Europe’s Biggest Business Lobby Calls for Carbon Market Overhaul
(Bloomberg) -- Europe’s largest business lobby called for reforms to the region’s multi-billion euro carbon market to better support industry, piling on more pressure to amend the bloc’s main emissions-cutting tool.
The European Union’s Emissions Trading System, which puts a price on each metric ton of CO2 released into the atmosphere by industry, has come under fire in recent weeks for adding to the financial burden of companies already battling high energy costs and stiff global competition. The European Commission, the bloc’s executive branch, is due to review the market later this year.
BusinessEurope, a powerful trade group that represents 42 national business federations, said that while it remained in favor of keeping the ETS, the pace of planned emissions cuts needed to be reconsidered. An injection of liquidity could come from permits currently stashed in a market reserve, according to a report seen by Bloomberg.
The European Commission should also reconsider phasing out the free emissions allowances currently used to support heavy industry and power producers.
“You have a situation where carbon costs are up to 30% of energy costs — it’s not negligible,” Alexandre Affre, BusinessEurope’s deputy director general, said in an interview. “The risk of deindustrialization, if the problem is not solved, is high.”
The report adds to the growing clamor for the EU to dilute the signature tool designed to put the bloc on the path to climate neutrality by the middle of the century. It comes after an industry summit in Antwerp this month, where several CEOs and German Chancellor Friedrich Merz called for the market to be reformed to help European industry stay competitive.
Any weakening of the ETS not only risks undermining the bloc’s climate goals, but also reduces a key source of revenue that can be used to help decarbonize heavy-emitting sectors of the economy, like steel and cement. Since 2013, ETS auctions have raised about €245 billion ($289 billion), a portion of which goes into a €40 billion Innovation Fund that supports new clean technologies.
BusinessEurope called for its remit to be broadened, and for funds raised by the ETS to go toward decarbonization.
The price to emit one ton of CO2 has fallen about 18% this year. On Monday, benchmark carbon allowances closed below €72 a ton.
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