Exclusion of ceramics industry from emission cost offsets. Challenges to competitiveness at Italian and European level

Subject: Exclusion of ceramics industry from emission cost offsets. Challenges to competitiveness at Italian and European level

Cerame-Unie (the European Ceramic Industry Association) has recently asked the Commission to contest the decision of 21 September to exclude ceramics from the sectors receiving carbon emission (‘carbon leakage’) cost offsets in the decade 2021-2030.

Manufacturers fear that lack of access to state aid under the EU Emissions Trading System (ETS) will jeopardise the competitiveness, profitability and survival of the ceramics industry, which, given its hefty production costs and high level of exposure to international competition, risks being forced to relocate outside Europe, especially to African and Asian countries that apply lower environmental standards than the EU.

According to Confindustria Ceramica, exclusion from the ETS as of 1 January 2021 is tantamount to imposing a tax that unfairly affects the Italian ceramic industry, which has already invested heavily in sustainable technologies to achieve high levels of energy efficiency.

In addition, it is a top-level Italian and European sector, directly employing 27 500 people in Italy in 2019, with a turnover of EUR 6.5 billion. Given the loss of earnings for Italian companies, amounting to over EUR 350 million, following the COVID-19 outbreak:

1. Will the Commission reinstate ceramics on the list of sectors eligible for state aid under the ETS for the decade 2021-2030?

2. Will it adopt special measures to help the Italian ceramics sector recover from the economic impact of the pandemic?

Answer given by Executive Vice-President Vestager on behalf of the European Commission (30 March 2021)

When designing the state aid guidelines applicable to the EU Emissions Trading System (ETS) (1), the Commission has paid careful attention to the economic, environmental and social impacts of these rules.

The guidelines play an important role in the context of the Green Deal, by setting out the principles to be followed by the Commission when assessing compatibility with the internal market, under Article 107(3)(c) of the Treaty on the Functioning of the European Union (TFEU) of aid measures taken by Member States to prevent carbon leakage for sectors genuinely at risk of relocation outside Europe due to indirect ETS costs.

As part of the revision process of the previous guidelines, the Commission has assessed the risk of a carbon leakage in a large number of sectors based on objective economic data. The different sectors, including the sector for manufacturing of ceramic tiles and flags, have repeatedly had the opportunity to contribute to the process.

Based on the abovementioned information, the ceramics sector was not included amongst the sectors regarding which, under the principles set out in the guidelines, State aid could be considered compatible with the internal market.

The main reason why the sector was not included is that it has a relatively low indirect emission intensity of 0.548 kgCO2/EUR (the threshold for inclusion was 1 kg CO2/EUR). As the list of eligible sectors has just been updated, a further revision is not foreseen in the short term.

The ETS State aid guidelines have the objective of preventing carbon leakage. They are not designed to tackle the impact of the COVID-19 crisis on the European economy.

However, the Commission has taken important steps to ensure that Member States have adequate state aid compliant tools at their disposal to address this major challenge, most importantly the Temporary Framework (2), which has been amended several times to meet the changing needs of the COVID-19 crisis.

⋅1∙ https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52020XC0925%2801%29&qid=1604303944057

⋅2∙ https://ec.europa.eu/competition/state_aid/what_is_new/covid_19.html