Steel Firm Sues to Block EU Greenhouse Emissions Trading

BRUSSELS, Belgium, February 19, 2004 (ENS) - Europe's biggest steelmaker has mounted a legal challenge to the European Union's fledgling carbon dioxide emissions trading scheme. Luxembourg based Arcelor wants the European Court of Justice to partially annul the law underpinning the emissions trading system before it even gets underway. The firm is also seeking compensation for any losses it incurs if the scheme does go ahead.

"In our view the steel industry is not treated fairly," an Arcelor official told reporters Wednesday. "Other industry sectors haven't been asked to do the same amount of effort," he said.

Arcelor makes a wide range of steel products including thin flat steels used in automobile production, household appliances, packaging, civil engineering, mechanical construction and engineering.

Sources following the case predict that the court will most likely rule the annulment challenge inadmissible. They think the firm is taking the action simply in a bid to influence imminent greenhouse allowance allocation decisions by national governments. But the claim for damages will have to be heard by the court. Any Arcelor victory would have huge implications.

In the lobby of the Arcelor Building in Luxembourg (Photo courtesy Arcelor)

The company is giving no further details and has not specified what damages it would claim. But sources say the company is seeking annulment of the key parts of the law requiring governments to cap emissions. "They want themselves carved out of the law," one source said.

Arcelor's move is thought to be the first legal challenge against the law at any level, though there have been several threats of legal action at national level.

It comes at a sensitive time, as governments finalize plans on how to allocate emission allowances to participating companies.

One of Arcelor's grievances is that action already taken by firms to cut emissions might not be rewarded in the allocation of allowances. "There's a feeling that the steel industry is being treated as though it had made no effort since the 1990s," the official said.

The steel sector argues that carbon dioxide emissions have been reduced by 18 percent since then and that there is little scope for more improvement.

The firm is also troubled by other issues whose impact will become clear only once the national allocation plans are adopted. It wants emission allowances to be automatically transferable between its plants in different countries. Specifically, it is thought to be worried that Belgian plants due for closure early on in the trading scheme will not get a full allocation that could be sold or used by other installations in the group.

Arcelor also wants to ensure it receives emission allowances for the exhaust gases produced by its blast furnaces. These gases are often sold to power firms for electricity generation, but they have a very high carbon dioxide content. If the firm cannot supply them complete with emission rights, the gases might be priced out of the market.

In the electric arc furnace at one Arcelor plant, steel is melted from scrap. (Photo courtesy Arcelor)

News of the move emerged on Monday with the publication of a short note from the Council's legal service. Court officials say it could be up to a year before a first hearing is held.

The European Commission, which proposed the trading scheme, has been its most vigorous defender, and is responsible for scrutinizing national allocation plans, declined to comment on the case.

In a statement last July, Arcelor said the company "intends to assume its full responsibility in the long term, with the aim of establishing a balance between the environment, social well-being and the economy."

"Mastering greenhouse gas emissions is, in this respect, a key commitment for the group, which is in favor of encouraging sustainable development in whichever country it operates."

Arcelor has been applauded by the French business association for the reduction of greenhouse gases, AERES, for its voluntary commitment to cut greenhouse gas emissions on all its French sites.

More than 99 percent of greenhouse gases emitted by Arcelor are carbon dioxide or carbonic acid, and the input carbon for the blast furnaces is the originator of most of the emissions, the company says.

Even though they represent less than one percent of its greenhouse gas emissions, the methane and nitrogen monoxide are also included in the commitment, the company said. The six greenhouse gases covered in the Kyoto Protocol are part of the emissions checked and recorded regularly in the Arcelor Group's report.

{Published in cooperation with ENDS Environment Daily, Europe's choice for environmental news. Environmental Data Services Ltd, London. Email: envdaily@ends.co.uk}