Energy and Climate Change

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energy and climate change
01 Apr.2016 ,

European Paper Industry continues to reduce its carbon emissions

Preliminary estimates based on today’s publication of the Verified Emissions and Compliance Data for the year 2015 show that carbon emissions in the pulp and paper industry in 2015 fell by at least 1% compared to 2014. Compared to 2005, the year the EU Emission Trading Scheme came into force, absolute emissions fell by 27%.

With production levels remaining substantially the same in 2015, emission reductions were primarily driven by market consolidation, investments in bioenergy, and the push from international competition to improve efficiency in production processes. And with energy being the second main component in the cost structure, reducing energy-related costs, such as CO2 emissions, is a priority to secure an internationally-competitive position.

"We have been early-movers in low-carbon investments and have further plans to grow our business in Europe, building synergies with Circular Economy as well as the Bioeconomy”, says Jori Ringman, CEPI Acting Director General. “The EU ETS should support such efforts which are completely in line with its overarching scope of transforming the industries. Therefore the EU ETS should continue to improve the predictability of the regulatory framework, by promoting and rewarding investments in low-carbon technologies”, he added.

The European Paper Industry currently receives 1.4% of the total allocations for manufacturing sectors, while employing over 6% of the manufacturing industries’ workforce and being responsible for over 5% share of investments in Europe.


For more information, please contact Annie Xystouris at a.xystouris@cepi.org, mobile: +32 486 243 642.
 

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31 Mar.2016 ,

EU ETS: Three reasons why the Tiered Approach is bad for the EU economy

The non-paper jointly drafted by the French and British government on tiered free allocation arbitrarily determines which sector has a future in Europe and which sector has a future outside Europe.

Specifically, the proposal has three major critical points:

1. It is unjustified from both an economic and a fairness perspective

The proposal pretends to adequately ensure protection against the risk of carbon leakage. However, it reduces the share of free credits to the vast majority of industrial sectors, without providing any evidence of the impact of additional costs on their competitiveness. The proposal particularly lacks of any cost comparison between a given European and a non-European sector.

The proposal reduces the amount of free credits to certain sectors, as a supposedly fair gesture towards some others who would otherwise receive too little protection. Yet, some other sectors would unjustifiably be excluded from such a “solidarity clause”. This is far from being a fair approach.


2. It penalises competitive industries investing in low-carbon technologies

Protection against the risk of carbon leakage should provide the regulatory certainty for industries in transition towards a low-carbon economy.

However the tiered approach rewards the most carbon intensive and least profitable sectors. This is intrinsic in the formula used, which rewards high carbon intensity combined with low value added (GVA).

On the contrary, the formula punishes a sector investing in carbon emission reductions by giving a lower protection against the risk of carbon leakage as a direct consequence of these investments.


3. It hampers innovation

The ETS is expected to ultimately promote the substitution of high-carbon with low-carbon production. In this respect, solutions may come from within a given sector or as a cross-fertilisation of ideas coming from other sectors. One example is the potential coming from the bioeconomy or circular economy to provide solutions to decarbonise other sectors.

However, the proposed tiered approach provides different carbon cost exposure to different sectors, with the paradox that the most carbon intensive will bear the least carbon costs. As a consequence, the investment signal from the ETS will be totally jeopardised.

Sectors which successfully invest in decarbonising their processes are systematically at risk of being pushed outside the EU.

 


Alternatives to the tiered approach

Discussions on tiered free allocation are triggered by the need to avoid the application of the Cross-Sectoral Correction Factor (CSCF). The timing and magnitude of the CSCF are far from being certain, as it depends on a combination of factors (production levels, changes in the market, technological developments, innovation, development of international carbon markets, etc.).

Rather than picking one scenario and fixing the rules for the next 15 years accordingly, the EU should:

1. Define a regulatory framework that stimulates and rewards investments in low-carbon technologies, as a way to reduce the demand for free credits;

2. Support programmes to accelerate the market-readiness of breakthrough technologies for industrial installations;

3. Secure a sufficient amount of free credits to allow for low-carbon economic growth in energy intensive industries exposed to international competition;

4. Set rules to predictably assess potential shortages in the supply of free credits and, when the case, explore all possible options to preserve industrial competitiveness.


