EU ETS diluted - but only for some

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Wednesday, 22 December 2010

International airlines' management will be interested to read that the EU has dispensed about EUR 100 billion of carbon permits for Euope-based industries that it feared might move outside the EU.

As a result, steelmakers and oil refineries will be given free emission allowances in an effort to shield them from international competition after 2012.

The EU's emissions trading scheme (EU ETS) required manufacturers to purchase CO2 emission permits, but heavy industries, including the cement, steel, aluminium and chemical sectors lobbied that the ETS would make them uncompetitive and they might be forced to relocate outside the EU, leading to a 'leakage' of CO2 emissions and no EU tax revenues without any environmental benefits.
They therefore have successfully lobbied for a higher share of free emissions.

In total, 164 market sectors have been identified by the EU as at risk of leakage because of international competition.

Some will be given permits giving them 100 per cent of benchmarked allowances till end 2014.

Airlines, meanwhile, have been included in the EU ETS from January 2012.