Opinion of the European Economic and Social Committee on the Impact of the ongoing development of energy markets on industrial value chains in Europe
Date: 2008-09-17
Institutions: European Economic and Social Committee
Subjects: ESC opinion, building industry, climate change, ecology, economic recession, energy industry, energy policy, energy supply, environmental protection

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Opinion of

the European Economic and Social Committee on the ‘Impact of
development of energy markets on industrial value chains in Europe’

the ongoing

(2009/C 77/22)

On 17 January 2008, the European Economic and Social Committee, acting under Article 29(2) of its Rules
of Procedure, decided to draw up an own-initiative opinion on the

Impact of the ongoing development of energy markets on industrial value chains in Europe.

The Consultative Commission on Industrial Change, which was responsible for preparing the Committee's
work on the subject, adopted its opinion on 24 June 2008. The rapporteur was Mr Zboril and the
co-rapporteur was Mr Kerkhoff.

At its447th plenary session, held on 17 and 18 September (meeting of 17 September), the European
Economic and Social Committee adopted the following opinion by 62 votes to 5 with 5 abstentions.

1. Conclusions and recommendations

1.1
The Committee takes note of the changed environment
for energy markets and recognises the need to mitigate anthro-
pogenic climate change by cutting GHG emissions. The costs of
climate change and cost-efficient approaches of reducing the
greenhouse gas emissions are important issues in the climate
policy discussion. These questions are even more important, as
global energy supplies will have to double by 2050 to meet the
energy needs of all the people in the world. Sustainable energy
and climate policy must be structured in such a way that it
achieves its aims while at the same time retaining the industrial
value chains as the backbone of the European economy, even
when the costs of the damage associated with climate change
are taken into account. This is very much in the interests of the
European Union itself.

1.2
Because of the high share of energy which is inevitably
required to produce basic materials by conversion from raw
materials, the basic material industries are strongly affected by
any change of energy costs or by energy taxes or similar finan-
cial measures. However, the energy-related footprint of basic
materials has to be attributed to the whole industrial value
chain and cannot be sensibly addressed separately.

1.3
The Committee's opinion is that economic growth and
innovation in European economy can only be achieved on a
viable industrial basis. Competitive and innovative basic material
industries are a fundamental prerequisite for the industrial value
chains. In fact, the support for environmental technology and
renewable energy is an important target. But even the develop-
ment of environmental technologies requires performing indus-
trial value chains. They are dependent on the availability and
expertise of the basic material
industries. Environment-related
innovations, in particular, can be achieved only with coopera-
tion throughout the entire value chain. There can be no success
without a holistic approach spanning the entire length of value
chains.

1.4
The Committee recalls that buildings, accounting for
40 % of final energy demand in the European Union, represent
the single largest consumer of energy. As much as half the

potential for gains in energy efficiency can be secured in the
built environment and at negative economic cost. Such savings
could by themselves achieve the EU's commitments under the
Kyoto Protocol. Moreover, these energy savings can be achieved
using technologies that already exist today. Furthermore, raising
the energy performance of buildings has only positive effects,
creating useful employment, reducing running costs, increased
comfort and a cleaner environment. This should be an absolute
priority for the European Union. The Committee equally recog-
nises the importance of new and further developed basic mate-
rials in domestic and office appliances as well as other sectors
such as energy or transport.

A possible relocation of energy-intensive industry outside
1.5
the
the EU would significantly reduce the attractiveness of
industrial
location in Europe and lead to a loss in economic
growth and employment and jeopardise the European social
model. Because of the interdependency within the industrial
value chains it is not feasible, in the short run, to compensate
for these losses with other sectors, for example environmental
technology. Instead, these sectors would lose competitiveness as
well.

1.6
The energy-intensive industries must indeed contribute
towards energy and climate policy aims. The requirements,
however, must be such that competitive disadvantages in a
global business environment can be largely ruled out. By their
nature, the basic material industries are highly sensitive to the
impact of energy costs. Therefore energy and environment
policy instruments must be carefully examined and designed in
terms of the extent to which they impact on the competitiveness
of these industries.

