EU Emissions Trading Scheme

2009 marks the start of the carbon-constrained economy in Europe. The EU Emissions Trading Scheme (EU-ETS) generates substantial risk — and potentially creates substantial opportunities — for companies operating in the metals sector. As the world's largest emissions trading regime, EU-ETS also generates new assets and liabilities worth 20 billion euros and presents new and unique challenges for company management. Investors and financial institutions across the globe are becoming increasingly alert to climate change risk and the impact EU-ETS will undoubtedly have on companies in the industrial sectors.

Although many believe that the steel industry has already achieved emissions reductions close to theoretical limits, the cost base and competitive position of steel and other industrial companies is likely to be impacted by emissions trading. Steel producers, along with other energy intensive industries, will also face the double burden of emission reduction targets and higher energy prices, as at least some of the carbon costs of generation are likely to be passed through in wholesale prices. Companies would do well to factor a robust carbon management strategy into their overall corporate strategy.

Planning for the EU-ETS should now be well under way, both strategically and at a more detailed level. Indeed, "carbon thinking" will need to span the full range of activities within the organisation: from operations and trading to merger and acquisitions strategy and investment planning; and from legal and environmental compliance to tax and accounting. While many industrial companies have made good progress with the operational and systems aspects of EU-ETS, others are still grappling with longer-term strategic issues and with trading arrangements, as well as accounting and tax treatments.

How PwC can help you

PwC’s global climate change team of professionals can help your company tackle the many complex issues associated with CO2 emission trading, including climate change strategy, system and risk management, verification, CDM/JI project development and CER procurement, and accounting and tax implications both within and outside the EU-ETS.