Lobbying by Trade Associations at the EU: Is there an Alignment between the Preferences of Trade Associations and Individual Companies?

Lobbying by Trade Associations at the EU: Is there an

Alignment between the Preferences

of Trade Associations and Individual Companies?

Public Administration

International and European Governance June 2018

Author:

Mohamud Mohamed Khadar (s2110873)

Supervisor:

Adrià Albareda

Foreword

This thesis is written as part of the completion of the Master programme in Public Administration, specialisation in International and European Governance. The basis for the research is the capstone on the role of non-state actors in managing regulatory risks. Corporate political behaviour is one of the themes of the capstone and my interest in the area of corporate lobbying led me to choose the research topic of this paper. I was always interested in knowing more about the non-market activities of companies such as lobbying and doing this research gave me the opportunity to enhance my knowledge on the topic.

The research topic was challenging due to the novelty of the topic (alignment of positions), limited availability of data and theory on the subject. But an effort was made to be as objective as possible in the case selection and the documents used to answer the research question. Analysis of the available documents and data allowed me to answer the research question.

During the research period, I have received support and guidance from the team of the named capstone. Adrià Albareda, supervisor, gave me unwavaring support throughout the whole research period. Therefore, I would like to thank the whole team of the capstone and special thanks to Adrià Albareda. I would not have completed the thesis without the support of the supervisor. I would also like to thank the European Chemical Industry Council (Cefic) for agreeing to provide me quick responses to the questions I asked.

Abstract

This research investigates the interaction between EU trade associations and members (companies). The study particularly focuses on whether the size of companies determine the positions adopted by associations vis-à-vis EU regulations. The main research question of the study is whether trade associations represent the preferences of all their members or only the biggest members of the association. The research answers this question by analysing and comparing the positions of two trade associations and six companies (three companies in each trade association) on the proposed reform of the EU Emission Trading Scheme. The study finds that size of firms does not determine the positions taken by trade associations vis-à-vis EU regulations. Contrary to the hypotheses of the existing literature, multinational companies do not dominate trade associations. Size of firms does not determine alignment of positions. Associations adopt their positions through compromise and dialogue among all the members. Therefore, trade associations represent the preferences of all their members.

Table of Contents

Foreword ... Abstract ...

1. Introduction and Research Question ... 1

2. Theoretical Framework ... 5

2.1. What are EU Trade Associations and what do they do? ... 5

2.2. Challenges faced by Trade Associations ... 7

2.3. The dominance of large firms in Trade Associations ... 10

3. Research Methods and Data Collection ... 15

3.1. Case Selection ... 15

3.1.1. The European Chemical Industry Council ... 16

3.1.2. FuelsEurope ... 18

3.1.3. Consultation on structural options to strengthen Directive 2003/87 (ETS) ... 19

3.2. Data Collection ... 22

3.3. Concepts and Operationalization ... 23

4. Empirical Analysis ... 24

4.1.1. The Positions of Cefic and members on the Proposed reform of the ETS ... 26

4.1.2. The Positions of FuelsEurope and members on the proposed reform of the ETS ... 32

5. Discussion ... 38

6. Conclusion ... 42

7. Limitations ... 43

8. Bibliography ... 45

List of Acronyms used CDP Carbon Disclosure Project

Cefic European Chemical Industry Council ETS Emission Trading Scheme (system)

GHG Greenhouse Gas

PDT Power Dependence Theory RDT Resource Dependence Theory

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1. Introduction and Research Question

The competencies of EU institutions increased over the years as more legislative authority moved from the domestic to the supranational level (Eising, 2004). Particularly, lobbying at the European level exploded in mid-1980s and the beginning of the 1990s (Woll, 2006). As a result, interest groups try to influence EU policymaking via the multiple points available: sub-national and national public authorities as well as EU institutions (i.e., the Commission, the Parliament and the Council). It is not only the plurality of access points, but interest groups have many different ways in which they can lobby. For instance, they can seek access to public officials or organize public demonstrations. If we focus on firms we also see that sometimes they lobby alone and some other times they do so through their involvement in trade associations (hereafter referred to as TAs). In principle, access to the EU institutions is open to all and no interested party can be excluded in giving their inputs on a policy (European Commission , 2002). The EU wants the engagement of interest groups as a way of enhancing democratic participation. The White Paper of the European Commission (2001) encouraged the involvement of non-state actors in the EU governance. However, it is practically impossible to listen to every interest group. For example, when business lobbying exploded at the EU level, access to the Commission was restricted to industrial forums (Lehmann, 2003). Consequently, large firms joined trade federations and industrial forums and the institutionalization of business lobbying in the European Union policy-making started (ibid). Firms who formed alliances with others at the European level such as European business associations were able to establish relevant contacts with EU Commission officials (Bouwen, 2002, 2004; Coen, 2009; Eising, 2007).

TAs are not-for-profit organizations primarily set up by companies to represent their interests (Esparza et al., 2014) with EU institutions. TAs have formal members, norms, rules and regulations that define the rights and duties of the members and the organization (Marques, 2017). Joining a TA has a number of tangible and intangible benefits. TAs provide a platform for members to exchange market information, coordinate their actions and create networks (Barnett, 2013; Kowal, 2018; Lawton, Rajwani & Minto, 2018; OECD, 2007). Policy-makers consider TAs as representatives of industry-wide interests and hence their voice has more weight than individual company action (Drope & Hansen, 2009; Grant, 2005; Richardson, 2000).

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Despite the advantages, TAs face a number of challenges. Olson’s (1965) Collective Action Problem is the prominent challenge in collective actions particularly the issue of free-riding. The second challenge is the logic of membership. TAs need to attract and retain members. Securing membership is relatively easier in highly regulated sectors which are dominated by large companies while it is rather difficult in less regulated sectors which mainly consist of large number of smaller companies (Boléat, 2003). A third challenge is maintaining internal cohesion and organizational autonomy (Ellinas & Suleiman, 2012; Huang, Wang & Lin, 2011). Finally, TAs need to manage the interests of rival members with divergent interests (Barnett, 2013; Esparza et al., 2014). The members within TAs are rival in the market. The strength of TAs lies in their abilities of finding common positions among divergent interests (Greenwood, 2004). For example, the European Chemical Industry Council (Cefic) is one of the largest TA in Europe and represents 29,000 chemical companies (Fagan-Watson, Elliott, Watson, 2015). It is very likely that such large number of members will have different views and positions on certain policy matters. It is the job of Cefic to build consensus among the members and represent the viewpoints of all without supporting one viewpoint against another. Reaching consensus and presenting a common position of an industry on a certain policy to EU institutions will likely strengthen the access and influence of a TA in the EU policy process. Therefore, it is pertinent to investigate whether TAs in fact represent the preferences of all their members.