1.7
The energy-intensive industries require secure energy
supplies, drawn from an appropriate European energy mix,
which should not exclude any energy source (coal, renewable
energy nuclear energy) and be based upon efficient competition
on the electricity and gas markets ultimately resulting in reason-
able prices of energy supplies. The interests of national energy
policies should be more strongly embedded in an integrated

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European concept, because so far the energy market has not
kept pace with the single market for industrial goods. Although
some Member States have decided not to use nuclear energy,
maintaining electricity generation based on fission in the EU
would also mean keeping the know-how on this technology in
Europe. Of course, continuing the nuclear option would require
a high safety level and well-trained employees (1).

emitting countries

1.8
Concluding an ambitious international climate change
agreement is of utmost importance for the fight against climate
change. It has to lead to emission reduction obligations for all
(according to the principle of
major
common, but differentiated responsibilities),
including the
energy-intensive industries in order to ensure fair competition
and a level playing field. In the absence of such an agreement,
free allocation of allowances to energy-intensive industries at
risk of ‘carbon leakage’ should be considered in the framework
of the EU ETS in order to counter risks to the competitiveness
of industrial location and economic growth in Europe. The final
choice of allocation method should be performance-based (such
as benchmarking), on the basis of best available techniques.

To pave the way for a long-term contribution to the aims
1.9
of energy and climate policy, the Committee strongly recom-
mends focusing on research and development of new technolo-
gies, particularly because the available production processes are
largely mature. Where technical solutions do not yet exist, the
requirements of higher energy efficiency and emission reduction
targets cannot be fulfilled. There are workable structures in
place already, such as Technology platforms for example, but
efforts need much stronger coordination as is expected in the
instance (2). However, enough time must be
SET-Plan,
allowed to achieve the intended advance in technology and the
required marketability in terms of global competitiveness.

for

1.10
The European and Economic Social Committee, with its
special relationship with economic players, should highlight the
problems of industrial value chains, which are sometimes not
given due consideration by the political institutions.

2. The impact of energy, as a production factor, on

industrial value chains in Europe

The production of basic materials such as steel, alumi-
2.1
nium and other non ferrous metals, chemicals, cement,
lime,
glass and pulp and paper is the indispensable basis for industrial
Industrial products require basic constructional
value chains.
and functional materials with specifically defined mechanical,
physical and chemical properties which are not available in a
natural form. As a matter of fact, the performance of industrial

(1) World Nuclear Association,

‘World Nuclear

Power Reactors

2007-2008 and Uranium requirements’
http://www.world-nuclear.org/info/reactors.html.

products is dependent upon the material used having a particu-
lar application profile and being optimised in terms of substance
and energy consumption, quality, reliability, economic efficiency,
durability, environmental effects, etc. The continuous develop-
ment of such materials is therefore a major factor in the level of
technological innovation present in all conceivable products. A
value chain is a string of companies or collaborating players
who work together
to satisfy market demands for specific
products or services. Downstream industries in the industrial
value chains consume comparably less energy for their manufac-
turing processes; thus, an isolated consideration of the end-
product is not helpful. The energy-related footprint must be
judged over the entire value chain. An increase in energy costs
does not have an impact solely at the level of basic material
production, but may simultaneously result in price increases in
the downstream industrial intermediate and end-products as a
result of the increased cost of the basic material if there is room
on the market for such increases.

A competitive and innovative basic material industry is
2.2
an important factor in deciding on the location of subsequent
links in the industrial value-creation chain,
like car manufac-
turing, engine building or construction industry. It guarantees
the joint development of tailor-made materials, adapted to meet
the user's individual requirements. Customer demands for just-
in-time delivery also necessitate the supplier's physical proxi-
mity. The industrial value chain loses its innovative power and
competitiveness if an appropriate material basis is lacking. This
is especially true for small and medium enterprises. Many of
them can be found in the steel processing sector for example.

