Memorandum submitted by the British Cement
Association)
INTRODUCTION
1. The UK Cement Industry—The
British Cement Association is the trade and research organisation
that represents the interests of the United Kingdom cement industry
in its relations with Her Majesty's Government, the European Union
and relevant organisations in the United Kingdom. The members
of the BCA (Buxton Lime Industries, Castle Cement, CEMEX Limited,
and Lafarge Cement UK) are the major domestic manufacturers of
Portland cement, producing over 90% of the cement sold in the
UK.
2. Energy represents over 35% of the variable
cost of cement manufacture, and it is therefore a primary concern
of the industry to take all cost effective measures to improve
energy efficiency and thereby reduce its emissions of carbon dioxide.
3. Emissions Trading—The cement
industry supports the principle of emissions trading, which is
becoming an increasingly important component of its activities
through the UK Climate Change Levy, (UK CCL), and the EU Emissions
Trading Scheme, (EU ETS). Additionally, one Member Company is
a Direct Participant of the UK Emissions Trading Scheme, (UK ETS).
4. In the UK, BCA, its member companies
and Quinn Cement have been working with Defra, Dti, and their
consultants in relation to the development of domestic schemes.
At the European level, BCA and other European cement manufacturers
work through CEMBUREAU.
5. Through their parent companies, BCA
Members are involved in measures to reduce carbon dioxide emissions
under the World Business Council for Sustainable Development Cement
Sustainability Initiative, (WBCSD CSI). Additionally, Member Companies
have made their own voluntary agreements to the reduction of carbon
dioxide.
6. The BCA Response to earlier Consultations—The
British Cement Association submitted evidence relating to emissions
trading to the Environmental Audit Committee's inquiry, "The
International Challenge of Climate Change": UK Leadership
in the G8 and EU":[1]
and is preparing evidence on its inquiry "The EU Emissions
Trading Scheme: Lessons from Phase I".[2]
7. In addition, it has submitted evidence
on emissions trading to other select Committees of the House of
Commons[3]
and House of Lords.[4],
[5]
8. Together with other delegates from the
European cement industry, the BCA contributed to the Paris workshop
of the International Energy Association, IEA, on 4 and 5 September
2006. This was one of a series of similar events held with the
objective of informing the IEA in its role as advisor to G8 in
its discussions on climate change.
GENERAL COMMENTS
9. The UK cement industry is committed to
sustainable development, and a major component of its work in
this area is the minimization of the impact of its greenhouse
gas emissions. The UK industry is developing a carbon strategy,
that will enable it to make a major contribution to the >60%
reduction in greenhouse gas emissions by 2050.
10. In order to achieve this it is necessary
to have in place SMART targets (ie specific, measurable, achievable;
realistic; and time-bound) that enable all actors to make meaningful
contributions to overall 60% target.
11. At the recent International Energy
Association workshop in Paris, the European cement industry came
to the following conclusions:
11.1 the industry is supportive of
emissions trading;
11.2 experience with Phase I has demonstrated
that the principle of national allocation of allowances is flawed;
11.3 there is a need for long term certainty
of controls/rules associated with trading to allow industry to
make the necessary investment decisions for new plant. In addition,
it is important to avoid market distortions occurring as a result
of windfalls;
11.4 the legislation timescale must match
industry investment cycle; and
11.5 the cement industry believes that bench-marking
is the way forward, but current approaches are not ideal; the
technical potential of industry for reducing CO2 must
be taken into consideration.
12. The pre-requisites for the development
of meaningful measures on a global basis are:
12.1 Sound data on the current level of emissions.
12.2 Robust procedures for measuring, monitoring
and reporting emissions.
13. At the IEA workshop, it was identified
that this is not the case for nationally-generated data (on emissions
from cement manufacture) pertaining to India, China and Latin
America, although multi-nationals operating within these countries
have the necessary structure and procedures for achieving this
within their own organizations.
14. Through the World Business Council
for Sustainable Development's Cement Sustainability Initiative,
(WBCSD CSI), a global, externally accredited, monitoring and reporting
protocol has been produced, and is being used within Europe in
relation to the EU ETS and other measures.
COMMENTS ON
THE QUESTIONS
RAISED BY
THE COMMITTEE
What is the likely outcome from the meetings in
Nairobi in November? Will the Parties to the Protocol be able
to maintain whatever momentum they possessed at Montreal in 2005?
15. BCA believes that unless momentum is
maintained, the credibility of current GHG initiatives may be
seriously undermined and will be difficult if not impossible to
regain.
16. Vital to building on the current momentum
is the acceptance, by a substantially larger audience than at
present, of the urgency for meaningful GHG reductions to be achieved.
What is the likely shape of an agreement post-2012
which will (presumably) include at least all those currently signed
up to the Protocol? To what extent will the current stance of
the United States of America and other countries not signed up
to the Protocol influence the discussions concerning any post-2012
framework?
17. Although an increasing number of parties
are now signatories to the Kyoto Agreement, there appears to be
relatively little enthusiasm, even within Europe, for the adoption
of meaningful targets for GHG reduction.
18. It therefore seems likely that post-2012,
any modifications are likely to be incremental rather than significant
step changes. Unless there is acceptance, by a substantially larger
audience than at present, of the urgency for meaningful GHG reductions
to be achieved, global reduction in greenhouse gas emissions will
be insufficient to prevent significant climate change.
