FuelsEurope supports the EU ETS as the EU’s ‘flagship instrument’ within its energy and climate policy framework, as a cost-effective market mechanism for emissions reduction in the power and industry sector.
FuelsEurope fully supported the conclusions of the EU Council of October 2014, which outlined the key requirements and principles for the EU ETS reform. The Conclusions specifically mentioned that the most efficient installations should not face undue carbon costs and that free allocations should take into account both direct and indirect carbon costs. FuelsEurope also welcomed the outcome of the ETS reform with regards to carbon leakage protection and the recognition of the key role of Energy Intensive Industries in the European economy.
FuelsEurope furthermore welcomed the provision regarding the adjustments to free allocation of emission allowances as a result of activity level changes. However, the only proposed relative threshold of 15% activity level change is, in our view, not sufficient to ensure the alignment of allocation level for large installations with their actual activity level.
Given the absence of global climate policies with a comparable ambition level to the EU ETS, and the strong exposure of the refining industry to international competition, indirect emission costs compensations are essential for the refining sector. Since it is highly electro intensive, being ineligible for cost compensation would reduce our contribution to the EU low carbon economy. Since other energy intensive sectors are already compensated, this creates an uneven level playing field when using novel electricity-based low carbon technologies (e.g. hydrogen produced by RES – E).
FuelsEurope therefore proposes specific criteria for the ETS state aid Guidelines that will define the sectors and sub-sectors eligible for aid. Find out more details in our Position Paper.
FuelsEurope estimated that the refining industry would face a total cost of approximately 15 Billion € over Phase IV (based on a CO2 price of 30 €), including the indirect costs. This represents more than 10% of the average refinery margins, which are already eroded by other legislation on air and fuel quality. FuelsEurope, therefore, hopes that these issues will be recognised and addressed in the upcoming revision of the guidelines and adoption of further ETS phase 4 implementing acts.