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Paper industry unhappy at carbon allowance proposals

The paper industry has criticised a proposal from the UK and French governments for certain industrial sectors to be allocated more free carbon allowances than others.

A discussion paper issued by the governments on the European Union Emissions Trading System (EU ETS) is said by the paper industry to be using “questionable” assessments to advocate different allowances for each sector from 2020.

The Confederation of Paper Industries (CPI) has recommended the current equal treatment between all carbon exposed sectors be continued, saying tiered allocation was “unjustified from both an economic and a fairness perspective”.

“The proposal’s aim is to ensure adequate protection against the risk of carbon leakage. However, it reduces the free allocation to the vast majority of industrial sectors, without providing any evidence on the impact of the resulting additional costs on their competitiveness.”

It says the proposal also “penalises competitive industries investing in low-carbon technologies” and “hampers innovation”.

Of the 29 UK mills currently in the main EU ETS, 22 were already short of allowances in 2015, according to the CPI.

Companies receive or buy emission allowances to trade with one another as needed. They can also buy limited amounts of international credits from emission-saving projects around the world.

After each year a company must surrender enough allowances to cover all its emissions, otherwise heavy fines are imposed. If a company reduces its emissions, it can keep the spare allowances to cover its future needs or sell them to another company that is short of allowances.

CPI director of energy and environmental affairs Steve Freeland said the paper industry might get all the allocations it needed from the new system but thought it was unfair that other sectors would be at a disadvantage.

”We do not think it is fair to band sectors together and effectively take allocations from one sector to support another sector.”

He added that the shortfall was being created for member states to generate revenue from sales of carbon allowances between sectors but other initiatives were preferable.

“To decarbonise European industry, breakthrough technologies are required; support is required to develop and deploy such technologies,” Freeland said

UK paper and cardboard production fell below four million tonnes a year and mill usage of recovered materials dropped by 10% in 2015, according to recent CPI figures.

Paper firms Aylesford Newsprint, Ideal Waste Paper and Tullis Russell Papermakers have all closed in the past 18 months.

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