May 9, 2013 / 9:31 AM / 4 years ago

EU ponders energy tariffs freeze for steelmakers-sources

* Energy intensive opposition blocked carbon market rescue

* Renewable tariffs a political flashpoint in Germany

* Environment lobby says short-term costs an investment

By Barbara Lewis

BRUSSELS, May 9 (Reuters) - The European Commission has asked EU member states to consider removing tariffs on energy intensive industry, in an action plan drawn up for the steel industry, EU sources said.

The impact of energy costs on the competitiveness of EU industry has shot up the political agenda following a shale gas revolution in the United States, which has delivered a glut of cheap natural gas to aid the U.S. economy.

A draft action plan drawn up by Commission officials for the steel industry asks member states to consider measures “such as the temporary freeze of taxes and levies for a period of two years”, the sources told Reuters on condition of anonymity.

It also suggests they might reduce or exempt energy intensive industry from “renewable and network levies and tariffs”, they said, adding it found that at national level, taxes and levies for renewable subsidies could be very high.

The plan is not expected to be made public before June and the Commission does not comment on unpublished documents.

EU leaders are meanwhile set to debate how to limit the impact of energy costs at a summit on May 22.

The issue is divisive. Environment campaigners and some in the European Commission argue strongly that investment now, even if it pushes up short-term costs, is vital to the long-term competitiveness of Europe and keeping its industries at the forefront of innovation.

But the business community has said not enough attention has been paid to the impact of energy costs on competitiveness.

Debate has been particularly fierce in Germany, ahead of elections this year, as renewable subsidies have taken the blame for driving up energy bills.

Arguments from the EU energy intensive industry that it is disadvantaged compared with the rest of the world, where environmental standards are lower or energy is cheaper, has played a big part in blocking a Commission plan to boost the price of the EU Emissions Trading Scheme (ETS).

The world’s biggest carbon market, the ETS is meant to be central to EU efforts to shift towards a low carbon economy, but it has collapsed to record low levels under a glut of pollution permits generated by recession and weak demand.

Energy intensive industry says driving up the ETS would punish it further in difficult times and could drive it out of Europe. It is expected to oppose high levels of ambition as the European Union opens a debate on 2030 climate and energy policy to follow on from 2020 targets.

The draft document says more advanced industrial processes and equipment could be financed from cash from auctioning ETS allowances.

Attempts to use auction revenues to fund technology to sequester carbon emissions (carbon capture and storage) failed last year, but the Commission is trying again.

Editing by James Jukwey

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