EC set to grant industry relief on carbon trading

Nick Mathiason, business correspondent
The Observer,
Sunday October 12 2008

Energy-intensive industries are set to receive a huge cash boost from the European Commission as part of a controversial move to protect Europe's industrial sector from world recession.
Within weeks the EU is to debate whether to allow European industrial giants tens of millions of pounds off carbon allowances they have to buy as part of the Emission Trading Scheme (ETS).
Günter Verheugen, European Commissioner for Enterprise and Industry, in an exclusive interview with The Observer, said the move will prevent hundreds of thousands of job losses in the EU industrial sector amid the worst economic conditions for decades.
Verheugen said European industrial powerhouses are refusing to invest in new plants and businesses in the eurozone because they claim 'compliance costs' caused by the emission trading scheme make new ventures too costly. Verheugen fears a huge surge in unemployment if the world's financial crisis escalates.
The move will provoke opposition from green groups who will interpret the measure as a signal that Europe is putting economic concerns above environmental imperatives.
Verheugen countered by saying that the allowance would be restricted to firms which invested in the most modern 'sustainable' technologies. They would, however, see a significant reduction in carbon credits, which would wipe millions of pounds off their cost base.
Verheugen's proposals could be rushed through by the commission as fears grow over unemployment, which averages 7.5 per cent across the 27 EU states.
'I don't want to change the EU's environmental objectives because I believe that's economically healthy,' said Verheugen, who is close to Peter Mandelson, the former EU Trade Commissioner and current UK business secretary.
'Doing nothing on the environment will cost more than taking action ... [But] it makes no sense to force certain industries to leave Europe. They will take jobs and their pollution. As a result, there will be more pollution in the world and we will have fewer jobs. Deindustrialisation does not solve environmental problems.'
The news will delight some of Europe's biggest companies, including French giant La Farge and the British cement industry, which has lobbied strongly for this measure.
The ETS is the largest emissions trading scheme in the world and is a pillar of EU climate policy. It covers more than 10,000 installations in the energy and industrial sectors, collectively responsible for close to half of the EU's emissions of carbon dioxide and 40 per cent of its total greenhouse gas emissions.