* Industries want cost assurances before carbon market
* Tying reform to protection issues risks reform delay
* Governments split over whether to link reform to 2030
By Ben Garside
LONDON, July 31 Manufacturers in the European
Union want clear assurances they will be insulated from costs of
complying with emissions regulations before lawmakers agree
reforms to the bloc's carbon market, industry lobby group IFIEC
Europe said on Thursday.
The European Commission admits the EU Emissions Trading
System (ETS) is failing to drive low carbon investment and wants
to reform it with a reserve to set aside surplus permits.
This so-called market stability reserve was the only
legislative proposal among a package of measures the EU
executive published in January reflecting 2030 climate and
Analysts say the reserve could add 11 euros ($14.72) per
tonne to carbon permit prices currently trading at around 6
euros, but tying it to wider 2030 discussions risks the
Commission's goal of getting it agreed by early next year.
"This should be one process in parallel, there shouldn't be
a decision on the market stability reserve in advance of the
whole carbon leakage area," IFIEC's Lena Recknagel told Reuters.
She was referring to the risk of carbon regulations
resulting in the transfer of industrial production to countries
with looser environmental policies.
"The Commission has a very strong agenda to strengthen the
ETS and take measures to the end of increasing the CO2 price
while the agenda on giving industry more certainty over carbon
leakage protection is not driven forward with the same verve,"
The EU ETS regulates around half of Europe's greenhouse gas
output by forcing power plants, factories and airlines to
surrender a permit for every tonne of carbon dioxide they emit.
Heavy industries such as chemical companies, steelmakers and
cement producers represented by IFIEC receive the vast majority
of their permits for free to prevent carbon leakage.
The Commission has yet to propose whether this system should
continue beyond 2020 and the issue is being fiercely debated.
One senior Commission official has said the list of industries
getting free permits should be trimmed.
The International Emissions Trading Association (IETA),
representing a mostly different group of companies regulated and
participating in the ETS, also want assurances over carbon
leakage but without hampering the reserve's passage into law.
"A political commitment on how to deal with industrial
competitiveness should be in place by the time the (reserve) is
adopted," the group said in a statement on its website.
The reserve proposal has yet to be debated by the European
Parliament and is at an early stage of talks between national
governments. To pass, a majority of both must agree.
Italy is chairing talks between EU member states as the
current holder of the EU presidency, but observers expect
Latvia, the next presidency holder from January, to steer it to
A spokeswoman for Latvia's representation in Brussels said
national governments were divided over whether the reserve plan
should be tied to the 2030 talks.
"There are still diverging views, therefore for us the first
thing to do, before taking any decisions, would be to await the
results of (the) October European Council," she said by email.
In October, all 28 European leaders have pledged to agree on
2030 climate and energy goals, which would allow the Commission
to draft additional proposals on how to meet the goals.
($1 = 0.7471 euros)
(Editing by Paul Simao)