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Rio Tinto caught in EC net

Published by MAC on 2008-01-08

Rio Tinto caught in EC net

8th January 2008

Rio Tinto and the British government are at loggerheads with the European Commission which seeks to toughen up directives limiting So2 and NOx emissions from power and other coal-burning plants.

The Commission has targeted a coal-fired power plant and adjacent aluminium smelter in Northumberland, acquired by Rio Tinto when it took over Alcan last year.

Industry attacks EU green legislation

By Chris Tighe and Andrew Bounds

Financial Times

6th January 2008

Plans to tighten European anti-pollution legislation could force the closure of swathes of industry in the UK, business leaders have warned.

The European Commission tabled proposals just before Christmas to toughen directives dealing with dust, sulphur and nitrogen emissions that cause acid rain and smog, saying national governments were set to miss targets that would save tens of thousands of lives.

However, BusinessEurope, which represents employers across the European Union, says the cost of compliance could force many plants to close. "These directives will impose a disproportionate cost on industry, leading to production cuts in Europe rather than to further innovation and investment in clean technologies," it said in a letter to commissioners.

Crucially, it said, governments' rights to allow flexibility according to the location and design of power ­stations and steel mills, for example, would be taken away. The Commission believes this right has been abused and wants polluters to justify any departure from agreed mitigation measures.

The UK government is ­lobbying to retain this ­flexibility even as it faces a legal battle with Brussels in a test case under the existing laws. At stake is the future of one of the biggest industrial employers in the North East.

Rio Tinto Alcan's coal-fired Lynemouth power station and the adjacent aluminium smelter it supplies employ 670 workers in an area of Northumberland that has struggled to rebuild its economy since the loss of coal mining.

The Commission says it must reduce emissions from January 1 as part of the extension of the EU's large combustion plant directive to cover older power plants. The law covers emissions of dust and sulphur and nitrogen oxides from installations generating more than 50MW.

The UK claims Lynemouth is exempt - the only one of more than 100 UK pre-1987 plants that the Commission's regulation targets.

"This breaches the directive. It is precisely the sort of plant that is covered," a Commission spokeswoman told the Financial Times. "We have strict controls and we have to ensure a level playing field across Europe." It recently sent a second letter of objection to London, the last step before court action.

A UK government official said there was a "legal difference over interpretation of the directive".

"This plant complies with all UK legislation," he added. He foresaw London fighting a case at the European Court of Justice, the EU's top court.

The 420MW Lynemouth plant was commissioned in 1972 by Alcan, which was recently taken over by Rio Tinto. It burns 1.2m tonnes of coal a year, and is the UK's second youngest coal-fired power station and one of the smallest. Alcan says it has been independently assessed to be the UK's most thermally efficient plant of its kind.

The plant was sited on the Northumberland?coast partly to take advantage of huge coal reserves in the area. However, since the closure of the North East's last deep coal mine in 2005 it has been supplied by UK opencast sites and from abroad - currently Russia.

The Lynemouth smelter complies with current EU regulations, including the air quality directive and integrated pollution prevention control legislation. These regulate wider environmental impacts, however, rather than focusing strictly on "end of pipe" emissions.

The Commission's recent proposal aims to simplify emissions legislation, by bundling most of it together in one package, and tighten standards.

Alcan said the discussions were an "ongoing matter" between the Commission and the UK government, on which it could not comment further.

EU emissions target threatens heavy industry

By Andrew Bounds in Brussels

Financial Times

8th January 2008

Plans to tighten up the rationing of greenhouse gas emissions will contribute to the loss of some heavy industries from the European Union, according to official documents.

Europe’s aluminium producers are among those unlikely to be able to absorb increased costs resulting from proposals contained in a draft European Commission directive to widen the scope of the bloc’s emissions trading scheme (ETS) and reduce the permits it allocates, officials acknowledge.

Steel, cement and chemical makers would need to raise prices by between 5 per cent and 48 per cent to cover costs, according to internal papers obtained by the Financial Times and Financial Times Deutschland.

Changes to the ETS follow a proposal to reduce sulphur, nitrogen and dust emissions from heavy industry, which business leaders this week warned could lead to plant closures.

Commissioners are divided over whether to offer some sectors special protection. One option would be to hand out free emissions permits. Another would be to include imports from countries without binding reduction targets in the ETS.

They will review the situation in 2011.

The changes come into effect in 2013 and are aimed at closing loopholes that allowed power generators to make billions of euros in windfall profits from the over-allocation of free emissions permits under the ETS’s first phase, from 2005-2007.

The commission has cut national allocations of permits by 6.5 per cent for 2008-2012 compared with 2005, as it attempts to meet an EU target to slash emissions by a fifth between 1990 and 2020. The 10,800 installations covered by the scheme account for 41 per cent of the bloc’s carbon emissions.

The directive would include carbon dioxide emissions from petrochemicals, ammonia and aluminium; emissions of nitrous oxide from the production of nitric, adipic and glyoxalic acids; and perfluorocarbon, a potent greenhouse gas produced by some aluminium manufacturers.

But the internal documents estimate job losses in the affected industries would be offset by gains in those boosted by a shift to a low-carbon economy. Gross domestic product would fall 0.1 per cent.

The commission wants to set an EU-wide emissions cap from 2013 – currently member states set their own, which are approved by Brussels – and eliminate free emissions allocations for the energy sector and refineries.

“Overall, it is estimated that at least two-thirds of the total quantity of allowances will be auctioned in 2013,” the document says. Today’s level is less than 10 per cent.

Fast-growing former communist countries with below-average incomes would receive disproportionate amounts of permits to allow them to catch up economically. The auction proceeds would go towards reforestation projects, investment in renewable technology, helping poor countries adapt to climate change and compensating poorer householders for rising electricity costs.

The commission has turned a deaf ear to much national lobbying. A UK request to include transport in the ETS has been rebuffed. But there could yet be changes before publication of the draft directive. EU states and the European parliament will then have to agree the directive before it becomes law.

Copyright The Financial Times Limited 2008

Brussels' plan to clear the fog of air contamination

By Chris Tighe, Financial Times

6th January 2008

Air pollution has been one of Europe's main political concerns since the late 1970s and directives set maximum levels for sulphur, nitrogen and particles. It causes 350,000 premature deaths a year in the EU, claims the European Commission.

Last September, the UK got a warning from Brussels for breaching sulphur dioxide levels in its big cities.

The large combustion plant directive (LDPD) aims to reduce acidification, ground-level ozone and particles, by controlling emissions of sulphur dioxide (SO2), nitrogen oxides (Nox) and dust from large combustion plants.

Extra acidity in precipitation - "acid rain" - is usually caused by human emissions of sulphur dioxide and nitrogen oxide combining with water vapour in the atmosphere. The main sources of SO2 from human action are the burning of fossil fuels in power stations as well as industrial complexes and traffic.

The net benefits of the directive - taking into account health benefits and compliance costs - would be between ?7bn (£5.2bn) and ?28bn a year, the Commission says.

Last month, China's State Environmental Protection Agency announced the country's first drop in sulphur dioxide emissions for four years following steps to force power plants to install and use desulphurisation equipment.

In England and Wales, the amount of sulphur dioxide released annually into the atmosphere has fallen by 75 per cent, largely due to decreasing use of coal for power generation.

Many European countries are falling behind targets. The Commission last month proposed simplifying and tightening emissions legislation .

Copyright The Financial Times Limited 2008

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