As noted earlier TAs bring together different firms in the same sector. Firms join TAs to represent their collective interests (Coen, 2007). They lobby EU institutions on behalf of their members. However, it is often argued that big companies dominate TAs because of the size of their contributions to an association’s budget, subscription, and sponsoring (Barnett, 2013; Lawton et al., 2018; Lehmann, 2003). Large firms advance their own interests and preferences rather than the presumed common interest of the members of the association (Barnett, 2013; Lawton et al., 2018). As such, a “Club within” is created (Lehmann, 2003, p.13). Therefore, big companies have two hats when lobbying: the company’s and the association’s hats (ibid). This dominance of large firms might hamper the work of associations. TAs may be seen as representing the preferences of large multinationals and not all the members of an associations.

In terms of lobbying at the EU, it is evident that businesses extensively use TAs. Business associations account for almost two third of interest groups lobbying at the EU and the majority

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are TAs (Coen, 2009; Lehmann, 2003). Moreover, TAs are recognized by the EU institutions as the “official representative body” and hence are invited to attend meetings and receive information (Lehmann, 2003, p.13). While the focus of much research work has been on interest group lobbying at the EU level, little attention has been paid to the interaction between individual companies and trade associations. Both large, medium and small sized firms are usually members of the same trade associations. Much of the existing research shows that large companies dominate TAs. However, this has not been empirically tested. If the positions adopted by TAs reflect only the views of the big corporations, then it is biased and is not representative of the industry. This research uses the Power-Dependence relations and Resource Dependence Theory to analyse the power-dependence dynamics between TAs and large firms. Using the theoretical foundations empirically investigates whether trade associations represent the interests of all the member companies and to what extent do firms agree/disagree with the positions taken by trade associations on a certain policy area. Is there an alignment? Do large companies dominate the management of trade associations and hence subdue the voice of relatively medium-sized and smaller companies? The main research question is “To what extent are the preferences of individual companies represented by trade associations?” Given the importance of TAs, these are relevant questions which need to be answered.

Apart from representing the interests of their members with policy-makers, TAs play an important role in enhancing the efficiency of the market (OECD, 2007). They set industry standards and promote industry self-regulation (ibid). They are important for the economy. Secondly, it is normally assumed that trade associations are representing the will of all their members. EU institutions rely on the inputs of TAs in the policy making process because they are considered to be the voice of their industries. If the views of TAs are not representing accurately the will of all their members, then the input legitimacy of the EU may be hampered. Hence, given the importance of TAs in the policy process of the EU, it is essential to examine their legitimacy.

The research looks into a case study related to EU climate policy. Climate change is one of the cross-cutting issues that directly impact the business operations of companies. The European Union is at the forefront in tackling climate change. Accordingly, the EU adopted 2020 Climate and Energy Package which consists of a set of binding legislations to reduce greenhouse gas emissions, enhance the use of renewable energy and improve energy efficiency (European

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Commission, 2018). One of the legislation in the package is the Carbon Emission Trading Scheme (ETS). Companies operating in the EU must abide by EU climate policies and regulations. On their part, companies are actively engaged in the EU policy-making by lobbying through TAs because the policies directly affect their business interests. The case study focuses on two sectors that are closely related: the chemical and oil and gas sectors. The positions of TAs and companies are analysed in relation to the Proposed Reform of the Emission Trade Scheme directive. The analysis is based on the consultation process launched in 2012 to reform Directive 2003/87/EC. A sample of trade associations and individual companies are selected for analysis. Accordingly, two TAs are selected and three companies in each TA. The selected TAs are The European Chemical Industry Council (Cefic) and FuelsEurope. The companies selected from the former are BASF, Arkema, Ercros while the companies from the latter are Royal Dutch Shell, Galp Energia, Hellenic Petroleum. First, the lobbying activities of the TAs and their positions on the selected policy are analysed. Secondly, I analyse the lobbying activities of the individual companies and their positions on the selected policy. Then, the positions of the trade associations and the individual companies are compared to evaluate whether there is an alignment between their respective positions. By comparing and evaluating the positions of the TAs against their member companies, the research uncovers whether the associations represent the preferences of their members.

The paper is arranged in the following order. The second chapter sets out the theoretical framework which the thesis builds on. Using the theoretical framework, the thesis proceeds to answer the proposed main research question. The third chapter outlines the research methodology and data collection. Through data gained from the European Commission website, Carbon Disclosure Project website, websites of TAs and companies and media articles, the positions of the selected TAs and companies are analysed to answer the research question. The fourth chapter presents the empirical analysis. The results and the key findings of the research are discussed in the fifth chapter of the paper. The answer to the main research question is presented in chapter five. Finally, the last chapters contain the concluding remarks of the thesis and a discussion on the limitations of the research.

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2. Theoretical Framework

2.1. What are EU Trade Associations and what do they do?

There are different types of associations. Boléat (2003) identified six types of associations which include national and European associations. While “federations are associations of associations”, the most common business interest groups are trade associations of single industries (ibid, p. 1-2). For instance, the European Chemical Industry Council (Cefic) is an interest group that represent the European chemical industry (Cefic, 2018). EU institutions rely on such interest groups for inputs (e.g. expertise information) in the policy making (Bouwen, 2002; Eising, 2007). In addition, the EU Commission favors European associations than individual company action (Coen, 1998; 2009; Commission of the European Communities, 1993; Lehmann, 2003). This is because association have wide range of members. In other words, associations have European-wide voice of their industries which is essential for the input legitimacy of the EU. The focus of this research is European associations which represent business interests with EU institutions. The research focuses on member companies and not member associations.

Nearly all firms (large and small) are members of at least one Trade Association (Barnett, 2013). TAs are meta-organizations that have other organizations as members and the latter must have common interests (Boléat, 2003; Rajwani et al., 2015). This means TAs bring together firms that share common interests. They have an interest in the prosperity of their firms in particular and the industry in general. Another important characteristic of TAs is that they engage with policy makers in order to influence regulations in favor of their members (Rajwani et al., 2015). They are not involved in the market but in non-market activities.

