The EU should extend the free carbon allowances to industry

The top business lobby in the European Union has urged 'the bloc to maintain free carbon permits for industry, adding pressure on officials who are preparing an overhaul of the EU Carbon Market.

Brussels is redesigning its Emissions Trading System (ETS), which is the EU's main climate tool that forces factories and power plants to buy CO2 permits when polluting.

ETS is under increasing political pressure from leaders concerned about Europe's declining competitiveness. Some governments have called for a reduction in the ETS price, or even a suspension of the system.

The upcoming review will focus on whether to change the free CO2 permits system that reduces pollution costs for industry. These permits are due to be phased-out by 2034.

BusinessEurope, a trade association for the industry, said in a Tuesday position paper that "the Commission should reconsider its planned phase-out free allowances across all sectors".

The EU should instead expand the list of sectors that are eligible for free permits, it said.

BusinessEurope, whose member associations include national industry groups such as Germany's BDI, and Poland's Lewiatan urged the EU to?not make free permits contingent on companies investing in energy -savings.

This demand puts a lot of pressure on the Commission who designed the ETS in order to eliminate free permits and introduce a CO2 tariff for imported goods. Brussels said that keeping both systems would mean double compensation for domestic industry, violating World Trade Organization regulations.

A previously published internal document of the?Commission?showed that officials were weighing up options to overhaul free permits. This included making them conditional upon industrial decarbonisation.

The Commission plans to propose ETS revision by the third quarter of this year. Reporting by Kate Abnett. Mark Potter (Editing)

(source: Reuters)