By Alissa de Carbonnel
BRUSSELS (Reuters) - Britain should abolish its carbon floor price to help the hard-hit steel industry, the lawmaker shepherding a reform of the EU Emissions Trading System (ETS) through parliament said on Tuesday.
With the British government looking for ways to save jobs threatened by the sale of Indian firm Tata Steel 's (NS:TISC) British plants, Scottish Conservative Ian Duncan said repealing the carbon floor was one of the few tools available to it.
"The carbon floor price must go," Duncan said, adding he would write to British Business Secretary Sajid Javid calling for an end to the policy in place since 2013.
While cheap Chinese imports are the steel industry's primary worry, high energy prices, boosted by environmental charges, have added to their woes.
Duncan's comments are seen fuelling a debate over how the EU's draft reform bill can promote a high-enough carbon price to spur green growth while maintaining industry competitiveness in the absence of a global carbon market.
It runs counter to a French proposal for an EU-wide price corridor to fix what aims to be the bloc's flagship climate policy but which is floundering as oversupply depresses prices.
While many in the 28-nation bloc oppose higher environmental taxes, such as coal-reliant Poland, EU sources said the French proposal was forcing a debate about how to shore up carbon prices.
Benchmark carbon prices are hovering around 5 euros. "The real fix would be a minimum price of 30 euros," said Patrick Graichen of the Berlin-based think tank Agora Energiewende.
British factories regulated by the ETS, including steel which accounts for some 27 percent of EU industrial pollution, pay an additional 18 pounds ($25.58) per tonne of carbon dioxide emitted.
Along with other energy-intensive industries, steelmakers fret the ETS reform will slash some of their free carbon permits. The Eurofer industry group warns they will be short of half of the permits they needed in 2030 under the proposal.
"What the European Commission is asking is too big," Eurofer head Geert Van Poelvoorde, a senior executive at ArcelorMittal, told Reuters last month. "It pushes de-industrialisation in Europe but to places where probably or most likely the CO2 emission is higher."
The ETS handouts were a concession to some of the biggest employers in Europe to prevent their relocating abroad in what is known as "carbon leakage".