Profit-making firms are rivals in the market. They seek competitive advantages over their rivals. However, they join forces in TAs to address common problems. The external environment of organizations is complex due to globalization, competition and the EU multilevel governance system, among other things. Organizations seek ways to manage this complex external environment. The Resource Dependence Theory (RDT) suggests that autonomous organizations engage in interorganizational arrangements such as forming alliances to manage their external environment (Drees & Heugens, 2013). The environment consists of within boundary (under the control of the organization) and outside boundary (Malatesta & Smith, 2014). Organizations do not have control over the latter. It is the complex external environment. Therefore, organizations join forces to survive in this critical environment. No single organization can achieve its objectives

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without collaborating with other organizations. According to the RDT, organizations obtain the resources they need to survive by joining forces (ibid). This means, by forming alliances companies have more power and expertise to influence the EU policy-process.

As a result, firms join TAs for various reasons. Being a member of TAs provide firms to access more information about the market and competitors, coordinate collective responses and network with other like-minded organizations, among other things (Barnett, 2013; Kowal, 2018; Lawton et al., 2018). Barnett (2018) makes similar arguments regarding why firms join TAs: “Economic self-interest and Sociological identity” (p.1). By joining TAs, firms expect a certain level of economic return. Apart from economic benefits, firms cooperate with others in their industry to show solidarity (ibid). Therefore, while the primary motivation is the expectation of an economic benefit, companies also engage with others in their sectors to show alliance and that survival of their industry is in the interest of all of them. In addition, members of TAs have more reputation and trust with policy-makers (Larrain & Prüfer, 2015; Tucker, 2008).

Membership of a TA offers members a collective voice and coalitions (Drope & Hansen, 2009). They coordinate with each other and join forces to impact the policy-process, among other things. TAs also create shared understanding among member firms of their industry (Lawton et al., 2018). This means, TAs construct and enable members to understand “what shared interests are”, as well as the problems facing their industry (ibid, p.2). By doing so, TAs may be able to better present common positions on policies they lobby on with EU institutions. Moreover, policy-makers also view the positions of TAs as being an industry-wide decision (ibid). Therefore, the information they present to policy makers have more weight than individual company action in terms of representation of the industry (Grant, 2005; Richardson, 2000). Hence, building consensus is one of the main tasks of TAs.

Consensus building among member companies is affected by the relationship between the members and the organization (TAs). In the definition of TAs, it was stated that TAs are meta-organizations. Gulati et al. (2012) define meta-organization as “organizations that comprise networks of firms or individuals not bound by authority based on employment relationships but characterized by a system-level goal” (p.573). The member firms are autonomous of the organization and vice versa. TAs are run by an independent staff (Barnett, 2018). TAs are organizations that have rivals as members but the day-to-day activities of the former are managed

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by an autonomous staff. Such staff play a crucial role in deciding the actions the association takes. Once a TA is established the founding document grants legitimacy. It defines the rights and duties of each stakeholder in the organization. There is delegation of authority by the members to the TA (Bauer & Ege, 2016). The relationship between TAs and members resemble the Principal-agent relationship. TAs may play a positive role in building consensus among industry members and providing expertise and information to policy-makers. In the context of the EU, lobbying by TAs is an essential part of firms’ lobby strategies (Coen, 2009). It is seen as complementary to individual action (ibid).

Little research has been done on the interaction between TAs and their members. There are researchers who argue that large firms dominate TAs (Barnett, 2013; Lawton et al., 2017: Yue, Luo & Ingram, 2013). Such claims have not been empirically investigated. Yue et al. (2013) researched an association of the banking sector in New York and found out that large players in the market advanced their “own interest” at the expense of their rivals outside of the association (p. 1). Although the research does not directly relate to the dominance of large firms over other companies within the association, it nevertheless, indicates that big players mainly use associations to advance their interests. Further research on this topic is relevant to (dis)confirm the (real) perceived dominance of multinational firms in TAs.

2.2. Challenges faced by Trade Associations

Despite the obvious advantages and the favoring of the European Commission of associations over individual action, collective action has its problems. Olson’s (1965) Collective Action Problem is the prominent challenge in collective actions particularly the issue of free-riding. Drope & Hansen (2009) argue that “common interests do not produce collective action, except under conditions that overcome the free-rider incentive” (p.1). Firms pay subscription fees to TAs but non-members can still benefit from a positive policy impact generated as a result of the lobbying activities of a certain TA. The non-members cannot be excluded from the positive impact (Barnett, 2006).

However, there are scholars who argue that collective action issue is less of a problem in the EU (Coen, 2009, Greenwood, 2007, 2002). The reasons mainly relate to the history of European federations and their structure. The EU funded the earliest European federations and entry costs are low (Coen, 2009). This means all firms were encouraged to join associations. Research also shows that joining associations is partly due to contagion (Barnett, 2006; Barnett, Mischke &

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Ocasio, 2000). Firms are likely to join TAs if other firms in their industry join. When household names (successful/prominent companies) join TAs, others will follow. Because of the history of European federations, TAs remain an important lobbying channel for firms.

As stated earlier being a member of an association enhances firm’s reputation with the policy makers. Therefore, the reasons of participating in a TA for large companies is not the low cost of entry but rather building reputation and trust with EU institutions (Coen, 1998; Tucker, 2008). Coen (2009) indicated that firms participation of associations is more the “logic of the cost of non-membership” (p.162). Although the benefits of membership in a TA are not known or quantified by member companies (Greenwood & Webster, 2000), non-membership might put companies at a disadvantage. Non-members miss out the afore-mentioned benefits. Even if there are no tangible benefits, the mere fact of building alliances enhances the credentials of a firm. These are the main mechanisms that enable TAs overcome the collective action problem. Since TAs bring together companies with different capabilities, resources and interests, the relevant question at this point is how well do TAs represent the interests of all members?

This brings us to the second challenge that TAs face. This challenge relates to the recruitment of member companies. Greenwood & Webster (2000) state that EU TAs face the problem of “associability” which is “the ability of associations to recruit members” (p.65). To function successfully, TAs need to attract member companies. According to Boléat (2003) recruitment of member companies is relatively easier in highly regulated sectors which are dominated by large companies while securing membership is rather difficult in less regulated sectors that consist of large number of smaller companies. Therefore, TAs spend resources in attracting members particularly the dominant companies. Being open to all members and attracting known companies will enhance the credibility of a TA.

A third challenge is maintaining internal cohesion and organizational autonomy. Cohesion means that group members have a common eye for common objectives (Huang, Wang & Lin, 2011; Odom, Boxx & Dunn, 1990). This means less conflict among the members and that all members feel their views are being heard and stride toward the common goals. Several factors have been identified that are important to group cohesion. These are appeal to the group, motivation and collective efforts of the members (Huang et al., 2011). Appeal to the group relates to an associations ability to attract and retain the members. It means making an effort to appeal and

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satisfy the needs of all members so that the trust and confidence in the TA increases. That can only be achieved if the TA represents the preferences of all members.

