April 4, 2011 / 10:19 AM / 7 years ago

Steel industry plans challenge to EU carbon rules

* EU steel body to challenge EU carbon market decision

* Eurofer says draft EU benchmarking rules unfair

By Pete Harrison

BRUSSELS, April 4 (Reuters) - European Union steel industry body Eurofer said on Monday it planned a legal challenge to draft EU methodology for including steel plants in Europe’s carbon emissions market.

Eurofer says the European Commission’s draft rules do not properly implement laws that would allow the industry’s most efficient 10 percent of factories to get free pollution permits after 2013. The draft rules were agreed in October. [ID:nLDE6951SL]

The Commission said it was confident in its methodology, which followed two years of consultation with the industry and EU member governments.

The EU aims to cut carbon dioxide emissions to 20 percent below 1990 levels over the next decade. Its main tool for doing that is its Emissions Trading System (ETS), which forces companies to buy permits for each tonne of carbon they emit.

But some industries, including steel, have been given free permits to prevent their costs rising above those of overseas rivals. That has often translated into large windfall profits for the companies involved.

Provisional EU data revealed last week that 10 of the biggest steel plants in the EU were given excess carbon permits worth almost 1 billion euros ($1.42 billion) last year. [ID:nLDE7301AF] Steel giant ArcelorMittal ISPA.AS was one of the biggest beneficiaries.

From 2013, the EU aims to tighten up the ETS to eliminate such windfall profits, and only the 10 percent most efficient plants, which meet an efficiency “benchmark”, will receive free permits. It is these benchmarks that have caused the dispute.

The steel industry says its installations recycle waste gases as an additional source of energy, and should be given credit for that in the benchmarking process.

“The directive requires that best performers ... receive for free all the allowances necessary to cover their emissions in order to prevent de-localisation of emissions, production and jobs to countries outside Europe,” said Eurofer Director General Gordon Moffat.

“That’s the rule, but since it is not being applied for the steel industry, resulting in billions of additional costs, we now have no other choice than to go to court,” he added.

The European Commission is expected formally to adopt the draft benchmarking rules in mid-April, and Eurofer has instructed its lawyers to seek an annulment at the EU’s General Court soon after that.

It says the problems it sees with the benchmarks will cost the industry about 5 billion euros in the period 2013-2020, on top of 18 billion euros from the move from a system of free permits to one of benchmarking. (Editing by Rex Merrifield)

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