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By Michael Szabo
LONDON, Dec 11 (Reuters) - Europe's heavy industry is firinga barrage of legal challenges to cuts in the carbon permits theywill get up to 2020 - subsidies worth over 4 billion euros ($5.5billion) - with at least nine firms opening the assault in aDutch court.
Companies including ExxonMobil, Dow Chemical and Shell have challenged the Dutch government overwhat they say is an under-allocation of carbon allowances by theEuropean Commission under the EU Emissions Trading Scheme (ETS),which are given free to heavy industry.
According to legal advice prepared for several chemical andsteel firms and seen by Reuters, emissions generated at theirplants from producing power by capturing heat (CHP) and burningwaste gas were incorrectly treated by the Commission asattributable to the power sector, which has to pay for permits.
As a result, the related permits are to be auctioned bygovernments rather than given to industry, removing subsidiesfor manufacturers that source energy through those twoactivities.
"This distribution was not done in line with EU (rules),"the legal advice said.
A spokesman for the Netherlands' national court on Wednesdaysaid at least nine companies had so far lodged complaints aheadof Wednesday's deadline.
"Based on a conservative estimate, European industry hasbeen unjustifiably under-allocated 168 million permits in 2013and around 800 million permits up to 2020," said the UtilitySupport Group's Vianney Schyns, a legal expert advising aconsortium of chemical firms including SABIC, OCINitrogen, Ineos and Lanxess.
The allowances are valued at more than 4 billion euros,based on average EU carbon future prices of around 5.50 eurosbetween now and 2020 <0#CFI:>.
Schyns added that he was helping another 10 firms filecomplaints in the Dutch court this week.
Another legal source advising firms said major industrialcompanies including Tata Steel and BP wouldalso launch appeals in the Netherlands and in other countries.
Both the European Commission and the Dutch Ministry ofInfrastructure and Environment - the government body named inthe challenges filed in the Netherlands - declined to comment.
Three of the firms named confirmed that they were appealingthe Commission's decision, adding that they had collaboratedwith others from their industries to coordinate their arguments.
FIRST DEADLINES
Sources said firms may find it difficult to challenge theCommission directly, so they are being encouraged to file in asmany national courts as possible in the hope that at least oneescalates the issue to the European Union's General Court inLuxembourg, where an over-arching verdict would be expected.
Firms have until Dec. 11 to file in the Netherlands anduntil Dec. 12 to file in Sweden, the first deadlines across theEuropean Union's 28 member states, Schyns added.
Before companies in other countries can lodge complaints,they must first be notified by their governments as to how manypermits they will get - a process that has been held up in mostEU member states for months due to bureaucratic delays.
Under the EU ETS, the bloc's main tool to fight climatechange, greenhouse gas emissions from Europe's 12,000 biggestpolluters are capped and firms must surrender a permit for everytonne of carbon dioxide they emit.
In the scheme's current trading phase, which runs from 2013to 2020, the majority of emissions allowances earmarked forutilities are sold, while heavy industry including makers ofcement and steel receive most of their quota for free.
This is to help them compete with rivals in countriesoutside the EU that have less stringent environmentalregulation, and because the firms argue that power generatorspass on their carbon costs to them.
Bernhard Mauritz Stormyr, a spokesman for Norway-basedchemical and fertiliser firm Yara, warned that as aresult of the under-allocation, many industry sectors in Europewill be "seriously harmed" in both their global and regionalcompetitiveness.
"This is not a question of seeking additional permits. Weare simply pursuing what we perceive to be our legal right," headded.
To keep the bloc's overall emissions under legal limits, theCommission slashed the number of ETS permits to be given to EUindustry in 2013-2020 by 12 percent below the amount they hadrequested, or by around 900 million units.
But trade groups say that assigning CHP and waste gasemissions to the power sector has distorted the bloc-widereduction in allowances, or 'correction factor' in EU jargon.
The International Federation of Industrial Energy Consumers(IFIEC), which represents heavy industry across Europe, said theissue has been compounded by a lack of transparency in how theCommission calculated the reduction.
"Therefore we remain in doubt whether the significantreduction of the industry's allocation is correct," said IFIECvice president Annette Loske.
Axel Eggert, director of public affairs at the Europeansteelmakers association Eurofer, added: "You can't attack thewhole correction factor but you can challenge part of it, around5 percent of the 12 percent, which is a huge amount of money."
The Alliance of Energy Intensive Industries (CEMBUREAU) saidthat this, coupled with what it considered as oversights by theCommission related to the bloc's most efficient plants, made acut in industry's carbon permit quota before 2021 unjustified. (Editing by Will Waterman)