On the other hand, autonomy has different meanings in different fields but here it means the ability of an organization to perform tasks without interference from the member organizations (Ellinas & Suleiman, 2012; Schmitter & Streeck 1999). If TAs have low insulation from large firms, trust between the members will be undermined. This is because if an association relies on large firms, for instance, intra member trust will suffer (Greenwood, 2002). However, it is often indicated that large firms take initiatives in TAs and set the agenda (Barnett, 2013). This means, TAs depend on the big firms in the association.

The fourth challenge faced by TAs is managing the interests of rival companies (Barnett, 2013; Esparza et al., 2014). The members within TAs are rivals in the market. The strength of TAs lies in their abilities of finding common positions among divergent interests (Greenwood, 2004). Reaching consensus and presenting a common position of an industry on a certain policy to EU institutions will likely strengthen the access and influence of a TA in the EU policy process. Greenwood & Webster (2000) suggest that “public institutions make excessive demands of TAs to deliver a high level of collective opinion” (p. 70). On the other hand, business associations struggle to go beyond the “lowest common denominator” (ibid). EU institutions need expertise information. The challenges faced by TAs with large number of members are how to adopt collective position while delivering the information resources required by policy makers. EU institutions indicated that when policy proposals involve technical matters, it prefers associations to present divergent views of their members rather than a single voice that is of little use to the policy making (Greenwood, 2002). Simplifying complex issues for the sake of building consensus might damage the reputation of an association. This shows managing the different views of the members is one of the biggest challenges that associations have to deal with. From the literature, it is not clear whether the collective position (inputs) presented to EU institutions by TAs are the preferences of all or only the views of large companies since the latter possess more resources and expertise. This is what this research intends to investigate.

TAs must maintain the support of the members for them to continue to function (Barnett, 2018). It is not always agreed (or not clearly defined) by all members what the common interests that the TA seeks to further are (ibid). The common position adopted by TAs reflect a compromise of the

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many views of the member companies (Greenwood, 2002). That poses a challenge for the TA as an organization. It may not always satisfy all the members. Again, here it is not clear if the views of certain members (e.g. large firms) have more weight than others. The output legitimacy (Bekkers & Edwards, 2007) is very important for the functioning of organizations. This relates to the efficiency and effectiveness of TAs and the outcomes of their lobbying activities. Do these activities solve common industry problems or further the interests of the industry in general? As long as the outcomes of the lobbying activities of TAs further the interests of the industry, then it will be acceptable to at least the majority of the members. According to Greenwood (2004) European TAs have low membership turnover. This may suggest that all members are satisfied because TAs represent the preferences of all their members. However, the following section discusses the dominance of large firms which is contrary to the presumed collective voice of all members.

2.3. The dominance of large firms in Trade Associations

The literature review presented earlier showed that TAs struggle to build consensus among member companies and at the same time deliver expertise information to EU institutions. When the institutionalization of European federations started in the 1990s, large firms viewed business associations as ineffective and inefficient (Coen, 2009). The federations were deemed to be incompetent in delivering the expertise and critical information needed by EU institutions (ibid, p.161). So, the associations needed to proof their credentials as being worthy of making valuable inputs to EU policy making and at the same time ensure that their voice is the collective opinion of all member companies.

TAs are faced with the delicate task of balancing different interests of member firms. One of the biggest challenges TAs face is how to represent the viewpoints of all members (Tucker, 2008). This problem is natural given the size of large and well-established TAs. While it is ideal to have the collective positions of all members, in reality it is the views of the larger firms that dominate the agenda of TAs (Barnett, 2013). Two theories are used to explain the relationship between TAs (as organizations) and large firms. These are: The Power-Dependence Theory (PDT) and the Resource Dependence Theory (RDT). The theories are used in a complementary way since they are related in their propositions and assumptions. PDT has more a general application while RDT relies on exchange of resources.

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Emerson (1962) developed the PDT theory when he published his article titled “Power-Dependence Relations”. This theory helps us understand the role of power and interorganizational dependencies between actors. In this research, it is the relationship between TAs and large firms. Which actor has relative power over the other and vice versa? To what extent are they interdependent; in other words, who control the critical resources needed by the other? According to PDT, “the power of A over B is equal to, and based upon, the dependence of B upon A” (Emerson, 1962, p.33). Here TAs and large firms can be substituted in A & B respectively. An organization has power because another organization depends on it and that power is equal to the dependence. Power is a function of dependence. It is also important to mention that resources determine the level of dependence between the organizations (Casciaro & Piskorski, 2005; Provan, Beyer & Kruytbosch, 1980). Therefore, the organization that has the critical resources needed by another organization will have more power over the latter and vice versa. In addition, the availability of alternative sources of resources will influence the power-dependence dynamics (Emerson, 1962). This means, if B can source the critical resources it needs from elsewhere then the power of A over B diminishes. In the power-dependence relations, there could be two scenarios: power imbalance and mutual dependence (ibid). There is an imbalance when one has more power over the other and there is mutual dependence when both organizations equally depend on each other. The importance of resources in the power-dependence dynamics between organizations brings us to the discussion of the second theory.

The second theory is the Resource Dependence Theory (RDT) which was developed by Pfeffer and Salancik in 1978 (Bouwen, 2002). This theory can be used to explain the reasons behind “interorganizational arrangements” such as TAs (Drees & Heugens, 2013: 1668). No organization is self-sufficient and hence they rely on other organizations for the provision of critical resources they need to function (Pfeffer & Salancik, 2003). According to RDT, organizations exchange resources and become interdependent on each other (Bouwen, 2004). Just like the Power-Dependence theory, the organization that has the critical resources needed by another organization will have the power to influence or pressure the latter to act in accordance with the wishes of the former. Provan et al. (1980) put it in the following way: “organizations will be powerful relative to others to the extent that they (1) control resources needed by others and (2) can reduce their dependencies on others for resources” (p. 200). Since resources are scarce, interorganizational bodies such as TAs will be dominated by firms that possess the critical resources such as expertise

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information needed by EU institutions. Therefore, we can now analyze the relationship between TAs and large firms.

