Shell re­jects EU fee, cit­ing hard times

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JEROEN van der Veer, chief ex­ec­u­tive of Royal Dutch Shell, has warned that a pro­posed EU scheme to force com­pa­nies to pay for car­bon emis­sions per­mits, pre­vi­ously handed out free, threat­ens to de­stroy Europe’s petro­chem­i­cals and re­fin­ing in­dus­try.

Van der Veer says the EU needs to be care­ful not to trig­ger an ex­o­dus of Euro­pean jobs and in­vest­ment off­shore with no net re­duc­tion in global emis­sions.

He says the pro­pos­als would un­der­mine the com­pet­i­tive­ness of a strug­gling in­dus­try.

They would have a cas­cad­ing im­pact on Europe’s wider econ­omy be­cause of the close links be­tween the re­gion’s oil, chem­i­cals and plas­tics in­dus­tries, which col­lec­tively em­ploy nearly two mil­lion peo­ple.

‘‘ In the past 20 years the re­fin­ing in­dus­try in Europe has been very dif­fi­cult . . . But if we have ad­di­tional penal­ties be­cause we move away from a sys­tem of free al­lo­ca­tions to a large ex­tent, then in such a mar­ginal in­dus­try that is a real prob­lem,’’ he said.

In Jan­uary the Euro­pean Com­mis­sion an­nounced mea­sures de­signed to cut EU emis­sions of CO by 20 per cent of 1990 lev­els

2 by 2020. One of the cor­ner­stones was a re­form of the emis­sions trad­ing scheme (ETS), which al­lo­cates a free, fixed quota of emis­sions per­mits to heavy in­dus­try.

The com­mis­sion has pro­posed that from 2013 oil re­finer­ies and air­lines, and pos­si­bly other sec­tors, will have to pay for 20 per cent of their emis­sions per­mits, ris­ing to 100 per cent by 2020. It hopes to for­malise the plan by the end of the year.

‘‘ We don’t want to threaten dra­co­nian mea­sures,’’ van der Veer says. ‘‘ We pre­fer to make the case in a pos­i­tive way. But it’s a hell of a lot of em­ploy­ment.’’

His com­ments are re­jected by Peter Mad­den, chief ex­ec­u­tive of Fo­rum for the Fu­ture, the sus­tain­able de­vel­op­ment char­ity.

‘‘ The EU emis­sions trad­ing scheme is the most im­por­tant ini­tia­tive we cur­rently have in the world to tackle cli­mate change. Our ma­jor com­pa­nies need to be get­ting be­hind it and in­vest­ing in a low-car­bon fu­ture and not try­ing to un­der­mine pos­i­tive ac­tion,’’ he says.

Van der Veer says a level play­ing field for in­dus­try is crit­i­cal if the ETS is to suc­ceed in cut­ting emis­sions.

‘‘ If the re­gional block is big enough, then that is OK. But it gets very dif­fi­cult for en­ergy-in­ten­sive in­dus­tries. What will hap­pen if you have to buy auc­tion rights inside EU but not out­side?’’

He claims Europe’s oil-re­fin­ing in­dus­try, which em­ploys about 100,000 peo­ple di­rectly and rep­re­sents 18 per cent of global re­fin­ing ca­pac­ity, should be re­warded, not pun­ished, for the progress it has made to en­hance en­ergy ef­fi­ciency.

‘‘ In Europe our in­dus­try is al­ready quite ef­fi­cient,’’ van der Veer says. ‘‘ And if [it] is more en­ergy-ef­fi­cient than else­where, then you should not drive that in­dus­try away. Maybe we need to bench­mark EU in­dus­try with the out­side world. If it is en­er­gy­ef­fi­cient, you should get a lot of free al­lo­ca­tions . . . You have to start with lots of free al­lo­ca­tions to get the sys­tem to work. Then, over time, you can tighten the mea­sures.’’

Van der Veer in­di­cates that the global na­ture of the oil and chem­i­cals in­dus­tries would force them to­wards lower-cost re­gions. Shell has al­ready sold three of its re­finer­ies in France be­cause of con­cerns over prof­itabil­ity.

‘‘ The in­dus­tries are very in­ter­na­tional,’’ he says. ‘‘ A lot of our re­fin­ing is Mid­dle East­ern oil, a lot of which is then ex­ported to the US.’’ Europe’s petro­chem­i­cals in­dus­try has an an­nual turnover of 74 bil­lion euros ($139 bil­lion), ac­cord­ing to the Euro­pean pro­duc­ers’ as­so­ci­a­tion.

Warn­ing: Shell’s Jeroen van der Veer

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