Azoty alarms over withdrawal of free allowances, wants govt. to enter into talks with EC

At the end of April, the climate ministry presented for consultation draft amendments to the Law on the greenhouse gas emission trading scheme and certain other laws (UC39).

"The draft presented transposes provisions that have a fundamentally negative impact on the functioning of the domestic chemical sector," Azoty pointed out.

"Taking away free GHG emission allowances for the sectors covered by the CBAM will threaten the competitiveness and existence of the entire domestic fertiliser sector. It is necessary to take regulatory action to prevent a reduction in fertiliser production in Poland due to the costs of valuing emissions," it added.

The draft assumes, among other things, that 100 percent of the proceeds from the sale of CO2 emission allowances are to be earmarked for purposes related to climate protection and adaptation to climate change. So far, it has been 50 percent.

The idea is to implement EU legislation resulting from the provisions of the EU climate package “Fit for 55” into Polish law.

Azoty stressed that the change being implemented is fundamental to the functioning of energy-intensive industries in Poland. This is because the EU ETS Directive stipulates that goods covered by the border price adjustment mechanism taking into account CO2 emissions (the so-called CBAM mechanism) will, from 2026 onwards, gradually lose their allocation of free allowances each year until their complete withdrawal in 2034.

"The CBAM mechanism was intended to equalise the competitiveness of EU ETS producers (for CO2 equivalent emissions) against non-EU producers, where analogous emission charges are not incurred or are enforced to a much lesser extent," Azoty explained.

"However, as research by the Organisation for Economic Co-operation and Development (OECD) indicates, not only will the withdrawal of free allowances result in a decrease in value added in the sectors covered by CBAM, but the effect will be more severe for the countries of Central and Eastern Europe," it added.

Azoty emphasised that the implementation of the free withdrawal mechanism will have a significant impact on the functioning of the fertiliser sector in the EU.

"Based on the emission levels of ammonia and nitric acid, the cost of withdrawing free emission allowances for the EU fertiliser sector will increase by more than EUR 5.5 billion per year compared to the 2021 emission valuation costs, which will have a devastating effect on the fertiliser industry," the group assessed.

"This is expected to result in higher EU nitrogen fertiliser prices and lower consumption, while contributing to a loss of competitiveness for EU manufacturers," it added.

Azoty calls for the government administration to immediately enter into talks with the European Commission with a view to amending the EU ETS Directive and suspending the withdrawal of free allowances until at least 2030, i.e. verifying the effectiveness of the entire mechanism and the impact on the competitiveness of the EU energy-intensive industry.

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