For more information, please contact Nicola Rega at n.rega@cepi.org mobile: +32(0)485403412.

 

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11 Feb.2016 ,

Consultation on the Review of Directive 2012/27/EU on Energy Efficiency

This consultation was launched to collect views and suggestions from different stakeholders and citizens in view of the review of Directive 2012/27/EU on energy efficiency (Energy Efficiency Directive or EED), foreseen for the second half of 2016. The full consultation replies can be found here.

Here are some highlights:

In reviewing the EU energy efficiency target for 2030, the Commission should have in mind that energy efficiency has to be achieved by voluntary initiatives, rather than by mandatory requirements. An EU-wide binding energy saving target until 2030 would limit the scope for economic room to manoeuvre. A rigid objective as a binding cap on energy consumption would impede growth. Therefore, it is of vital importance that the Commission designs the target in such a way that recognises early measures and focuses on lowering the energy intensity, not the energy use as such. The European framework has to create ideal long-term conditions to realize energy efficiency measures covering all sectors. This is particularly important for the non-ETS sectors, where incentives to improve energy efficiency are often insufficient. Effective incentives are needed, especially for research and development as well as for the cost-efficient implementation of investments in energy efficiency measures.

In view of achieving the new EU energy efficiency target for 2030, we believe that energy efficiency work must be done locally and as close to the energy consuming unit as possible. The role of the EU should therefore only be limited to setting targets, creating the overall regulatory framework, monitor the process in terms of energy efficiency improvements and give non-binding advice to those countries that are not able to reach the given goals. But details on how to implement energy efficiency policies need to be formulated at national or even industry level.
The EU should also promote and finance research and innovation in the field of energy and process technology to enable breakthrough technologies.

Regarding the most appropriate financing mechanisms to significantly increase energy efficiency investments in view of the 2030 target, it is important to find a high efficient way of financing. To make sure that the highest possible potential is tapped with the available amount of money, it is important to prefer energy investment funding for measures with high returns on investment. One way would be to support investment in form of cheap call money from a revolving fund for efficiency measures that would otherwise not take place without support. Ensuring that the invested money always returns to the fund (e.g. oney is paid back to the fund in the same rate as the energy savings pay back), allows multiple use of the available budget and therefore enables highest efficiency.
Interest-free loans to finance investments are also a way to achieve energy efficiency measures.
Tax decrease/benefit could also be envisaged if companies are participating in energy efficiency programs and achieving results.
Income from auctioning of emission rights should also be used to finance energy efficiency measures.

 

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11 Feb.2016 ,

CEPI's response to EU Commission's Preparation of a new Renewable Energy Directive for the period after 2020

In its Energy Union Framework Strategy, the Commission announced a new renewable energy package for the period after 2020, to include a new renewable energy directive (REDII) for the period 2020-2030 and an updated EU bioenergy sustainability policy. This consultation covered the REDII aspects. You can find the fully completed consultation here.

Here are some highlights:

CEPI believes that the RED has been successful in deploying large volumes of renewable energy sources. However, the costs directly and indirectly associated to such deployment in most Member States have been quite significant. The energy
prices gap with competing economies has widened, with policy-induced costs being particularly relevant in electricity prices. This has a negative impact on industrial competitiveness, as acknowledged by the 2014 Commission Guidelines on State aid for environmental protection and energy 2014-2020. Weather dependent renewable energy, solar and wind, is remarkable and growing challenge to secure availability of electricity.
The RED has also led to measures promoting the demand for bioenergy, not sufficiently taking into account the availability of wood for the wood processing industry, which is producing substitutes to fossil fuel based and more carbon intensive products. This negative impact on the competitiveness of the wood processing industry is hampering the uptake of the bio-economy and
its climate change mitigation potential. Support to bio-energy should rather focus on stimulating the supply of wood.

Member States have a responsibility to ensure that additional demand for bioenergy is met by supply of raw materials, taking into account local biomass availability. Therefore demand-side measures should be balanced with supply-side measures to mobilise existing additional potential of wood that can otherwise not be used for wood and fibre based products. Reference could be made to the biomass mobilisation brochure jointly developed by DG AGRI, Forest-Europe and the UNECE-FAO.

