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Industry urges swifter phase out of free EUA allocation

21 Nov 2022 09:53

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21 Nov 2022 09:53

(Montel) The EU should end free allocations of carbon emission allowances as soon as possible and broaden the carbon border adjustment mechanism (CBAM) scope to avoid damaging the bloc’s competitiveness, industry groups have urged.

The European Parliament’s proposal to phase out free allowances to CBAM sectors by 2032 “is already too late and should by no means be postponed”, said the two groups in a letter.

The European Recycling Industries’ Confederation (EuRIC), which represents 5,500 companies, and climate change think tank Sandbag sent the letter on Friday to the three EU institutions involved in the ETS revision and CBAM negotiations.

The next ETS trilogue discussion – involving the EU Council of ministers, the European Parliament and the European Commission – will take place on Tuesday.

“We believe that the proposals [to extend free allocation well in the 2030s] perpetuate competitive distortions, which are damaging to the EU’s competitiveness, its self-sufficiency, its resilience to inflation and its ability to adapt to a lower-carbon world,” wrote EuRIC and Sandbag in their letter.

“Obstacle to profits”
The free allocation system was designed to incentivise high levels of production activity to the detriment of resource-saving, they added. “A late phase-out of free allocation of allowances and a slow implementation of the CBAM would create an obstacle to otherwise profitable production practices.”

While free allocation was still in place, there should be incentives to reward demand-reduction measures for primary steel, they wrote.

The so-called CBAM was designed to prevent carbon leakage by taxing carbon intensity of imports into the EU. It should also cover all corresponding upstream products falling under the EU ETS, the letter recommended.

The CBAM is set to initially cover aluminium, cement, fertilisers and iron and steel products.

The EU ETS should cover greenhouse gas emissions from hard coal, iron ore and other non-ferrous metal ore mining sectors, as well as the production of pellets and DRI pellets to avoid putting recycled materials at a disadvantage to primary raw materials, according to the recommendations outlined in the letter.

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