Exposure to Carbon leakage for the Lime Industry · Exposure to Carbon leakage for the Lime...

ECCP WG on ETS Ad Hoc meeting111 April 2008

Exposure to Carbon leakage

for the Lime IndustryDr M. Wyart-Remy

EuLA / IMA-Europe Secretary-General

ESMA

EUROSIL

EUBA

IDPA

KPC-Europe

EBA

EUROFEL

CCA-Europe

EUROTALC

EUROGYPSUM

EULA

IMA-Europe membership

EuLA Membership

23 countries28.4 M t of lime and dolime

Over 100 companies11.000 employees

600 lime kilns at > 200 sites2.5 billion € turnover


Steelmaking & Non-ferrous metals

Water treatment

Gas treatment

Chemicals

Agriculture & Forestry

Construction

Civil engineering

Refractories

Pulp and Paper

Glass

Lime, an essential productfor a number of EU sectors


The Lime production process

CaCO3 + energy CaO + CO2Calcium Lime

carbonate

100 g 56 g 44 gProcess CO2

Combustion CO2

• The production of 1 tonne of lime generates 1 to 1.6 tonne of CO2

• 2/3 of CO2 emissions come from the decarbonation of limestone: i.e. “process CO2”• 1/3 of CO2 emissions comes from the fuel combustion: i.e. “combustion CO2”


The most exposed industry

Hourcade et al. (2008) Differentiation and Dynamics of EU ETS Competitiveness Impacts


0%

20%

40%

60%

80%

100%

120%

140%

Lime Cement Basic Ironand Steel

Refinedpetroleum

Fertilisersand

Nitrogen

Aluminium Otherinorganic

basicchemicals

Pulp andPaper

Pote

nita

l max

imim

um v

alue

at s

take

The most exposed industry

Source: Hourcade et al. (2008) Differentiation and Dynamics of EU ETS Competitiveness Impacts


Capital

0%

20%

40%

60%

80%

100%

120%

140%

160%Pr

opor

tion

of P

rodu

ctio

n C

ost E

xclu

ding

CO

2

Sources: NERA analysis of data provided byEuLA member companies

Note: Assumes a CO2 price of €30/tCO2

CO2 (€30/tCO2)

Other

Raw materials

Fuel

Average cost of EU lime production

CO2 value & Lime costs structure


CO2 costs of Lime production are currently not passed through to prices

• Lime prices have risen with higher fuel costs

• However, prices did not rise with CO2 costs in 2005-6

• Fuel costs are global, CO2costs are EU-specific

• Fuel costs are direct costs; with free allocation CO2 costs are opportunity costs

Sources: NERA calculations based on data from PointCarbon, EuLA member companies, Eurostat, Platts, McCloskey

Notes: Calculations do not account for all factors that couldaffect prices, but are based on 2006 production costdata and historic fuel and CO2 prices.

EU lime production cost and prices (2003-2006)

60%

80%

100%

120%

140%

160%

2003 2004 2005 2006

Prop

ortio

n of

200

6 Pr

oduc

tion

Cos

t Exc

ludi

ng C

O2

EU average cost incl. CO2EU average cost excl. CO2EU-wide average lime price


0%

50%

100%

150%

200%

Quartile 1 Quartile 2 Quartile 3 Quartile 4 N. Africa FSU China

Prop

ortio

n of

Ave

rage

EU

Pr

oduc

tion

Cos

t Exc

ludi

ng C

O2

EU production cost CO2 cost Non-EU production cost Transport cost

EU Supply Non-EU Supply

CO2 Costs comparedto Transport Costs

• A CO2 price of €30/tCO2 could make economic supply of lime from several non-EU regions.

Sources: NERA calculations based on data from EuLA member companies and literature survey of shipping costs.Notes: Assumes CO2 price of €30/tCO2. The first four bars show the average cost for quartiles of EU volumes

produced. Non-EU production cost are assumed to be €45/t lime, a central estimate based on limited data provided by EuLA member companies. Transport costs are estimates to EU border and not varied by EU region.

Sea transport costs

Road transport costs

Rail transport costs


Total CO2 costs = abatement cost + purchase of allowances

Total allowances required according toEuLA's Global Allocation BM

Allocation of allowances to the lime sector according to the provisions under Art 10 a of EU ETS proposal

15,000,000

20,000,000

25,000,000

30,000,000

2013 2014 2015 2016 2017 2018 2019 2020

Year

CO

2al

low

ance

s (to

nnes

)

Total allowances required whenconsidering a BM based on the 10%best kilnsEstimated total allowances availableaccording to EU ETS provisions (sector correction)

Amount of technically feasible CO emissions reductions

2

2Additional CO allowances shortage required by the provisions set underArt 10 a

Breakthrough TechnologiesPROGRESS


In Summary

• Based on collection of data’s by an independent party:

Cost structure in EU

Market value in Europe

CO2 cost

Transportation cost

Cost of production in countries without comparable carbon constraints

Carbon leakage is related to the gap between Production Costs in the EU including CO2 costs and Production Costs of products imported from outside the EU incl. transport costs


Thank you for your attentionFor more information

Please contactEuLA c/o IMA-Europe

26 Rue des Deux Eglises, 1000 BrusselsTel: +32 2 210 44 10 – Fax: +32 2 210 44 29

E-mail : [email protected]

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