VIK German Association of Industrial Energy Consumers appreciates the possibility to participate at the EU Consultation on the Revision of the benchmark values for free allocation of emission allowances and highlights in this position paper the main points which are very important for energy-intensive industries in Germany.
Compared with the baseline value for the 2013–2020 period, the most benchmarks would be reduced, especially fallback benchmarks will decrease by half under maximum tightening for the 2026–2030 period (-50%). This leads to a steep decline in free allocation and thus to enormous cost disadvantages for energy-intensive industries in the EU compared with international competitors.
In our view, the methodology used to update the benchmarks is not representative, meaning that the benchmarks cannot be achieved in practice. Benchmarks should be based on actually achieved improvements and not on a minimum requirement for performance gains that is unrealistic under current conditions.
In particular, the heat benchmark does not represent a realistic and EU-wide representative value for heat generation processes or resource availability. Even state-of-the-art facilities, such as highly modern industrial CHP-plants, do not achieve this value. Substantial investments have been made in these technologies based on the best available technologies at present, resulting in significant CO₂-reductions, which are now effectively penalised over operating periods of up to 20 years. This cannot be intentional under conditions of protection of legitimate expectations.
The benchmark update should be realistically based on the use of natural gas as a generally available energy source for heat generation. In other words, within the top 10% of heat generation plants, those using biomass or alternative fuels are not representative in a broader sphere, thus they should not be included. These processes do not provide suitable reference values, as they cannot be broadly replicated across the sector.
Furthermore, the sustainability requirements of RED III for biomass are very strict and limit the availability of this resource. Existing biomass resources are limited, cannot cover total demand, and therefore lead to carbon leakage.
It is therefore not realistic to set fuel and heat benchmarks with reference to sustainable biomass. The calculation of the fallback benchmark reduction rate must reflect the availability and technical feasibility of alternative energy sources in the EU.
It should also be ensured that the adjustment of the fallback benchmark is designed in such a way that it does not trigger a cross-sectoral correction factor. In this context, consideration should additionally be given to a relaxation of the 43% limit on free allocation in order to avoid additional reductions in free allocation and thus further uncertainty for industry.
According to our interpretation of (EU) 2003/87 Article 10a(1), specifically the wording “provided that corresponding installations are available”, the following interpretation should apply: If technologies are not yet sufficiently available, benchmarks must not be tightened as if such technologies were already available. Otherwise, it would prevent best-performing installations that cannot be implemented across Europe from setting the benchmark.
Another important point is the new methodology for the calculation of product benchmarks. In our view, the calculation method for the product benchmarks (exclusion of indirect emissions) should be revised in order to enable a de facto relief from CO₂-costs through free allowances and electricity price compensation. It is important to keep these two carbon leakage compensation mechanisms separate, while ensuring there is no risk of a shortage in electricity price compensation.
Additionally, the draft contains Recital 16, which states that the EU Commission will propose, in the upcoming ETS-revision, the introduction of sector-specific fallback benchmarks. There is no additional information on the details, including the planned methodology; therefore, this presumably very important information should be published and discussed by stakeholders as soon as possible.
Against this background, it is important to suspend the tightening of benchmarks for the 2026–2030 period and maintain them at the 2025 level or at least limit them to the minimum tightening. Such a flexibly designed ETS implementation would make an important contribution to stabilising the affected industries and create the conditions for a realistic and investment-friendly transformation.
Seniorreferentin für Klimapolitik & Koordinatorin für EU-Energie- und Klimapolitik.
