Car makers and airlines warn EU climate plan puts innovation at risk

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Europe’s most polluting companies have accused the EU of compromising investment and innovation after Brussels unveiled ambitious plans to halve the bloc’s emissions by 2030 in a bid to curb global warming .

Automakers, airlines and heavy industry have all rejected the proposals, which include a de facto ban on new diesel and gasoline cars from 2035, a tax on aviation and marine fuel, and the decision to phase out from 2026 free pollution credits allocated under the EU Emissions Trading System.

The ETS, which sets a price on pollution, was also extended for the first time to the shipping industry.

Just hours after the EU released its plan, many companies and trade organizations were preparing to pressure their own governments to reject it, signaling an uphill battle for the European Commission as it negotiates with states members to have the roadmap promulgated.

European automakers, in particular, have stood up against stricter emissions targets for cars and trucks over the next decade, including the requirement for all new cars to have zero emissions from 2035.

Spain’s auto industry, the EU’s second after Germany, said the sector had been treated unfavorably, even though other industries between them produced more than two-thirds of greenhouse gases. greenhouse of the EU. He urged the Spanish government “to consider its position”.

The German automaker’s lobby group, the VDA, said the measures were “anti-innovation”, calling them “almost impossible to achieve” for companies, including suppliers. However, the largest European car manufacturer Volkswagen, which is investing 35 billion euros in electric vehicles, welcomed the whole.

In the aviation industry, Lufthansa agreed that ambitious climate protection and a carbon price were “both fair and necessary”, but said it would be at a disadvantage compared to global competitors.

He said the combination of phasing out carbon credits, a binding quota for sustainable aviation fuels and, in particular, a kerosene tax would hamper European airlines.

The German carrier said a financing mechanism should be developed to help pay for sustainable fuels, which were several times more expensive than kerosene. “It was only then that [the road map] be competitively neutral.

The boss of Iata, the global aviation trade group, was more scathing. Willie Walsh, the former managing director of airline group IAG, accused Brussels of a “personal target” over plans to tax fossil fuel-based jet fuel.

“Making kerosene more expensive through taxation marks a ‘personal goal’ in competitiveness that does little to accelerate the commercialization of sustainable fuel,” he said.

European aviation trade body A4E joined in the chorus of disapproval, saying the measures would make the flight more expensive for passengers.

Hard-to-decarbonize sectors such as cement, steel, fertilizers and aluminum producers have also complained about plans to phase out free carbon credits by 2036.

What is ETS

The emissions trading system requires large industrial polluters to buy carbon credits to cover the cost of their emissions. Industries covered by the system receive free allowances. These credits are traded on the financial markets.

These sectors, along with electricity generation, account for 45% of emissions under the EU ETS, and will be the first to be included in a new regime that will impose carbon taxes on imports from countries that do not ‘have no equivalent carbon price.

The so-called carbon border adjustment mechanism would help level the playing field against cheaper imports, the companies said, but still presented problems.

Cedric de Meeus, vice president of public affairs at Holcim, one of Europe’s largest cement producers, argued that phasing out carbon credits for the industry should be done with caution. “You don’t want an economic shock that no industrial sector can withstand.”

European metal producers have also joined in the call for greater protection.

The European Steel Association said phasing out free carbon allowances would increase industry costs and reduce the financial resources available to invest in decarbonization technologies in the medium term.

Tata Steel agreed that the new framework would result in increased operating costs. “But we also recognize the measures to support our transition to decarbonization. “

What is the carbon frontier adjustment mechanism

A tariff on imported goods based on their carbon content

Aluminum producers had asked for the exclusion of the pilot phase of the carbon tax at the border but failed to do so. Eurometaux, which represents metal producers in Europe, said that while this aspect was disappointing, it was “satisfied” with the exclusion of indirect emissions from the plan.

Indirect emissions, called scope 2, are those linked to the production of purchased electricity. Aluminum is one of the most energy-intensive materials to produce.

The capture of the shipping industry in EU plans has sparked some consternation, with the carbon trading system being extended to all intra-EU travel and 50% of all travel to destination or from countries outside the bloc.

Guy Platten, secretary general of the International Chamber of Merchant Navy, blasted the proposals as “pure seizure of money” to support the bloc’s economic recovery after the pandemic.

The response has been more balanced from Maersk, the world’s largest container shipping company.

Simon Bergulf, director of regulatory affairs at Maersk, said the framework was “the right idea”, although he feared policies could alienate non-EU countries.

Unlike other industrial sectors, energy companies have been largely positive about the roadmap encouraging renewable energy.

BP chief executive Bernard Looney said it would boost consumer demand for low-carbon energy and create great business opportunities.

Utilities that turned to renewables were also bullish. Markus Krebber, Managing Director of RWE in Germany, said it was a “good day” for the environment and for business. “[It] opens up new possibilities to accelerate the expansion of renewable energies and advance the hydrogen economy.

Some energy company executives have warned that if they broadly support the EU’s goals, there might be elements they would oppose if they felt they were poorly designed or entailed unfair costs. .

Ignacio Galán, executive chairman of Spanish firm Iberdrola, considered a leader in renewable energy, said member states should “review their planning and licensing processes to ensure projects can be delivered on time required “.

Reporting by Peggy Hollinger, Harry Dempsey, Daniel Dombey in Spain, Joe Miller in Frankfurt, Sylvia Pfeifer, Neil Hume, David Sheppard, Peter Campbell, Richard Milne in Norway, Gill Plimmer and Guy Chazan in Berlin

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