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27 Sep.2016

Tiered approach impacts seriously the majority of energy-intensive industries in the EU and their associated value chains

We, the signatories of this paper, energy-intensive sectors representing about 2 million jobs in the EU and comprising many SME’s, are under direct impact of the EU ETS and are deemed exposed to carbon, investment and employment leakage.

We urge Members of the European Parliament to acknowledge the importance of our sectors for the EU economy, in particular for European jobs, and all their economic value chains by rejecting any “tiered approach” to free allocation and voting against it.

We strongly oppose any “tiered approach1” and continue to advocate for full (100%) free allocation up to emissions efficiency benchmark levels for all sectors.

We maintain that:

  • The tiered approach would reserve free allowances for some sectors at the expense of others. It would go against the principle set in the October European Council Conclusions that best performing companies in the ETS carbon leakage sectors should not bear additional carbon costs. Fairness should be a key principle of policy making. Jobs in one sector are neither more nor less important than those in other sectors.


  • The proposed tiering has no economic logic. It is based on flawed assumptions that the European industrial sectors could pass on costs without losing market shares and lacks any cost comparison between a given European and a non-European sector.


  • Nor does it have proven environmental logic. It would not deliver decarbonisation through investment and innovation but rather drag those investments outside Europe. In fact, the tiered approach punishes a sector investing in carbon emission reductions by giving a lower protection against the risk of carbon leakage as a direct consequence of these investments.

 

  • Moreover, it could well prove to have been unnecessary to prevent a Cross Sectoral Correction factor (CSCF). Many analysts’ reports, including the Commission’s Impact Assessment, predict that there will be sufficient allowances available to ensure full free allocation at the benchmark levels and there is no grounds for referring to discriminatory instruments.

Our industries have made several alternative proposals to tiering, which include a lower auctioning share (52% instead of 57%), the application of a dynamic allocation and a fully flexible reserve for growth that would deliver full and effective carbon leakage protection without the need for arbitrary discrimination.

In conclusion, we ask you to create a framework that gives all sectors an equal opportunity to thrive in Europe and not to pick and choose which sectors stay in Europe.

Signatories:
1. Cefic - European Chemical Industry Council
2. Cembureau – European Cement Association
3. Cepi – Confederation of European Paper Industries
4. Cerame-Unie - European Ceramic Industry Association
5. Epmf – European Precious Metals Federation
6. European Copper Institute
7. Esga – European Special Glass Association
8. Esta – European Steel Tube Association
9. EuroAlliages - Association of European ferro-Alloy producers
10. Eurogypsum - Gypsum Industry
11. Eula – European Lime Association
12. Exca - European Expanded Clay Association
13. Feve – The European Container Glass Association
14. Association of the world's Primary Nickel Producers
15. International Zinc Association

1 In fact, there is no single approach on tiering, as there is no sound basis to build a tiered approach in the EU ETS.

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22 Sep.2016

Hydrophobic Deep Eutectic Solvents promise to play key role in making paper industry more sustainable

PhD research carried out as part of the PROVIDES project has recently resulted in promising new sustainable hydrophobic Deep Eutectic Solvents (DESs). These hydrophobic DESs could successfully replace chemical solvents in the paper recycling process in order to remove transition metal ions such as iron and manganese from paper pulp.

Coordinated by ISPT, the industry-driven PROVIDES project focuses on developing environmentally friendly alternatives to chemical solvents in the European pulp and paper industry. It is financially supported by 20 industrial partners.

Deep Eutectic Solvents (DESs) are nature-based, renewable, biodegradable, low-volatile and cost-effective. When used for producing high-quality cellulose fibers in paper-making applications, they are extremely energy efficient, particularly because they do not require high temperatures. They offer a groundbreaking new method for the pulping of many different lignocellulosic materials for producing chemical pulp, pure lignin and other chemicals.

Read the full press release by ISPT here

DES was the winning project of the Two Team Project, a CEPI project thanks to which the industry identified eight breakthrough technologies that would help decarbonise papermaking. Read more about it here.

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19 Sep.2016

European Paper Week 2016 registration is open

European Paper Industry – Navigating towards the future

The Confederation of European Paper Industries (CEPI) has kicked off registration for European Paper Week (EPW), taking place on 22-24 November in Brussels. The event will offer for the 18th time a unique opportunity to liaise with the movers and shakers in the European paper industry. This year, it promises exciting new features: more networking opportunities with a welcome cocktail, a new location at the Radisson Blu Royal Hotel in Brussels city centre and a focus on the key topic of future employee skills and education, to name but a few.

