* Investors fear pushback on EU emissions goals
* Steel and cement sectors lobby EU on carbon credits
* Carbon border costs a key pillar of EU's "Green Deal"
(Adds ArcelorMittal comment)
By Kate Abnett and Simon Jessop
LONDON, April 9 (Reuters) - Cement and steel companies are
being warned by investors over their lobbying on planned
European Union carbon costs, saying they are effectively asking
to be compensated twice over.
A review of public consultation responses by Reuters shows
lobbyists want the EU to maintain an existing scheme to support
firms with carbon credits at the same time as it introduces a
new carbon border tax to shield them from outside rivals.
Manufacturers of cement and steel contacted by Reuters said
such concerns were misplaced and they are fully committed to the
EU's goal to decarbonise its economy by 2050.
"We as a company welcome it," Cedric de Meeus, Swiss cement
maker LafargeHolcim's head of public affairs, said.
"This is going to be a complex transition. We are prepared
to play our part," de Meeus added.
Imposing carbon costs at its borders is a central pillar of
EU chief executive Ursula von der Leyen's Green Deal policy and
aims to protect firms who incur costs in meeting the target.
The fear is that competition from Chinese, Turkish, African
firms and others subject to less stringent climate policies
could prompt EU firms to relocate outside the bloc. This risks
causing "carbon leakage", where emissions move elsewhere rather
than falling in line with climate targets.
"Companies should not be compensated twice for the potential
risks of carbon leakage," Institutional Investors Group on
Climate Change chief executive Stephanie Pfeifer told Reuters.
This European group of mainly pension funds and insurers has
some 30 trillion euros ($32.6 trillion) of assets under
management, whose 230 investor members will hold shares and
bonds in European steel and cement firms in their portfolios.
With climate change topping lists of investor concerns
before the coronavirus crisis, money managers have become
increasingly vocal over any perceived risk that corporate
lobbying could undermine tougher action on emissions.
"The decarbonisation pathway of this sector to-date already
looks to miss the mark," Bruce Duguid, head of stewardship at
EOS, the corporate engagement arm of British asset manager
Hermes told Reuters, referring to cement.
"We do not agree that it is necessary to have in place both
free allocations and a border adjustment mechanism," he added.
The European Commission says it will publish a proposal in
2021 on the border charges and has therefore begun the
consultations on the plans.
"Avoiding 'carbon leakage' – allowing more steel to be
produced outside the EU under less stringent environmental
standards - is absolutely crucial if the European Commission
wants the bloc to be carbon neutral by 2050," said
Luxembourg-based ArcelorMittal, the world's largest steelmaker.
For an interactive version of the graphic, click here https://reut.rs/2wpzlqK.
BATTLE LINES
Battle lines have been drawn in more than 200 responses
submitted to a consultation by the European Commission on its
planned carbon border charges last month over whether the
measures would replace, or be applied on top of, existing
industry support.
At present, the EU gives industry a share of free carbon
credits under its emissions trading system (ETS), allowing them
to produce a certain amount for free.
For an interactive version of the graphic, click here https://reut.rs/3e5gUsh.
In responses reviewed by Reuters, groups including cement
industry association CEMBUREAU, EUROFER, which represents
steelmakers, and European Aluminium said the carbon border tax
must complement, not replace, these free carbon credits.
Companies adopting this stance included LafargeHolcim and
ArcelorMittal, while Germany's biggest steelmaker ThyssenKrupp
told Reuters it holds the same position. ArcelorMittal submitted
EUROFER's position paper in the consultation.
"It is essential that the free allocation of emissions
allowances under the EU ETS up to 2030 be strengthened and
continued, applying realistic benchmarks and with no additional
reduction of allocations," ThyssenKrupp said.
EU carbon credits will drop as Brussels attempts to steer
industry towards decarbonisation, although firms will continue
to receive some free permits until at least the 2030s.
CEMBUREAU, EUROFER and LafargeHolcim all said they were not
seeking double compensation, but instead proposing a hybrid
system in which any new border mechanism avoided the same
emissions being covered by both forms of protection.
Under their proposal, EU companies would continue to receive
free carbon permits, while companies exporting into Europe would
receive a comparable share of "free" emissions, and pay a carbon
border tax for any extra emissions.
"What we ask for is that third country importers are treated
equally to European producers," CEMBUREAU chief executive Koen
Coppenholle told Reuters.
"There should be no double protection for the same
emissions," a EUROFER spokesman said. "But there should be
protection for those emissions costs that are not covered by
free allocation."
European Aluminium said existing protections should remain
untouched because a border tax could not fully address the
sector's carbon costs, which are mostly incurred through the
large amounts of electricity needed to make aluminium.
Some say such measures will only serve to delay action to
phase out free allocations of carbon credits.
"We want disruptive change, we want new low-carbon
alternatives," Georg Zachmann, senior fellow at Brussels
think-tank Bruegel, said.
"Therefore, we should really shift away from any measure
that protects investments into dirty technology."
($1 = 0.9205 euros)
(Additional reporting by Phil Blenkinsop in BRUSSELS; Writing
by Matthew Green; Editing by Alexander Smith and Daniel Wallis)