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ETS reform to quadruple refiners’ carbon costs, industry says

March 5, 2016

By Paul Homewood  





The next phase of the EU Emissions Trading System (ETS) will nearly quadruple European refiners’ carbon costs to around 23 euro cents per barrel, up from six cents now, the head of the European refiners’ industry body said on Tuesday.

He added to calls from other energy intensive industries for free allowances to cover their emissions until there is a global carbon price.

“A carbon market is fundamentally the right approach,” John Cooper, director general FuelsEurope, said at a forum attended by the European Commission and representatives from the refining industry.

“But we see the pathway to global pricing of carbon as key to restoring a global level playing field. We need to be realistic. That will take time.”

EU regulators are implementing ETS reforms to reduce the number of allocations handed out for free and to increase the price of permits, now around €5 per tonne.

In the current market phase, which ends in 2020, refiners buy around 23% of their allocations, which based on the assumption that carbon costs €10 per tonne, translates into a fee of 6 cents per barrel for refiners.

Apart from buying permits, they face extra energy costs as utilities that buy their ETS allowances pass on costs.

Arguments are ongoing about how free allowances will be distributed in the phase from 2021 and all heavy energy users are making their case to the Commission in parallel, within a wider debate about industrial competitiveness.

FuelsEurope estimates the refiners will buy 30% of ETS allowances they need to cover emissions in the next market phase, when it assumes carbon permits will cost €30 per tonne. This would translate as a 23 euro cent carbon cost per barrel.

European refiners have enjoyed rare success as the low oil price has boosted profits, but Cooper said they faced a growing challenge from Middle Eastern refiners with lower regulatory costs and very low energy costs.

For those selling into Europe, the higher regulatory costs are a bonus because they increase market prices for refined products, Cooper said.

For the Europeans, in addition to the ETS, they also have to implement other EU pollution laws, whose costs the industry estimates at $1.50 per barrel.

The Commission in June said EU environment law added 47 euro cents per barrel and on Tuesday said it would analyse the issue further.

From the Netherlands, holder of the EU presidency and home to major refiner Royal Dutch Shell, Erik Janssen, an adviser to the Dutch Ministry of Economic Affairs, said the focus was on implementing the Paris Agreement on climate change, without “a negative impact on the level playing field for European industry”.


Of course, it does not stop there. Higher refined oil prices then need to be absorbed by industry, adding yet another barrier to EU competitiveness.

  1. emsnews permalink
    March 6, 2016 12:40 am

    Between millions and millions if idle foreign males invading and destroying everything, you get to be taxed to death due to exhalation taxes. Kiss the EU goodbye and tell the Bilderberg gang, their plot to destroy everyone in Europe is working fantastically.

  2. markl permalink
    March 6, 2016 1:23 am

    Taxing the air we breath use to be a joke punch line. This is no joke. Why are people so complacent about this travesty? It obviously will result in the collapse of society in
    Europe as we know it and you don’t need a “model” to figure it out.

  3. March 6, 2016 9:47 am

    The European Commission is like a perpetual coalition govt in which “greens” are forever in charge of environmental issues. When one zealot commissioner comes to the end of their term they are simply replaced by another zealot. No wonder “greens” like this arrangement.

  4. It doesn't add up... permalink
    March 6, 2016 12:00 pm

    Of course in the UK, refiners are subject to the Carbon Floor price, which is higher still. No wonder so many of them have closed down. We will soon be reliant on importing not crude oil (widely available from many different sources, including on our doorstep in the North Sea), but refined products produced in countries that have extra capacity – mainly Russia and OPEC countries. This will add to cost and sharply diminish security of supply, making us beholden to some rather unsavoury regimes. Perhaps taht is the real objective of these policies.

    • Newsel permalink
      March 6, 2016 5:54 pm

      More ammo for BRITEX…..why does the UK have to suffer these fools – unless they need to make for the loss of tax revenues being seen at the pump as technological driven fuel efficiencies keep on improving?

  5. BLACK PEARL permalink
    March 6, 2016 7:53 pm

    Its the media’s job to keep the public at large informed on information like this, but they don’t, because of the howls of anguish they would get from the greenblob
    We all know documentaries & reports only appear when someone funds them and always comes out with the storyline the funder wants to portray.
    And whos got all the money to do this:- Govt, EU & fat funded green lobbyists on behalf of those with their snouts in the subsidy trough, eagerly aided by naive brain washed climate crusaders
    Until some Govt with a backbone stands up to end this absurdity it will never end

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