ETD - Carbon leakage

In order to secure a Directive that would not condemn the cement industry in Europe, The Boston Consulting Group was commissioned by CEMBUREAU to produce a study on the risk of carbon leakage in the European cement industry. The results of this independent study clearly demonstrated that the European cement industry – as an integrated clinker-cement producer – could be entirely wiped out at a price of €35 per tonne of CO₂ if auctioning were to be applied to this industry.

At current CO₂ prices of 25€ per tonne, approximately 80% of clinker production would be offshored if no free allowances are allocated. This would heavily affect employment and the gross value added (GVA) generated by the industry. With full auctioning at a price above 35€ per tonne of CO₂, integrated cement production (meaning cement and clinker) would be wiped out of the EU. BCG stresses that, even without auctioning in the EU-ETSⁱ, the proposed cap would still affect one third of the European cement industry. In addition, if the entire CO₂ cost were to be passed through to consumers – an unrealistic hypothesis as cement and clinker are already exposed to international competition – the European cement industry would still be vulnerable to carbon leakage. As a result, the international competitiveness of the European cement industry will be at high risk due to the cap proposed in the EU-ETS unless appropriate measures are taken to prevent unfair competition from products (cement and clinker) imported into the EU from regions with no carbon constraints and, therefore, no CO₂ costs. Moreover, the study indicates that the relocation of the European cement industry will have a negative impact on global emissions.

The full study is available from The Boston Consulting Group:

In September 2009, the European Commission released its draft list of sectors at risk of carbon leakage. This would entail 164 sectors and sub-sectors free carbon allowances from 2013 onwards according to stringent benchmarks. As expected, the cement industry qualifies as highly vulnerable to carbon leakage. The list has since approved by the European Parliament and the Council.

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