Transcript A Regulatory Framework for Energy Intensive Industries - Green-Tax

A Regulatory Framework for Energy
Intensive Industries within the EU
Berlin
30 November 2012
Chris Lenon – Green Tax Group BE
A Regulatory Framework for Energy
Intensive Industries within the EU
• The challenge of carbon pricing
• The lack of a global agreement and price and the
impact on EU competitiveness
• What is the long term vision for Energy Intensive
Industries in the EU? Where will we be in 2050?
• What is the holistic policy framework to achieve
this?
• What is our current policy framework for
electricity, energy tax and carbon pricing? Are
they joined up?
Policy Challenges
• Carbon and energy taxation policy needs to be focused
on the energy and environmental policy objectives
while recognising the competitive position of European
business globally – Europe is not an island. It also has
to consider the impact of energy pricing.
• Energy intensive businesses have long investment
profiles where decisions are based on the expected
cost structure over the useful life of the investment. It
is not only the price today which is important in these
decisions but a series of forecast future prices.
Aluminium – An energy intensive sector
• Aluminium is an energy intensive process but
• Aluminium as a product is less energy
intensive than other products
• Aluminium is a key input for European
business
• Recycling
Aluminium
Global aluminium production continues to rise
But growth comes in regions with the highest carbon footprint
20 000
Production increase 2004 to 2011*
+183 %
18 000
16 000
1000 tonnes
14 000
Production 2004
Increase
Decrease
12 000
10 000
8 000
6 000
-3 %
4 000
+10 %
+155 %
-26 %
10 %
+72 %
-7 %
+2 %
LA
Oceania
2 000
5%
0
China
Source: CRU
NA
Russia
ME
EU27
Rest
Europe
Other
Asia
Africa
Aluminium
Part of the solution to a sustainable future
• CO2 emissions from the primary production have been reduced
by 50% and PFCs emissions by 94% since 1990
• From a life-cycle perspective, the use (e.g. transportation,
building, packaging) and recycling of aluminium contribute to
the reduction of GHG emissions
• Aluminium can be recycled with no intrinsic loss of properties
and has high end-of-life recycling rates
• Recycling saves up to 95% of the energy required for the
primary production
• Aluminium is an energy containing resource (energy bank)
Aluminium
Keeping the value chain in Europe is crucial (1/2)
• Major impacts on the short and long-term:
– Innovation needs a close supplier / customer dialogue and
the vicinity of research and new alloys development;
– Facilities benefit from top level technology both in terms of
productivity and environmental performance developed in
EU;
– EU equipment suppliers are World leaders and need close
collaboration and proximity with the entire value chain;
Aluminium
Keeping the value chain in Europe is crucial (2/2)
– SMEs avoid purchase of big quantities per alloy/ shape,
reduce stocks and reduce financial issues;
– Alumina refineries and aluminium smelters are essentially
located in economically depressed areas
– Many downstream industries (e.g. extruders) are SMEs
Aluminium
Decline of primary production in EU 27
The end of historical contracts and
sharp increase in power costs have
already generated a drop of the
EU27 Aluminium Primary
Production compensated
by imports and recycling
•
Since 2009 consumption rose
by 1 to 1,5% a year
•
1 MT of primary output has
closed or is curtailed (1/3 of
total output)
•
Another 1 MT is under threat
•
This can only be reversed by
EU policy making
Already closed
Under threat
(*)
No immediate
threat
Not members
(*) Under threat: Contracts expiry, partial curtailment, announced reductions
Aluminium
Challenges for the downstream industry
• EU supply of primary metal is already <15% of the metal
used in Europe – and declining
• EU demand for aluminium semis is growing at an average
1,4% per annum overall (last 10 years)
(*) semi-fabricated products producers
Energy and Carbon Taxes and charges
Policy Framework
• The impact of carbon and energy taxes has to be seen
in the context of all taxes, charges and
electricity/energy costs – are the EC and member
states doing this?
• European Fiscal policy which moves emissions out of
Europe contributes nothing to global goals and hurts
Europe.
• Given the investment timelines in Energy Intensive
sectors, a long term competitive framework is
necessary.
• How is European policy being implemented in member
states?
Energy and Carbon Taxes and charges
Carbon
• Trade exposed sectors need protection until a global carbon price
exists – carbon, energy tax and electricity
• All sectors – including households and buildings – must bear the
cost of the transition to a low carbon economy. Industry alone
cannot bear these costs. Member states will not achieve emission
reduction targets at 2050 from Industry alone.
• ETS and non ETS emissions must be treated consistently. Different
pricing mechanisms need to be justified in policy terms.
• A long term framework is needed to provide a roadmap for a
competitive Europe and long term investment decisions in the
transition to a low carbon economy for all players. Building stock
has a 50 year + replacement cycle.
Energy and Carbon Taxes and charges
Electricity
• Electricity policy is key for Energy Intensive
sectors.
• Decisions this decade will determine the
electricity source mix and pricing for the
period to 2050 given power plant lives.
• Currently, renewables cannot meet base load
requirements. What are alternative options.
Energy and Carbon Taxes and charges
Energy Tax
• Energy tax is an important issue
• Exemptions do matter and should be consistent
across business.
• Do high rates with exemptions make sense in
terms of state aid issues as the mechanism?
• Fiscal cliffs don’t encourage efficiency, Germany
2MW difference in treatment of power plants.
• Interactions between carbon pricing, electricity
pricing and energy taxes need to be assessed to
produce a coherent policy.
A Regulatory Framework for Energy Intensive Industries
within the EU
• Need for consistent policies which maintain the
competitive position of European business.
• Is Energy tax policy integrated with energy policy?
• Energy tax, carbon pricing and energy policies
need to be developed together not in silos.
• Need to decide which form of Energy Intensive
Industry Europe needs in a low carbon economy
and what are the power sources to support it in
the Global economy.
A Regulatory Framework for Energy Intensive Industries
within the EU
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Thankyou
Chris Lenon
[email protected]
44 7802283527
www.green-tax.co.uk