Business backtracks on emissions trading

Date: 11/03/04

WHAT do Loyola de Palacio, Spain and UNICE have in common?

The energy commissioner, her native land and the "voice" of business in Europe have all slammed the EU's planned emissions trading scheme, due to begin on 1 January 2005, wondering aloud whether there is perhaps a better way to curb the continent's carbon dioxide output.

To this end, the Brussels-based Union of Industrial and Employers' Confederations of Europe (UNICE) is turning up the heat on member states ahead of the Spring summit in the Belgian capital on 25-26 March that aims to set the European Union's economic agenda.

This move follows signs of dissent in Spain and Finland, open questioning of the Commission's line by de Palacio and a legal challenge to the emissions trading system by the continent's biggest steel producer, Luxembourg-based Arcelor.

"We can't remain without a 'Plan B'," said Daniel Cloquet, director of industrial affairs at UNICE.

"We are calling for a renewed debate on this, because if we continue to go it alone, our competitiveness is going to suffer."

UNICE, Cloquet explained, is worried about a "unilateral" EU policy on climate change, with no end in sight to Russia's stalling on ratifying the Kyoto Protocol and no hope that the United States ever will.

But Cloquet had no suggestions as to what this 'Plan B' might look like.

Still, with member states running up to a 31 March deadline to submit their plans to the European Commission detailing how they intend to implement the new EU-wide emissions trading regime, UNICE is demanding that the EU executive and governments change their tune on climate change.

Cloquet said the Commission should conduct a new impact assessment of the system to ensure it does not drive businesses - and jobs - out of Europe.

To this end, a letter has been addressed to ministers meeting at today's (11 March) Competitiveness Council by UNICE President Jürgen Strube. It follows one sent to the Union's environment ministers, who met in Brussels on 2 March, that was signed by the group's Secretary-General, Philippe de Buck.

Draft documents seen by European Voice express the same sentiments in a more forceful fashion.

In a 'background note', for instance, UNICE states that "the EU institutions will probably not change course - at least not within considerable time - unless they are put under severe political pressure".

It stresses that: "There is an obvious and urgent need for a re-evaluation of the climate change policy of the EU. It is high time that European business encourages the Commission and member states to come up with a 'Plan B'."

The EU, the document concludes, "can play an important role in designing this new approach if it enters into an open dialogue with Russia, the US and developing countries".

But critics claim that UNICE is being pushed by some of the climate change 'laggards' among its national member organizations, notably in Spain, but also - somewhat surprisingly to environmentalists at least - in Denmark.

The employers' federations of the UK and Germany, by contrast, where governments are well on their way to implementing effective climate change strategies, have been far less hostile to the EU emissions trading regime.

"Those organizations that tend to be doing well [on emissions trading] are behind it," said Andrew Warren, secretary- general of EuroACE, a London-based coalition of large firms that manufacture products and offer services to make buildings more energy efficient.

"Those pressing for abandonment of all the European Kyoto treaty pledges tend to come from countries where governments have not produced national plans of much substance and which are already way over their quotas in terms of carbon emissions."

Warren also stressed that UNICE has long supported emissions trading as a less painful alternative for industry than previous EU models suggesting either "carbon taxes or regulation".

Jos Delbeke, a senior Commission official responsible for climate change, said the emissions trading directive, adopted by the European Parliament last July, had been developed "in strong cooperation with all the stakeholders" over several years.

"The number of simulations and economic analyses we did - together with industry, by the way - have been extensive," he said. "We have something that has been scrutinized from here to there on all sides. This is really a market-based instrument.

"And now industry turns around and is saying 'wait a minute, why can't we wait?'," he added. "We are surprised by this move of UNICE."

Rob Bradley, of Climate Action Network Europe, dismissed the UNICE move as little more than political posturing in the manner of de Palacio.

"A lot of this is pretty cynical stuff. But they're just trying to be disruptive.

"For a long time they advocated emissions trading, thinking they'd never get it," he said.

Cloquet explained that UNICE has "always supported a well-designed European emissions trading scheme" and had not "waited until it was very late to suddenly change our minds".

"It's just that the circumstances around us have not changed [as they should have]," he claimed.

But Bradley said this is precisely the point: "There's absolutely nothing new happening now.

"It makes not the slightest bit of difference whether Russia ratifies or not. It's certainly not something that justifies a reassessment of the whole system.

"They [UNICE] are simply seizing upon an opportunity to muddy the waters.

"From the EU's perspective, it's pretty clear, given the political capital we've invested in this, that we're not going to give it up so fast," he added.

What UNICE is suggesting, he said, "is seriously at odds with public opinion and with the political environment in Europe".

Moreover, he claimed, "the overall impact of emissions trading on competitiveness in the EU is rather low".

Pulp and paper firms in some Nordic countries have, for instance, been making noises about their costs going up. But according to Bradley this is because big electricity companies are planning to artificially jack up prices - especially for customers who buy in bulk - under the new system.

"Electricity firms are saying costs will be some ten times higher than they actually need to be," he claimed, which amounts to nothing more than "illegal market abuse by electricity companies in a market that is not yet fully liberalized".

"They are abusing their monopoly under the guise of 'implementing Kyoto'," he said.

"And it's the big electricity consumers who are the ones complaining about it. This seems to be something which some large consumers are really getting worried about."

But, Bradley added, "many members of these associations [the members of UNICE] are actively implementing climate policy. Companies that are actually dynamic and progressive are getting on with it and doing things."

Warren, meanwhile, said EuroACE, formed in 1998, is comprised of 20 companies - including Siemens, Dow Europe and Philips Lighting - employing 438,000 people with a combined €70 billion annual turnover.

Their aim is to raise awareness on how improving the energy efficiency of buildings - another plank of the EU's climate change strategy - via better insulation, more efficient lighting and similar measures, can help the EU meet its Kyoto goals.

"The point is there is actually a positive angle - there is this great opportunity for getting sensible, positive things done.

"It's not an issue of damaging competition, but actually of improving it," Warren said.

"We should see the short-term Kyoto targets as opportunities rather than burdens," he added.

"There are many commercial opportunities, not just problems, and I do wish that UNICE would see this."

The Union of Industrial and Employers' Confederations in Europe (UNICE) has called for a renewed debate on emissions trading and the Kyoto Protocol. Member States have until 31 March 2004 to submit plans to the European Commission detailing how they intend to implement the emissions trading scheme.

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