Reform of EU ETS will boost overall competitiveness: Aldersgate

New proposals expected to be announced by the European Commission to substantially cut greenhouse gas emissions of EU heavy industries could boost economic growth and employment in the region, claimed the Aldersgate group, a coalition of businesses, regulators and NGOs.

In a recent study the Aldersgate Group found that reform of the EU ETS is imperative to restore confidence in the flagship emissions reduction scheme and ensure the region’s long-term economic competitiveness.

The European Commission is expected to announce a greater proportion of permits will be auctioned from 2013, a key recommendation in the Aldersgate Group report. This would provide a greater incentive for business to accurately state their emissions allowance needs, and prevent a repeat of the over-allocation of permits in Stage 1, which led to a steep collapse of the carbon price.

In the past week, there has been speculative predictions that tough new proposals could drive heavy industries overseas. While a more demanding regime might adversely affect the internationally competitiveness of some energy intensive industries to a limited degree, suggesting that this will prompt a large scale exodus from the region is overtly alarmist.

“Well designed reform of the EU ETS will actually have a positive impact on the overall competitiveness of EU industry, creating jobs in the booming environmental industry, stimulating innovation and boosting economic growth.

Peter Young, chairman of the Aldersgate Group

Aldersgate said, analyses of potential competitiveness impacts show that they have been widely exaggerated and it could be possible to recycle auctioning revenue to the significantly affected sectors which are few in number.

Last week, a Carbon Trust study found that overall UK and EU competitiveness would not be damaged by deeper emission cuts post-2012, and that carbon costs will remain trivial for 90% of manufacturing industry compared to other influences on competitiveness, such as exchange rate fluctuations or differences in the cost of raw materials or labour.

It is also expected to be announced that energy companies and refiners will have to bid 100% for their pollution permits from 2013. This should rectify the current perplexing scenario that heavy polluters are effectively being paid to pollute, with a suggested £8bn being earned in windfall profits since 2005.

Peter Young, chairman of the Aldersgate Group said: ‘Well designed reform of the EU ETS will actually have a positive impact on the overall competitiveness of EU industry, creating jobs in the booming environmental industry, stimulating innovation and boosting economic growth. Intelligent debate should not be unduly influenced by alarmist predictions of a mass exodus overseas when research shows that this will not be the case.’