Eurofer sees EC’s move to reduce permits as ‘unfair’

European steel industry association Eurofer has labelled the European Commission’s move to reduce the amount of carbon allowances it auctions as “unfair”.

Paragraph entered by Atlantic migration, in order for SteelFirst articles to display correctly on Metal Bulletin.

The group says the move will harm companies which have managed to perform well despite the financial crisis, a Eurofer spokesman told Metal Bulletin on Tuesday July 31.

On July 25, the Commission announced a plan to postpone, or “backload”, some portion of the carbon allowances auctioned through the emissions trading system (ETS) from 2013-15, a move that Eurofer believes will lead to higher prices for carbon allowances.

Before the move, the EC’s intention to reduce the amount of carbon allowances on the market came under close scrutiny from the industry.

Although some companies in the steel sector have a surplus of carbon permits, Eurofer sees no possibility for financial gain from the Commission’s latest move.

“I don’t know of any companies making a lot of money selling allowances. Most of them bank them for the future,” the Eurofer spokesman said.

“It does not make sense to sell them now for a small price and have to buy them back later for a higher one,” he added.

The proposed system is also biased against bigger steel companies, Eurofer added.

“If the price is raised artificially, then companies that have high capacity utilisation will be punished, which would be very unfair,” the spokesman said.

Improving the market
The Commission argues that the purpose of the move is to improve the functioning of the market and not to drive up the price, as increased volumes later on will offset short-term reductions.

“The EU ETS has a growing surplus of allowances built up over the past few years,” climate action commissioner Connie Hedegaard said. “It is not wise to deliberately continue to flood a market that is already oversupplied.”

Eurofer said the current system is working. “The market is oversupplied, but this is due to the crisis, not because it is not functioning. It is the same in any stock market across Europe,” the spokesman explained.

The German association for energy-intensive industries (EID) said that the surplus of allowances in the market has been overdone.

“The balance [of allowances in the market] has been evened from 2008 to 2012,” Martin Kneer, EID spokesman and gm of the German association for metals, said.

It is now up to the European parliament and member states to decide on the EC’s proposed plan, Hedegaard said, although industry groups such as Eurofer will put pressure on politicians to reject it.