’s Environment Committee in December 2016

In a comment published in Carbon Pulse on Jan 31, former cement industry executive Bruno Vanderborght questioned CEMBUREAU’s position on cross border measures. Unfortunately, he did so in an opinion largely based on past internal CEMBUREAU documents that have, in addition, been wrongly quoted or taken out of context. CEMBUREAU feels obliged to briefly clarify certain points and set the record straight.

From the very start of the EU ETSi, all energy intensive industries, including the cement industry, have emphasised that climate change is a global problem that needs to be tackled at an international level. In the absence of an international agreement with equivalent obligations on operators around the world, the industry has always insisted upon a global level playing field. The suggestion to study and assess a border adjustment mechanism was one of several tools proposed to address the risk of carbon leakage. Such a mechanism could operate either in addition to free allowances or, as free allowances are considered to be transitional in nature, as a potential alternative in the long run. It is also correct that the current EU ETS Directive foresees in the possibility for the European Commission to examine an importer inclusion scheme considering the outcome of negotiations concerning an international climate change agreement.

The amendments on the importer inclusion scheme put forward in December 2016 by the European Parliament’s Environment Committee (ENVI’s) in a last-minute move and without proper debate within political groups, are based on a totally different context. ENVI’s proposal does not aim to address carbon leakage, but rather to target a limited number of sectors which, as a result, would no longer be entitled to free allocation. Through these amendments, the legislator aims to resolve the problem of having a sufficient number of free allowances available at the level of best performers in the other sectors. It is clear that this approach entails a direct discrimination of the sectors covered by the import inclusion scheme compared to those which can continue to benefit from free allowances. In addition, the suggested measure bears no relation to the objective of the Directive which is to reduce CO2 emissions. It merely seeks to single out sectors for the application of a yet untested regime, thereby creating legal uncertainty. Let it therefore be clear: at no point in time has CEMBUREAU defended an import inclusion scheme that includes a consequential loss of free allowances, singles out specific sectors or requires the European Commission to come up with a legislative proposal. CEMBUREAU will not support any amendment that is presented in relation to such a measure as it disagrees with the context in which the discussion is taking place.

CEMBUREAU is prepared to continue to discuss how to best achieve the objectives of the EU Emission Trading Directive. A workable EU ETS should include a dynamic allocation system whereby allocation is more closely aligned with production to avoid windfall profits. Free allowances need to be given at the level of the best performer but it is indeed essential that benchmarks are not only set based on real data but show a downward path in CO2 emission reductions. Our sector has decreased its CO2 emissions per tonne clinker by 9% since 1990 and is on a constant reduction path. The allegation that the EU has the highest share of old installations worldwide is not substantiated as whilst the ‘Getting the Numbers Right’ (GNRi) data for the EU covers close to 100% of EU plants (those of Cement Sustainability Initiative (CSIi) member companies as well as non-CSI companies reporting to GNR through CEMBUREAU coordination) this is not the case for other jurisdictions, where it is mainly the best performing plants which are contributing to the GNR data collection (the ones of companies belonging to CSI only). GNR data shows that Europe is still the world leader in CO2 efficiency. It also uses the highest level of alternative fuels (41% of all fuel needs) globally and places a strong focus on innovation and breakthrough technology.

It is precisely within this context that CEMBUREAU therefore supports a minimum benchmark reduction threshold of 0.25% as suggested in ENVI. The combination of a reduced benchmark level with production figures that are still 40% below pre-crisis levels (and which will only gradually pick up), will most likely result in a sufficient amount of free allowances being available so that all plants can receive free allocation at the level of the best performer. This will free up the necessary investment funds to continue to innovate in Europe and further engage in the development of breakthrough technologies such as carbon capture and storage or use as well as in other innovation efforts such as the development of new binders, reduction of clinker content in cement and downstream product innovation. In our view, these are the elements that need to be at the heart of the EU ETS debate as they pursue the environmental objectives of the Directive.

 

For comments, please contact: aj.johnson@cembureau.eu