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IndustriAll policy brief on the energy crisis

In a policy brief, IndustriAll union analyses the causes and effects of the recent energy price increases with a thorough criticism of the response measures being taken at the EU level. The policy brief notes that the observed rise in energy prices in the EU in 2021 was mainly driven by price developments in EU and international commodity markets, while the gas price on wholesale markets has reached unprecedented levels. It also adds that the impact of the commodity price increase on electricity goes beyond the share of the related commodities in the power generation due to the applied price-setting mechanism. This means that an electricity mix made of a majority of decarbonised sources, but requiring fossil-based sources to ensure part of its supply, is also exposed to the price increase of fossil-based electricity. Europe`s structural dependence on energy imports has even increased in the last decades, as in 2019, 61% of its gross energy consumption relied on imported energy products. IndustriAll also points to the investment challenge the EU is facing: beyond the electricity grid investment needs, reaching the EU 2030 emission reduction target would require €438 bn of additional annual investment, equivalent to 2.7-3% of GDP, while current investment commitments are massively falling short of this. The paper also claims that, not least due to market liberalisation, the EU has a fragmented energy supply chain where final consumers bear risk. An overview is provided about the response measures member states have undertaken to alleviate the effect of the price increases on consumers, from the temporary reduction of energy-related taxes and levies to handouts and `energy cheques`. The EU has recently published a toolbox to tackle energy prices. This document lists the initiatives that Member States can implement within the framework of the EU Energy and Single Market rules. Compensation measures and direct support for poor end-users, safeguards against disconnections, tax reductions, reform of the renewable support schemes, and the provision of state aid to companies and industries are among the most important recommendations to Member States.

IndustriAll argues that while reaching climate neutrality must remain the EU’s main objective, the current geopolitical situation and its impact on energy supplies and costs demand the mobilisation of all available means to secure affordable energy for all in the coming months.

IndustriAll Just Transition Manifesto

IndustriAll Europe launched a Just Transition Manifesto as the measures of the Fit for 55 package that implement European Green Deal objectives are taking their final shape. The union stresses that 25 million industrial workers in Europe potentially face restructuring and job losses due to the green transformation - exacerbated by the COVID-19 crisis, digitalisation, trade and market developments and a volatile geopolitical situation.

The manifesto is calling to policymakers Europe to ensure a transition to a green economy that is fair and just to ALL workers, and that does not destroy but preserves and creates good quality jobs. It speaks out for a transition that is anticipated, managed and negotiated with workers for every aspect that concerns them. For achieving this, the union demands a comprehensive Just Transition framework that provides guarantees for adequate resources, is based on effective policy planning, promotes and strengthen workers’ rights, and involves trade unions through intense social dialogue. 

The main demands of the manifesto are:

  • An industrial policy fit for ambitious climate goals and good quality jobs.
  • Adequate resources to fund the transition.
  • Stronger collective bargaining and social dialogue to negotiate the transitions.
  • A toolbox of workers’ rights and companies’ duties to anticipate and shape the change.
  • Tackling new skills needs and a right to quality training and life-long learning for every worker to support the Just Transition.

IndustriAll on REPowerEU

Industriall all has published a critical review on the European Commission's REPowerEU Plan that was launched on 18 May 2022 with the aim to achieve full EU independence from energy imports from Russia by 2027.

The plan raises the EU 2030 targets for energy efficiency from 9% to 13% and the share of renewable energy from 40% to 45% by 2030. It also sets out recommendations to speed up permitting procedures for new wind and solar projects. In terms of diversification of energy imports, it proposes to set up an EU Energy Platform for the voluntary common purchase of gas, while considering a voluntary operational joint purchasing mechanism as a next step. Upgrading and adapting Europe’s energy infrastructure in line with changing routes of energy transport needs, while ensuring infrastructure is ready for the uptake of hydrogen and ammonia, will come at considerable cost. The Commission’s proposal seeks to tackle this with €300bn made available from untapped loans of the Recovery and Resilience Facility (€225bn), topped up with additional funding coming from the auctioning of reserved ETS (Emissions Trading Scheme) allowances and allowing for the transfer of up to 12.5% of Member States’ Cohesion Funds.