2.3
In the main, production of basic materials requires large
amounts of energy — particularly when compared with subse-
quent production steps. The energy consumption required in
energy-intensive industries per unit of value is at least ten times
(and up to fifty times) greater than in subsequent industries,
such as mechanical engineering. In Germany, for example, the
primary energy consumption of cement lies at 4.5 kg, of steel at
2.83 kg and paper at 2.02 kg SKE per unit of added value,
while this figure amounts to only 0.05 kg SKE in the mechan-
ical engineering sector (3). This is due to the fact that basic mate-
rials must be obtained from natural raw materials by means of
physical/chemical conversion. This involves high temperatures
for burning and melting and reduction processes, as well as elec-
tricity for electrolysis. The forming of semi-finished products
also requires high levels of energy consumption. In many cases,
primary energy sources are not applied for heat and electricity
production, but used as raw materials or reducing agents, for
example in the reduction processes carried out during iron
production. It is also important to note that quality of raw
materials is gradually falling and their processing involves
usually more energy.

2.4
The overall energy requirements of an industrial product
must be compared with both the energy savings which may
result from any innovations to this product and its application
in other sectors. Such a comparison can only come about as a

(2) SET Plan — COM(2007) 723 final.

(3) Calculations as per Destatis.

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result of cooperation between the basic material suppliers and
the downstream industrial producers, in which newly developed
materials play a considerable role. For example, power plants
with greater efficiency levels and lower primary energy source
consumption rates require high-performance, temperature-resis-
tant steels. Alternatively, specific fuel-consumption rates in the
transport sector, for example, can be reduced by using light
materials in automobile construction.

3.4
Coal reserves that may be extracted in an economically
viable manner are far greater than reserves of oil and gas. A
static range of 150 years for coal
is the general assumption.
are more widely distributed
these
Furthermore,
amongst the continents as well as being, on the whole, located
in politically stable countries such as the USA or Australia. Like
other energy carriers, due to rising demand, the price of coal
has increased significantly in recent years.

reserves

3. The situation in various energy markets (coal, oil, gas,
impact on energy-intensive

and their

electricity)
industries (4)

The basic material

3.1
industries — cement, steel, non
ferrous metals, chemical products, glass and pulp and paper —
employ fossil fuels in the form of energy as well as raw material
and they are affected by the costs of the various energy sources
in a variety of ways. Crude oil, for instance,
is used in the
chemical industry as a raw material for the production of plas-
tics and other petrochemical products. Meanwhile, develop-
ments in the oil markets have also affected purchase prices for
gas and electricity because gas prices are still linked to the price
of oil. Developments in the coal market also affect the cost of
electricity for energy-intensive industries. At the same time, the
steel industry uses coal and coke as reducing agents.

3.2
The static range of oil reserves, e.g. of those resources
which can today be profitably and technically exploited, is about
40 years. It could essentially expand if further resources can be
opened up economically in the future, especially non-conven-
tional oil resources like oil sand. The evolution of oil prices is
characterised by growth in consumption, particularly in China
and India. The effect of this situation is amplified by the OPEC
nations' growing power on the market, which is making diversi-
fication of supply sources increasingly difficult due to unevenly
distributed reserves. The regional concentration of production
in nations characterised by considerable political and economic
instability will
increase uncertainty due to the incalculable
nature of possible future restrictions on supply, with all their
concurrent effects on price.

oil

gas

and

3.3
The static range of natural gas reserves is — at approxi-
mately 60 years from today's viewpoint — greater than that of
oil. Natural gas is Europe's most rapidly expanding primary
energy source. The EU's dependence on imports of natural gas
is increasing at an even greater rate than its consumption. Indi-
vidual
like
the Netherlands, Norway and the United Kingdom are gradually
becoming depleted, while the importation of gas — largely
from a single source, Russia — increases. Rising gas prices must
be expected in the long term and, what is more, such reliance
on a single source may result in the potential for Russia to exert
political influence over the EU. The possibility of such a devel-
opment is enhanced by naturally limited strategic reserves of gas
within the EU.

in Member

deposits

States

3.5
Electricity is a secondary form of energy that is produced
mainly from coal, gas, nuclear and renewable primary energy
sources and a good deal of power generation is still based upon
oil in some Member States. The composition of the electricity
generating mix largely determines the electricity generation
costs. Coal and nuclear based power offers a cost-effective
source for base-load power supplies, while renewable energies in
the EU are to be developed further. Compared to other primary
energy sources, the latter have so far been characterised by
rather high cost, not least because external effects to a large
extent are not reflected in the price of conventional energies. In
the case of wind power and photovoltaic power, there is low
and fluctuating availability with corresponding problems for the
grids which will need to be adapted to accommodate the future
growth of electricity supply from renewables. Certain renewable
sources are less costly than others, differing from region to
region. Photovoltaic power, for example, may be economically
advantageous in sunny regions like the south of Europe, while it
is not economical in Northern Europe.

