Statement to the Ministry of Economy regarding the uneven application of indirect electricity compensations

BACI presented attention to the Ministry of Economy with a letter, addressed to the uneven – among various electricity industrial consumers – application of indirect electricity compensation under EU ETS directive and asked for support in endorsing a petition addressed to the EU Competition Commissioner by the European Cement Association – CEMBUREAU to which BACI is a full- time member.

The cement industry qualifies under EU ETS directive as a sector that is at risk of carbon leakage, however it is not included among the sectors that are entitled to indirect compensation for escalating electricity costs due to the impact of greenhouse gas emission (CO2) prices. Specifically, according to paragraph 15 of art. 10a of Directive 2009/29/EC and the acting „Guidelines on certain State aid measures in the context of the greenhouse gas emission allowance trading scheme post-2012“, defining for the classification of a sector or subsector as exposed to a significant risk of carbon leakage are:

  1. The sum of direct and indirect additional costs, to lead to a substantial increase of production costs, calculated as a proportion of the gross value added, of at least 5 % and;
  2. the intensity of trade with third countries, defined as the ratio between the total value of exports to third countries plus the value of imports from third countries and the total market size for the Community to be above 10 %.

These thresholds are currently covered by the cement industry at European level as a whole, as confirmed by the calculation of the European Commission. Therefore, not including the industry in the list of sectors and subsectors deemed ex-ante to be exposed to a significant risk of „carbon leakage“ due to indirect emission costs, deviates from the established rules. Precisely this position, along with all the facts justifying its fairness, has been officially presented by CEMBUREAU to the European Commissioner for Competition – Mrs. Margrethe Vestager.

Cement production is an energy-intensive industry and, unless it is included in the list of sectors and sub-sectors exposed to a significant risk of „carbon leakage“ due to indirect emission costs, this will mean, in addition to non-uniform application of established European rules, a direct impact on competitiveness on a Pan-European level as well as for the Bulgarian producers in particular.

Specifically, for the cement producers in Republic of Bulgaria the aforementioned argument represents an even greater burden, due to the fact that the intensity of trade with third countries is of significant higher impact than the European-average. According to data from the National Statistical Institute of Bulgaria intensity of trade with third countries is calculated to be 28% in year 2016 and 32% in year 2017 (while the same benchmark for the European Cement Industry as whole is slightly higher than 10%). On the other side the impact of increasing electricity cost due to CO2 emissions is also significantly higher in Bulgaria compared to other countries in the EU due to lower percentage of electricity produced from renewables compared to coal fired power plants in the country.

With the letter, The Bulgarian Association of Cement Industry (BACI) kindly asked that the Republic of Bulgaria to officially support the position expressed in front of the European Commissioner for Competition. In order to avoid unfair treatment of the cement industry, BACI asked that all possible actions for addressing the situation to the European Union institutions are taken, in order for the cement industry to be included in the current list of sectors and sub-sectors exposed to a significant risk of „carbon leakage“ due to indirect emission costs, as well as on a possible updated list post 2020.

BACI believes that each Member State of the European Union should be proactive and support a position that ensures equal application of legislation and rules established within the Union, while at the same time ensures level playing field conditions which are necessary for the industry to perform effectively.