“European Paper Industry - Navigating towards the future” will be the overriding theme. Our sector is navigating in stormy weather, facing a significantly challenging political and economic climate. However, it has a clear vision for 2050. Indeed, EPW will see the launch of a reviewed 2050 Roadmap, examining 80% decarbonisation with 50% added value, five years after the highly-popular first edition.

CEPI is honoured to have Financial Times chief foreign affairs commentator Gideon Rachman, as the moderator of the main EPW session. He and London Business school professor Lucrezia Reichlin will give valuable insights on the global economy and its impact on our industry. In addition, we will look deeply into the means to ensure the sector receives the necessary future investments.

This year’s event will also be the first for recently-appointed CEPI Director General, Sylvain Lhôte, at the helm of the association since the beginning of September. With many years of experience in Brussels and other industries and a newcomer in the sector, Sylvain is ready to make a mark, starting at EPW.

A detailed programme and registration information are available at www.cepi.org/epw. If you need any further information don’t hesitate to email us at epw@cepi.org.

The event will be held in conjunction with the PPI 2016 Awards, taking place on 21 November.
 

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15 Sep.2016

CEPI joins demand-side flexibility platform

CEPI has joined I.D.E.A.S., a European informal multi-stakeholder platform for advocates of demand-side flexibility. I.D.E.A.S stands for:
• Improve energy efficiency
• Develop new business models
• Empower consumers
• Address security of supply and competitiveness
• Support a cost-efficient integration of renewable energy sources

The aim of the platform is to contribute to the development and implementation of European policies and initiatives to drive the deployment of flexible demand side resources in support of EU’s goals in energy and climate, security of supply and competitiveness.

The platform consists of the following European industry associations and civil society organisations:

  • European Building Automation Controls Association
  • CECED
  • CEPI
  • COGEN Europe
  • E3G
  • ECOS
  • ESMIG
  • EDSO for smart grids
  • European Climate Foundation
  • European Copper Institute
  • Smart Energy Demand Coalition
  • BNE
  • Orgalime
  • CAPIEL
  • European Heat Pump Association
  • Solar Power Europe
  • RAP
  • IFIEC Europe
  • EREF - European Renewable Energies Federation
  • Wind Europe

We are looking forward to sharing intelligence and expertise and exchanging on possible common actions.
 

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07 Sep.2016

Sylvain Lhôte takes up duty as Director General

As of 5 September, Sylvain Lhôte is at the helm of CEPI. Appointed by CEPI’s Board in June 2016, Sylvain brings 25 years of government and public affairs expertise working with leading material technology and manufacturing industries on climate and energy policies, sustainability and industrial affairs, as well as competition and international trade issues.

Prior to joining CEPI, he was Vice-president Governmental Affairs and Business Development in the EMEA Region for Alcoa, the aluminium and metals engineering group. He previously directed EU and sustainability affairs for the Borealis Group, in the base chemicals and plastics industry. He also chaired FleishmanHillard’s Public Affairs practice in Europe and headed its environment department advising major trade associations and industries in the field of sustainability policies and PA strategies. Sylvain started his career in parliamentary cabinets at the European Parliament and at the French National Assembly.

A French national, Sylvain studied political sciences, international law and business administration at Strasbourg and Paris-Sorbonne Universities and post-graduated cum laude in European Administration at the College of Europe in Bruges.
 

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04 Jul.2016

European paper industry: Structural change continues, overall positive performance

In 2015, the European paper industry’s performance in total was second best in the world after China, with a stable production and increased consumption compared to 2014. The packaging sector’s production continued to increase whilst graphic paper (newsprint, printing and writing paper) maintained its recent decline. This and other figures can be found in the Confederation of European Paper Industries (CEPI)’s recently-launched 2015 Key Statistics brochure, which gives a clear picture of the industry’s performance last year. The report includes data on production, consumption and the trade of pulp, paper and raw materials, as well as on energy and environment.

Here are the main highlights of the report:
- CEPI members produced 90.9 million tonnes of paper and board. This corresponds to a slight decrease of 0.2% in 2014 and relative stability over the last three years. The operating rate for 2015 was 91.2%, up from 89.7% in 2014.

