The European Union’s industrial greenhouse gas emissions are self-regulated through the market rather than the Industrial Emissions Directive. By so doing, Europe risks allowing climate neutrality to slip through the fingers of the market’s invisible hand’.

Alberto Vela reports on the need to reform the Industrial Emissions Directive and the EU emission trading system to include greenhouse gas emissions in their scopes

As the EU attempts to race towards climate neutrality by 2050, polluting industry seems not only to be the slowest off the mark but is also allowed to play by different rules.

The policy framework established by the European Union to clean up industry has strong potential, but there are loopholes that are being exploited by obstructionist players to curb the green transformation.

With the Industrial Emissions Directive (IED) and the Emission Trading Scheme (ETS), the main regulations governing this sort of pollution, currently under review, the time to plug these holes has come.

Decommodifying the climate 

The IED, which regulates emissions from around 50,000 large industrial installations in Europe, aims to prevent, and where not technically feasible, to reduce the environmental impacts of industrial activities: emissions, the use of resources (such as water, energy, materials or chemicals), waste prevention, production efficiency, etc.

This broad approach is meant to achieve a high level of environmental and human health protection by requiring industries to meet dynamic performance-based standards that evolve over time. 

However, although the IED tackles many kinds of air pollutants, it does not directly address greenhouse gas emissions and their climate impact. Instead, the regulation of greenhouse gas emissions is left to the EU carbon market established through the Emissions Trading Scheme.

Article 26 of the ETS prevents member states from setting emission limits for industrial installations in the operating permits, except to protect local air quality. Furthermore, energy consumption and efficiency standards are classified as ‘optional’.  

Room for scheming

These limitations are counter-productive and incompatible with the integrated approach of the IED to prevent pollution at source. They also provide little incentive to industries to invest in more environmentally friendly processes and reduce their greenhouse gas emissions at the source. 

In this way, the carbon market gives member states and industries a trap door through which to escape their climate obligations. This effectively leaves industrial emissions reductions at the full discretion of corporations.

With so much resistance to change, climate neutrality will slip through the fingers of the market’s supposedly invisible hand.  

Binding standards

The solution is to put in place the right policy mix that more effectively combines enhanced regulation through the IED with market forces under the ETS. 

This would allow the EU to get the best available standards-based policy instruments from the IED and carbon pricing under the ETS to work in concert with a meaningful carbon price, which should not be below €100/tCO2eq, according to Christian Schaible, Policy Manager for Industrial Production at the European Environmental Bureau (EEB). 

He said: “We need policymakers and industry to stop talking the talk about the climate crisis and to speed up the walk.”

Article 26 of the ETS needs to be urgently replaced with emissions targets, obligations to switch away from fossil fuels and binding energy efficiency performance standards, Schaible elaborates.

These parameters would be used to set a dynamic emissions cap based on best-in-class performance, Schaible insists.

The inclusion of greenhouse gas emissions within the scope of the IED does not entail duplication of regulation vis-a-vis the EU carbon market rules because both frameworks are complementary and follow di­fferent approaches.

In addition, unlike the IED, the carbon market does not use the “best available techniques” concept, so the IED’s best available techniques reference documents (BREFs) would be reinforcing and complementary regulation, not overlapping. Moreover, most industry benefits from free allocations under the ETS, meaning the carbon price does not even operate. 

Unmissable opportunity

The IED can and should be used to reinforce the market-based approach under the EU emissions trading scheme and vice versa. The ongoing revision of the IED is a unique opportunity that cannot be missed to ensure a new industrial policy framework that will help Europe achieve the goals of the European Green Deal. 

To urge the European Commission to strengthen environmental protection of IED, a group of legal, environmental and health NGOs recently launched a petition called Clean The Industry, which is currently gathering signatures. It’s time to include greenhouse gas emissions within the scope of the legislation and strengthen its key elements to ensure that it fulfils its full potential and yields the best environmental outcomes. 

New directions

EEB witnesses how the carbon market alibi is being used systematically over IED emission standards negotiations, where member states, concerned industry, NGOs and the European Commission exchange information to define best available techniques reference documents (BREFs).

The most recent controversial case took place during the kick-off meeting for the review of the EU BREF for the ceramic manufacturing industry (CER BREF), where industrial lobbies and some EU governments (especially Spain and Italy) were strong in defending the ETS limitations (Art 26 ETS and 9 of the IED). Once again, the mantra of “double regulation” was deployed to leave CO2 regulation up to the market, far away from the industry’s green benchmarking process. 

Nevertheless, the EEB delegation managed to achieve quite some progress thanks to a forward-looking shift of attitude of the European Commission’s European Integrates Pollution Prevention and Control Bureau (EIPPCB), being in line with the EU Green Deal ambition.

The European Commission, recognising CO2 emissions as an issue of key importance, decided the collection of emission data alongside information on the most effective techniques to reduce such emissions from energy-intensive ceramic manufacturing plants. Furthermore, information will be collected on ’best available techniques’ for energy sourcing and consumption, despite industry opposition, with the aim of establishing binding standards to come into force by 2030 at the latest.  

We see a decisive shift by the European Commission, as well as the willingness of progressive member states to deliver in this technical process. If the Commission maintains this new direction, the EU BREF process can be a key driver for environmental progress that will trust the power of facts rather than the invisible hand of a market that won’t regulate itself,”  

commented Aliki Kriekouki, Senior Technical Officer at the EEB
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