In order to understand the power-dependence relations and the interdependence between TAs and large firms, one needs to understand the resources held by both sides (TAs and firms). TAs provide their members the services discussed earlier under section 2.1. of this paper. On their part, member companies pay membership fees and bring expertise knowledge to the associations they belong to. In addition, the prestige of having household names (well-known companies) enhance the trust and capabilities of TAs, and associations boost on their websites the large and well-known companies they have as members. Therefore, TAs provide services and member companies contribute to the former material resources, expertise and prestige. The existing literature indicate that large multinational companies dominate TAs (Barnett, 2013; Lawton et al., 2017; Yue et al., 2013). The said literature argue that large firms and elite groups use interorganizational bodies such as TAs to further their interests. Therefore, this issue needs close scrutiny to understand the power-dependence dynamics between TAs and large firms.

It is often argued that large firms dominate trade associations due to their subscription, contributions to the associations’ budget, sponsoring and hence a “Club within” has been created in trade associations (Lehmann, 2003, p.13). The budget of TAs depends on the subscription fees paid by member companies. For instance, a review of the founding document (Statutes) of Cefic reveal that membership fees are divided into categories in accordance with the annual revenues of the members. Large member firms contribute the biggest share to the budget of associations. This means, in terms of material resources, TAs largely depend on big firms. Another critical resource that large firms contribute to association is the expertise and the technical know-how they possess (Bouwen, 2002). Large firms have expertise information required by EU institutions (ibid). This is crucial for the policy making process. Since large firms are actively involved in the management of TAs (board members and committees), they bring expertise to the table. Compared to large firms, TAs have lower expertise knowledge (Bouwen, 2004; Eising, 2007; Greenwood & Webster, 2000). Therefore, organizations need to provide expertise knowledge to EU institutions in order to have access to them, build credentials with policy makers and influence the policy process. TAs depend on the resources held by large member companies. In terms of Power-Dependence

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relations, large firms have power over TAs due to material contributions and expertise knowledge. In a nutshell, there is power imbalance.

That being said, the picture is not complete unless one examines whether the critical resources held by the organizations (TAs or large firms) can be sourced from elsewhere. In other words, are there alternative sources of the critical resources each need? The availability of alternative sources of the critical resources affect the level of power and dependence between actors according to the PDT and RDT theories. Therefore, whoever has alternative sources reduces its dependencies on other organizations (Emerson, 1962). First, the entry costs of joining TAs are not high for large organizations and once they join a TA renewal of membership is automatic with no cost-benefit calculations (Coen, 2009; Greenwood & Webster, 2000). Moreover, Greenwood & Webster (2000) indicate that “it is not uncommon that large firms lose count of how many associations they are members of, and to be unable to cite the total costs of company affiliations” (p. 75). Multinational companies hold membership in around thirty different TAs (ibid). Therefore, it is actually the large companies that have alternative sources rather than TAs. It is easier for large firms to shop for associations taking into account their relative importance and whether the latter’s positions are close to the former’s. The availability of many associations that offer similar services to companies reduce the power of associations over large firm members. To put it differently, large firms have many alternatives and hence reduce their dependencies on one or two associations.

Regarding the membership fees and expertise knowledge, medium and smaller firms may not be able to replace large companies since they have limited resources (Bouwen, 2004; Eising, 2007). So, the crucial members of a TA are the large firms and without them the existence of the former will be in doubt. It is the multinational companies that have the resources (material and knowledge) required by policy makers. An association may not lobby effectively with EU institutions in the absence of large company members. In short, large firms have power over TAs because of the dependence of the latter on the former.

It is because of the above discussed points that large firms dominate TAs. Large firms influence and manipulate the agenda of TAs (Barnett, 2013). This may be detrimental to the reputation of TAs. It may also affect the input legitimacy of the EU policy making because the voice of TAs is

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deemed to represent the views of all members. Moreover, TAs may be viewed as rent-seekers and special interest groups (Doner & Schneider, 2000; Marques, 2017). For the proper functioning of organizations, the essential factors are internal cohesion and autonomy (Greenwood, 2002; Staber, 1987). Without these crucial elements an organization may fracture and become less representative of the members.

Therefore, from the above discussion it is safe to conclude that large firms have dominant power over trade associations and try to make the positions of the latter be consistent with the former. However, this has not been empirically tested. The grey area is whether the positions of trade associations on a certain policy are consistent with the positions of all members or only that of large firms. This research empirically investigates this grey area and contributes to the understanding of whether the dominant position of large companies within trade associations translate to neutralizing other voices (e.g. relatively smaller companies) within the association. Therefore, the research hopes to uncover whether TAs represent the preferences of all members. Equipped with this theoretical background, the following chapters of the paper empirically answer the main research question:

To what extent are the preferences of individual companies represented by trade associations?

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3. Research Methods and Data Collection

Little research has been done on the alignment between the positions of member companies and the final position of trade associations (Fagan-Watson et al., 2015). Much of the existing literature deals with individual lobby by firms and trade associations separately (Bernhagen & Mitchell, 2009; Bombardini & Trebbi, 2012). As such their positions are not compared. Other scholars focused on the lobbying activities of interest groups at the domestic or European level (Broscheid & Coen, 2007; Coen, & Richardson, 2009; Coen, 2007; Dür, 2008; Dür & Mateo, 2012; Klüver, 2010; Eising, 2007). However, such vast literature fails to assess the lobbying activities of companies and their trade associations together in order to understand their respective positions on issues they lobby on. Therefore, this research developed a way of measuring and comparing the positions of individual firms and the trade associations they belong to.

3.1. Case Selection

To determine whether TAs represent the preferences of member companies and to what extent, this research uses Small-N comparative study. Specifically, Most Similar Systems Design is employed to first analyse and compare the positions of selected TAs and secondly compare the positions of the TAs with those of the individual companies. The TAs selected are as similar as possible in the relevant dimensions (Toshkov, 2016) such as the policies they lobby on with EU institutions. The TAs differ in sector/industry they represent. Likewise, the selected companies in each TA are also similar in the relevant dimensions but only differ in one variable: size. The relevant dimensions are EU climate policies that the companies and the TAs lobby with EU institutions. The positions of individual companies are compared with each other and with their TA.

Two trade associations have been selected. The associations were selected based on several criteria. First the associations are European associations with European companies as members. Associations at the EU level have other associations (e.g. national trade associations) as members. For this research, such members are excluded since the focus of the research is comparing the positions of member companies and their TAs. The second criterion is that the associations mainly lobby with EU institutions on Climate policies1. Thirdly, availability of information about the associations. This means, the associations are active in the European policy process, have

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responded to the EU Commission when the policy was initiated and they have also made their positions on the policy known by publishing position papers. Therefore, the selected associations are actively engaged in lobbying with EU institutions. The selected trade associations are briefly explained in the following sections. How much the selected associations spend on lobbying and the number of meetings held with EU institutions are discussed, among others.

