Policy Position

EU Emissions Trading System (EU ETS)

Sep 01, 2023

Context

The EU ETS puts a cap on the carbon dioxide (CO2) emitted by business and creates a market and price for carbon allowances. It covers 45% of EU emissions, including energy intensive sectors and approximately 12,000 installations.

The EU ETS works on the ‘cap and trade’ principle. A ‘cap’, or limit, is set on the total amount of certain greenhouse gases that can be emitted by the factories, power plants and other installations in the system within the cap, companies receive or buy emission allowances which they can trade with one another as needed.

The revised ETS Directive specifies the rules for the 3rd trading period in CO2 allowances which will run from 2013 till 2020. The sectors that fall within the scope of the ETS Directive, like lime, will have to reduce their total emissions by about 21% by 2020. The European lime producers are actively working to reach that target.

ETS & The Lime Industry

The lime industry is both energy and carbon intensive. However, unlike most carbon intensive industries, the majority of lime emissions are not generated by heat or power generation but by the chemical reaction that occurs when limestone is heated (Limestone + Energy = lime + CO2, or CaCo3 + energy =CaO + CO2).

This makes our carbon profile unique.

EU ETS post-2020: EuLA priorities

Directive 2018/410 concerning Phase IV (2021-2030) of the ETS was published in the EU Official Journal on 19 March 2018 and entered into force on 8 April 2018. However, secondary legislation and guidance documents defining the legislative background of the IV Trading Period are still on going. In order to contribute to a convenient and fair framework for the lime industry after 2021, EuLA is directly contributing to the legislative development process as a member of both European Commission Climate Change Expert Group (ECCEG), and through the Innovation Fund Expert Group, with a special focus on the following topics:

  • Implementing act on Update on Benchmark Values.
  • Implementing act on Allocation Adjustments due to Activity Level Changes (ALC).
  • Innovation Fund Delegated Act.
  • Free Allocation.
  • Delegated Act on Carbon Leakage (CLL).
  • Border Adjustment Mechanism (BAM).
  • Market Stability Reserve.

On the “Implementing act on free allocation adjustments due to activity level changes”. EuLA submitted a position paper (2019 07 08 EuLA Position Paper on ALC – Distributed – Final). EuLA supports a linear approach as straightforward and simpler to apply both at operation level and administrative levels, allocation changes shall start in 2021 to align as close as possible the number of free allowances with the actual level of production and non-discrimination of installations for the same investment.

On the public consultation on the Delegated Act establishing the the Innovation Fund. EuLA position is available through the following link: (https://ec.europa.eu/info/law/betterregulation /initiatives /ares-2017-3157624/feedback/F16247_en?p_id=342127)

EuLA also participated in the EC survey on “Methodological choices for determining the mist of sectors and subsectors deemed exposed to a significant risk of carbon leakage, for the period 2021-2030”. The sector ‘manufacture of lime and plaster’ was effectively included during all the legislative development process, what means the EU ETS lime plants are expected to be deemed for 100% of free CO2 allowances at the benchmark level until 2030.

As far as the introduction of a Border Adjustment Mechanism (BAM) is concerned as discussed in 2017, EuLA called for a common treatment to protect sectors exposed to carbon leakage, in order to maintain the integrity of the internal market and ensure a global level playing field. The position paper is available through the following: 2017 01 18 – EuLA EU ETS BAM position paper.

Regarding the proposal from the European Commission to create a Market Stability Reserve for the EU ETS after 2020, EuLA developed in 2015 a position paper supporting policy options that ensure a stable and predictable legal framework on reducing CO2 emissions without damaging industrial competitiveness. The position paper can be found here: EuLA – Position paper on MSR for the post-2020 EU ETS.

The European Lime association believes that the EU ETS should remain a cost-effective market-based instrument and should support the growth of the industry while providing an incentive to reduce the emissions according to the best available techniques.

Our Position

The lime industry is the most exposed industry under the EU ETS, and has been recognised as a sector exposed to international trade, therefore at risk of “carbon leakage”. EuLA supports the efforts to reach an international climate agreement that will create a legally binding level playing. In the absence of such agreement, EuLA demands that the EU adopts carbon leakage mitigation measures to avoid a loss of competitiveness for the Lime sector.

EuLA also believes that “energy” and “climate” requirements should be integrated in any international agreements with its trade partners, especially Free Trade Agreement. “Climate and energy” targets should also be further promoted by means of the EU Neighborhood policy.

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