According to the industrialists of the Old Continent, this is a destructive text that has just been adopted by the European Parliament’s Committee on the Environment on May 17th. And not without reason, if it came into force, it would bring them closer to ” crucial moment “threatening” million jobs “, but also “ export ” and “ investments within the European Union. At least that’s what AEGIS Europe, which brings together more than 200 industry associations across the value chain and whose members are set to be heard ahead of a plenary vote scheduled for June 7, said on Monday.
” It is very serious. […] We are very concerned. Parliamentarians are shouting for victory, but we totally disagree. It seems that they are preparing a tool that will absolutely not solve problems “We slipped into its ranks.
Yet the device in question, called the Carbon Frontier Adjustment Facility (MACF), should have produced just the opposite effect. That is, to calm the G27 by fighting the “climate dumping” that is now damaging their competitiveness by imposing on importers the same environmental requirements as European companies in some sectors with high emissions (cement, steel, fertilizers, electricity and etc.). especially aluminium). One way to raise the cost of polluting products from overseas markets is at prices that are currently on the decline and encourage people not to move. In other words, kill two birds with one stone, returning European industry to the top… while reducing global carbon emissions.
Which, at first glance, tempts European companies seeking to balance trade, and forces them to “green” their processes in order to adhere to the trajectory imposed by government authorities. So what made them lock it down so hard, along with foreign trading partners?
Specifically, European producers that are subject to a carbon pricing market – the EU Emissions Trading Scheme (ETS) – and are at significant risk of international competition, have been enjoying support against competitive distortions for several years now: free caps. In other words, “pollution rights” that are graciously distributed among them to avoid inflating their prices and to enable them to maintain their position in a highly competitive globalized market.
But like this: in parallel with the creation of the PDKF, these allowances will gradually disappear in order to avoid “double protection”. Therefore, interested companies must buy all their permits on the market, which will automatically increase their production costs, while a ton of CO2 exceeds 80 euros.
First of all, the text voted by the parliamentarians accelerates this removal, now scheduled for January 2029, seven years earlier than what the Brussels executive has so far proposed. BUT” huge red line which could hinder necessary investment in technology and would present “unprecedented risks to employment, investment and inflation ”, warns AEGIS Europe.
“This acceleration in the schedule worries manufacturers, especially as they fear that what will replace free quotas will be ineffective. In addition, the proposal of the parliamentary commission does not provide a plan B,” emphasizes Caroline Mini, project manager of the think tank La Fabrique de l’industrie and author of a note on the issue.
Especially since the text also cuts from three to two years the transitional period before gradual implementation, during which the reporting requirements will be in place, but the border fee will not be levied. ” We’re just going to collect data that won’t allow for a serious impact study. “, laments Bernard Lombard, Director of the European Paper Confederation.
Rising Carbon Prices Above Forecasts
The impact will be even stronger as Europe faces an unprecedented gas crisis, with stock market prices quadrupling compared to last summer. Added to this is the unprecedented increase in CO2 prices in the EU, which has significantly exceeded the forecasts of recent months, despite the recent fall from 90 to 80 euros per tonne. ” We must be careful not to weaken companies that are already going through a difficult period. “, thus we approve in AEGIS Europe.
” Of course, the industry still demands more. But for those whose emissions account for most of the value added, such as aluminum and cement, we understand that all the political details matter. “, notes Philip Kirion, a researcher in environmental economics and energy economics.
Thus, according to another recent note from La Fabrique de l’Industrie, a price per tonne of CO2 above €100 could hurt some European industries just at the time when they should be investing heavily in the transition period. According to the think tank’s calculations, if this price continues to rise and reaches 250 euros in 2030, the emissions of French manufacturers will be worth even 58 billion euros (about 2.5 points of GDP). ” This will force manufacturers to choose between maintaining their margins or maintaining their market share. “particularly in the event of the abolition of free quotas and higher energy prices, the authors warn.
“When a company faces additional costs for CO2 emissions, it may decide to either absorb some of that amount in its margin or include it in its selling price. In any case, this risks reducing its investment ability, ”explains Caroline Meaney.
In this regard, the MACF will support the respective industries, allowing the restoration of fair competition, they say in Brussels. But the blatant lack of visibility continues to worry early stakeholders, deeply attached to the stability offered to them by free allowances.
ZOOM – export blind spot
In addition to the problem of free quotas, European industrialists warn of a serious racketeering hole in the current European texts: the conditions for exporting their products abroad. Indeed, since companies enjoying pollution rights today will have to buy them on the market tomorrow, their production costs will increase, which means that in the end, their selling prices. Thus, in the domestic market, the MACF on paper will still put them on an equal footing with their non-European competitors. But abroad, in markets not subject to emission quotas, the European industrialist will suffer from a distortion in export competitiveness, since his additional costs will not be compensated.
However, exports make up a significant share of EU production: up to 22% for sectors covered by the MACF and even 50% for other energy-intensive sectors.
To remedy this, European parliamentarians are proposing ” assess the impact of MACF on exports and make legislative proposals to address any issues where the Commission agreed to defer consideration of the issue to a later date. But this evolution is not enough for AEGIS Europe. ” Export is essential for economic viability. It is absolutely essential to take this important issue into account from the outset. ”, the alliance is really alarmed.
Under these conditions, producers may demand the exclusion of CO2 emissions from the production of export goods from the European market. “ But there is a risk of circumvention: EU industrialists who develop two production technologies, one of which is more polluting than the other, will export their most polluting goods, as this will save them from paying the price of CO2 there. Philip Kirion warns. Another option could be to exempt part of the production located in Europe from the CO2 price while maintaining the default emission factors. “ But this decision does not seem to persist today “, notes Caroline Meaney. Therefore, while this question remains completely unanswered.