3.1.1. The European Chemical Industry Council

The European Chemical Industry Council (Cefic) was founded in 1972 and is based in Brussels (Cefic, 2018). This trade association represents 29,000 (large, medium and small) European chemical companies (Fagan-Watson et al., 2015: 60). It claims to be the voice of the chemical industry in Europe and has four categories of members: Corporate members, Business members, Member federations and Associate federations (Cefic, 2018). It is one of the largest interest groups in Brussels.

Cefic states that its main objective is to represent the common interests of the European Chemical Industry with EU institutions (EU Transparency Register, 2018). In addition, the association aggregates the scientific knowledge of the industry, bring together the different stakeholders to exchange information and ensure compliance with legislations, among other things (ibid). It is an important association in Europe and it plays an active role in the European Chemical Industry. The main policies followed by the association are Environmental policies in general such as Energy and Climate policies, Sustainability and Industrial Emissions and also specific policies related to chemicals (ibid).

According to the EU Transparency Register (2018) Cefic has 76 individuals involved in the lobbying activities of the association 28 of which are accredited to access the European Parliament premises. Moreover, last year (Jan – Dec 2017) the association spent €12.3 million Euros on lobbying activities (ibid). It is one of the largest spenders on lobbying at the EU level. As of June 2018, the association had 65 meetings with EU institutions (EU Integrity Watch, 2018).

Cefic responded to the consultations on the selected policy regime. In addition, on its website it has published its position on the Emission Trading System (ETS) and the proposed revision of the scheme by the Commission. Moreover, the association has published position papers on climate related issues. To analyze the position of Cefic and compare with the positions of its member companies, the following three companies are selected from the association members.

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Table 1. Selected companies of Cefic

Size Companies Year founded Country Total revenues

2017 (in millions of €)2

Large BASF SE 1865 Germany 16,331

Medium-size Arkema SA 2003 France 8,326

Small Ercros SA 1817 Spain 686

Sources: BASF, 2017; Arkema, 2017; Ercros, 2017; Bloomberg, 2018

The companies are selected based on their size (the independent variable). BASF is the largest chemical company in the association, Arkema is a medium-sized company and Ercros is the smallest in terms of the total revenues for the year 2017. When it comes to size, companies are ranked according to the revenues generated by the companies. Such classifications are used by Forbes ranking of the world’s largest companies (Forbes, 2018) and other organizations that classify companies.

Cefic also classifies member companies according to their revenues (Cefic, 2018). The association classifies companies into two categories: companies with over one billion in sales and those with less than a billion (ibid). BASF and Arkema are in the first category while Ercros is in the latter category. This means, the association puts large and medium-sized companies in one category. Thus, I have taken a step further to identify companies that can be considered medium-sized. I have classified the companies into three: 1st, 2nd and 3rd quartiles. The first are the largest, second are the medium-size companies and third the smaller companies. In this classification, companies with more than ten billion in sales were considered to be large, between one and ten billion medium-size and less than one billion small companies.

Therefore, having classified the companies, the final selection was made based on the availability of data. It is not easy to get data on smaller companies as they do not respond to Commission consultations or most of them do not publish position papers on policies. Therefore, the selection

2 _{The revenue figures are taken from the annual reports of the companies for the year 2017. The annual reports of}

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was based on the availability of data and the companies that provided such data on the Carbon Disclosure Project and on their websites have been selected.

3.1.2. FuelsEurope

FuelsEurope formerly knowns as Europia is a trade association that was founded in 1989 and based in Brussels (FuelsEurope, 2018). It represents the interests of 41 oil and gas companies in the EU with EU institutions (FuelsEurope, 2018). It lobbies EU institutions by providing expert advice and inputs on policies and regulations that might affect the oil and gas industry (ibid). The trade association brings together the largest oil and gas companies in the world such as BP, Total, Shell etc. But the association also has medium-sized and smaller oil and gas companies as members. The association claims that it contributes to make EU policies technically feasible and cost-effective (Transparency Register, 2018). It only has 15 individuals engaged in lobbying activities and 7 of them have accreditation to access European Parliament premises (ibid). Unlike Cefic, FuelsEurope has fewer number of people who are involved in lobbying activities. It also has fewer member companies. In terms of the budget spent on lobbying activities last year, FuelsEurope spent €2.5 million Euros. FuelsEurope’s budget on lobbying is just 20% of Cefic’s budget for similar activities. Since the association has fewer member companies, it has less resources because the members pay subscription fees. As of June 2018, the association held 19 meetings with EU institutions (EU Integrity Watch, 2018).

FuelsEurope submitted its response to the Commission regarding the consultation on the ETS directive. The following three companies from the association are selected for analysis.

Table 2. Selected companies of FuelsEurope

Size Companies Year founded Country Total revenues

2017 (in billions)3

Large Royal Dutch Shell4 _{1907 Netherlands 305,2}

Medium-size Galp Energia 1999 Portugal 15,19

Small Hellenic Petroleum 1998 Greece 8

Sources: Bloomberg, 2018; Hellenic Petroleum, 2017; Shell, 2017; WSJ, 2018

3 _{The revenues are taken from the financial reports of the companies for the year 2017. They are attached in the}

appendix of this paper.

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Just like the chemical companies selected under Cefic, the three oil and gas companies are also selected based on the size of the firms (one large, one medium-size and one small). Size is measured by the total revenues of the companies for the year 2017. The 41 member companies of the association include the largest oil and gas companies in the world such as Shell, Total, BP and ExxonMobil. But there are also medium-sized and smaller companies in the association. Unlike Cefic (explained earlier), FuelsEurope does not classify the companies into categories. Therefore, I have classified the 41 companies into three categories: 1st, 2nd and 3rd. the first companies are the largest, the second are medium-sized and the third smaller companies. The classification is based on the size which is measured by the total revenues. Total assets can also be used but the result is the same. Companies that have revenues of more than 20 billion have been categorized as large, between 10 and 20 billion medium-size and less than 10 billion smaller companies. Having classified the companies, the final companies were selected based on the following criteria: the availability of data5, the companies have business operations in Europe (incorporated and headquartered in a European country) so they come under the jurisdiction of the ETS directive. Therefore, one company at the top, one from the middle and one from the lower end have been selected. Again, while there is plenty of data on the positions of large companies, the difficulty was finding data on the medium-sized and smaller companies. Hence, the main selection criteria of the latter were particularly based on the availability of data which could be used to analyze the positions of the companies on the Commission’s proposal of the ETS.