The main criticism of IndustriAll is that the plan does not tackle the sensitive issue of price setting, and fails therefore to effectively address both the short- and long-term risks of skyrocketing energy prices and potential sudden supply disruptions. A comprehensive strategy to tackle investment risks and enough time for a Just Transition are missing.
The union also warns that combined with other decisions, such as the proposal to accelerate the phase-out of free allocations in the revised ETS more quickly than originally proposed (as voted for by MEPs in the ENVI Committee of the European Parliament), the future of jobs in Europe’s energy-intensive industries is getting under threat. IndustriAll fears that “this perfect storm could result in plant closures, mass layoffs and increasing poverty across Europe”.

There is no reflection beyond empty rhetoric on how to address the social dimension and no strategy on how the EU can realistically keep its promise of ensuring a Just Transition for workers in the current context.
 

The ETUC on REPowerEU

The ETUC welcomes the overall objectives of the plan and strongly supports the willingness of the Commission to reduce EU’s energy dependency towards Russia. Boosting energy efficiency, increasing circular economy as well as speeding the deployment of renewables and clean hydrogen should be EU’s top priority to reduce our gas imports from Russia while cutting Europe’s GHG emissions. The ETUC calls the EU and its Member State adopt urgent measures to shield citizens and workers from the negative impacts of rising energy prices, but stresses that the ambition of REPower EU remains quite limited.  Trade Unions therefore call for a much more ambitious plan when it comes to the social aspect of REPower EU. The Commission should significantly increase the size of the Social Climate Fund while abandoning the idea of creating a second ETS on road transport and buildings, says the ETUC. It also calls for the revision of the functioning of the EU energy market, when it comes to price setting mechanisms, preventing speculation on energy markets. On financing of REPower EU, ETUC deplores that the Commission does not really propose additional money but rather a reshuffling of existing funds. It supports the Commission’s recommendation to tax windfall profits made by energy companies in light of the energy price crisis. 

The ETUC on carbon tax and the ETS reform

The ETUC calls MEPs – ahead of the vote on June 6 - for backing changes to the Emissions Trading System. The European Commission had proposed earlier to extend the ETS to road transport and residential buildings from 2025. According to the ETUC this would disproportionately hit millions of low-income families who already struggling to pay their bills and do not have the means to invest in low carbon alternatives. MEPs have proposed amendments that would mean that the ETS would only be extended to commercial transport and buildings in 2025. Accordingly the Commission would have to introduce a new legislative initiative to extend the ETS to households and the soonest it could be introduced is 2029, while the carbon price for households would also be capped at €50 per tonne of CO2.  The extension of the ETS would be dependent on a Social Climate Fund to compensate poorer households being in operation for at least three years. The ETUC calls for abandoning the proposal to apply ETS to households, while keeping and increasing the Social Climate Fund.

Eurofer on CBAM

Eurofer was alarmed by the decision of the ENVI Committee of the European Parliament on the 17th May 2022 to reduce free allocation of emission allowances within the ETS by 40% in three years after the Carbon Border Adjustment Mechanism (CBAM) is set up. Eurofer argues that for transitioning plants it would be impossible to implement in just three years. In addition, an abrupt ETS free allocation phase out of CBAM-affected sectors deliberately risks endangering the viability of these industries. The steel industry alone risks losing up to 20 million tonnes of exports worth €45 billion euros and at least 30,000 jobs, not even considering the damage caused to the internal steel market. Other proposals on ‘rebasing’ and on the Market Stability Reserve will also contribute towards fuelling carbon and electricity price increases, inflation and financial speculation by withdrawing millions of allowances from the system without any benefit for the achievement of the EU’s 2030 climate objective.