4. Changing environment for energy markets

4.1
The energy markets exist in a dynamic environment, to
which assorted economic, political and social influences — the
interactions of which are complex — contribute. Industry is
confronted by a change in the conditions and costs of energy
supply which results in excessive uncertainty. The growing
dependency of Europe on energy imports and anticipated
further increases in energy prices reinforce the concerns about
meeting energy demand in the future. It is well recognised that
ensuring secure and reliable energy supplies at affordable, stable
prices is vital to economic and social development and should
constitute an integral part of a sound and consistent energy
policy.

4.2
The recent rapid changes in the economic environment
in Europe and worldwide require the energy sector to develop
new concepts and policies to respond better to the security
requirements of energy supply. While in the past security of
energy supplies has traditionally been considered primarily the
responsibility of the MS governments, the current status of the
European energy market
forces to play a
complimentary role. In a liberalised market, security and compe-
titiveness come at a cost. To achieve long-term security of
supply the common European energy policy becomes an issue
of key strategic importance (5).

requires market

(4) For example BP Statistical Review of World Energy June 2007.

(5) Opinion

TEN/312
CESE 236/2008 fin.

‘Towards

a

common

energy

policy’

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should be seen in light of

4.3
Fossil energy sources are non-renewable. Many of the EU
oil and natural gas resources have already been completely
exhausted. This
the growing
consumption levels of developing countries such as China and
India. In the case of oil in particular, there is a wide range of
additional, non-conventional deposits (e.g. oil sands), which are
still difficult and expensive to exploit and generate vast amounts
of GHGs. Reduced deposits are therefore likely to be reflected in
increased exploitation costs and thus lead, ultimately, to rising
prices.

The share of imported primary energy sources in the
4.4
total consumption of the European Union is currently at about
50 % and it is expected to grow to 70 % in the near future
(2030). The EU is thus dependent for its oil and gas in particu-
lar, on imports from a few countries (such as the OPEC nations
or Russia) that have a powerful position on the market. Given
that
these countries and regions are often characterised by
considerable political and economic instability, a stable supply is
not guaranteed. A recent increase in the price of oil has demon-
strated the EU's economic vulnerability. Therefore, the opening-
up of own resources and sustainable development of existing
resources in the European Union is an important task. Depen-
dence on energy importation has major security consequences
in respect of all its forms except coal, as procurement of the
latter takes place from a wider variety of states that happen also
to be considered stable. Even so, Europe also has own coal
sources which are economically viable: the mining of lignite in
the EU is relatively inexpensive.

4.5
The electricity and gas markets, which used to be charac-
terised by a natural monopoly and national scope, are in the
process of liberalisation and integration. While the grid is regu-
lated, competition on generation and commercial levels should
lead to reduced prices and greater efficiency. This strategy has
resulted in a certain degree of price convergence between neigh-
bouring countries. However, the national segmentation of the
markets due to the historical bottlenecks in the transmission
impaired competition
network, have with few exceptions
amongst Member States.

In addition, gas prices and other primary energy prices
4.6
— which form the main part of electricity generation costs
(see 3.5 above) — have experienced huge increases in the last
few years. Finally, there are no longer power generation overca-
pacities and the electricity industry is facing a period of massive
investments. All these factors have resulted in rising prices, in
spite of continuing improvements (see for example the progres-
sive integration of the Central West region: Belgium, France,
Germany, Luxembourg and the Netherlands). Concentration of
energy production and distribution can also be found outside
the European Union without a correlation between that and gas
or electricity price levels.

energy sources (such as gas) or nearly CO2-free technologies
(such as renewable energies and,
in some respect nuclear
energy) have gained in status, although this is not the case in all
Member States.