3.1.3. Consultation on structural options to strengthen Directive 2003/87 (ETS)

In order to analyze and compare the positions of the TAs and the individual companies, a specific regulation has been selected for analysis. The selected policy area for study is the Proposed Reform of the Emission Trade Scheme directive. The analysis is based on the consultation process launched in 2012 to reform Directive 2003/87/EC. The directive was originally adopted in 2003 and operates in all the member states of the European Economic Area (EU Commission, 2017). The objective of the directive is to combat climate change and reduce Greenhouse Gas Emissions (GHG).

5 _{The companies’ positions can be evaluated because they responded to the consultations of the EU Commission or}

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This directive has been chosen for the following reasons. First a word of caution. It may be argued that companies have similar position on the ETS particularly GHG emissions. However, while companies agree on the principles, there are differences among companies on the details. After all companies have different capabilities in terms of meeting certain standards and targets. They have different resources and are at different stages of technological development. Therefore, specific proposals may generate different views. In addition, the positions of the companies and TAs are compared not one element. Having said that, the policy issue selected for this research could be a limitation. Analyzing alignment of positions requires in-depth interviews with companies and associations which is beyond the scope of this research due to resource and time constraint. Hence, this policy area was selected due to the availability of data about the directive which is very helpful in analyzing the positions of individual firms and trade associations and thereby find out whether their positions are in agreement or not. Secondly, the ETS directive is the cornerstone of the European Union’s policy in tackling climate change (European Commission, 2017). Although it was adopted fifteen years ago, the directive (with amendments) will remain part of the EU climate policy for 2030. Thirdly, any directive that is part of EU climate policy directly affects the business operations of both the Chemical industry and the oil and gas sector. Thus, Cefic, FuelsEurope and their member companies closely follow the directive, lobby with EU institutions and make their positions on ETS known. Regarding the relevance of the directive to the study of (mis)alignment of positions of TAs and their members is that EU climate policies create risks and opportunities for businesses. Hence, business associations and companies may have strong views (positive and negative) on such policies which is suitable in comparing their positions.

The European Commission launched a “Consultation on structural options to strengthen the EU Emissions Trading System” from 07/12/2012 - 28/02/2013 (European Commission, 2012). The Carbon Emission Trading Scheme (ETS) has phases (phase 2 ended in 2012) and the scheme is now in phase 3 which is the last phase (2013 – 2020) (European Commission, 2018). The consultations launched in 2012 was to assess phases 1 & 2 and possibly revise/amend the directive for the remaining phase (2013 – 2020) and beyond. The Commission proposed to revise the directive due to “large surplus of allowance in the system” which resulted from the economic down turn that started at the end of 2008 (Council of European Union, 2017). This means demand for emission trading and allowances decreased. As a result, there was a need to review the directive.

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Hence, after the consultations, the Commission made a proposal in 2015 to review the ETS and in February 2017 the Environment Council and the European parliament agreed and the proposal has been submitted to the Parliament for approval (Ibid). It is currently before the parliament. The new proposed revision of the directive is for the period 2021 – 2030 (ibid).

Therefore, when the Commission launched the consultations all stakeholders (all citizens and organizations) were asked to contribute to the consultations (European Commission, 2012). Hence, responses were submitted by the selected TAs and companies, among others. The submitted responses of Cefic and FuelsEurope and member companies of the associations are analyzed. Not all the companies responded. In that case, their positions are assessed using their press release and other publications. The selected companies are 6 in total (3 firms from each TA and consist of 2 large, 2 medium-sized and 2 smaller companies). The selection criteria of the companies and the TAs have been explained earlier (see previous sections).

Therefore, the analysis of the positions of the selected TAs and member companies focuses the consultations to reform the EU ETS directive. Responses from the companies (Consultation responses from 2012 – 2013) and subsequent publications such as position papers, media reports and websites of the companies are good indicator of the positions of the actors on reforming the ETS directive. The positions of the companies are evaluated against the positions of their trade associations. The timeframe of analysis is from the launch of the consultations (2012) until 2018 since the final legislation is yet to be passed.

Directive Consultation Responses Timeframe

The policy issue selected for study is the Consultation on structural options to strengthen the EU Emissions Trading System (Directive 2003/87). The Commission launched consultation on reforming the current directive. The main issues in the reform are increasing emission reduction targets and extending the directive to other sectors that are not covered in the current directive.

The period of consultation in which stakeholders submitted responses were 7 December 2012 to 28 February 2013

The timeframe of analysis of this paper is from the launch of the consultation May 2018

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3.2. Data Collection

Data is collected from the European Commission website. The consultation responses are publicly available on the Commission website. The second data source is the Carbon Disclosure Project (CDP)6 website and the data submitted by the companies in relation to climate change policies in general and carbon emission in particular for the years 2016 and 2017. Trade associations do not submit responses to the CDP. It is only for companies. Companies voluntarily submit responses on carbon emission and climate related issues to the CDP. It is a primary source since the companies themselves fill out the information. It is like an interview. The companies respond to a number of questions and fill out the information. While this is an important data for analysis, the companies might, however, hide somethings or not fully disclose the truth on the CDP website. That is the disadvantage of self-reporting. Nevertheless, the data on the CDP7 website gives insight information that is not available anywhere else. But the responses to the Commission’s consultations and the information on the CDP website are compared and cross-checked to see if there are any dissimilarities. In addition, the websites of the six companies, their position papers, press releases and the media are reviewed to supplement information.

Regarding trade associations, the EU Transparency Register, their websites8, position papers9 and the media have been used to analyse their positions. European Chemical Industry Council (Cefic) provided short written responses to several questions10 _{asked. I have contacted both Cefic and}

FuelsEurope but only the former responded and agreed to provide me some information. The implication is that unlike Cefic, the analysis of the position of FuelsEurope is solely based on documents and the media.

The media articles used in the analysis have been obtained from Factiva. Different search terms such as the names of the selected companies, TAs and the policy area have been used in searching

6 _{The data on the CDP is self-reported. Hence, it may contain bias. However, it is an important data that provide}

insight information about the positions of companies on climate change policies. It is also used by other researchers (e.g. Skjærseth et al., 2013)

7 _{To get access to the data on the CDP website, one has to create an account, log in and then search for specific}

companies (companies one is interested in). If a company submitted response to the CDP, then the data can be accessed free of charge.

