Alliance of Energy Intensive Industries warns that any EU further pass-through of carbon cost impairs industry’s competitiveness
For industries exposed to international competition, product prices are determined by the international producer which sells at the lowest price. Therefore, if an EU producer would pass-through (parts of) EU carbon costs in their product prices, non-EU competitors not exposed to carbon costs would:
- either undercut EU products market prices without any disadvantage – thereby gaining market share;
- or follow the EU company’s product price thereby increasing their sales margin with respect to the EU competitors and attracting future investments;
In both cases and without proper carbon leakage provisions the competitiveness of ETS installations will be impaired, discouraging investments in the EU. This would lead to a relocation of EU production activities and investment to off-shore.