FuelsEurope Position on EU ETS Reform
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 supports the conclusions of the EU Council of October 2014 where the key needs and principles for EU ETS reform were set out: it was stated 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 welcomes the focus of the Commission in its proposals for amending the ETS Directive on carbon leakage protection and the recognition of the key role of Energy Intensive Industries in the European economy.
However, FuelsEurope’s assessment is that the current proposals are not in line with the EU Council conclusions and that within carbon leakage sectors even the most efficient facilities(those at the benchmark level) could face a 10 to 20% shortage on their free allocation by the end of Phase IV. FuelsEurope estimates that Refining would face a total cost of approximately 15 Billion € over Phase IV (with a CO2 price of 30 €), including indirect costs. This represents more than 10% of average refinery margins which are already eroded by other legislation in the field of air and fuel quality.