By Barbara Lewis
BRUSSELS (Reuters) - Proposed reforms to the EU carbon market do not go far enough and need to be supplemented by a phase-out of fossil fuel subsidies, a group of major companies said in an open letter to European Union environment ministers meeting on Monday.
The European Commission in July outlined its plans to bolster the Emissions Trading System (ETS), on which permits to pollute trade at around 8.5 euros per ton, seen as too little to drive a shift to lower carbon energy. Environment ministers of the 28 EU states debated the proposals on Monday in Luxembourg, in one of the early steps towards turning the plans into law." We do not believe that the Commission's ETS reform proposal will deliver a carbon price sufficient to maintain the EU ETS as the cornerstone of EU climate policy," said the Corporate Leaders Group, which brings together firms including EDF Energy, Unilever, Acciona and Coca Cola.The letter also predicted auctions of carbon allowances would not "generate sufficient innovation funds to help industry decarbonize".
To shelter sectors most affected by carbon prices the Commission proposal offers 10 years of free emission credits. The Corporate Leaders Group said the free credits were not being allocated as effectively as possible. It also said plans to cut progressively the level of pollution allowed were not rigorous enough to keep global warming below the 2 degrees Celsius ceiling (3.6 Fahrenheit) scientists say prevents the worst effects of extreme weather. ETS reform needs to be matched with the elimination of fossil fuel subsidies, it said, something not all EU member states have backed. While the corporate leaders want tougher action, those in energy intensive industries say the Commission's proposal is already damaging.
EUROFER, which represents the EU steel industry, said the plan put its future at risk." This proposal presents an existential threat to the 330,000 jobs that the industry supports," Axel Eggert, director general of EUROFER, said. In a statement, the body cited research the proposal would cost the industry around 34 billion euros ($37 billion) in direct and indirect carbon costs between 2021 and 2030.
In the debate on Monday, nations such as Britain and France urged greater ambition, while central European ministers sought protection for industry. Poland, whose economy relies on carbon-intensive coal, said it was still considering legal action following an interim reforms to limit a surplus of allowances that has depressed carbon prices. Energy and Environment Commissioner Miguel Arias Canete said the EU executive had sought a balance and its proposals on free allowances represented an "evolution not a revolution".
(Editing by David Evans)