Industry will struggle to comply with emission cuts

The application of the Kyoto protocol on the reduction of greenhouse gas emissions threatens to stifle economic growth. While the world’s two worst polluters, the United States and China, have refused to sign the protocol and do not apply it, Greece has and its application of the protocol is leading to the stagnation of the already-weak Greek industrial sector and is especially burdensome for state electricity company Public Power Corporation (PPC). The Ministry of Environment and Public Works, responsible for allocating emission rights, has almost completed the public consultation process. Deputy Minister Stavros Kaloyiannis will then submit his proposals concerning the allocation of emissions to Environment Minister Giorgos Souflias and Development Minister Dimitris Sioufas. Given Greece’s performance thus far, the allocations scheme will drastically reduce carbon dioxide emission limits. Reducing emissions is not as simple as it sounds, because it could mean a reduction in production for certain industries, since production capacity is not taken into consideration. One such example concerns a Heracles cement production factory, which stopped exports last December because it had filled its annual emissions quota and the price of cement did not allow it to buy emissions rights from a factory that had stayed well within the limits. So Heracles opted to stop exports rather than sell its products at a loss. But this action, and the non-operation of the factory, deprived the Greek economy of money. PPC is going to face a greater problem, since it already pays 12 million euros annually to acquire emissions rights, thus hurting its profitability. PPC accounts for most of Greece’s greenhouse gas emissions, because its electricity-producing units burn lignite and it has to resort to emissions trading to keep the units operating year-round. According to the new emissions plan, which covers the period 2008-2012, PPC must reduce its carbon dioxide emissions to 46.6 million tons annually, from 52 million currently (although Environment Ministry readings show that emissions exceed the allowed limit). If the Environment Ministry insists on the cut, PPC will take a big hit, given that additional electricity production units will be required to keep up with rising demand. The new units will use natural gas instead of lignite but there will still be greenhouse gas emissions, although far fewer than in the lignite-burning units. The current emissions plan, for the period 2005-2007, applies to 150 industrial units and allows slightly over 71 million tons of greenhouse gas emissions annually. The new plan will allow 68.8 million tons. There are some sectors, however, that will be allowed to increase their emissions, according to the website that posts the results of the public consultation. Refineries, for example, will be allowed to emit 4.2 million tons of greenhouse gases, up from 3.4 million. Surprisingly, the quicklime industry is allowed a generous emissions increase, from 659,600 tons to 937,300. The emissions scheme is not the only instance of the Environment Ministry decisions affecting economic activity. The lack of a national land-use plan is a major reason that the country’s highest administrative court, Council of State, often rules investment plans illegal. Ministry officials claim that the lack of a comprehensive plan will be compensated for by special land-use plans concerning renewable energy sources, tourism and industry. These plans are expected to be finalized by the end of the year.