Take on the “fatcats” or scrap EU carbon market – think-tank

Europe’s emissions trading system is failing as steel and cement companies hoard excess permits, warns Sandbag

The ArcelorMittal Orbit at London's Olympic Park (Pic: Flickr/Gary Ullah)

The ArcelorMittal Orbit at London’s Olympic Park
(Pic: Flickr/Gary Ullah)

By Megan Darby

ArcelorMittal is hoarding a surplus of climate pollution permits worth almost twice its annual carbon emissions, a think-tank has revealed.

With an excess of 93 million allowances, the steel and mining giant is top of Sandbag’s “carbon fatcat” leader board.

These are the heavy industrial companies benefitting from a glut of cheap permits under the EU’s emissions trading system (ETS).

Sandbag, which supports carbon markets in principle, for the first time called on EU policymakers to scrap the ETS if they cannot halt the bonanza.

“We’ve been saying for years: ‘Fix the emissions trading scheme’,” said Sandbag director Bryony Worthington.

“But sadly the incentives  for investment in green growth are still not there. It has now got to the stage where the ETS is so broken we are recommending ditching it unless problems are sorted out with new laws within the next 12 months.”

Baroness Worthington is due to present the report in Brussels on Wednesday.

Slow reform

The European Commission has proposed reforms to prevent future ETS surpluses growing too large, but these are not due to come in until 2021.

Some member states are urging policymakers to go further, faster to revive the ailing carbon price.

That challenge will fall to Miguel Arias Canete, who takes up the energy and climate action brief in the commission next month.

The EU ETS is the largest carbon market in the world, although China is expected to overtake it with a national scheme soon.

Advocates of market mechanisms say they are a cost-effective way to encourage all sectors to curb their greenhouse gas emissions.

But an excess of allowances on the EU ETS reached 2.1 billion tonnes of CO2 equivalent at the end of 2013.

That has made it cheap, at just €5-6 a tonne, to release the greenhouse gases responsible for global warming.

Easy ride

Sandbag estimates it will take ten years for ArcelorMittal to use up its excess, giving the company little incentive to use energy more efficiently.

Three of the “fatcats” – Lafarge, Cemex and Duferco – have enough permits to carry on as usual until after 2050, according to Sandbag.

Heavy emitting sectors such as steel and cement production have amassed free allowances, handed out to prevent them relocating overseas.

Just 10 companies are holding 22% of the surplus, Sandbag has found.

The freebies are now being phased out, but this stockpile cushions emitters from the price of pollution.

It amounts to a €4.3 billion subsidy for big emitters, said Damien Morris, lead author of the report.

Unless proposed reforms go through soon, “we are basically wasting our time on this policy,” he told RTCC.

“It is not creating any meaningful limit on emissions in the near future.”

Jeff Swartz, director of international policy at the International Emissions Trading Association (IETA), defended the ETS.

IETA supports early reform of the ETS and says it should be the “central pillar” of European carbon cutting policy.

“There is absolutely a huge, huge policy risk if we were to do away with such an effective policy measure,” said Swartz.

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