The tiered approach to free allowance allocation for the EU ETS carbon leakage list is a concept which undermines the aim of the EU ETS and contradicts the October 2014 European Council Conclusions. It would not ensure the delivery of cost-effective greenhouse gas emission reductions, but on the contrary would have a deleterious impact on the wider European economy and would result in an increase in global emissions. A tiered approach would result in an inadequate level of carbon leakage protection for all ceramic sectors. Among others, we urge that the following key points are taken into account:
1) Carbon leakage risk – difficult to quantify accurately
2) Un-level playing field on EU internal and global markets
3) Evolution of trade and emission intensity
4) Unfair treatment for those sectors who have invested in carbon-efficiency
5) Increased compliance costs

1) Carbon leakage risk – difficult to quantify accurately
Carbon leakage (i.e. the loss of production, jobs and investment to third countries with no or less stringent carbon constraints) occurs if companies are not able to pass-through the carbon costs onto consumers without losing market share. It is extremely difficult to quantify such risks at sectoral or sub-sectoral levels, since it is affected by the strategies adopted by individual businesses and across a long- term business cycle. Due to the specific cost structure (where energy and climate costs account for a large share of total production costs) coupled with the wider impacts on industrial value chains across the European economy, all energy-intensive industries must receive full protection to guard against leakage risks.
2) Un-level playing field on EU internal and global markets
The introduction of a tiered list would lead to inadequate carbon leakage protection for most industrial sectors and a further major distortion of the playing field both globally (against non-EU ceramic producers) and in the internal EU market. The reduced mitigation and increased carbon costs associated with tiering will increase the competiveness of non-EU producers (at the expense of EU producers) allowing non-EU products to penetrate the EU market to a greater degree than at present. Potential competitive market distortions would occur between industrial sectors producing substitutable products, for example: clay vs. cement-based concrete, steel and glass construction products and ceramic wall/floor tiles vs. carpet, vinyl, laminate etc). Moreover, given the durability of ceramics, such a shift would neither facilitate carbon emission reductions, nor improve the ecological footprint of the materials used, nor have any environmental justification or benefit.

Furthermore, there are substantial differences in carbon leakage exposure between different Member States, as the trade intensity of sectors and sub-sectors varies markedly with geographic location. Naturally, trade intensity tends to be higher for countries located at EU borders and subject to significantly higher import pressures from adjacent, non-EU countries. It should also be noted that producers of clay construction products tend to fulfil significant economic and employment roles in these regions (often being the main local employer). Furthermore, costal countries show increased vulnerability to sea transportation of non-EU imports.
3) Evolution of trade and emission intensity
In addition to geographic location, both trade and emission intensity indicators will evolve over time (in response to changing market characteristics) and will be impacted by other policy instruments (such as trade or industrial policy), meaning it is extremely difficult to reach a fair tiering conclusion. The carbon leakage list, which is to be drawn for a 10-year period (2021-30), needs to retain the flexibility to accommodate such changes and developments.
In particular, the Gross Value Added (GVA) element of the emission intensity indicator is not appropriate to reflect the impact of carbon costs on the competitiveness of a sector. It is reported at company level (which may cover a diverse range of ETS and non ETS activities), whilst carbon emissions are declared at installation level. There is often a significant mismatch between the two data sets, such that inappropriate GVA figures would skew any tiering assessment. In addition, the use of GVA underestimates and penalises the impact of carbon costs on sectors which are labour intensive, such as ceramics (since GVA = Gross Operating Surplus + labour costs). In this context, to enable a correct and comprehensive assessment, we also stress the need for qualitative carbon leakage risk assessments to be available to all sectors (without application of the 0.18 threshold).
4) Unfair treatment for those sectors who have invested in carbon-efficiency
Sectors which have reduced their greenhouse gas emissions in the recent years and hence have decreased their emissions intensity, would be penalised for their early action by being classified into a lower risk category. In other words, tiering would create a disincentive and discourage sectors from reducing their carbon emissions.
5) Increased compliance costs
Increasing the complexity of the scheme will increase administrative costs and burdens for public authorities as well as the scheme participants. Increased compliance costs will disproportionately hit SME-led sectors, such as ceramics, the hardest.

It is essential that before any tiering proposal is further considered, it is properly assessed under a full impact assessment to ascertain the effects on EU jobs and sectors’ competitiveness, both against non-EU competitors and between competing sectors in the internal EU market. It must also be recognised that tiering is not a guarantee to prevent triggering of the Cross Sectoral Correction Factor (CSCF). The only justifiable approach to target free allocation could be to develop a more dynamic allocation system that better reflects recent production levels. In addition, the number of free allowances available to industry must be increased (within the confines of the overall scheme cap) to maintain the competitiveness of all energy-intensive industries.
We urge EU Member States, Members of the European Parliament, the European Commission as well as other interested stakeholders not to support any tiered approach to free allocation for the afore-mentioned reasons.

