EU lawmakers approve helping industry with CO2 cost

European Union lawmakers approved a list on Wednesday of EU industries that stand to receive help with meeting the cost of permits to emit carbon dioxide.

Industries such as metals, textiles, building materials and ceramics will be given free permits from 2013 under the Emissions Trading Scheme (ETS), the 27-country European Union's main tool to force industry to cut greenhouse gases.

Heavy industries are battling to avoid paying for permits, saying the added cost will harm their ability to compete with overseas rivals such as those in India, North Africa or Russia.

The same fight is being played out in the United States as it prepares its own emissions scheme.

The European Parliament's environment committee voted against a motion rejecting the list, drawn up by the EU's executive European Commission. Thirty-nine parliamentarians opposed the motion, and 19 supported it.

The move ended any organized opposition, effectively granting the last approval the hard-fought list needs to enter force.

LEAKAGE

Heavy industries argue that if forced to pay, factories would migrate to outside the EU, resulting in a geographical shift in where carbon is emitted in the production of goods for European consumption -- so-called "carbon leakage."

The sectors and sub-sectors judged at risk of carbon leakage are estimated to account for around 77 percent of emissions from manufacturing industry, the European Commission says.

Europe's plastics, textiles, plywood and cast iron makers won a fight in September to be included on the list. Steel, aluminum, cement and glass had been identified in earlier EU discussions as the main industries that would receive help.

Environmentalists were unimpressed. "Today we moved from a scheme designed to reduce emissions to one that will subsidize an increase in emissions, and we also lost any driver for green innovation," said WWF campaigner Sanjeev Kumar.

However, the help for industry does contain caveats.

Only the most efficient 10 percent of installations will receive help, selected via a filtering scheme known as "benchmarking" to be finalized next year.

Less efficient installations and the sectors deemed not exposed to carbon leakage will have to buy 20 percent of their carbon emissions permits in 2013, rising to 70 percent in 2020 and 100 percent in 2027.

But long before 2027, the risk of carbon leakage is hoped to subside as other regions take on comparable measures to cut carbon emissions in a global climate deal. That deal could emerge as soon as December at a meeting in Copenhagen.

"This decision is explicitly subject to review in light of the outcome at Copenhagen," European Environment Commissioner Stavros Dimas told lawmakers ahead of their vote.

(Published by Reuters - November 4, 2009)