4.8
Ensuring sufficient energy supply for the EU has become
both a major challenge from the point of view of acquiring
increasingly, a race
appropriate and available technology and,
against the clock. In the past, a few EU Member States decided
to cease using nuclear energy, with all the corresponding restric-
tions for the electricity generation mix that this would entail. In
addition, the construction of both coal-fired power stations and
the infrastructure required for energy transmission has been the
subject of some resistance among the population. This could
increasingly lead to the cancellation of coal fired power plant
projects, as happened for example in Ensdorf, Germany, due to
the activities of citizens groups. Even certain renewable energies
like wind mills are increasingly subject
to resistance. Public
acceptance of all sorts of energy, not just nuclear energy, has
become a serious issue which has to be dealt with the utmost
care if power generation is to be brought up to the EU citizens
and economy's needs.

4.9
As the result, generation capacity in the EU is stagnating,
only a few new projects are under development and it is not
inconceivable that the EU will encounter problems in the future.
The
stations
presents both a challenge and an opportunity. It is now impera-
tive that potential investors get the message that only invest-
ment in low-carbon technologies makes economic sense.

imminent modernisation of Europe's power

5. The adaptation strategies of industry

5.1
Energy-intensive basic material industries face numerous
pressures to adapt — in view of globalisation of the markets
and the changing situation of energy markets. On one hand,
companies have to succeed against international competition
through the development of innovative products and processes.
On the other hand, they are forced to accommodate increasing
energy costs, to ensure compliance with the political decisions
taken in terms of appropriate reduction of both CO2 emissions
and energy consumption levels.

5.2
International economic interactions have intensified in
the wake of globalisation. Suppliers from developing countries
have caught up in technological terms and they now offer more
reasonably priced labour-intensive production. Basic material
suppliers have reacted to this challenge by optimising their
production processes, specialising in technologically high-quality
products, by developing customised products in close collabora-
tion with the customers.
Increasingly, partnerships between
material suppliers and customers have developed, offering a
variety of services.

4.7
The political decision taken in the EU to mitigate anthro-
pogenic climate change with far-reaching cutting of GHG emis-
sions is already a major factor on the energy markets and its
importance is ever growing. Correspondingly, energy efficiency
has been focused on much more strongly and it has to be
increased dramatically so that
intensity of energy
consumption is safely reduced. From this perspective, acceptance
of carbon-rich fossil fuels is declining, while the low carbon

the CO2

5.3
Energy costs represent a significant share of the produc-
tion costs for materials in energy-intensive industries. Thus,
reducing specific energy consumption is in the economic inter-
ests of energy-intensive industries. Remarkable successes have
been achieved here over
the past decades. Energy-intensive
industries in the EU are worldwide leaders in energy efficiency
during production.

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limits (6). The steel

furnace converter process,

5.4
The recent political demands for reduced CO2 emissions
and increased energy efficiency pose further challenges for
energy-intensive industries. Existing manufacturing technologies
and processes have in many cases already reached their physical
and chemical
industry's consumption of
reducing agents in the blast
for
instance, is already at a chemical/physical minimum and cannot
be further decreased without sacrificing demand of customers
and production volumes. A number of fundamental technolo-
gical achievements, which have yet to be identified, researched
and developed, would be required before any further note-
worthy improvements in energy efficiency could be made. This
requires great efforts from industry. For this reason, long-term
joint research projects and demonstration projects already exist
within the framework of the technology platforms, and endea-
vours like CCS. The same holds true for other industries with
process emissions, such as the lime and cement industries. Also
in energy supply, research and development is an important
long-term challenge, for example with respect to CCS or renew-
able technologies.

the basic prerequisite for

5.5
The basic materials industries' endeavour to achieve revo-
lutionary new production technologies with lower energy
consumptions will take time. In addition to technical advances,
the roll-out of new processes must be in sync with companies'
the
investment cycles. Ultimately,
introduction of new processes is their economic viability —
which, in turn, must be measured against competition on the
world market. For this reason, and other factors (administrative
burdens,
resources and ensuing economic
uncertainties), a period of several decades must be reckoned on
for basic material industries to realise any major steps forward
in energy savings. This distinguishes the energy-intensive indus-
tries
from the power-generating sector, which, while also
achieving efficiency improvements in a step-by-step fashion in
line with innovation cycles, can more readily pass on improve-
ment costs and other related administrative burdens to captive
customers.

