EU Parliament, ITRE Committee Hearing

Transcription

1 EU Parliament, ITRE Committee Hearing Energy Costs & EU Industry Competitiveness

2 EU Steel Industry EU steel industry 500 production sites 166 bln turnover 1.3% of EU s GDP direct jobs Millions of dependent jobs in value chain & service sectors 100% recycable, endlessly, steel: a permanent material 25% CO2 reduction since mio. t CO2 savings p.a. by 2030 with innovative steel 2 20% employment drop vs % drop in EU steel demand (2007/2014), imports benefit from current modest recovery EU: high energy prices EU: unfair trade practices from non-eu countries

3 Steel sector s very high economic leverage for society The multiplier is a measure for the leverage of an industry. An additional 1 euro demand for steel products is accompanied by another demand of 3.1, of which 1 euro is allocates to the steel industry itself and 2.1 to other suppliers. The powerful leverage arises from long value chains in the national economic areas (transport, industry-related services, etc.). 3

4 The US & key emerging economies increase export market share on energy-intensive goods while the EU sees a sharp decline: European Union +1% Japan +3% +2% +2% Today 36% 10% 7% 7% 3% 2% United States China Middle East India -3% -10% How to reverse that? International Energy Agency, World Energy Outlook, November 2013: Share of global export market for energy-intensive goods 4

5 Energy costs are already a huge part of the margins of steel companies, even excluding other policy costs Integrated route: Electrical route: CEPS (Center for European Policy Study) for 2014 EU Commission Energy prices and costs report - an update is currently being made with the Commission 5

6 The main problems to solve 1. Additional energy levies increase in the EU: how to get to a global level playing field vs competitors? 2. Allow energy market integration: promote demand response / stop capacity mechanisms 3. The merits of ETS are highly questionable. Start effective decarbonisation incentives, for both the energy sector and industry with dedicated policies 6

7 Electricity: what comes on top of the energy price Different schemes: to set transport tariffs, support mechanisms to renewables, and electricity taxes are applied in Europe => absence of level playing field Typical structure of electricity cost components added to the electron price: /MWh Taxes Support to renewable energy and cogeneration development Others: capacity payments to EE generators System services: Cost to cover grid losses & congestions, primary-tertiary reserve band, voltage control Could be directly included in transport tariffs Transport tariffs Interruptibility / Demand response Indirect CO2 compensation 7 MAD-

8 Additional energy levies increase in the EU: - how to get to a global level playing field? Taxes & levies are getting more and more important It is becoming the essential part of the electricity bills. Given current market development, this tendency will strengthen. For energy intensive industries the current exemptions on these addons will be their lifeline v/s international competition : It is key to guarantee the current exemptions on the long run. Protections are required when specific regimes are not already available. Different approach in Member States no real level playing field. 8

9 Allow energy market integration: promote demand response / stop capacity mechanisms Capacity mechanisms arrange for standby back up power for RES. They block market integration They should only be used as last resort solution, when other more cost-efficient solutions has already been used One of them is industrial demand response: Voluntary industrial demand response should be stimulated, against fair remuneration. 9

10 Emission Trading Scheme against industry and jobs The EU climate goal & a new limit on allowances is agreed To reach this, the Commission plans to reserve 57% of allowances for auctioning, which is meant in some countries to halt decarbonisation of the EU energy/coal sector and generate budget revenue This and the reduction by artificial benchmarks creates huge shortages of free allowances for best plants in main trade/carbon intensive sectors The consequence is that large parts of the steel manufacturing base value chains and jobs will have to close in order to meet the shortage East-Europe first, being furthest from benchmark 10

11 Impact acknowledged by the best ETS experts: Ecofys study on ETS impact on the steel sector post 2020 : Possible ETS reality: 48% shortage in free allocation in % of indirect costs not compensated 34 billion total costs in /t crude steel total costs in

12 ETS plan is counterproductive to climate incentives This ETS plan is meant to and can stop the decarbonisation of the fossil/coal energy sector by the huge reservation of the auctioning share In the future power market, fossil fuel will no longer set the prices all the time: the ETS signal to consumers becomes meaningless and did not deliver anyway A one size fits all system is counterproductive: ETS supply & demand deliver 1 price, which is by definition too high or too low for most sectors as optimal low-carbon investments signal. Result: carbon leakage or windfall profits Industry cannot make a positive investment management for low carbon technologies, as even the best plants will still be faced with huge shortages Shortages take away money to invest, eg. in CCU or to become the best This plan creates huge carbon leakage and imports via imported products 12

13 Current ETS negotiation is unlikely to solve the huge planned shortages; Required here: The 57 % reserved auctioning volume to sharply decrease yearly with 5,5% & from a much lower starting level eg 49%, matching reality of the decarbonising power sector Completely reset benchmarks by ETS period, evidence based on existing installations,without artificial yearly reductions or surpluses Sectors like steel at very high risk should receive 100% free allocation at benchmark / Low risk sectors less Full compensation for CO2 in power prices shall be provided Unallocated allowances & MSR: to be used for free allocation.. even if this would happen, many plants far from benchmark have huge extra costs. 13

14 Start installing effective decarbonisation policy incentives Conclusion The ETS post-2020 plan is exporting jobs and importing carbon. It is bad for climate and bad for industry : loose-loose for Europe. Dedicated effective policies should be developed Enough effective alternatives are available: eg. More sectoral targeted incentives, CO2 performance standards, a CCU incentive program, targeted taxation, climate policy based on life cycle approach, etc. Europe deserves it that all its plants will be able again, to invest and become the best in the world Industry needs a global level playing field with : - globally competitive cumulative energy costs - change ETS to avoid disadvantages for carbon leakage risk industry 14