8 _{Cefic website http://www.cefic.org/ and the website of fuelsEurope https://www.fuelseurope.eu/ The complete list}

of the documents used and their URLs are attached in the appendix

9 _{The position papers have been obtained from the websites of the associations.} 10 _{The questions are attached in the appendix of this paper}

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for media articles. The relevant news articles that specifically relate to the topic of this research have been used.

3.3. Concepts and Operationalization

The concept of alignment is measured into two steps. First the positions of the individual companies and the trade associations are measured by two variables: “Support or support with exceptions/reservations11”. This is to measure the positions of the TAs and the companies on the selected EU policy regime (directive). The second step is the concept of alignment which will be measured by three variables “Consistent, mixed or inconsistent”. Consistent means there is an alignment between the positions of the individual companies and their trade associations. Mixed means there is some agreement between their respective positions and inconsistent means no alignment.

The dependent variable is the alignment of positions between individual firms and their respective trade associations. I will be looking into alignment by focusing on complete similarity (consistent), some similarity (mixed) and difference (inconsistent) of the positions. There is similarity of positions if there is “support for the selected policy regime and the positions of companies and TAs are consistent with each other”. In that case, TAs represent the preferences of individual company members. If there is some similarity between their positions then the alignment is mixed. This means partial representation of the preferences of individual companies by the TA. When there are major differences, then the preferences of the companies are not represented (inconsistent) by the selected TA. Therefore, preference (in the research question) is measured by the presence (consistent, mixed) or absence (inconsistent) of alignment of the positions between TAs and individual companies.

The main explanatory (independent) variable is the size of the companies (firm’s size). According to the theoretical framework presented earlier, the bigger the company the higher the alignment of positions and vice versa (Greenwood & Webster, 2000; Greenwood, 2002; Barnett, 2013; Lehmann, 2003; Doner & Schneider, 2000; Coen, 2009; Boléat, 2003; Tucker, 2008; Fagan-Watson et al., 2015). To have variations in the independent variable, size consists of three variables: large, medium and small. Size of a firm is measured by the total revenues of the companies in the financial year 2017. This measure of size of companies have been selected

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because companies are ranked by revenues when identifying the largest companies (Forbes, 2018). For this paper, total assets have also been looked into (checked for the selected companies) and it leads to similar outcome. But revenues have been used for the final classification.

Variable summaries

Variable Operationalization Source

Dependent variable

Alignment Consistent, mixed or

inconsistent

European Commission

Website, Carbon Disclosure Project website, Website of companies, media reports Independent variable

Size Large Sized is measured by the total

revenues of the companies for the financial year 2017. Six companies in two TAs. Two large, two medium-sized and two small companies.

The income statements of the companies in the annual reports of 2017

CDP website and the websites of companies are used to evaluate the positions of the companies.

Medium-size

Small

Table 4. Summary of the variables, operationalization and sources

4. Empirical Analysis

This research relies on qualitative techniques and hence carries out a qualitative analysis of primary and secondary documents. The coding process started by looking for information that relates to the research study (Given, 2008). Although the documents were read with an open mind, specific concepts that concern the research question were being searched for. In addition, the ETS directive and the Commission’s proposal were thoroughly studied. The data in the documents were coded and categorized according to the main concepts repeatedly stated in the documents. The Commission proposed a number of issues in the consultations on the structural options to strengthen the EU Emissions Trading System. Some are technical issues. Thus, two main elements that are crucial in the ETS have been selected. These are increasing emission reduction targets and

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extending the ETS to other sectors of the economy that are not covered under the present directive. The two elements were selected because they directly affect the business operations of companies and TAs give special attention to these matters when lobbying at the EU institutions (Reyes & Balanyá, 2016). Out of the two, one is particularly emphasized by both companies and TAs alike. It is the Increase of Emission Reduction Targets. The proposal of the Commission states that sectors in the ETS will be required to reduce their emissions by 43% (EU Commission, 2017). At the moment (phase 3: from 2013-2020)12, companies in the ETS are obliged to cut emission by 21% (ibid). The high increase of the pace of reducing emissions proposed by the Commission and its impact on companies makes it the most important element in the proposal of the Commission. The second element in the proposal is extending the ETS to other sectors that are not at the moment covered by the directive. Finally, a third element has been added to the categories to evaluate the general support (or lack of support) of the ETS in its current form and the reforms proposed. The last element has been added to assess the views/positions of the companies and TAs on the ETS as a policy. The following table summarizes the categories of the elements and the coding labels used in the analysis.

Table 5. Categorization & coding

Category Code

Support for ETS and the proposed reform Support

Do not support

Support with reservations

Increase Emission Reduction targets Support

Do not support

Support with reservations Extension of the ETS to other sectors Support

Do not support

Support with reservations

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4.1.1. The Positions of Cefic and members on the Proposed reform of the ETS

I. Position of Cefic

The European Chemical Industry Council (Cefic) responded to the EU Commission’s Consultations of the EU Emissions Trading System (ETS) on February 27, 2013 (Cefic, 2013). Cefic sent a four-page response to the Commission which is available on the EU Commission website. To assess the position of Cefic on the ETS, the four-page document is an important starting point because as a general rule, in document analysis the document that is readily available and most accessible is first examined (Trachtenberg, 2006: 163). However, to avoid unwarranted selectivity and bias (Thies, 2002) and hence increase the validity of the source material, other publications are reviewed and cross-checked as well. These include the website of Cefic, position papers and other publications complement the documents.

Cefic generally supports the current EU ETS directive. However, the association opposes amending the directive because according Cefic the directive is achieving its primary goals and hence should not be revised until 2020 (Cefic, 2013). Accordingly, the association stated that:

“The ETS is delivering on its primary objective, achieving the agreed GHG emission reductions for 2020 at the lowest cost. Investment decisions for until 2020 have already been made in economically difficult times - relying on the current regulatory framework’s stability. The Commission’s

short-term ETS ‘quick-fix’ options for before 2020 are narrow” (Cefic, 2013).

Therefore, the position of Cefic regarding the proposal of the Commission to revise the ETS directive is that the association has major reservations. This position has been explicitly stated by Mr Hubert Mandery, Director General of Cefic who said that:

“There’s little fresh thinking. The Commission proposals shy away from measures that would encourage carbon-efficient companies to invest in Europe. Overall, this makes matters worse for companies wanting to grow in Europe,” (Lopez, 2015).

According to Cefic, the proposed reform of the ETS does not address the concerns of the chemical industry and it could add up to €10bn Euros of carbon costs to the sector (ibid). Clearly, the association is against the proposed revisions to the ETS. Cross-checking the consultation response