- Graphic grades (newsprint, writing and printing paper) represented 38.8% of all paper and board produced in Europe in 2015, packaging grades 49.0%, sanitary and household papers 7.9% and speciality grades 4.3%.

- The overall output performance of CEPI countries in total was slightly better than in most other major traditional paper producing regions of the world, with a fall in production recorded in all regions except China. Paper and board production decreased in Brazil (-0.5%), South Korea (-0.9%), the USA (-1.0%), Japan (-1.0%) and Canada (-7.4%). Production in China rose by 2.3% compared to 2014.

- Consumption rose for the second year in a row by 0.5% compared to 2014, totalling 77.4 million tonnes. The economic recovery observed in the EU28 and the euro area in 2015 - annual GDP increase by 2.0% and 1.7% respectively (source: Eurostat) - had a positive impact on paper and board demand.

- CEPI countries maintained an overall positive paper and board trade balance (exports exceeding imports) of 13.5 million tonnes in 2015, compared to 14.0 million tonnes in 2014.

- Market pulp production fell by 0.7% compared to 2014, with an output of 13.1 million tonnes.

Ernst & Young issued a limited assurance statement on the data quality rating that CEPI carried out on its core indicators in the statistics report. You can download it as well as the Key Statistics report in PDF format from CEPI’s website at www.cepi.org/topics/statistics or request your own paper copy by sending an email to mail@cepi.org.

More detailed statistical information is available to non-CEPI members by subscription. A full report can be ordered by contacting Ariane Crèvecoeur, by telephone +32 (0)2 62749 35 or email at a.crevecoeur@cepi.org or Eric Kilby at e.kilby@cepi.org.
 

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23 Jun.2016

European paper industry announces new Director General, Sylvain Lhôte

CEPI (Confederation of European Paper Industries) hereby announces the appointment of Sylvain Lhôte as its new Director General. As of 5 September 2016, Sylvain Lhôte will take over from the current Acting Director General, Jori Ringman. Mr Lhôte is currently Vice-president Governmental Affairs in Europe for Alcoa, the leading aluminium and light metals engineering group.

“We are very pleased to welcome Sylvain Lhôte on board and are sure his leadership and expertise will help CEPI reach ever higher levels of excellence. We are thankful to both Marco Mensink for his work during his mandate and Jori Ringman, who ensured the smooth functioning of the organisation until the new Director General was found”, said Peter Oswald, CEPI Chairman.

Prior to joining Alcoa, Sylvain directed EU and sustainability affairs for the Borealis Group, in the base chemicals and plastics industry and led a global CSR programme for the company in the EMEA region. He previously chaired the Fleishman-Hillard Public Affairs practice in Europe and headed its environment department, advising major trade associations and industries in the field of sustainability policies and public affairs strategies. Sylvain began his career in parliamentary cabinets at the European Parliament and the French National Assembly.

French national, Sylvain studied political sciences, international law and business administration at Strasbourg and Paris-Sorbonne Universities and post-graduated cum laude in European Administration at the College of Europe in Bruges.

For more information, please contact Annie Xystouris at a.xystouris@cepi.org mobile: +32(0)486243642.
 

Note to the Editor

CEPI aisbl - The Confederation of European Paper Industries
The Confederation of European Paper Industries (CEPI) is a Brussels-based non-profit organisation regrouping the European pulp and paper industry and championing the industry’s achievements and the benefits of its products. Through its 18 member countries (17 EU members plus Norway) CEPI represents some 505 pulp, paper and board producing companies across Europe, ranging from small and medium sized companies to multi-nationals, and 920 paper mills. Together they represent 23% of world production.

www.cepi.org
mail@cepi.org
@Europeanpaper
 

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31 May.2016

The day Aristotle said: “The Tiered Approach doesn’t work”

This article appeared in the Parliament Magazine issue no 435, 30 May 2016

Aristotle often used the reduction ad absurdum to show the untenable consequences one would ensue from accepting the item at issue. If he was alive and would hear about the Tiered Approach in the ETS review, we would probably have engaged in the following dialogue:

Aristotle: What is the purpose of proposing a Tiered Approach?
N.Rega: To avoid the so-called cross-sectoral correction factor (CSCF) – a uniformed cut in free credits allocated to each industrial installation, should the total demand excess the total availability of free credits.

