European policies and practices for their implementation provide for energy-intensive industries in the Member States to receive state aid to compensate for indirect carbon costs. This financial scheme has been applied since 2012 in countries that have production from sectors eligible under the EC list. Despite the significant risk of “carbon leakage” and the high carbon intensity of our products, the cement sector was excluded from the list of eligible sectors for state aid under the current State Aid Guidelines for indirect costs due to the level of trade intensity, which was below the threshold set by the Commission. The trade intensity index is determined on the basis of average European statistical data and while the average level for the European Union is below the threshold set, this is not the case for border countries. The high transport costs of cement limit its distribution within the EU mainly to the country through which the import is made. According to NSI data, the trade intensity of cement in Bulgaria is significantly above the average European level and cement imports reach nearly 20% of the domestic cement market.

We have been informed of a questionnaire sent by the European Commission to national authorities on a possible revision of the indirect state aid guidelines with a deadline of 5 February for Member States to respond to the Commission and we would like to summarise again the position of the cement industry on the subject:

• The cement sector has an indirect emissions intensity (1330 kg.CO2/€ GVA), which is higher than 1 kg.CO2/€ GVAand thus ranks 8th in the overall list of 246 industrial sectors assessed by the European Commission in its 2020 impact assessment. This means that the cement industry bears an exceptionally high-cost burden caused by indirect emissions.
• It is not plausible that a sector that is among the top 10 sectors in terms of indirect emissions intensity and is clearly exposed to a significant risk of carbon leakage should not be explicitly included in the list of targeted sectors.
• Emissions intensity is a key indicator that allows assessing the risks of carbon leakage, as it provides a “business case” for imports to replace European production, due to the lack of carbon restrictions abroad. CEMBUREAU’s analysis of carbon costs, based on publicly available data, for example, showed that at an ETS price of €55, carbon costs already represent 8-10% of total cement production costs, even when the sector receives free allocation at the current level. At an ETS price of €90, this rises to 12-15% of production costs – even with free allocation.
• EU cement imports have quadrupled in recent years, jumping from 2 million tonnes per year in 2016 to just under 10 million tonnes today, while EU exports have more than halved over the same period. 
• The intensity of trade at EU level does not sufficiently reflect the significant differences in national situations. This is particularly true for cement, a heavy product by nature, with countries close to the EU’s external land borders or with large port facilities being particularly at risk. For example, a moderate intensity of trade at EU level (below 10% in the case of cement) translates into very different situations at national level: in fact, some countries have high trade intensities in both exports and imports, reaching figures of 40% for some.
• In assessing the risk of carbon leakage under CBAM, a report commissioned by DG CLIMA from Ricardo consultants distinguishes the intensity of cement trade (which is 8%) from the intensity of clinker trade, which is 46%.
• The cement sector was declared eligible for state aid under the European Commission’s Temporary Framework for State Aid in Crisis and Transition, which bases the eligibility of the carbon leakage list under the EU ETS, as well as under section 4.11 of the State Aid Guidelines for Environmental and Energy Protection – a combination of trade intensity and electro-intensity, which qualified the cement sector as being at “significant risk” of carbon leakage. 
• The use of qualitative criteria in addition to purely quantitative ones should be assessed. For example, when assessing the risk of carbon leakage in imports or exports in relation to a specific third country, it may be useful to consider developments in taxation of production in exporting countries (e.g. carbon offsets). Similarly, overcapacity in non-EU countries also plays an important role.

Compensation of indirect costs is of paramount importance for the cement sector in Bulgaria and we kindly ask you to take the necessary steps so that the cement sector can be included in the list of sectors that can receive compensation due to high electricity prices.

The cement industry in Bulgaria also expects initiatives from our government based on the country’s CO2 roadmap strategy (which needs to be developed) to co-finance all existing and future CCUS projects in Bulgaria, to bring our Bulgarian legislation in line with best practice countries, and to publicly announce and establish a Strategic Decarbonization Fund.