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01 Dec.2015 ,

EU ETS: Six steps to ensure industry’s competitiveness

The EU ETS reform, published on 15 July, presents several positive elements that contribute to improving the predictability of the regulatory framework. However, these improvements are not yet sufficient in protecting the competitiveness of energy intensive industries, ensuring adequate regulatory stability and predictability, and in stimulating investments in low-carbon technologies.


From 2005 to 2014, our industry has reduced carbon emissions by 26%, resulting in 21% carbon-intensity reduction. We have been early-movers in low-carbon investments and have plans to grow our business in Europe, building synergies with circular economy and the bioeconomy.
To bring environmental protection in line with industry competitiveness, we ask to:


1. Remove artificial cap on free credits to industry.
Artificially capping access to free credits depresses future investments: it means acceptingdeindustrialisation as a legitimate way to reduce emissions in Europe, even if this wouldincrease Europe’s carbon footprint in the world.
The artificial cap will also lead, sooner or later, to the application of the cross-sectoralcorrection factor (CSCF). This is the most unfair among all instruments, as it cuts allocationirrespective of industry potentials, neutralises carbon leakage provisions, limits predictability,and punishes investments made by early movers.


2. Keep the proposed approach to benchmarks review, but improve key design aspects.
The benchmark review needs to predictably promote and reward investments in low-carbontechnologies, while finding the right balance between accuracy and administrative burden.Reducing benchmarks at achievable paces, with rules clearly stated upfront, will lowerregulatory risks and reward the installations who will invest in low-carbon technologies.


Looking at the administrative burden, the pulp and paper industry, with more than 700installations in the ETS – 60% of which below 25kt – emitted just 31.6 MtCO2 in 2014.Roughly 1.4% of total ETS emissions. Yet, it is the 2nd biggest sector for number ofbenchmarks (11), covering only about 50% of industry production – the rest being under theso-called fall-back approach. It is self-evident that opting for a full review of benchmark valuesinstead is disproportionately costly while only delivering marginal accuracy improvements.


This is why we look favourably at the approach proposed by the Commission. However, manyparameters need to be reviewed and/or clarified, starting with:
•Linearity of the reduction factor;
•Disruptive impact in moving from one reduction pattern to the other;
•Avoid/reduce administrative burden in data collection and verification;
•Fairly assess progresses for installations in fall-back approaches.


3. Grant to all energy-intensive industries equal protection against present and futurerisks of carbon leakage.
Industry is either exposed to global competition or not: there is no middle ground. In thiscontext, the Commission proposal seems reasonable. Moreover, it is worth noticing that therest of the world does not impose comparable costs on energy intensive industries, withcarbon leakage provisions appearing also in other non-EU countries.


4. Adopt binding EU rules for compensation of indirect carbon costs.
Indirect carbon costs affect industrial international competitiveness as much as direct carboncosts do. The principle of equal treatment in shielding industry from both carbon costs musteffectively and consistently apply in all Member States.


5. Stop penalising investments in industrial Combined Heat and Power (CHP).
In the pulp and paper industry CHP is considered as Best Available Technique. Installations are therefore expected to use this technology. Today however the EU ETS does not send the right investment signal to invest in industrial CHP: the EU ETS grants no free credits for electricity produced and no consistent and adequate compensation for indirect carbon costs is given across Europe either. Given the relevant co-benefits CHP delivers in moving Europe towards a low-carbon economy, corrective measures to provide the right investment signal are urgently needed.


6. Earmark innovation and modernisation funding to energy intensive industries.
The earmarked 450 million allowances is the largest industry innovation fund ever. To deliverits full potential it should be linked to the goal of 2050 sectoral roadmaps, and aimed at thedeployment of new technologies for each Annex I sectors. The modernisation fund should alsoprimarily support low-carbon technologies in industry.


For more information, please contact Nicola Rega, Climate Change and Energy Director, at n.rega@cepi.org, mobile: +32 485 403 412
 

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