The EU ETS and the Circular Economy

We need regulatory coherence between the various EU objectives

The Commission’s proposal to reform the ETS aims at drastically reduce the number of sectors on the carbon leakage list, by applying a purely one-size-fits-all quantitative formula that multiplies trade intensity by emission intensity. This approach, however, ignores the potential strategic importance of these sectors in providing solutions towards the EU objectives of the circular economy.

The EU copper-producing industry is championing the returning of end of life products back into recovery and recycling. Through significant capital investments, the industry has successfully contributed to achieving its zero-waste goal and is meeting 50% of the European demand for copper through recycling.

The European copper industry is being punished for their good performances towards the circular economy

Recycling copper is a very efficient way of reintroducing a valuable material back into the economy. It requires up to 85% less energy than primary production. Around the world, it saves 100 million MWh of electrical energy and 40 million tonnes of CO2 annually.

The process undertaken by the EU smelters in order to recover and recycle more end-of-life complex copper scrap is carbon-costly. Increasing the recycling rate to contributing to the circular economy will therefore lead to more CO2 emissions. Therefore, increasing the cost of carbon – as it is foreseen in the ETS reform by reducing the number of free allowances – means having to pay for the positive contributions made to the EU circular economy. This, in turn, will increase the risk of carbon leakage.

This is why the option for qualitative considerations should be maintained. While it is challenging to set technically sound and achievable “fallback” benchmarks for the small, heterogeneous copper sector, it is important that they take into account the goals of the circular economy (to recover and recycle more end-of-life scrap), all of which require substantially more energy. A one-size-fits-all quantitative approach is too simplistic and will inevitably lead to discrimination between sectors.

The European Copper Industry calls for future assessment methodologies to prevent carbon leakage to include qualitative considerations, such as the price taker element used in the EU State Aid Guidelines.

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