As the EU looks to the post-2012 horizon for regulating emissions of greenhouse gases, Rhodia CEO Jean-Pierre Clamadieu has expressed interest in ways of implementing an auction of emission rights, which since 2005 have been issued cost-free based on past emission levels and then traded. He calls for a sector analysis to identify which industries are most energy-intensive and could thus be hardest-hit by a new auction system.

While viewing auctions as the 'most practicable' approach compared to a potentially 'complex' tax scheme (which could trigger a World Trade Organisation inquiry) or requirements on importers to buy credits based on a carbon-content analysis of products coming into the EU, Clamadieu feels Europe shouldn't set up obstacles for its industries that can't easily reduce CO2 emissions. The EU Commission should study all the options to ensure that Europe doesn't create insurmountable challenges for some industries which are the most vulnerable since they are energy-intensive.

His own company, a European leader in specialty chemicals, has been successfully addressing these issues since the 1990s.

The world's second-largest producer of nylon (a polyamide), Rhodia operates plants that emit N2O, one of six industrial gases targeted by an EU permit trading scheme that took effect in 2005. But it was clear, says Clamadieu, that we couldn't just wait for regulations or incentives to come on line since in France Rhodia was the largest single industrial source of greenhouse gases. So, he continues, we made a decision to invest in these solutions and, as a responsible company, we're on track to reach new targets ? gesturing downwards to show the direction.

The European emission trading scheme, or ETS, has been very successful, according to Clamadieu, resulting in a marketplace with 10 billion euros in annual exchange of carbon-emission allowances. He observes, we can trade the permits, but we don't have to buy them up front. This system has resulted in the cost of a (metric) ton of carbon emitted into the atmosphere floating ? fairly stably, he indicates ? at around 20 euros. That price, in turn, enables industry to enter into longer-term investment planning, an immediate requirement, he says, since the ETS is set to expire in 2012. On some basic elements, we lack visibility, he adds. We lack the basic rules of where we'll be post-2012.

Under the proposed auction system, the permits would be sold. But Clamadieu proposes that the hardest-hit players in the industry could continue to receive free permits within a benchmark set by an international body.

Clamadieu notes that industry in France reduced greenhouse-gas emissions by 20 per cent between 1990 and 2005 while emissions from households (mainly due to poor insulation) and transportation sources rose by the same percentage. This performance indicates where real gains in emission-reduction could also be made and hence where regulators could focus attention.

Another EU tool that Rhodia has been using to collect carbon-emission rights is known as the clean development mechanism, or CDM, where lower-emission technologies are transferred to plants in newly-industrializing countries. We're a leader in using CDM, Clamadieu says, giving as examples new facilities in Brazil and Korea. We receive credits that we can trade in the EU scheme, he explains.

Looking at the post-2012 landscape, Clamadieu believes that some [proposed] changes fit very well with what industry wants. He cautions, however, that some elements lack clarity. We want to make sure that we achieve EU and government goals, but we also want to achieve our own goals as an industrial company.