European environmental plan would devastate heavy industry

EU plans to reduce emission caps in all 25-member nations

By Tom Stundza -- Purchasing, 1/9/2008 9:02:00 AM

Environmental proposals in Europe could dislocate global supply of aluminum, steel, oil defining, petrochemicals and cement or, at the least, trigger huge price increases by producers to cover costs. European Union officials acknowledge in documents obtained by the Financial Times that plans to tighten up the rationing of greenhouse gas emissions will contribute to the loss of some heavy industries from the bloc.

Europe's aluminum producers are among those unlikely to be able to absorb increased costs resulting from proposals contained in a draft European Commission directive to widen the scope of the bloc's emissions trading scheme and reduce the permits it allocates. Steel, cement and chemical makers also would need to raise prices by between 5% and 48% to cover costs, according to internal papers obtained by the Financial Times.

The European Union’s environmental commissioner, Stavros Dimas, announced in late October that one complicated EU-wide emissions cap would cover manufacturing plants from 2008-2012 and a stricter one from 2013.

Currently, the 25 member states set their own caps, which are approved by EU headquarters in Brussels, but the new rules will cut emissions by more than 10% through 2012, which Dimas says “will constitute an important contribution to meeting our Kyoto target." The Kyoto Protocol is a protocol to the international convention on climate change with the objective of reducing greenhouse gases that the EU has signed; the U.S. has not.