Power users warn EU investment stalls over climate

By Huw Jones and William Schomberg

BRUSSELS (Reuters) - Energy-intensive industries in Europe warned on Thursday that big investment decisions are being put on hold until the European Union hammers out its plan for fighting climate change after 2012.

A month after the EU's executive announced proposals to curb greenhouse gas emissions in the 27-nation bloc, executives from some of Europe's biggest companies said they could not afford to wait long for details of how the system will work.

Juha Rantanen, chief executive of Finnish stainless steel company Outokumpu, said the EU's Emissions Trading Scheme, which will make companies pay increasingly for their pollution, was already hitting his company's plans to expand mining of ferrochrome, a stainless steel ingredient.

"With not knowing what the price of electricity will be beyond 2012, or what will be the price of emissions rights, we are not making that investment and instead we buy ferrochrome from South Africa and Kazakhstan, where it's being produced in an environmentally less efficient way," he told Reuters.

"This trading scheme puts a cost into operations in Europe which is higher than for competitors in other regions. That will ultimately lead to European industry investing less in Europe."

Jean-Pierre Clamadieu, CEO of French chemicals group Rhodia , noted that French cement maker Lafarge had recently suspended its investments in plants in the EU and said Rhodia might face a similar dilemma in the near future.

"It is important we get as quickly as possible visibility on (the EU plans)," Clamadieu said. "If we don't, then I think there will be lot of investment project delay or investment which will move to different regions of the world."

DECISION DEFERRED

EU governments aim to agree on a post-2012 reform of the Emissions Trading Scheme by the end of this year, but the Commission wants to defer the question of special treatment for energy-intensive industries until 2010.

The outcome will depend on whether there is an international agreement on curbing greenhouse gas emissions, blamed for global warming, it argues.

Addressing the same conference on climate change and business, European Commission President Jose Manuel Barroso pledged again that if there were no global solution, the EU would look at interim measures such as free emissions permits for energy-intensive industries.

Other executives voiced concern that Europe's ambitious plans to cut greenhouse gas emissions would hurt the competitiveness of industry.

The United States, the world's biggest economy, rejects the idea of mandatory emissions caps and major developing economies, such as China and India, say it is unfair to ask them to make big emissions cuts after centuries of pollution by richer countries.

U.S. Ambassador to the EU Boyden Gray suggested Europe should delay its ambitious targets for cutting emissions from 2020 until 2030 to allow time for technology to develop.

European industries that are the biggest consumers of power want special treatment under the new rules.

Michel Wurth, who sits on the management board of the world's biggest steelmaker, ArcelorMittal, said companies like his wanted know how the EU would define energy-intensive industries, what proportion of emissions rights they would have to pay for and how much funding they would get to finance research into cleaner manufacturing and new products.

"Today the European steel industry is at the top in terms of energy efficiency so if you force European steel to reduce or get out of production, the consequence will be the global steel industry will emit more than it does today," he said.

ArcelorMittal recently agreed to keep open a blast furnace in Liege, Belgium, until 2012 but possibly not longer due to the uncertainties about the next phase of the EU energy rules after that date, Wurth said.

(Additional reporting by David Lawsky, editing by Anthony Barker)