Industry makes concerted effort to relax EU emissions trading rules

A group of more than three dozen heavy industry companies with manufacturing operations in Europe have signed a letter to the EU Council appealing for carbon prices in the emissions trading scheme (ETS) to be frozen to “prevent further damage to Europe’s industrial base,” reported newspaper Handelsblatt. The letter, which Handelsblatt has received a copy of, stated that emissions trading no longer reflects global realities and that Europe is effectively acting alone by imposing rapidly rising carbon costs on industry. 

Emissions trading has been the EU’s most important instrument for reducing carbon dioxide emissions since 2005. The majority of global carbon costs are paid in Europe, according to Handelsblatt; where an allowance in China’s emissions trading scheme costs the equivalent of around ten euros, the figure is around 80 euros in the EU. 

The signatories of the letter criticised the fact that the infrastructure for a climate friendly transformation – electricity, hydrogen, transport and carbon storage – is either lacking or inadequate, leaving them with heightened costs but no ability to act. “Instead of facilitating transformation, Brussels is taking hundreds of millions from companies in the midst of the crisis,” said Wolfgang Große Entrup, chief executive of the German Chemical Industry Association (VCI).

Earlier this week, VCI already had criticised a deal between EU member states that would change the conditions under which free allowances for emitting carbon under the ETS are awarded. A group of German environmental organisations urged chancellor Friedrich Merz to reject proposals that would interfere with the core functions of the ETS, especially in the context of how the Iran War has underlined the economic risks of fossil fuels and how a clear focus on more sustainable energy sources would stabilise industrial resilience in the long run. 

Various advisory bodies from EU countries, including the German Federal Government’s Scientific Advisory Board on Global Environmental Change (WBGU) and the German Advisory Council on the Environment (SRU), have warned against weakening the carbon pricing scheme. The energy association BDEW also called on the EU not to weaken the ETS as doing so would reduce planning certainty, investment incentives and the environmental integrity of the system. “Support for industry should be provided in a targeted manner through accompanying industrial and social policy instruments – not by diluting the CO2 price signal,” said Kerstin Andreae, chair of the executive board at BDEW.