How would a Tiered Approach work? Sectors are clustered in different groups, and receive a different level of free credits. How would sectors be clustered?
On the basis of the different degree of the sectors’ exposure to the risk of carbon leakage, whereby industrial production would relocate outside the EU due to climate policies.

And how could different exposure levels to such risk be evaluated?
For every sector we should assess the impact of carbon pricing in and outside the EU, the carbon intensity of EU and non-EU production, specific trade patterns, products’ price elasticity, and so-forth.

Have any of these analyses been used in the proposed tiered approach?
Not really. Sectors have not been compared with their respective non-EU sectors. Instead, they have just been all lined up and assumed that the higher a sector strikes in terms of combined carbon and trade intensity, the higher it is exposed.

This is counter-intuitive: when a sector reduces its carbon intensity, shouldn’t it increase its exposure to the risk of carbon leakage?
Indeed, as relocation outside the EU in countries with less stringent carbon constraints would then increase global carbon emissions.

So far, the methodology behind the Tiered Approach doesn’t look very sound-based.
Indeed, one could argue that it is rather arbitrary and discriminatory.

Could it be legally challenged?
In case of rigid boundaries in defining the carbon leakage groups, companies not receiving the highest level of free credits will most likely go to court.

Would these companies have a chance to win?
Most likely, given the flawed methodology being used.

What would happen then?
Sectors would retroactively receive additional free credits at the highest level.

So, the risk of triggering the CSCF won’t be avoided.
Indeed.

And what if the boundaries were not be rigid but rather flexible?
In this case, sectors initially allocated in some clusters would still be allowed to prove their higher need for protection, via the so-called qualitative assessment.

But if sectors will be granted additional free credits, where would these come from?
Like in past cases, the Commission would have to take a relevant amount of free credits upfront and park them aside, in case all sectors would apply and receive full protection.

Does it mean that sectors will be deemed to receive 100% free credits?
Yes, as allowances potentially needed would not be allocated.

So, also in this case, the risk of triggering the CSCF won’t be reduced.
Indeed. Additionally, a generalised use of the qualitative assessment would exponentially increase both the administrative burden and the lack of transparency in the decision-making process.

Thanks to Aristotle, we have come to a straight-forward conclusion: the Tiered Approach defeats its original purpose, namely to reduce the risk of triggering the CSCF. With additional drawbacks impacting the stability, predictability and transparency of regulatory framework.

A better way to cost-effectively reduce industry’s demand for free credits is to focus instead on developing rules to stimulate and reward investments in low-carbon technologies. In this respect, tiering does neither. Something that even Aristotle would agree upon.
 

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31 May.2016

What next for our industry? A recarbonisation revolution

This article was written by Petri Vasara from Pöyry Management Consulting. Pöyry is one of our Partners. Read more about them here

Our industry faces exciting times ahead. The world needs a ‘recarbonisation revolution’ of global material flows as we must increase biomass and decrease non-renewable materials such as metals and minerals in the movement of global trade. Additionally, recarbonisation requires moving from fossil carbon to biocarbon. The re-carbonisation revolution offers a simple way to define the bioeconomy: re-carbonise materials, de-carbonise energy.

Society’s concern with climate change has shaped our language to always refer to “decarbonisation” policies and attempts to create a “low carbon economy”. Whilst these sentiments are honourable in their intention, they neglect a key truth – that carbon is the basis of life. The only area where the removal of carbon should be focused is in fossil-based carbon fuels. Outside of fuel - in a vast range of other materials - carbon is needed in the form of biomass to create a truly renewable and sustainable loop.

What does a recarbonisation revolution mean for our industry?

Imagine a solution where we recarbonise just 1% of the market of some key global material flows. The packaging market in 2013 was worth 590 billion euros alone with plastics and fibre producing 220 and 215 billion euros in turnover respectively. Therefore, if 1% of the packaging market which is currently created from fossil plastics was moved to biopackaging, it would equate to 6 billion euros in turnover.

Likewise, plastics correspond to about 300 million tons, meaning that moving 1% from fossil plastics to bioplastics would represent about 3.5 billion euros of new biobusiness. Finally, imagine that 1% of the global volume of fossil fuels is taken and substituted with biomass, and that biomass is processed further in the forest industry – this would mean a green recarbonisation of a part of the world’s materials flows. This could result in an estimated 30 billion euros of annual new biobusiness.