limited financial

The energy efficiency of

5.6
industrial products can be
increased significantly through the use of new and highly-devel-
oped basic materials produced in collaboration with other
sectors, such as carmakers or power plant developers, resulting
in components with greater temperature resistance or lower
weight. Appropriate process control systems also bring about
new levels of quality in terms of energy efficiency. Equipment
for generating renewable energies
is also produced from
constructional and functional basic materials (e.g. wind turbines
made of steel and high performance plastics). Although the
potential is great, the need for material research remains corre-
spondingly great since the majority of new developments are
still not mature enough for commercial use.

6. The impact of energy policy on industrial value chains

6.1
Energy policy affects the energy markets by means of a
mix of instruments. On one hand, a European regulatory frame-

(6) Presentations Public Hearing CCMI 052, 7 May 2008.

at CCMI website: http://eesc.europa.eu/sections/ccmi/

Available
index_en.asp.

work for a single market in electricity and gas is slowly progres-
sing, but it has still not led to the sought-after goal of price
stabilisation. On the other hand, energy production and indus-
trial energy consumption are and would be heavily affected by
the EU ETS, intended to act as a major instrument for emissions
reduction. The value of the Emission Trading System (ETS) will
be measured by its impact on European GHG emissions and its
relevance and example in stimulating global action and/or evol-
ving into a comprehensive global scheme. The main problem is
that the system is not global, but restricted to the European
Union, which leads to the risk of carbon leakage in international
competing industries. For that reason too the EU should push at
climate talks for GHG trading to be carried out internationally.
The problematic features of the proposed revised system should
therefore addressed with great care to minimise the foreseen
cost impacts.

6.2
Absolute emission caps of CO2 for power plants and
process facilities in energy-intensive industries were introduced
in 2005. For energy-intensive industries, the emissions of which
are closely interlinked with production volumes because of tech-
nological limitations, this considerably increases the cost of any
growth of production that exceeds the allocated volumes. The
auctioning of emission allowances, planned to start in 2013,
would involve a substantial increase of costs of all basic material
production, which,
is not transferable to the
downstream customers.

in most cases,

6.3
The EU aims to reduce CO2 emissions, maintain depen-
dency on imports at manageable levels and promote technolo-
gies for export by expanding its share of renewable energy
sources. Financing the start of renewables would be a reasonable
contribution to these targets, but permanent subsidy systems
should be avoided. Finally, renewable energies have to become
competitive on the market. Current trends in energy prices and
technical advances in renewable energies have already signifi-
cantly increased the competitiveness of renewable energies. The
promotion of renewable energies in the electricity sector is
currently taking place in the EU by means of national subsidy
systems, variously involving quota systems with the trading of
certificates and systems of feed-in tariffs for renewables. The
additional costs of renewable energies are generally conveyed in
the price of electricity for end consumers. Energy-intensive
industries are, for the time being, like other users exposed to
financing renewable energy via electricity prices.

from the renewable markets,

Although certain sectors, for example parts of mechan-
6.4
ical engineering, benefit
these
gains have to be compared with negative effects in the basic
materials industries. Furthermore, their supply chain and there-
fore competitiveness could be affected if basic materials were
crowded out by the additional costs from subsidising renew-
ables (7). This can at least be avoided by cost capping for these
industries. While the development of the renewable market also
opens up opportunities to export technology, for example wind

(7) See, for example, Pfaffenberger, Nguyen, Gabriel (December 2003):
Ermittlung der Arbeitsplätze und Beschäftigungswirkungen im Bereich
Eneuerbarer Energien.

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power, to those regions where it can be profitably operated, it
should also be considered that not only European companies
but the European economy as well benefit in turn from the
subsidised markets in Europe — a large proportion of photovol-
taic materials in Europe for example are delivered from Japan.

are strongly reliant on exports, such as the automotive or
machine building industries, pass on the cost pressures induced
by the world market to the material industries. The international
competitive situation distinguishes energy-intensive industries
from regional sectors, such as the electricity sector.

