Pollution is expensive. And more each time. The Valencian industrial group, which emits large amounts of greenhouse gases, is facing a bill of 250 million euros due to the excess tonnes of CO2 released last year alone, according to a report by the Generalitat.
There are 111 installations in the Valencian Community subject to the emissions trading regime. So they pay to pollute beyond what is allowed. There are also 71 other facilities that are excluded because they are below a certain emission level.
The increase in the bill covers strategic companies in the Valencian Community. 31.8% of the tons emitted correspond to the ceramic industry (floor and wall tiles); 22% to electricity generation operators, especially cogeneration facilities. In many cases, a cost added to the negative situation experienced by these sectors due to gas and electricity prices.
The emissions trading system is one of the EU tools to reduce greenhouse gas emissions by 40% compared to 1990 values by 2030, as part of the Paris agreement.
Polluting facilities must submit a report each year that includes emissions from the previous year and is verified by an independent organization. In the case of the Valencian Community, confirmed and predicted emissions in 2022 were 7.8 million tonnes of CO2. This amount represents a decrease compared to 8 million tonnes in 2021, but still exceeds 57% of the amount that C. Valenciana plants have allocated free of charge for this year.
It should be noted that the state allows facilities to export a certain amount free of charge in order to compete with operators outside the European Union, while fulfilling the commitments of the Kyoto protocol. However, the amount of pollution that is free is reduced from year to year, and all emissions that exceed this threshold must be paid for. Amount paid to the Spanish State. And the price fluctuates. Because it is not a fixed amount, but there is a financial market that determines its price. To put it in context, in March 2018 the tonne was 12.62 euros. 21.44 euros per ton in 2019. 72.89 euros in 2021. In March 2023, this figure reached 87.48 euros. 600% more.
new mechanism
Countries like Spain, and more specifically industrialized autonomies like it, have maneuvered to stop the extraordinary rise in the cost of these emissions rights. This speculative process even led the European Commission to put an end to some practices in the new regulation regarding these ETS rights, which accelerated the reduction of free rights. Especially with the initiative of the European Parliament and the EU Council, an article is included to prevent speculation. Sources familiar with the process say that it will be seen over time whether this mechanism will come into play in the case of new fund movements or investment banking.
Brussels’ idea is to encourage investment in technological changes that prevent emissions. The problem in industries like Castelló’s is that there is not yet a suitable technology to evolve towards less polluting processes. In any case, time will tell how the volatility of these emission rights will develop. While its price was around 68 euros this week, it reached the 100 euro limit this year.
In any case, this is an irreversible process. The commission has set targets and this deterrent mechanism will continue. Last October, the European Union’s new climate commissioner, Wopke Hoekstra, pledged to advocate for a 90% reduction in net greenhouse gas emissions by 2040. It didn’t take long for financial analysts to predict that the price of EU carbon emissions would rise. It jumped to the 400 euro limit.