Following the regulation passed by the Constitutional Council, UIC (the French chemical industries association) warns against the risk of imposing “double penalties”, which would threaten the very existence of a large part of France’s chemical industry.

The French chemical industry fully supports the introduction of legal and fiscal instruments designed to reduce greenhouse gases without affecting its competitiveness with respect to its competitors in the rest of Europe and beyond.

This is why the industry lent its full support to the initial carbon footprint project designed to fulfil the aims of the European ETS (Emissions Trading Scheme) Directive on greenhouse gas emissions quotas. Since most emissions generated by the chemical industry are subject to this Directive, the initial carbon footprint project quite rightly ensured that the industry would be exempted from the regulations, resulting in a fair distribution of effort among individuals and the various relevant sectors of the economy.

“Double penalties” are out of the question

Now that the Constitutional Council has ruled against this project, UIC has flagged a warning about the new initiative designed to take its place, as industrial businesses would be penalised on two counts for a single issue. This would present a major threat to the future of the chemical industry in France.

Implementation of the quota system under the ETS Directive involves significant costs in itself. Here too, emissions reduction is mandatory, thus requiring considerable investment in technology and in the purchase of additional quotas during periods of growth. UIC has calculated that from 2012, the ETS trading scheme will cost the chemical industry €250m per year, mainly due to purchasing additional quotas and having to make the necessary investments.

 
If a carbon footprint penalty is to be introduced in France in addition to the existing European penalty, applied to all emissions, this will add an extra €400m per year from 2010, i.e. almost 15% of the chemical industry’s total annual investment budget. Consequently, the total bill for carbon emissions will amount to €650m per year, from 2013.

 
An over-taxed, under-paid industry 

Chemical businesses in France are simply not in a position to bear this “double penalty”, which would represent 4% of the sector’s added value. The current level of taxation is already equivalent to 23% of its added value, compared to only 14% for its German counterparts.
 
The current economic status of the French chemical industry is critical (production levels in 2009 were 11.5% lower than in 2008) and the replacement of corporate tax with the new CET¹ is unlikely to result in any major savings. Therefore the chemical industry has warned the authorities of the danger of weighing its businesses down with this additional burden, and of the threat this poses to the future of the industry in France.

Carbon footprint and quota trading regulations must be clearly articulated

Consequently, UIC has expressed the need for businesses subjected to the ETS Directive to be subjected to the carbon footprint project for only three years (2010-2012). This is because, from 2013, these businesses will need to invest not only in the necessary technology to reduce their emissions by 20%, but also in the purchase of additional emissions trading quotas.
 
UIC agrees with the following elements of the regulations:

• a sliding scale of penalty rates for businesses subjected to the ETS, which varies according to their exposure to the risk of “carbon leakage” (i.e. industrial activity being moved away from France) and their degree of intensity of energy consumption; and

• a list of recognised costs which are free of carbon footprint so as to stimulate the necessary  investments for fulfilling the aims of reduced emissions, greater energy efficiency, and the ambitious environmental goals of the Grenelle de l’Environnement initiative.

 
“As already expressed during the États Généraux de l’Industrie (or Chemistry Today Conference), France must not allow itself to take decisions without fully considering the implications of global economic competition and the potentially destructive impact of said decisions on our country’s industry” stated Bernard Chambon, President of UIC.

 
The Chemical Industry and the Fight against Climate Change

Between 1990 and 2006, the chemical industry reduced its greenhouse gas emissions by 45%. It is now preparing to reduce them by a further 20% by 2020, in line with the ETS Directive.

Its products contribute directly to reducing greenhouse gas emissions, mainly because of energy savings achieved through the use of new generation insulating panels in the automotives and aeronautics industries. This has been made possible due to the introduction of lighter, higher-performance plastics and the development of innovative materials for use in the area of renewable energy and energy storage.

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¹ CET Contribution économique territoriale – a regional economy tax