FuelsEurope – Position Paper EU Emission Trading Scheme: Compensation for indirect emission costs

The refining sector, deemed exposed to a significant risk of carbon leakage for the EU ETS period 2021-2030, must also be compensated for the indirect emission costs

In the absence of global climate policies with a comparable ambition level to the EU ETS, and because of the strong exposure to international competition, it is essential to compensate the refining sector for indirect emission costs. The refining sector is electro-intensive, using 32,000 Gigawatt hours in 2015, and we anticipate this trend continuing. Being ineligible for cost compensation would reduce our sector’s contribution to the EU low-carbon economy when compared to other already compensated energy-intensive sectors, as there would be no level playing field when using novel electricity-based low-carbon technologies (e.g. hydrogen produced by  RES-E).

FuelsEurope welcomes the revised ETS directive (article 10.a.6) that enables Member States to implement financial measures in favour of sectors and sub-sectors that are exposed to a genuine risk of carbon leakage due to significant costs that are actually incurred from GHG emission costs passed on in electricity prices in line with the EU state aid rules, so as to in particular do not cause undue distortions of competition in the internal market.

The current Guidelines on certain State aid measures in the context of the greenhouse gas emission allowance trading scheme post-2012 are applicable until 31 December 2020 and will therefore have to be revised with a view to apply from the beginning of the ETS period 2021-2030.

FuelsEurope proposes that in line with Article 10b of the revised ETS directive regarding the transitional measures to support certain energy-intensive industries, the Guidelines must define the sectors and sub-sectors that are eligible for aid as those deemed to be exposed to a significant risk of carbon leakage on an EU-wide quantitative basis under EU ETS 2021-2030 rules where the ‘carbon leakage indicator’ exceeds the 0,2 threshold when multiplying the trade intensity and the indirect emission intensity. This aid, however, should also strictly be proportional to the ETS-induced cost increase and be based on the refinery product-specific electricity consumption efficiency benchmark that is calculated by multiplying the refinery benchmark product by the share of relevant indirect emissions.