February 15, 2016 / 6:11 PM / 4 years ago

Most vulnerable EU industries need 100 percent free carbon - France

BRUSSELS (Reuters) - Energy intensive industries most likely to leave the European Union because of costs should get all of their EU Emissions Trading System permits free until other major blocs have a carbon price in place, France’s economy minister said on Monday.

French Economy Minister Emmanuel Macron attends a ceremony for the MSC Meraviglia cruise ship at the STX Les Chantiers de l'Atlantique shipyard site in Saint-Nazaire, France, February 1, 2016. REUTERS/Stephane Mahe

The European Commission is revising its rules for handing out free permits to cushion energy intensive industries, such as the steel sector and oil refiners, from the expense of offsetting emissions on the ETS.

French Economy Minister Emmanuel Macron was addressing a high-level debate hosted by the Commission in response to pressure from EU governments over the plight of the European steel industry.

Thousands of steel industry workers marched in Brussels on Monday to demand action to defend their jobs against competition from cheap Chinese imports, as well as higher energy costs in Europe, caused in part by the ETS.

Macron also backed proposals for border carbon adjustments - measures that would impose a tax on imports according to the emissions that went into their production, at the same price faced by domestic consumers - to level the playing field.

“It’s the only deal that is in some way a win, win,” he said.

Ten years ago the EU launched a plan to tackle climate change by asking heavy industry and utilities to pay for every tonne of carbon dioxide they produced by buying permits to pollute. After fierce lobbying, it conceded the biggest users of energy could have free permits to prevent what is known as “carbon leakage”, or industry leaving the EU because of regulatory costs.

Environmental campaigners say the Paris Agreement on climate change and China’s own plans to develop an emissions market belie comments from industry that costs associated with the ETS can drive them to produce more cheaply elsewhere.

But industry says the international playing field is not yet level and the ETS is a heavy burden.

Macron suggested the EU might pilot a scheme of carbon border adjustments on imports in certain energy-intensive sectors, before rolling it out across the 28-member bloc.

Such measures are controversial among some trade law experts who fear they may go against World Trade Organization rules. They also present a challenge linked to measuring emissions in foreign production.

Speaking in Brussels on Monday, Tata Steel (TISC.NS) said that, using a carbon price assumption of 30 euros per tonne, the company would face additional costs of 50 euros per tonne of steel manufactured by 2030.

The ETS is currently trading at around 5 euros per tonne CFI2Zc1.

Reporting by Barbara Lewis and Alissa de Carbonnel, editing by David Evans and Alexander Smith

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