Glass for Europe's contribution to the consultation on structural options to strengthen the EU Emissions Trading System

Glass for Europe is the trade association for Europe’s manufacturers of flat glass. Flat glass is the material that goes into a variety of end products and primarily in windows and facades for buildings, windscreens and windows for automotive and transport as well as glass covers, connectors and mirrors for solar energy equipment.

It is also used in smaller quantities for other applications such as furniture, appliances, electronics, etc.      

Glass for Europe has four members: AGC Glass Europe, NSG Group, Saint-Gobain Glass and Sisecam Trakya Cam and works in association with Guardian. All together, these five companies represent 90% of Europe’s flat glass production.

Glass products not only provide light, comfort, style, security and safety, they are also essential to energy-efficient buildings, houses and transport. Windows containing high-performance glass such as low-e insulating glass, which helps keep warmth in, and solar-control glass, which reflects unwanted heat away, help reduce energy consumption. Solar energy glass helps enhance the production of a renewable source of energy.

As a supporter of a move towards a competitive low carbon economy, Glass for Europe believes that it is highly important to ensure that the EU Emission Trading Scheme operates in the most optimal way to achieve the set CO2 emission reduction objectives while safeguarding the competitiveness of EU-based industries.

In that regard, Glass for Europe does not believe in the incompatibility of the two objectives since low carbon investments can be providers of competitive edges in energy intensive sectors where reducing energy costs is a permanent endeavour. At the same time, it must be recognised that acquiring CO2 allowances represents a cost to manufacturing industries, costs that, regardless of the amount of allowances needed and the CO2 prices, are not borne by most non-EU competitors.

Pursuing the two objectives of ensuring the competitiveness of EU-based industries and achieving the defined CO2 emissions reduction objectives through a carbon market nevertheless requires the combination of carefully crafted mechanisms, which do not limit themselves to implementing an artificially defined CO2 price.

Addressing the ‘CO2 price imbalance’ of the EU ETS does not require irreversible solutions

What is often described as ‘imbalances of the EU ETS’ are the low prices of carbon allowances. According to Glass for Europe, this situation is the result of two factors: first, the economic downturn, which has led to a reduction in production capacities in ETS-covered sectors and, second, the CO2 savings measures undertaken by ETS-covered industries, which are acting to deliver on the 2020 greenhouse gas reduction target. Both factors combined to drag down overall demand for CO2 allowances, thus affecting prices by way of market mechanisms.

The CO2 price imbalance is for the most part not a ‘structural problem’ requiring structural reforms, but rather a temporary issue arising from today’s exceptional circumstances. As a consequence, Glass for Europe would like to call for great caution. CO2 price forecasts have been repeatedly proven to be wrong over the recent years and the CO2 price is even more unpredictable in exceptional circumstances. As a consequence, Glass for Europe believes that action in this field should not pursue irreversible effects beyond 2020, when the situation might have drastically changed and the CO2 price may go back to reasonable levels.

Generally speaking, it is also important that EU policies are not based on static recession scenarios. Hopefully the recovery will arrive sooner rather than later and lead to manufacturing growth which will boost demand for CO2 allowances and therefore drive prices upward.

Therefore the temporary issue that the European Commission is trying to address does not require structural reforms that would have irreversible consequences beyond the third trading period. Regardless of their eventual merits (see annex I), options a. c. d. and e. are not suited to addressing the current issue.

Existing uncertainties to the EU ETS scheme need to be urgently raised

Glass for Europe takes note of the political will to address this ‘imbalance’, but firmly believes that, in case of a reform of the EU ETS scheme, it must be designed to dovetail with the EU objective to reindustrialise its economy, as stated in the recent Commission review of the 2020 flagship initiative on industrial policy.1 In light of today’s economic realities, any reform needs to translate into a strengthening of the competitiveness of EU energy-intensive industries, which low carbon investments alone do not guarantee in the medium term.

This is all the more acute in the flat glass industry, which is currently facing an unprecedented competitiveness challenge, despite the efforts undertaken to reduce the energy and CO2 impact of its manufacturing process and to bring innovative energy and CO2 saving products on to the market.

Consequently, any intervention leading to a CO2 price increase under phase III cannot be isolated from reflection on the industry’s ability to absorb extra costs while maintaining and strengthening its competitiveness2. This paramount competitiveness proofing is for the time being difficult for our industry to undertake due to three major uncertainties:

  • a possible economic recovery,
  • the level of the cross sectoral correction factor, under phase III
  • the exposure to carbon leakage status of ETS covered sectors beyond 2015

Glass for Europe takes the view that the last two uncertainties must be raised by the European Commission ahead of any additional measure in order to reconcile a potential regulatory intervention, meant to lead to a CO2 price increase, and the EU’s industrial competitiveness objective.

It could be an option to decide on the appropriate measure to take in 2015 when uncertainties are clarified.

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600450 Glass for Europe's contribution to the consultation on structural options to strengthen the EU Emissions Trading System

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