Fertilizer industry outlines EU ETS reform wishlist

The fertilizer industry has called for tiering, or targeting, to be incorporated into the reform of Europe's struggling emission's trading scheme.

By Martin Banks

Martin Banks is a senior reporter at the Parliament Magazine

04 May 2016

It says this is the only way forward to guarantee a fair share of carbon allowances.
Speaking at a hearing in Parliament on Wednesday, Javier Goñi del Cacho, the President of Fertilizers Europe, the EU-wide body for the industry, said, "It is not about winners or losers... it is about ensuring that all industrial sectors have their fair share of allowances so they can continue to grow and create production and jobs in Europe."
The half-day hearing, organised by the EPP group, was opened by French member Françoise Grossetête who conceded that ETS, the programme launched 10 years ago to help cut greenhouse gas emissions, had so far failed to live up to initial expectations.


The Commission has proposed a sweeping reform of the system for the period 2021 to 2030. The EU says the ETS is their main tool to address climate change and reach the EU target of a 40 per cent reduction of carbon emissions by 2030. 
But the system is not functioning well. Economic problems have lowered the demand for paying emission allowances, making their price plummet. Some emissions are given for free to industries that could move their production out of Europe to countries with less ambitious climate measures, otherwise known as carbon leakage.
Addressing a panel on carbon leakage and tiering, Goñi del Cacho told the meeting, "Not all industry is in the same situation. The exposure to carbon leakage varies greatly between the different sectors, as has been shown in the Commission impact assessment."
The fertilizer sector, he said, is one of the sectors most exposed to carbon leakage.
"Two thirds of the emissions of the fertilizer industry are process emissions. Process emissions are by definition un-avoidable. It is technically not possible to reduce them.

"In practice this means that if a correction factor is applied, our industry will be affected three times more than other industries, since the whole reduction will have to fall on the one third of the emissions we can affect," added Goñi del Cacho, who is also CEO of Fertiberia, a Madrid-based company that manufactures and markets fertilizers and agricultural chemicals.
The Spaniard said, "We need tiering or targeting or differentiation of the ETS system."
He told MEPs that the onus was on them, as politicians, "to find this fair balance and make ETS work for the industry as a whole."
He added, "Because the fertilizer industry has a large share of process emissions, any correction will hit us three times as hard as other industries. This is why tiering is the way forward. "
Another option favoured by the fertilizers industry would be what is known as "back end tiering of the correction factor."
This is one of the options proposed by UK centre-right MEP Ian Duncan who is steering the EU ETS post-2020 reform bill through the Parliament's environment committee.
Under this proposal, the sectors most exposed to carbon leakage would have no correction applied, and sectors with relatively little exposure to carbon leakage would see a proportionally larger correction applied.
Grossetête, who chairs the economy and environment working group, said that despite competing claims from different sectors, including the fertilizer industry, she hoped Parliament could achieve ambitious and efficient reform of ETS.
She said, "It is not easy to reconcile all sides who are often pitted against each other but I still believe this is possible.

"ETS has not achieved initial expectations but it remains an important pillar of our energy systems in Europe. Companies still want to fight to reduce CO2 but technology progress has not been as fast as we would have liked so incentives are needed."
Another issue, she suggested, was the sharp fall in carbon prices, adding, "They have fallen to a very low level and this does not encourage investment in low carbon technologies. 
"We need an efficient ETS, one that sends the right signals to investors and rewards the best performing sectors."
Peter Zapfel, of the European Commission's climate directorate, outlined the three key objectives of the reform package: bringing about faster emissions reductions, a 'smart' system for free allowances and boosting innovation and modernisation of the energy sector.
He added, "I hope we can preserve the initial aims of ETS but some important political choices have to be made."
Chairing a session on innovation, German EPP group member Peter Liese, the group's coordinator on ETS revision proposal, said he and his group remained unconvinced by some of the Commission's proposals.
A policy paper distributed at the hearing which was issued by several member states, including Bulgaria, Croatia, Poland and Romania, said they too had some reservations about the reform package, particularly the modernisation fund.

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