Verbatim report of proceedings

Thursday, 29 September 2011 - Strasbourg

4. State aid guidelines concerning energy-intensive industries (debate)

  President. – The next item is the oral question to the Commission by Mario Pirillo, Rosario Crocetta, Gianni Pittella, Guido Milana, Rita Borsellino, Pier Antonio Panzeri, Andrea Cozzolino, Sergio Gaetano Cofferati, Salvatore Caronna, Patrizia Toia, Silvia Costa, David-Maria Sassoli, Gianluca Susta, Roberto Gualtieri, Leonardo Domenici, Francesco De Angelis, Oreste Rossi, Ioan Enciu, Paolo Bartolozzi, Giommaria Uggias, Amalia Sartori, Aldo Patriciello, Alfredo Antoniozzi, Giancarlo Scottà, Matteo Salvini, Clemente Mastella, Barbara Matera, Elisabetta Gardini, Vincenzo Iovine, Gabriele Albertini, Antonio Cancian, Cristiana Muscardini, Pavel Poc, Jo Leinen, Potito Salatto, Salvatore Tatarella, Claudiu Ciprian Tănăsescu, Iuliu Winkler, Paolo De Castro, Rovana Plumb, Sebastian Valentin Bodu, Crescenzio Rivellini, Iosif Matula, Roberta Angelilli, Cristian Silviu Buşoi and Carlo Fidanza on State aid guidelines concerning energy-intensive industries (Ο-000158/2011 Β7-0435/2011).

  Mario Pirillo, author. – (IT) Madam President, Commissioner, ladies and gentlemen, I am grateful to the many Members who have signed this oral question.

The EU’s objectives in terms of the fight against climate change have resulted in the implementation of what are very demanding EU policies and measures for European industry. The target of reducing CO2 emissions is, at present, a unilateral commitment that is exposing a large proportion of Europe’s industrial system and, in particular, its energy-intensive industries to a high risk of carbon leakage.

The emission reduction targets, while worthy in their aims, should be pursued in a realistic and practical way. We are calling on the Commission to adjust the tools for applying the Emissions Trading System (ETS) and the financial compensation measures envisaged as carefully and as accurately as possible, in order to prevent any imbalances in the EU internal market.

Under Directive 2003/87/EC, as amended in 2009, thermal power companies will be obliged, from 2013, to purchase allowances for all of their CO2 emissions, which means that the increased costs will be passed on in electricity prices and hence, that production costs will rise significantly.

According to Eurostat data, the ETS will cost European industry an estimated EUR 8.5 billion more each year in increased electricity prices. Indirect emissions, as opposed to direct emissions, do not benefit from a compensation system to prevent differences in treatment between industries in the same sector that have different production processes and which face obvious distortions of competition within the European Union.

If an equivalent compensation system is not established for indirect emissions, there is a very great risk that companies will relocate. Choosing sectors exposed to carbon leakage on the basis of the NACE code classification system is simplistic and restrictive, since it does not allow for the specific type of energy-intensive production to be identified, with the result that compensation cannot be granted to subsectors.

In the case of steel production, there are two production processes: the electric furnace and the full cycle, which uses fossil fuels and a small amount of electricity; it will receive almost all of the free allocation of allowances for direct emissions.

The electric furnace process, on the other hand, will receive only 30% of the free allowances due to the lack of a compensation system for the electricity portion, even though it emits a fifth of the CO2 produced by the full cycle. Therefore, because of the type of production process used, the same product will see its price increase in Europe.

Fears of such a market imbalance have been voiced by many parties, by many industrial sectors, as can be seen from the responses to the public consultation launched by the Directorate General for Competition. How does the Commission intend to proceed with regard to State aid for energy-intensive industries, in order to ensure the continuation of European industry and to guarantee jobs and prosperity? Could the revenues from the sale of allowances not be used to offset the imbalances that will be created from 2013? Are we certain that the sale of allowances will not lead to speculation? How does the Commission intend to rectify competitive disadvantages?