6.5
Nuclear energy is an important factor in the energy mix
of many EU countries, while some other countries have decided
to cease using this form of power generation. In such countries,
there is no source of reasonably-priced low CO2 electricity
generation for base-load power and the latter must be replaced
by fossil fuels or renewable resources (8). As a result, electricity
prices, CO2 emissions and the price of CO2 allowances would
energy-intensive
rise, with corresponding impact on the
industries.

6.6 Many EU Member States are introducing taxes with the
aim of reducing energy consumption or of cutting CO2 emis-
sions. In a green paper on economic climate policy instruments,
the EU Commission is considering harmonising these instru-
ments across Europe and introducing more incentives for redu-
cing CO2 emissions. Energy-intensive industries would face
considerable electricity and energy price rises. These costs could
only be partially offset by means of energy-efficiency measures
as indicated above.

7. The global environment

7.1
Energy and climate change policies no longer stop at
national or regional borders. Security of supply, shortages of
energy resources and, above all, climate change are global chal-
lenges. Climate change can only be combated effectively if all
the world's regions are involved in the effort. Conversely, ambi-
tious emission reduction policies in the EU will remain ineffec-
tive as long as rapidly growing countries such as China can
quickly exceed these savings through industrial growth.

trade and
The increasing interaction between global
7.2
capital
flows is leading to increasing competition between
global locations. Energy-intensive industries are also increasingly
subject to global competition for customers and capital. Firstly,
there is immediate competition with other material suppliers
outside the EU. Secondly, the processing industrial sectors that

Brussels, 17 September 2008.

7.3
The combination of the global energy and climate policy
challenge with industrial global competition means that an
excessive cost burden for energy-intensive industries triggers
relocations. These occur when regions outside Europe do not
impose any comparable cost burdens on their industries. All the
building blocs of
the EU climate/energy policy should be
soundly based upon realistic assessment of resources (natural,
human and social) and their potential development in the time
scale (Lisbon strategy etc.) to exploit those resources for our
mutual
sustainable future. The EU strategic considerations
should reflect those strategic fundamentals.

7.4
Relocation of production would probably lead to greater
emissions in regions outside Europe. Their production processes
might well exhibit lower energy efficiency than in the countries
of origin. Additional emissions arise from transporting the
leaked products to Europe. Even if the production were relo-
cated to efficient installations, however, the leakage would be
unsustainable, because production would be squeezed out from
Europe resulting in loss of jobs and technical know-how, even
in terms of environmental technology. Global reduction of GHG
emissions should be the decisive factor in setting up the com-
munity policy.

7.5
Relocation of the energy-intensive industries would result
in reduced employment and economic growth. The loss of the
basic material link also reduces the attractiveness of the location
for subsequent industrial chains and leads to an erosion of all
levels of
the value chain. The European economy, however,
requires its industrial core. A purely service-based economy is
sustainable — because many value-creation-intensive
not
services are industry-related services, which would also be at
risk from the loss of their industrial bases. Furthermore, leader-
ship in technology and innovation, (as much for the benefit of
environmental issues as others), depends upon the presence of
basic industries in the European Union.

The President

of the European Economic and Social Committee

Dimitris DIMITRIADIS

(8) Hydro-energy, as in Scandinavia for example, remains restricted to a
limited number of countries with advantageous natural conditions.

C 77/94

EN

Official Journal of the European Union

31.3.2009

APPENDIX 1

to the Opinion of the European Economic and Social Committee

The following amendments, which were supported by at least a quarter of the votes cast, were rejected in the debate:

1. Point 1.9

Add new point:

‘However, in the medium and long-term it is essential that the European economy moves to low carbon production methods and
products. If we wish to achieve a 60-80 % reduction in CO2 emissions in industrialised countries by 2050 (considered vital to
prevent climate change from getting out of hand) it is counterproductive to protect CO2-intensive industries. Instead, it is impera-
tive that Europe makes progress in restructuring its economy in order to gain a competitive advantage as the spearhead of techno-
logical innovation and to initiate changes in other countries. It will not be possible to carry out this third industrial revolution
with a “business as usual” attitude, accompanied by modest efficiency increases in energy-intensive products.’

