From: Reuters
Published January 22, 2008 08:20 AM

EU steel industry warns Brussels on climate plan

By Paul Taylor

BRUSSELS (Reuters) - Europe's steelmakers warned the European Commission on Tuesday that production and jobs would move abroad to less environmentally demanding locations if Brussels did not amend radical plans to fight climate change.

Philippe Varin, president of the European Confederation of Iron and Steel Industries (Eurofer), said proposals to curb greenhouse gas emissions due out on Wednesday would put his industry at a big competitive disadvantage compared to Chinese, Russian and U.S. rivals.

"We have very strong concerns that if the proposal is not properly drafted, it could have a very damaging impact on our industry," he told reporters on a teleconference.

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"If we were to relocate our industries outside Europe, we would then have to transport steel to Europe, adding emissions. We would have taken industry outside Europe and we would be emitting more (carbon dioxide) than before," he said.

Varin, chief executive of Anglo-Dutch steelmaker Corus, owned by India's Tata Steel, was traveling to Brussels for a last-ditch effort to lobby European Environment Commissioner Stavros Dimas before Wednesday's decisive meeting of the EU executive.

He said the Commission should promise free permits to emit CO2, the main gas blamed for global warming, until such time as an international agreement was in place to either curb global emissions or cover all major steel-producing nations.

EU sources involved in final drafting of the proposals told Reuters late on Monday that steel was one of three energy-intensive industries, along with cement and aluminum, which would receive permits for free initially, but be phased into a system for partial auctioning of emission rights.

Eurofer also wants the industry's emissions measured in terms of CO2 per ton, taking into account the performance of European plants, rather than a planned absolute cap of 20 percent less than the sector's 2008-2012 emissions.

Varin said steel makers faced a threat to profitability if they had to buy permits at auction, while non-European rivals did not, and also incurred higher electricity prices as the power sector passed on its own CO2 auction costs to consumers.

Eurofer says the EU steel industry represents 200 million tons of annual output and 140 billion euros in turnover, with 370,000 staff and up to 1 million including indirect employees.

Varin said European steel was already among world leaders in CO2 per ton, having reduced emission by 60 percent since 1975 and 21 percent since 1990, the reference year in the Kyoto protocol on climate change.

Eurofer Director-General Gordon Moffat said the latest draft of the Commission directive did not contain a clear definition of energy-intensive industries or give any commitment on what measures would be taken to protect them if there was no international agreement on climate change.

Phasing in auctioning for the steel industry could remove any incentive for steelmakers in China, India, Russia and the United States to reach an international sector-wide agreement on curbing emissions, since the others would know their European competitors would be handicapped anyway, he said.

(editing by James Jukwey)

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