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Financial Times: Industrialists issue dire warning over Europe’s green agenda

By Peggy Hollinger in Paris
Published: January 21 2008 02:00 | Last updated: January 21 2008 02:00

Europe’s plans to cut greenhouse gas emissions, due to be unveiled as part of a radical green agenda this week, risk working against the environment and could destroy the competitive position of European industry, say the region’s leading industrialists.

The warning comes in a letter to Gunter Verheugen, European Union commissioner for enterprise and industry, from Jeroen van der Veer, chief executive of Royal Dutch Shell and chairman of the energy and climate-change working group of the European Roundtable of Industrialists. ERT is a group of about 50 of Europe’s biggest industrial companies with aggregate sales of about €1,600bn.

The letter warns against the EU’s plans to introduce an auction system for carbon certificates to replace the current free allocation of permits on a country-by-country basis.

The ERT says the plan could encourage undesirable protectionist measures, such as import taxes on goods from countries without similar schemes, and could severely damage the competitiveness of European industry by imposing costs that cannot be passed on to consumers.

Mr van der Veer said that while the ERT supported a carbon trading scheme, industrialists believed that Brussels was moving too quickly. “We are concerned that we might have a system that if you look at Europe in isolation could work, but the reality is that Europe is not isolated. We may destroy capacity here and import those goods from somewhere else and those imports might be even worse [in terms of carbon emissions].”

The ERT’s concerns are shared by politicians and the wider business community as Brussels prepares to unveil on Tuesday the most extensive overhaul yet of the EU’s green agenda. Member states will on Wednesday receive binding targets on renewable energy usage.

The Breugel Institute, a Brussels think-tank, warned last year of a “real risk that business will resort to regulatory arbitrage, which will entail a shift in where emissions take place but no reduction in global emissions”.

Europe’s relatively high exposure to carbon-intensive industries would put its goods at a disadvantage to those from the US and China, which do not price carbon, the institute said.

Brussels has said it would review the trading system in 2011, but many fear this pledge only creates uncertainty.

Van der Verr letter to Mr Verheugen:

vanderveerletter17jan08.pdf

Copyright The Financial Times Limited 2008

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