EU ETS – A Clinker Benchmark but ...

In September, with just over 3 months to go if the end of year deadline is to be met, DG CLIMA revealed its intention in relation to the ETSⁱ benchmarks and allocation rules. On 8 September, a draft proposal went into interservices consultation, triggering an epic fight between DG CLIMA and DG ENTR.

Up to then the process through which the benchmark to be applied to the cement industry for free allocation of allowances was developed had been fairly open with industry being able to state its case. The result was a European clinker benchmark for grey cement clinker and a distinct benchmark for white cement clinker, the latter being the result of an obvious product differentiation. So far, so good...

The main remaining point of debate between the European cement industry and DG CLIMA is the value to be retained for the benchmark. The application, foreseen by the ETDⁱ, of the average emissions of the 10% best performing installations in 2007 and 2008 leads to a benchmark of 766 kg CO₂ per tonne of grey cement clinker. This is an already demanding target as, in those years, the average specific emission of the cement industry in the EU was 865 kg CO₂ per tonne of clinker. The value of 766 kg CO₂ per tonne of clinker is reached by taking into account all plants, including those with a very high use of biomass of up to 30% when the average use of biomass in the EU cement industry is 7%. If we discard process emissions (539 kg CO₂ per tonne of clinker), this value is attained through the application of the most efficient techniques, including the use of biomass, in the installations forming part of the best decile.

DG CLIMA considers that the 1st decile is only the starting point, as referred to in the Directive, and, from that point, purports to lower the benchmark down to a value of 689.5 kg CO₂ per tonne of grey cement clinker with a theoretical possibility to lift the value up to either 702 kg CO₂ per tonne of clinker or 716 kg CO₂ per tonne of clinker by additions such as slag and fly ash in the period of reference (respectively a clinker content either between 0.75 and 0.70 or below 0.70).

The European cement industry is prepared to meet the tough challenge of either operating its installations at a benchmark level of 766 kg CO₂ per tonne of clinker – by so-doing it would operate virtually at BATⁱ level – or to purchase the necessary allowances. But, it will not be possible, in the long run, to run European kilns with free allowances based on so low a benchmark. Imposing a lower benchmark, as proposed by DG CLIMA, would in fact render useless free allowances as the tool to address carbon leakage. If that were to be the way then inclusion of importers in the ETS would become preferable.

Now that the chips are down, the European Commission will have to decide collegially, in the very near future, which way to go and, after that, the vote in the Climate Change Committee by the Member States will determine to a significant extent the future of the cement industry in the EU.

Note: the Allocation Rules which form part of the package proposed by DG CLIMA are equally important. They are summarised hereinafter and will be commented in more detail in the next edition of Eurobrief.