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HORARIO PONENCIAS

29 Junio 2016
8.30 h. Entrega de acreditaciones
9.00 – 9.15 – Apertura del Congreso. Bienvenida del Presidente de ANFRE
9.15 – 10.00 – Ponencia de Unesid. “ La Siderurgía en España. Influencia de China en materias primas”.
Alfonso Hidalgo
10.00 – 10.30 – Ponencia de IMCD. “ Percepciones y características de materias primas electrofundidas y
sinterizadas”- José Bayón Álvarez
10.30 – 11.00 – Ponencia de Calucem. “ Improvement of the binder system of Refractory castables with
advanced Calcium Aluminate Cements”. Nikolaus Kreuels, Holger Schaffhauser.
11.00- 11.30 – Coffee Break
11.30 – 12.00 – Ponencia Kerneos. “ Mechanisms of castable dispersión in cost adapted formulations”
Fabien Simonin.
12.00 – 12.30 – Ponencia Gorka Cement. “ Las propiedades de los hormigones refractarios de alto
rendimiento fabricados con nuevos ligantes minerales”. Wojciech Kagan y Tomasz Turski
12.30 – 13.00 – Ponencia Imerys. “ Raw material purity and its impact the performance of refractory
products”. Danilo Frulli
13.00 – 13.30 – Ponencia Arcichamotas. “ Desarrollo de chamotas y mullitas a partir de materias primas
nacionales”. Celestino González
13.30 – 15.30 – Comida
15.30 – 16.15 – Ponencia Oficemen. “ La industria española del Cemento”. Ricardo López
16.15- 16.45 – Ponencia Elkem. “ Productos innovadores de Elkem basados en Partículas Microesféricas”.
José Ramón Luna
16.45 – 17.15 – Ponencia Exclusivas energéticas. “ Mercados energéticos, la importancia del momento de la
compra y la información en las negociaciones con las compañías energéticas”. Marc Crespi
17.15 – 18.00/18.30 – Mesa redonda de Materias Primas. Cierre de Congreso

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Refwin: As we know, refractories market in Europe has been stable for years, with annual output ranging over 3.5-4.5 million tons during the last five years. How did it perfom in 2015 since it is a tougher year for the overall refractories industry worldwide?

The production in 2015 has increased in number of tons in Germany by 4% but the sales in euros has decreased by 3%, what shows a decrease in selling prices. In Spain, production has decreased by 3% and the positive figure comes from Poland with an increase in production of 2%, even though there was no increase in Million € sales in this country. In any case, final accumulated 2015 figures from PRE are still not available.

Even though demand was somehow stable in Europe, as you say, we must also consider that in the last 10 years, raw materials prices for Europe have increased above 30% and selling prices have decreased considerably, in most European countries, and therefore the tough environment is neither new nor uncommon for our industry. Cost reductions and innovative management has been and will be the key for refractory industry survival in Europe.

Refwin: Under the economic downturn, what are the main challenges or risks for European refractories manufacturers?

Overcapacity in several customer industries, especially steel, but also glass and cement is a big risk, as it seriously affects the demand. As a result there will be a pressure for cost reduction as customers are not so focused on high value added products but more to low price materials.

Environmental and trade regulations from the EU will continue to impact the European refractory industry and it is a big challenge to adapt to them, more even if we consider that other Regions are no so strict on their policies. It will create an unfair competition but, at the same time it will encourage the European industry to be more innovative and competitive.

Refwin: It is reported that there are some production halts and shutdowns in Europe resulting from China steel and refractories exports. How about your opinion?

China has added a big production capacity to their steel industry in the last decade to support their internal growth but now, due to a decrease on domestic demand, a huge quantity of steel has been brought to the international market at very low prices and this is resulting in steel plants shut-downs in Europe. We can establish a parallelism with the refractory industry itself, which will lead to a process of restructuring and concentration or close down.

In any case European Union must support a fair trade and equivalent  environmental regulations with China, as well as with others.

Refwin: How do you evaluate the advantages of European enterprises, product and technology?

Historically, most of the biggest refractory giants where European and that has given the European industry an advantage in R+D to produce high value added materials. Now there is an obvious trend for them to allocate their production facilities in China, where there is a better access to raw materials. In any case, 50% of European refractory companies are SME´s and  these will need to either grow, merge or focus on niche markets to make their business sustainable. An advantage for smaller companies is that it is easier for them to develop tailor made products and to be more customer service oriented, including the installation of
their own materials.

Refwin: In the medium term, what can we expect for the development trend of global refractories industry?

The fallen of the oil price brings uncertainty. It will mean a cost reduction in energy for industries like steel, aluminum and cement but it will also affect negatively because of the reduction in investments in Oil & Gas industry. If we look at specific countries, some American nations like Brazil, Venezuela, Mexico and Canada will be affected by an oil low price as well as Nigeria and Russia. As a consequence, global refractory industry will also be affected.

The refractory industry will become more global and consolidated. We need to focus our strategy on the circular economy, using more recycled materials as the all world should walk towards a sustainable and environmentally friendly one. I think that Africa, Middle East and Asia will continue to grow, and China will have a key role in the industry.

In my personal opinion, global companies with vertical integration and lower costs will prevail in one end, and those focused on high value added niches with a very customer oriented service will also be successful on the other end.

http://www.refwin.com/news/viewnew.asp?id=24349