  Algirdas Šemeta, Member of the Commission. – Madam President, the Commission is aware of the importance of electricity costs for the production of steel, and of the influence that European climate change measures can have on electricity costs. The Commission is also mindful of the present difficult economic situation and of the importance of sustaining the economic recovery with smart measures, taking into account the move towards less polluting as well as less risky sources of energy.

The Commission aims to maintain a viable energy-intensive industry in the EU that can compete worldwide on its merits. State aid can help in this context, if it helps to structurally improve the competitiveness of the industry in a sustainable way, but it cannot serve to guarantee lower electricity costs for certain users in the long term. We therefore focus our efforts on measures that have the potential to structurally improve the situation of industry.

Under the ETS Directive, which was part of the 2008 climate change package, Member States may grant compensation for CO2 costs of electricity for companies at risk of carbon leakage due to these costs – aid for indirect emission costs – in accordance with State aid rules.

Financial compensation for indirect emissions can create major distortions in the internal market and may undermine the price signals created by the EU ETS if it is not properly targeted to sectors that are at real risk of carbon leakage due to indirect CO2 costs.

In its statement submitted to the Council during the climate change package negotiations, the Commission established the guiding principles for granting financial support for indirect emission costs. According to these principles, financial compensation should be limited to those electricity-intensive sectors which are unable to pass on the electricity cost increase stemming from CO2 to their customers through product prices without significant loss of market share, and would thus move to less carbon-efficient installations outside the EU.

In defining the rules for compensation for ‘indirect’ carbon leakage, the Commission will have to pay careful consideration to the effective need and justification for aid in view of the need to preserve the internal market, avoid ‘subsidy races’ between Member States at a time of tight budget constraints, and ensure equitable conditions for competition between firms in the same sectors.

  Herbert Reul, on behalf of the PPE Group. – (DE) Madam President, Commissioner, thank you for your detailed comments. However, these detailed statements do not answer the questions that were put. The point of the questions was to ask whether it has been ensured that results will be achieved quickly.

The industries that we want to exclude from these additional burdens, or in which we want to bring about fair conditions, need planning certainty. That is why we need decisions to be made soon. We need rapid decisions that can be relied on and we also need clear statements from the Commission. This process has already been extremely drawn out. We were all aware that it is a highly complex process that we have embarked upon, but when we accepted the compromise on the Emissions Trading Directive, we said that a condition of our acceptance was that relief would be provided for those European industries that were excessively burdened as a result, because otherwise they would not be able to compete with other areas of the world.

I expect the basis upon which we acted at the time, the grounds for the decision in Parliament, with the Council and the Commission, to be realised as intended. I am slightly worried that, along the way, the group of industries concerned is getting smaller and smaller, that – if I may say so – our perspective is getting meaner and meaner, that more and more areas are being excluded. We are not just talking about steel; the aluminium industry is also affected – you know that – along with many other areas, such as chemicals and so on, and we are talking about the fact that what was the political basis for the decision at the time is not being implemented in practice.

As you rightly pointed out, Commissioner, the situation of industries in Europe has not got any easier since this decision; rather, it has got more difficult. We are in a completely new situation and competition is much fiercer. We all struggling with it and giving fine speeches here about how these industries are very important for the future development of Europe. There were more smart speeches given here yesterday.

I expect – Parliament expects – that what was agreed then will now be implemented, for the benefit of the industries – no, not the industries, but rather the people who work in these enterprises, for jobs and thus for Europe’s future opportunities.

  Marita Ulvskog, on behalf of the S&D Group. – (SV) Madam President, industry is vital for jobs and development in Europe. Without a competitive industry, the service sector will not grow either. Against this background, it is clear that the Commission must be very strict, observant and active when there is competition or a risk of competition that is based on lower climate and environmental objectives that result in carbon leakage.

Of course, we must also stand up for the principle of making exceptions for sectors that are indeed exposed to carbon leakage, and apply the principle wisely. However, this must not be taken to mean that European industry should be able to avoid its responsibility for climate policy in general.

