LONDON Dec 11 Europe's heavy industry is firing
a barrage of legal challenges to cuts in the carbon permits they
will get up to 2020 - subsidies worth over 4 billion euros ($5.5
billion) - with at least nine firms opening the assault in a
Companies including ExxonMobil, Dow Chemical
and Shell have challenged the Dutch government over
what they say is an under-allocation of carbon allowances by the
European Commission under the EU Emissions Trading Scheme (ETS),
which are given free to heavy industry.
According to legal advice prepared for several chemical and
steel firms and seen by Reuters, emissions generated at their
plants from producing power by capturing heat (CHP) and burning
waste gas were incorrectly treated by the Commission as
attributable to the power sector, which has to pay for permits.
As a result, the related permits are to be auctioned by
governments rather than given to industry, removing subsidies
for manufacturers that source energy through those two
"This distribution was not done in line with EU (rules),"
the legal advice said.
A spokesman for the Netherlands' national court on Wednesday
said at least nine companies had so far lodged complaints ahead
of Wednesday's deadline.
"Based on a conservative estimate, European industry has
been unjustifiably under-allocated 168 million permits in 2013
and around 800 million permits up to 2020," said the Utility
Support Group's Vianney Schyns, a legal expert advising a
consortium of chemical firms including SABIC, OCI
Nitrogen, Ineos and Lanxess.
The allowances are valued at more than 4 billion euros,
based on average EU carbon future prices of around 5.50 euros
between now and 2020 <0#CFI:>.
Schyns added that he was helping another 10 firms file
complaints in the Dutch court this week.
Another legal source advising firms said major industrial
companies including Tata Steel and BP would
also launch appeals in the Netherlands and in other countries.
Both the European Commission and the Dutch Ministry of
Infrastructure and Environment - the government body named in
the challenges filed in the Netherlands - declined to comment.
Three of the firms named confirmed that they were appealing
the Commission's decision, adding that they had collaborated
with others from their industries to coordinate their arguments.
Sources said firms may find it difficult to challenge the
Commission directly, so they are being encouraged to file in as
many national courts as possible in the hope that at least one
escalates the issue to the European Union's General Court in
Luxembourg, where an over-arching verdict would be expected.
Firms have until Dec. 11 to file in the Netherlands and
until Dec. 12 to file in Sweden, the first deadlines across the
European Union's 28 member states, Schyns added.
Before companies in other countries can lodge complaints,
they must first be notified by their governments as to how many
permits they will get - a process that has been held up in most
EU member states for months due to bureaucratic delays.
Under the EU ETS, the bloc's main tool to fight climate
change, greenhouse gas emissions from Europe's 12,000 biggest
polluters are capped and firms must surrender a permit for every
tonne of carbon dioxide they emit.
In the scheme's current trading phase, which runs from 2013
to 2020, the majority of emissions allowances earmarked for
utilities are sold, while heavy industry including makers of
cement and steel receive most of their quota for free.
This is to help them compete with rivals in countries
outside the EU that have less stringent environmental
regulation, and because the firms argue that power generators
pass on their carbon costs to them.
Bernhard Mauritz Stormyr, a spokesman for Norway-based
chemical and fertiliser firm Yara, warned that as a
result of the under-allocation, many industry sectors in Europe
will be "seriously harmed" in both their global and regional
"This is not a question of seeking additional permits. We
are simply pursuing what we perceive to be our legal right," he
To keep the bloc's overall emissions under legal limits, the
Commission slashed the number of ETS permits to be given to EU
industry in 2013-2020 by 12 percent below the amount they had
requested, or by around 900 million units.
But trade groups say that assigning CHP and waste gas
emissions to the power sector has distorted the bloc-wide
reduction in allowances, or 'correction factor' in EU jargon.
The International Federation of Industrial Energy Consumers
(IFIEC), which represents heavy industry across Europe, said the
issue has been compounded by a lack of transparency in how the
Commission calculated the reduction.
"Therefore we remain in doubt whether the significant
reduction of the industry's allocation is correct," said IFIEC
vice president Annette Loske.
Axel Eggert, director of public affairs at the European
steelmakers association Eurofer, added: "You can't attack the
whole correction factor but you can challenge part of it, around
5 percent of the 12 percent, which is a huge amount of money."
The Alliance of Energy Intensive Industries (CEMBUREAU) said
that this, coupled with what it considered as oversights by the
Commission related to the bloc's most efficient plants, made a
cut in industry's carbon permit quota before 2021 unjustified.
(Editing by Will Waterman)