Climate change fears after German opt-out

By Chris Bryant in Berlin, Fiona Harvey in London and Tony Barber in Brussels
Published: September 22 2008 16:43

A German government decision to back an almost total exemption for industry from new rules that would force companies to pay for the carbon dioxide they emit threatens to undermine a key tenet of European Union climate policy, climate campaigners warn.
The decision is a victory for German industry, which feared European Commission proposals for an auction of carbon emission permits would cost billions of euros and restrict its ability to compete internationally.
Sigmar Gabriel: seeks establishment of special rules

Angela Merkel, chancellor, warned recently that although she supported the need to tackle climate change, she “could not support the destruction of German jobs through an ill-advised climate policy”.
Climate campaigners said the move would open the door to a slew of objections from other states seeking to protect their own key industries during the next phase of the EU emissions trading scheme (ETS).
“There are a lot of countries that want to protect their own industries without the economic arguments to back this up,” said Joris den Blanken, senior policy advisor at Greenpeace.
The European parliament’s industry committee last week voted to replace the current free distribution of carbon-dioxide permits with a mandatory auction between 2013 and 2020 in a bid to help cut European greenhouse gas emissions by 20 per cent from 1990 levels.
The proposals are likely to face a vote at a plenary session of the parliament later this year but must then be ratified by the heads of member states.
The German government is not alone in seeking opt- outs. Poland is anxious that auctioning could severely affect its power companies while Italy is pushing for free carbon permits for specific sectors.
After months of internal wrangling, Germany has accepted that from 2013, power companies, including those that construct new power plants, should take part in the auction process.
However, because this is expected to lead to higher electricity costs, the government is to insist that energy-intensive industries like aluminium producers should be compensated with free carbon permits.
Germany will also push for an exemption for large emitters like the steel industry, subject to these companies using the best available emission control technology.
Remaining companies would have their purchase of certificates capped at 20 per cent of total emissions.
The German government defends its stance by claiming there is a risk of carbon-emitting industries relocating to countries where they would be free to pollute.
“As long as European companies are governed by stricter climate protection regulations than their competitors in countries like China, we have to seek to establish special rules,” said Sigmar Gabriel, environment minister.
Copyright The Financial Times Limited 2008