Displaying items by tag: European Union

Belgium: Cembureau has issued a joint statement with other members of the Industrial Emissions Alliance declaring its concern for aspects of the upcoming European Commission proposals regarding the Air Policy Review. In particular the European Cement Association (Cembureau) singled out emissions reduction targets and the target year of 2025.

The statement calls for 50% 'gap closure' for emission reductions as it views a proposed rate of 75% as 'unobtainable' due to issues with how emissions reductions will be delivered by current legislation, the costs of going beyond current legislation and the environmental benefits of further measures. It added that the high rate would damage European Union (EU) industrial competiveness and EU jobs. The statement also calls for the target year to be extended to 2030 to align it with the Framework for Climate and Energy Policies dates.

In late November 2013 Guangdong province in China announced that it will be launching its carbon emissions trading scheme (ETS) in December 2013. Together with six other pilot projects in China the scheme will be the second largest carbon market in the world after the European Union (EU) when fully operational. Yet with the EU ETS floundering from excess carbon permits, with a resulting low price of permits and large cement producers such as a Lafarge reported as stockpiling permits, what are the Chinese schemes planning to do differently to avoid these pitfalls?

Overall, China has announced that it intends to cut its carbon dioxide emissions per unit of GDP by up to 45% by 2020 compared to 2005. In Guangdong, emissions from 202 companies will be capped at 350Mt for 2013, according to the local Development and Reform Commission. As shown in an article in the December 2013 issue of Global Cement Magazine, Guangdong province has a cement production capacity of 132.7Mt/yr, the second highest in the country after Anhui province.

From the perspective of the cement industry, Chunfang Wang from Huaxin Cement spoke about the importance of monitoring, reporting and verification (MRV) at an International Emissions Trading Association (IETA) workshop that took place in Guangzhou, Guangdong in early 2013. From Wang's perspective, emission assessment standards were at a 'developmental' stage in China and 'smooth' carbon trading would depend on consistent standards being adopted everywhere. Although at the time the particulars of the Guangdong scheme were unknown, participants at the IETA event advised cooperation with scheme planners to ensure emission producers and purchasers remained part of the decision process. Sliding carbon prices in the EU ETS may have been beneficial for permit buyers but once the government planners become involved to revive the market they might lose out.

As the Economist pointed out the summer of 2013, an ETS is a cap-and-trade scheme. Since China appears to have no definite cap to carbon emissions, how can the trading work? The Chinese schemes cap carbon per unit of Gross Domestic Product (GDP). Yet since GDP is dependent on production, any ETS run in this way would have to include adjustments at the end of trading. This would give central planners of the scheme plenty of wiggle room to rig the scheme. Worse yet, analysts Thomson Reuters Point Carbon have pointed out that the Chinese schemes face over-allocation of permits, the same issue that sank EU carbon prices. Additionally, one of the criticisms of the Guangdong Emissions Trading Scheme (GETS) pilot scheme was that the carbon prices may have been higher than expected due to market collusion.

The Chinese ETS projects face issues over their openness. If traders don't know accurately how much carbon dioxide is being produced by industry, such as cement production, then the scheme may be undermined. Similarly, over-allocating carbon permits may make it easier for producers to meet targets but it will cause problems in the trading price of carbon. However, given that a carbon emissions cap is an artificial mechanism to encourage markets to cut emissions, should any of these concerns really matter? The main question for Chinese citizens is whether or not China can cut its overall emissions and clear the air in its smog filled mega-cities.

Specifically for cement producers, it seems likely that large producers will be able to cope with the scheme best, from having more carbon permits to sell, to rolling out unified emissions assessment protocols, to liaising better with scheme planners. In Europe smaller cement producers, like Ecocem, have criticised the EU ETS for slowing a transition to a low carbon economy by subsidising the larger producers' emissions through over-allocation. In China, with its self-declared intention to consolidate an over-producing cement industry, whatever else happens it seems likely that smaller cement producers may become lost in the haze.

Ireland: The Irish cement industry stands to make windfall profits of up to Euro50m 'at the taxpayers' expense,' according to sources familiar with the EU's emissions trading scheme (ETS). The sources estimate that companies such as CRH, Quinn Cement and Lagan Cement have made Euro26m over the past five years from the over-allocation of carbon credits by the government.

The sources estimate that the cement industry stands to make a further Euro25m when the next round of carbon credits is allocated under the ETS. The government allocates a certain amount of emission permits to companies for free. The idea is that polluting companies would buy credits in the market if they exceeded the permitted amount of emissions.

This system is known as 'cap-and-trade' but an initial over-allocation arose, partly because of the construction bust which meant that firms did not produce as much cement as expected. The sources said the transfer was a waste of public funds at a time when the exchequer was financially stressed. They also argued that the effect was to distort the market in favour of making cement.

The estimate of the scale of the subsidy comes after the Economic and Social Research Institute (ESRI) noted earlier in 2011 that the current EU ETS provided potentially large windfall gains for certain industries, such as electricity generation and cement production. The ESRI argued that such windfall gains should be recaptured by society through the tax system.

A spokesman for Cement Manufacturers Ireland did not dispute the figures, saying that the industry had invested millions of Euros in new technology upgrades to become one of the most efficient in Europe. "The current recession was not predicted when allowances were allocated under rules proposed by the Commission," he said.