On the one hand, the Commission must keep an eye on carbon leakage, leakage of jobs and leakage of competitiveness, and take action. On the other hand, faced with the lobbyists who sometimes tend to exaggerate the leakage risk, the Commission must respond to the demands from these lobbyists with substantiated facts and sometimes also with a certain mistrust.

Thus, it is the Commission’s job to deal with both of these challenges and not to set them against each other.

  Cristian Silviu Buşoi, on behalf of the ALDE Group. – (RO) Madam President, we all acknowledge the need to set ambitious targets for reducing greenhouse gas emissions so that we can combat climate change, and we are proud that the European Union is the global leader in this important battle. At the same time, I believe that we need to adopt a pragmatic approach and examine closely the impact of these measures.

Stopping the free allocation of allowances to electricity producers will naturally have repercussions for the price of energy, which will have an impact on the competitiveness of energy-intensive industries, such as the steel industry. Member States and the sector are obviously affected in different ways, depending on the method used to produce electricity and the type of furnace, powered either by fuel or electricity, as also mentioned by Mr Pirillo. In my country, Romania, for example, half of the total amount of steel is produced in electric furnaces, which means that there will be a far-reaching impact. I firmly believe that similar situations are encountered in other Member States as well. I would like to stress that the steel market is a global market and that the emission reduction targets are likely to distort competition between producers.

At a time when a global agreement has not been reached on emission reduction targets, European Union industry is subject to pressure to which companies in countries that have not set such ambitious targets are not subject. This is why the risk of leakage is very real and must be tackled as such. To eliminate this risk, the Commission should clearly stipulate in future State aid guidelines that all the industries on the list adopted by the decision of 24 December 2009 are eligible to receive compensation for the costs incurred by indirect emissions. These compensatory measures also have to be proportionate to the level of indirect costs generated by the Emissions Trading System.

Failing this principle, only a partial solution is provided to the problem, which will pose a threat to the industry’s competitiveness and, therefore, to several thousand jobs in the European Union, and will mean failure in terms of the global reduction in carbon emissions.

  Konrad Szymański, on behalf of the ECR Group. – (PL) Madam President, in relation to the climate policy of the European Union, and only because of this, energy-intensive industry is under huge competitive pressure from countries outside of Europe, where discipline regarding CO2 emissions just does not exist.

In the case of the chemical, paper, cement and steel industries, this means reducing investment in Europe, it means reducing innovations in these areas, and it also means moving jobs outside of Europe. In many European Union Member States, these industries pay disproportionate amounts for electricity just because the energy sector is dominated by high-emission technology, as is the case in Poland. This interferes with competition in the EU market.

If we do not wish to lose competitiveness, we must provide energy-intensive industries with tax relief and public aid and we must suspend transmission fees, so that it will not be too difficult for these industries to make the transition to a low-emission economy.

  Oreste Rossi, on behalf of the EFD Group. – (IT) Madam President, ladies and gentlemen, I have denounced the risk, both in the Commission and in Parliament, of Emissions Trading System (ETS) allowances being turned into instruments of financial speculation forcing many companies to relocate to third countries because they can no longer compete in Europe.

Passing on the cost of CO2 emissions in electricity prices will affect the industrial system in various ways, and will penalise more energy-intensive industries such as steel and aluminium manufacturing. Does the Commission believe that compensation should reflect the actual price increase sustained by companies in various Member States and that it should be guaranteed until the risk of relocation has passed?

Furthermore, should financial compensation not be guaranteed for energy that is consumed and not just for energy that is bought in from abroad? The bureaucratic procedures enabling companies to take advantage of State aid encourage unfair competition on the part of companies located outside the EU. Does the Commission have any plans to simplify these overly burdensome procedures?

