EU's CO2 plans a cost disaster: German industry

BERLIN (Reuters) - Germany must push for change in how European countries share the financial burdens of tighter carbon trading rules after 2012, or face prohibitive rises in carbon avoidance costs, energy users’ group VIK said on Monday.

The village of Gusdorf, west of Cologne, is pictured in front of the lignite-fired power plant Frimmersdorf of German RWE AG energy company, December 3, 2006. REUTERS/Arnd Wiegmann

“Germany’s carbon trading position has to become top of the political agenda as we get closer to elections in 2009, the ball is in Chancellor Angela Merkel’s court to avert disaster,” said Alfred Richmann, managing director of the Essen-based group.

“The EU plans in their current shape will not lead to any more CO2 emissions savings, as those are capped, but bring sky-high new carbon taxes,” he said at a conference in Berlin.

“On top of that, there will be a tsunami of power price hikes as a consequence, which could threaten investment plans, our industry’s competitiveness, and jobs.”

Richmann’s remarks came days after the European Parliament’s industry committee endorsed plans for CO2 emitters to buy permits for their greenhouse gas emissions from 2013 at auction, while ignoring German pleas for a raft of exemptions.

VIK has calculated that the auctions will bring the government 15 billion euros ($21 billion) of additional annual income which would have to be borne by consumers in the sectors it represents, including steel, paper, aluminum and cement.

Power prices would increase by 50 percent after 2012.

The EU’s hard line was partly upheld as industries to be affected by the changes were divided, and Germany’s environment and economic ministers, who represent different parties in a coalition government, failed to resolve differing interests.

The European Commission aims to tighten the carbon emissions trading scheme (ETS), the bloc’s central tool to implement climate protection, as part of its international obligations.

To cut greenhouse gas emissions by 20 percent by 2020, the EU plans to hand out fewer CO2 emission permits to polluters and force them to buy them all instead of receiving most for free.

The head of the energy and environment unit at the EU Commission told the conference the discussion was still in flux, with more talks due in the EP and in the council of ministers.

“The process is ongoing, we are looking for the most cost effective ways to cut CO2 emissions and are looking to the member states for inspiration,” said Piotr Tulej, head of the energy and environment unit at the EC’s energy directorate.

Reporting by Vera Eckert