Dairy sector to be granted protection for ‘carbon leakage’

The dairy sector is set to be granted protection for ‘carbon leakage‘ in a bid to preserve competitiveness, according to amendments to a law passed by the European Parliament today.

The amendments – made by Sean Kelly MEP (Ireland South) and leader of Fine Gael in the European Parliament hope to ensure that the dairy sector gets a fair deal under the EU Emissions Trading System (EU-ETS), with proper assessments.

The EU-ETS – the EU’s main policy instruments for the reduction of emissions in large industrial plants and power plants – contains provisions for the protection of trade-intensive and carbon-intensive industries that are prone to relocate to other parts of the world due to the EU’s stringent climate legislation.

The phenomenon is known as ‘carbon leakage’.

Under the EU-ETS, sectors deemed most vulnerable to carbon leakage are allocated emission allowances for free – as opposed to other sectors that pay a market price for each tonne of carbon emitted.

It is understood that this free allocation is given as a means to preserving the EU’s industrial competitiveness

In 2016, Kelly identified and highlighted a technical issue – whereby the commission’s proposal for protection against carbon leakage could have left certain sectors unnecessarily exposed.

He has welcomed the final agreement, which was reached following negotiations with the European Council. The move ensures that the dairy sector and others are afforded fair assessments.

“Today’s text strikes the right balance between being ambitious on reducing greenhouse gas emissions from our industries in the EU; but, also ensuring that EU competitiveness will be maintained.

It is hugely important that a sensible solution to carbon leakage protection has now been agreed upon.

The commission’s proposal would have prevented sectors from being given a fair assessment to determine if protection through free allocation of emission allowances was necessary,” said the MEP.

“My proposals to prevent such a situation have been included in this text, which got the green light today. Therefore, our important sectors will get a proper and detailed assessment and will be allocated free allowances if thresholds outlined are met following the assessment.

“It would have been ridiculous if sectors were overlooked simply due to administrative issues; thankfully, now sectors are all put on a level playing field, and this won’t be the case.

“Ensuring access to this assessment is particularly important for our dairy industries, which provide an important market for our dairy farmers and create a significant number of rural jobs,” he concluded.

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