HELSINKI (Reuters) - European forestries would pay dearly under a European Union proposal to overhaul from 2013 its Emission Trading Scheme, which allocates a fixed quota of emissions permits to heavy industry, a research institute said.
The European Commission adopted plans last week to slash greenhouse gas emissions, seeking to push the world into tough climate action.
Some sectors could be granted exemptions from the emissions allowance auction process but the Commission delayed until 2010 the decisions on which energy-intensive industries should get free permits.
"If the European paper and pulp industry is not excluded from the emissions trade, annual costs could rise by 1.3 billion to 2.2 billion euros ($1.9 - $3.2 billion)," the study by Finnish research institute PTT said on Monday.
The institute has close ties to farmers and forest owners. Its head said it received some funding and assistance for the study from the Federation of Forest Industries but it was mainly an in-house study.
The PTT study added that if the emissions regulation scheme increased the carbon dioxide (CO2) emissions rights to 30 to 50 euros per ton from current 20 euros, it would also increase energy and raw material costs by an additional 2.1 to 5 billion euros.
To maintain current profit levels, paper prices would have to rise by 3 to 7 percent, the study said, but added raising them would be impossible due to intensifying competition from outside Europe.
Without exemption, the total cost increase would equal 6 to 12 percent of forestries' total current costs, wiping out nearly all profits in the sector.
Even if the sector received an exemption from emissions trading, the energy and raw material cost increases would hit forestries' profitability.
(Reporting by Sakari Suoninen and Sami Torma; Editing by Paul Bolding)
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