  Peter Liese (PPE). – (DE) Madam President, Commissioner, ladies and gentlemen, I would like to thank Mr Pirillo for having put this issue on the agenda because, after all, we have no direct powers here; however, we have to push the Commission on this. As Mr Reul pointed out, however, it is not just about electric furnace steel; a whole range of industries is at risk of carbon leakage. By way of example, I would mention the aluminium industry and the chemicals industry, which must also benefit from this aid. I emphasise ‘must’ because it says so in the directive. Our problem is not the Emissions Trading Directive and particularly not the amended directive, for the existing directive – which is effective until 2012 – does not contain this provision. We have now expressly laid down in the new Emissions Trading Directive that enterprises that are at risk of carbon leakage will receive support for direct and indirect emissions. The Commission must therefore implement this. The problem is not the text of the directive – that has actually been improved, because we now have this possibility of compensation which we did not have previously – but rather that the Commission must now get down to work.

We also need a clear aid framework that is transparent, otherwise there will be hidden subsidies in different Member States and competition will really be distorted. I would like to make it quite clear that some enterprises are urgently awaiting this. They are already making losses or at least are not making a profit, because the certificates – even if they are given out free of charge – have been priced in by the energy companies. If there is no light at the end of the tunnel for these enterprises from 2013 onwards in the form of aid that they will receive, then they may make decisions that can only be bad for Europe as a centre of enterprise.

We need differentiation depending on the electricity mix in the Member States. We must not over-compensate, but we must not under-compensate either, and we need to keep pointing out that we do have benchmarks. We are only talking about compensating the best 10% of enterprises. That is sufficient incentive to be efficient and the Commission now needs to implement this.

  Ioan Enciu (S&D). – (RO) Madam President, the steel industry is the foundation on which the European Union was created and one of its key economic pillars. Without the steel industry, it is not possible to maintain future growth and development in a global market which does not have any compulsory common rules. Steel and aluminium production requires large volumes of electricity. Regardless of the short- and medium-term improvements which will be made in the future to cut carbon emissions deriving from electricity production, the price of this energy will obviously rise due to additional costs incurred with emission certificates. I think that the production of steel and aluminium in electric furnaces must be quickly included among the industrial sectors eligible for financial compensatory measures, with the aim of safeguarding the European Union’s industrial competitiveness. This can eliminate the disadvantages in competing with steel and aluminium producers from countries that grant subsidies or do not promote policies aimed at reducing carbon emissions.

  Lara Comi (PPE). – (IT) Madam President, ladies and gentlemen, I feel very attached to this issue, since this directive can have a big impact on the energy-intensive sector.

I should like to point out that the additional costs involved in making the system more efficient will be able to generate investment for financing research and development activities. I believe that this can benefit companies and the sector as a whole, both in terms of increased productivity and in terms of innovation. The significant impact on employment should also be emphasised. We must ensure that discrimination between processes and sectors does not result in companies relocating outside Europe and, therefore, in a loss of companies that make a vital contribution in terms of production, distribution and consumption of resources.

The labour market and productivity, characterised by investment in new technologies, are two pillars that are crucial to Europe’s economic and sustainable growth. I should therefore like to stress the need to prevent increased direct and indirect costs from distorting the market and hence reducing competitiveness.

  Rovana Plumb (S&D). – Madam President, I would like to thank my colleague, Mr Pirillo, for this question. I would like to underline that the role of the EU ETC is to induce a positive change in the energy-intensive and emission-intensive industries towards more efficient technology. The ETC does not consider the competitiveness of the industries mentioned, which are caught in the middle between making investments to reduce emissions, thus internalising the debt service at their cost, and using market mechanisms to maintain existing technologies, i.e. internalising the cost of emissions certificates.

It is important to note that the timeline for technological change in these industries is rather long, in contrast to market dynamics. The effects on the competitiveness of these sectors induce the risk of lost production cells and emissions reallocation, leading to job losses and to serious social effects. For example, Romania is highly exposed to carbon leakage as it is located at EU borders. We call on the Commission to take all the necessary measures.

  Lambert van Nistelrooij (PPE). – (NL) Madam President, CO2 policy in the European Union is crystal clear, including the policy for vulnerable sectors. What is at issue is the fact that the costs which the electricity sector is able to pass on to energy-intensive sectors – such as steel, chemicals and aluminium – are a genuine threat to the competitive position of the companies concerned. The problem therefore lies with the passing on of the indirect costs associated with the electricity sector to high users.

