EU Energy-intensive Industries and Emissions Trading: Losers Becoming Winners?

FNI Report 10/2008. Lysaker, FNI, 2008, 20 p.

The EU Emissions Trading System (ETS) initially treated power producers and energy-intensive industries similarly, despite clear structural differences between these industries regarding pass through of costs and vulnerability to global competition. Hence, the energy-intensive industries could be seen as losing out in the internal distribution. In the January 2008 proposal for a reformed ETS post-2012, a differentiated system was proposed where the energy-intensive industries come out relatively much better. What is the explanation for the change taking place? Although power producers still have a dominant position in the system, the increasing consensus about windfall profits has weakened their standing. Conversely, the energy-intensive industries have become better organised and more active. This balance shift is first and foremost noticeable in several important EU-level stakeholder consultation processes and has contributed to learning  in the Commission about the need for differentiation. Energy-intensive industries have, however, also successfully utilised the national pathway to exert influence on Brussels policy-making. Finally, growing fear of lax global climate policies and related carbon leakage has strengthened the case of these industries further. The latter dimension indicates that although energy-intensive industries have managed to reduce internal distribution anomalies, external challenges remain.



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