Auch die Grundstoffindustrie ist stark von der aktuellen Corona-Krise betroffen. Dies gilt besonders für die im Rahmen des European Green Deal gerade startenden Aktivitäten um energieintensive Branchen, wie Stahlerzeugung, Grundstoffchemie, Zementherstellung und andere in Richtung Klimaneutralität umzubauen. Unser Gastautor Oliver Sartor von Agora Energiewende nimmt die aktuell laufende Konsultation der EU zu Grenzausgleichsabgaben auf emissionsintensive Grundstoffe (Border Carbon Adjustments) zum Anlass eine noch breitere Aufstellung der europäischen Industriepolitik in Richtung Klimaneutralität zu fordern. Er warnt davor, sich zu stark auf dieses derzeit viel diskutierte Instrument zu verlassen:
The economic impact of the coronavirus is going to put pressure on heavy industry in the EU and abroad. Unfortunately, it’s now likely that, when industry begins to emerge from the current lock down, this will likely increase demands for economic nationalism and protectionism. It will also lead to high emitting industries calling for a weakening of environmental ambition (as the aviation sector has begun doing, for example). This is undesirable, because it makes the politics of adopting the EU’s goal raising its 2030 climate ambition from -40% to between -50-55% (compared to 2005 levels) harder.
Of course, raising the EU’s ambition is not negotiable. It’s still possible with the right package of green economic recovery measures and must still be done. We do not have the choice of exchanging our response to one crisis (the pandemic) for another (runaway climate change).
However, the new circumstances do mean that we have to be careful about how we move forward with certain policy ideas. Border Carbon Adjustments are a good example of this point. In our view, the current crisis implies that Border Carbon Adjustments (BCAs), which were already going to be complicated politically, may be even more politically complicated to implement in a context of heightened industrial sensitivities and nationalistic tendencies.
This situation pleads for the EU to be cautious, to use the time at hand, to consider all options (not just BCAs). It also reinforces the point that many have been making for some time – i.e. to have the best chance of succeeding the approach to any new anti-leakage system, whether BCAs or not, should be as internationalised, consultative and cooperative as possible. Obviously the EU shouldn’t necessarily cede the initiative on its domestic policy to other countries, but the diplomatic groundwork, and an approach that is less risky, is now increasingly important.
The new circumstances also highlight the importance of setting priorities. The most urgent thing for this commission for industry decarbonisation is not BCAs. Rather, the main objective is removing the main bottlenecks for heavy industry to start investing in green production at commercial scale. This means infrastructure and creating a (missing) business case for commercialisation of ultra-low carbon and circular production technologies. Especially in the current political and economic context, it’s very important that the EU does not allow BCAs to become a distraction. The EU could, with minimum reforms, continue its current anti-carbon leakage framework – which consists of free allocation plus indirect cost subsidies to electro-intensive industries – until at least 2030, if not longer. In which case, why not do this?
However, with that said, it is also important to think about the long term objective with anti-leakage measures. Here, one must also admit that post-2030, a robust anti-leakage system will be needed, and this will need to go beyond free allocation. This system will need to be one that protects adequately against carbon leakage but also helps to create the conditions for investment into climate neutral production technologies. It will be essential to create a viable business case for greener – but more expensive – low carbon technologies to be invested in without being undercut by dirtier competitors. These cost differences are not small or able to be fully passed on to customers under competitive conditions without some form of border measures. For example, if "green" hydrogen-based steel costs 20 to 50% more than the dirtier conventional competitor, zero carbon plastics are 40% more expensive and zero carbon cement is 100% more expensive than the conventional alternative, that is not a viable economic proposition for investment in the climate neutral transition.
But what matters, even in the long term, is not Border Carbon Adjustments per se. What matters is that we have effective anti-leakage measures for future greener production to be invested in with confidence. Now, in this respect, there are three long-term anti-leakage options,
a) Border Carbon Adjustments ,
b) Free allocation + inclusion of Consumption in ETS
c) Carbon Product Standards (applied to all sales in the EU, including imported products).
The EU must eventually choose one of these options, if it wants to lead the world in transitioning high shares of the production of our energy-intensive industry to climate neutral production. Our sense is that setting climate-neutral Carbon Product Standards for basic materials sold in Europe, with these rules set today but implemented from, say, 2035, would do the most to guide the next round of investments in industrial production during the coming 10-15 years. This could also protect from leakage, while being simpler than the other options legally and administratively, since standards would also be applied similarly to imported products. However, it should be recognised that all three options mentioned above involve pros and cons and the solutions are not straightforward. Whatever the preference for anti-leakage would be, the main point is that the EU should intensively explore other alternatives to just BCAs.
Whichever option the EU settles on, it will take time to build international political acceptance and develop solutions. Therefore, even if BCAs or Carbon Product Standards might not be for implementation during the next 5 years, it is nevertheless important for the EU begin to prepare the transition to solutions like these during this Commission – even if its only implemented latter (e.g. post 2030). This means preparing the ground work for implementation via international diplomacy and consultation, developing robust certification and labelling tools, identifying the product scope, identifying the level at which standards could be set from 2035 onwards and announcing them etc.
Most importantly of all, this Commission must be focused on delivering the new policy instruments , infrastructure policies, and financing and state aid tools, that can allow for decarbonised technology investments to start occurring at scale. Only the combination of these broader enabling conditions for investment, together with the signalling of a robust long term anti-leakage framework, will give industry the assurance that it can accede to higher EU climate ambition for 2030 and beyond.
Oliver Sartor, Senior Associate for Industry, Agora Energiewende.
oliver.sartor@agora-energiewende.de