19. In addition, there will be a growing
imbalance in competitiveness between those countries that are
taking realistic measures to reduce their GHG emissions, and those
that do not. Commitment of the United States of America to such
a goal must be a primary aim of future negotiations, and current
discussions with the State of California indicate the possibility
of progress in this area.
20. BCA believes that global failure to
expand the application of GHG abatement through an ETS approach
will ultimately lead to the demise of basic domestic industries
such as cement manufacture where imports from non-regulated countries
will ultimately dominate. Within the United Kingdom, planned development
for two new manufacturing plants has been postponed, while investment
in plant for handling imported cement has increased.
21. Important lessons can be learned from
the first Phase of the EU ETS, and the BCA is preparing a submission
to the Environmental Audit Committee inquiry on this issue. In
the context of this enquiry, these lessons may be summarized as
follows:
21.1 The current national approach
to the allocation of carbon credits is illogical and anti-competitive.
Each Member State has a different Kyoto target to meet, and has
allocated the capped emissions in a different manner. Pan-European
sectoral allocations is one possible solution.
21.2 There must be an acknowledgement
that each industry sector has different technical and commercial
abilities to reduce GHG emissions. This will influence its ability
to contribute to an emissions trading scheme.
21.3 The European Emissions Trading
Scheme can provide a model for similar schemes elsewhere in the
world. However, such a replication will be of little value unless
trading between such schemes is possible. This would demand a
greater degree of parity in target-setting than in the current
European scheme, in addition to sound measurement, monitoring
and reporting schemes.
21.4 The current difference in the
price of carbon between the UK and the EU ETS scheme provides
a clear indication of the need for parity between trading schemes—UK
ETS: €2.2 to €5.9, (depending on quantity); EU ETS:
€16, (spot); €20, (forward, 2008).
What should be the position of the UK Government
and of the EU in the discussions? Is the UK Government and the
other governments of the EU in a good position to show leadership?
22. To date, the United Kingdom has demonstrated
leadership through the development of the UK CCL and ETS schemes.
This has resulted in a number of benefits:
22.1 The achievement of the targets
set, although there is less progress towards the domestic 20%
aspirational goal.
22.2 The establishment of a trading
registry, and experience of government and industry in trading.
23. However, there are still lessons to
be learned:
23.1 The UK ETS and EU ETS are directed
towards the same goals and provide a clear example of the "double
banking", contrary to the EU and UK aim of "Better Regulation".
This was highlighted by BCA in its response to the Hampton and
Davison enquiries. These two trading schemes are incompatible,
place burden on industry, and generate carbon credits that cannot
be effectively inter-traded.
23.2 Procedures within the UK are inflexibility
in relation to the operation of the EU ETS Clean Development Mechanism,
(CDMs), to the extent that UK firms are using through countries
such as Holland to develop their schemes, rather than the UK.
24. Whilst the record in achieving greenhouse
gas reductions of some Member States, including the United Kingdom,
places them in a good position to demonstrate leadership, this
does not appear to be the case for the EU as a whole.
25. The BCA welcomes the initiative of the
Secretary of State to develop an "UK Manifesto on the EU
Emissions Trading Scheme", with a view to encouraging others
in Europe and else where to adopt an effective trading scheme
as a means of reducing their greenhouse gas emissions.
26. In this context, the areas in which
BCA believes that there could be common ground between business,
environmental groups and government to shape the idea of a manifesto
for the future of the EU Emissions Trading Scheme include:
26.1 Development the current Kyoto
agreement to include additional countries, and more meaningful
targets, working towards the goal of achieving CO2
reductions of 60% or more by 2050.
26.2 Development of global emissions
trading based upon schemes that are compatible with the EU ETS.
26.3 Further development of the EU
Emissions Trading Scheme to incorporate lessons learned from Phase
I and the UK Climate Change Levy.
26.4 The requirement for a long term
view on carbon policy, and certainty on the measures to be implemented.
26.5 The development of a market that
functioned efficiently.
26.6 The requirement of a level playing
field.
26.7 The need for all sectors of society
to work to achieve reductions in carbon dioxide emissions.
26.8 Application of the "proximity
principle", internalizing the cost of carbon where possible,
ie it is preferable to achieve carbon reductions from BAT plant
in the UK, than to import products from plants outside the EU
with equivalent or worse environmental performance.
26.9 Sector-specific R&D for the
promotion of energy efficiency, that will lead to the investment
in technologies for energy reduction and product alternatives.
27. Whilst government is clearly best placed
to exploit such positions of leadership, it should recognize the
role that certain industry sectors might play.
28. For example, through the World Business
Council for Sustainable Development Cement Sustainability Initiative,
WBCSD CSI, an externally-verified, globally-agreed protocol for
the monitoring and reporting of CO2 emissions has been
developed. Such global initiatives will be necessary if an effective
emission trading is to be expanded beyond the European Union.
September 2006
1 "The International Challenge of Climate Change:
UK Leadership in the G8 and EU", HC 105, Ev 214. Back
2
To be submitted. Back
3
BCA Evidence to Environment, Food and Rural Affairs Committee,
Ninth report, Session 2004-05, Climate Change: Looking Forward,
HC 130-I. Back
4
BCA Evidence to House of Lords Science and Technology Committee,
"Energy Efficiency", 2nd Report of Session 2005-06,
HL Paper 21-II, 197, 213. Back
5
BCA evidence to House of Lords, European Union Committee, Sub-Committee
D (Environment, Agriculture, Public Health and Consumer Protection):
"The EU and Climate Change", 30th Report of Session
2003-04, HL Paper 179-I, 88 (written evidence), 92 (oral evidence). Back
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