What we need, Commissioner, is good information, information that covers the whole of Europe, so that you will also be able to apply Article 10 – which we have not introduced for nothing – right across Europe, because we cannot again damage the level playing field for companies in Europe. Quick action is required.

Secondly, I have another question. What impact does Germany’s decision to abandon nuclear power have on the rising costs faced by energy-intensive sectors in Germany? Could you give me some information on this subject?

  Zigmantas Balčytis (S&D). – Madam President, I should like to thank Mr Pirillo for raising this very important issue. The use of binding commitments will require proper measures in order to implement them and to shift our industry to a green and sustainable path. However, we will also have to carefully consider the possible negative impacts on certain industry sectors which are dependent on higher consumption of electricity and which, without certain compensatory mechanisms, risk losing their competitiveness both inside and outside the EU.

China, for example, has the fastest-growing steel sector in the world and the EU has become its biggest export market. I believe that the Commission has to carefully and responsibly address those issues in the upcoming State aid guidelines and to find a sound compromise between the EU’s commitments and the viability and competitiveness of our industry sector, which are inseparable from the overall growth and prosperity of the EU.

  Mario Pirillo, author. – (IT) Madam President, ladies and gentlemen, I must thank all my fellow Members, from all the political groups, who have spoken and who have strongly supported my question.

I cannot say that I am satisfied, because the catch-the-eye procedure will follow, and then the Commission will speak; this makes no sense to me, and I hope that we will adapt the Rules of Procedure accordingly. I must say that I will be making this statement to the press but, if I may be so bold, I am truly disappointed by the response that the Commissioner, as the Commission’s representative, has given to my questions.

I think that the Commission wants to wash its hands of this problem; it is a major problem as my fellow Members have described magnificently. I hope that the Commission will answer my questions, the questions I asked in my speech, and I hope that it will give serious consideration to this major problem that is affecting Europe: this industry that we boast about in Europe and then undervalue.

  Silvia-Adriana Ţicău (S&D). – (RO) Madam President, I am from Galaţi, a city which has both a steel industry and shipbuilding. My county is extremely reliant upon the jobs provided by these industrial sectors and, by extension, on the European framework enabling these industries to be developed. Therefore, the competitiveness of European industry and preserving jobs in the European Union depend on the way in which we are going to manage to modernise our energy-intensive industries.

I think that, during the debates we have on emission certificates for these industries, we should lay down clear conditions so that we oblige and, at the same time, help companies in these sectors to invest in technologies which are cleaner and more efficient in terms of resource consumption. I think that our ability to keep jobs and production in these sectors within the European Union in the long term depends on the measures we take now to modernise and make companies in energy-intensive industries more eco-efficient, including the steel industry.

  Algirdas Šemeta, Member of the Commission. – Madam President, firstly, I would again like to thank Mr Pirillo for his question. The Commission is certainly not washing its hands of this very important subject.

The impact assessment on State aid guidelines concerning energy-intensive industries is ongoing. This impact assessment includes the steel industry as well as other industries which could be exposed to this problem. We cannot reach a firm conclusion on the specific sectors that will be the subject of these guidelines until the impact assessment is finished.

As far as the timing is concerned, the Commission’s intention is to have the new guidelines adopted by the end of the year, after a public consultation. Its services, namely the Directorate General for Competition, launched a public consultation via a questionnaire on the controversial issues of sectoral eligibility and calculation of the aid level. We received more than 140 submissions from Member States, industry associations and environmental NGOs. The services are currently analysing the replies, after which the Commission will present draft State aid guidelines. Member States and stakeholders will be consulted another time, before their adoption by the Commission, and, at the same time, Parliament will also be informed.

As you can see, the process is fully transparent. We are working on the guidelines and we will come forward with those guidelines by the end of the year.

  President. – The debate is closed.