In a new analysis of the proposed European Union emissions trading scheme, members of Europe's aluminium, steel and cement industries are likely to qualify for free carbon allowances. The allowances would compensate companies that find it harder to compete on an international level as they meet new carbon constraints. The analysis focuses on "carbon leakage" — the relocation of production to areas with less stringent carbon emissions standards. The report noted that aluminium, steel and cement producers are especially vulnerable.

Beyond suggesting free carbon allowances, the same report set out a three-part risk assessment plan to measure the threat of carbon leakage. First, potential price increases must be calculated, including both costs incurred by a manufacturer's own emissions and by the higher cost of electricity. Second, the assessment must consider such factors as transportation costs and the geographical market for the product in question. Third, the effect of an new international climate treaty expected to be adopted next December must be considered.

The commission plans to continue its investigation and finalize a list of sectors considered at risk due to carbon leakage by 2011, despite efforts by members of the European Parliament to speed up the process.

Photo — mikko_l