Steel, aluminium need aid in EU carbon plan -study

BRUSSELS, Sept 16 (Reuters) - Parts of Europe's steel and aluminium industries are highly exposed to international competition and may need free allowances to emit carbon dioxide (CO2) after 2013, according to a preliminary EU analysis. The European Commission is now reviewing the flagship Emissions Trading Scheme (ETS), which caps how much CO2 industries may emit and establishes a system for trading in emissions permits. Under present proposals, power generators will be forced to buy permits for all their emissions at auctions from 2013 and a wide range of industries will be phased in to the auction system starting from that date. The Commission, the EU executive, is considering whether to allow steel and other energy-intensive industries to continue to get some or all of their permits free, to safeguard their global competitiveness against rivals based in less regulated areas. A preliminary Commission report named primary aluminium, hot rolled steel and slabs produced in basic oxygen furnaces and clinker as industries that would be strongly affected by such competition. "(They) would therefore be amongst the subsectors likely to benefit from partial to totally free allocations," the paper, seen by Reuters, said. The study was produced to demonstrate the Commission's methodology and the authors stressed it should not be taken to prejudge the final decision. It covered grey portland cement, which was judged to suffer low exposure to international competition, but did not cover other sectors such as chemicals, ceramics, pulp and paper, refineries, glass or metals which are also seeking special treatment. While industries have been pushing for clarity on which would qualify for free emissions permits, so they can plan their investments, the Commission has held back. It has said such information would weaken the EU's hand in global climate negotiations next summer. "The economic effects of ETS in the period 2013-2020 will obviously depend on the details of the international agreements which could crucially influence the list of sectors and activities at significant risk," said the report. As a first step, the Commission will define the sub-sectors where problems may occur, measure the potential impact on the price of their products and measure their exposure to international competition. "A certain number of other factors would be taken into account, such as transportation costs, tightness of the market, its geographical scope and concentration," the document added. (Reporting by Pete Harrison, editing by Paul Taylor and Anthony Barker)