Result of the vote

Votes in favour: 23 Votes against: 27 Abstentions: 12

2. Point 6.7

Add new point:

‘However, in the medium and long-term it is essential that the European economy moves to low carbon production methods and
products. If we wish to achieve a 60-80 % reduction in CO2 emissions in industrialised countries by 2050 (considered vital to
prevent climate change from getting out of hand) it is counterproductive to protect CO2-intensive industries. Instead, it is impera-
tive that Europe makes progress in restructuring its economy in order to gain a competitive advantage as the spearhead of techno-
logical innovation and to initiate changes in other countries. It will not be possible to carry out this third industrial revolution
with a “business as usual” attitude, accompanied by modest efficiency increases in energy-intensive products.’

It reproduces same text as in paragraph 1.9 (conclusions and recommendations) but in point 6. (The impact of energy
policy on industrial value change). Point 1.9 having been rejected, point 6.7 falls.

3. Point 7.4 and 7.5

Amend point 7.4 and delete point 7.5, as follows:

‘Relocation of production wcould probably lead to greater emissions in regions outside Europe. if Ttheir production processes might
well exhibit lower energy efficiency than in the countries of origin, which, given the rise in energy prices, is unlikely for new build-
ings. Additional emissions arise from transporting the leaked products to Europe. Even if the production were relocated to efficient
installations, however, the leakage would be unsustainable, because production would be squeezed out from Europe resulting in
loss of jobs and technical know-how, even in terms of environmental technology. It is therefore essential that a climate change
agreement be concluded that brings about a Gglobal reduction of GHG emissions should be the decisive factor in setting up the
community policy.

Relocation of the energy-intensive industries would result in reduced employment and economic growth. The loss of the basic
material link also reduces the attractiveness of the location for subsequent industrial chains and leads to an erosion of all levels of
the value chain. The European economy, however, requires its industrial core. A purely service-based economy is not sustainable
— because many value-creation-intensive services are industry-related services, which would also be at risk from the loss of their
issues as
industrial bases. Furthermore,
others), depends upon the presence of basic industries in the European Union.’

leadership in technology and innovation, (as much for the benefit of environmental

Result of the vote

Votes in favour: 21 Votes against: 41 Abstentions: 3

31.3.2009

EN

Official Journal of the European Union

C 77/95

APPENDIX 2

to the Opinion of the European Economic and Social Committee

The following CCMI Opinion texts were rejected in favour of amendments adopted by the assembly but obtained at least
one-quarter of the votes cast:

1. Point 4.9

‘The risks of certain technologies are exaggerated, while their economic benefits are by far underestimated. The German
energy agency, for example, expects for Germany a shortfall in guaranteed capacity of power generation of 11 700 to
15 800 MW in 2020, depending on the development of demand (1). This implies that power generation capacity defi-
ciency is imminent throughout the EU — the price of failing to act will be very high. Other studies deem it possible to
close the gap by increased energy efficiency and generation using renewable sources. However, an energy mix including
any energy source would be necessary to prevent such a development, and stakeholders should clearly and openly
communicate such needs to the citizens.’

Result of the vote

Votes in favour: 36 Votes against: 20 Abstentions: 5

2. Point 6.3

‘This can be avoided by cost caps for energy-intensive industries to reconcile the support of renewable energies with the
international competitiveness of basic material industries. Apart from that, if the support of renewables is imbalanced, it
threatens material supply chains for certain industries, such as forest-based industries (2). This threat could, for instance,
result in the eradication of traditional industries in the EU, such as pulp and paper.’

Result of the vote

Votes in favour: 37 Votes against: 20 Abstentions: 4

(1) DENA, Kurzanalyse der Kraftwerks- und Netzplanung in Deutschland, March 2008.
(2) Bio-energy and the European Pulp and Paper Industry — An Impact Assessment; McKinsey, Pöyry, for CEPI, August 2007.