Energy markets and value chains

Energy markets and value chains

Gist of the opinion

The opinion examines the impact of energy, as a production factor, on industrial value chains in Europe. It gives an overall picture of the situation in various energy markets and their impact on energy-intensive industries. It also goes through the adaptation strategies of industry and underlines the absolute interdependency of the whole industrial chain. In particular, this opinion stresses the impact of energy policies on industrial value chains on a global context.

Because of the high share of energy which is inevitably required to produce basic materials by conversion from raw materials, the basic material industries are strongly affected by any change of energy costs or by energy taxes or similar financial measures. However, the energy-related footprint of basic materials has to be attributed to the whole industrial value chain and cannot be sensibly addressed separately.

The Committee's opinion is that economic growth and innovation in European economy can only be achieved on a viable industrial basis. Sustainable energy and climate policy must be structured in such a way that it achieves its aims while at the same time retaining the industrial value chains as the backbone of the European economy, even when the costs of the damage associated with climate change are taken into account.

The Committee takes note of the changed environment for energy markets and recognises the need to mitigate anthropogenic climate change by cutting GHG emissions. The costs of climate change and cost-efficient approaches of reducing the greenhouse gas emissions are important issues in the climate policy discussion.

The energy-intensive industries must indeed contribute towards energy and climate policy aims. The requirements, however, must be properly adjusted since excessive cost burdens lead to considerable competitive disadvantages in a global business environment. By their nature, the basic material industries are highly sensitive to the impact of energy costs. Therefore energy and environment policy instruments must be carefully examined and designed in terms of the extent to which they impact on the competitiveness of these industries.

Concluding an ambitious international climate change agreement is of utmost importance for the fight against climate change. It has to lead to emission reduction obligations for all major emitting countries (according to the principle of common, but differentiated responsibilities), including the energy-intensive industries in order to ensure fair competition and a level playing field. In the absence of such an agreement, free allocation of allowances to energy-intensive industries at risk of 'carbon leakage' should be considered in the framework of the EU ETS in order to counter risks to the competitiveness of industrial location and economic growth in Europe. The final choice of allocation method should be performance-based (such as benchmarking), on the basis of best available techniques.

To pave the way for a long-term contribution to the aims of energy and climate policy, the Committee strongly recommends focusing on research and development of new technologies, particularly because the available production processes are largely mature. Where technical solutions do not yet exist, the requirements of higher energy efficiency and emission reduction targets cannot be fulfilled.