When combined these three 1% substitutions would provide an estimated 40 billion euros per annum to a new sustainable bioeconomy. The calculations above can be debated of course, but they are indicative of the potential size of the opportunity.

Why now?

Whereas in the past this level of change may have been implausible, new developments in technology and materials sciences have made it both possible and desirable. Four materials - Lignin, sugar, nanocellulose and graphene - stand out as examples of where recarbonisation can be truly effective. The first three are carbon-based and graphene is pure carbon meaning they have the potential to radically change the materials world.

As well as being technically possible, there is also a demand for these solutions from some of the world’s global brands such as IKEA, Toyota, Procter & Gamble and Coca-Cola. All have their own reasons for pushing biomaterials, both for functional or cost-related reasons. For example, biocomponents in cars weigh and cost less than metal or companies view it as a way of building brand image.

No revolution is easy, and the ‘recarbonisation revolution’ is no exception, but there is scope for many winners. Whilst alliances across sectors are not yet the norm, a transformation of the value chain must and is taking place. Companies operating in our industry must think ahead and align to benefit from this transformational shift.

We are only at the beginning of the recarbonisation journey and in many applications plastic is still much more competitive. However, even achieving a mere one per cent of the market would be a business worth billions of euros; the foundations are solid for this to happen and companies and brands from different sectors are already seriously looking at a biobased future. This is a positive sign for us all as the recarbonisation journey gets underway.
 

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23 May.2016

Strong industry concerns on the ITRE Draft Opinion on the EU-ETS Reform post-2020 and other thought experiments putting industries at risk of carbon leakage

Tiering is not the solution

The undersigned energy-intensive industries express their strong concerns regarding the proposal to introduce “tiered approaches” to carbon leakage protection, as introduced in the ITRE Draft Opinion.

According to all forecasts, “tiering” is not needed.

All forecasts, including the Commission’s Impact Assessment, predict that a shortage of free allowances is highly unlikely during phase IV of the ETS. A shortage can be as good as excluded if the proposed share of allowances to be auctioned were properly calculated. Those 700 million ‘unused’ allowances of phase III (that were earmarked for free allocation but remained unallocated due to business closures or a lack of new entrants) should remain available and within reach if needed for production, recovery and growth during 2021-2030. Thus, the ETS reform can deliver the agreed emission reductions cost-effectively, encourage best performance through safeguarding full and effective carbon leakage protection to the benchmark level. There is no need for exposing parts of EU industry to undue carbon costs.

The ITRE Draft Opinion proposes to expose a lot of industrial sectors to the risk of carbon leakage.

Burdening companies with undue carbon costs by cutting free allocation would divert resources from modernising and upgrading industrial infrastructure, thus exacerbating the risk of investment leakage to countries with less stringent climate policies. This does not send a positive signal to European
industry to accompany its decarbonisation investments and undermines our faith in, and support for, the ETS as a cost-effective means of reducing carbon emissions.

“Tiering” is based on theoretical assumptions and distorts the internal market

The proposed tiering has no environmental or economic justification and is based on flawed assumptions (“cost pass-through”) of unpredictable market dynamics. It reserves free allowances for some sectors at the expense of others. It goes against the principle set in the October European Council Conclusions that best performing companies in ETS carbon leakage sectors should not bear further carbon costs. Indeed, tiering would ensure that even best performers in most sectors would bear significant carbon costs and expose them to carbon and investment leakage.
Statistical indicators vary - sometimes greatly - with time and depend on many factors (market conditions, company structures, exposure to international trade, etc.). Hence, the setting of thresholds would be arbitrary and would risk not reflecting future needs and leakage risks of the sectors.

As a result, we call on the Members of the ITRE Committee to react strongly to the Draft Opinion, so that the ETS reform delivers full and effective carbon leakage protection without the need for arbitrary discrimination. Jobs in one sector are neither more nor less important than those in other sectors.

We call for an approach based on realistic benchmarks, allocation based on more recent production data and an adequate reserve that ensures full allocation to benchmark levels. Fairness and solidity should become key principles of policy making. We ask you to create a framework that gives all sectors an equal opportunity to compete and thrive in Europe, and not to pick certain sectors to stay in Europe.

 

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