EU heavy industry pockets €24bn in ‘pollution windfall’ – report

That’s ten times what Brussels green innovation fund pays out, says NGO in call for reform of EU emissions trading scheme

A blast furnace at a steel plant. The iron and steel sector made the biggest profits (credit: Archangel12)

A blast furnace at a steel plant. The iron and steel sector made the biggest profits (credit: Archangel12)

By Alex Pashley

Industry across the EU has swindled taxpayers by profiting from free carbon credits under the bloc’s chief climate policy, according to new research

Steelmakers, chemical giants and cement producers earned €24bn in sales of surplus emissions allowances from 2008-2014, a study commissioned by advocacy group Carbon Market Watch said on Tuesday.

The EU emissions trading scheme (ETS) awards heavy industry free allowances as they are deemed to be at risk of relocating to countries without pay-to-pollute rules, known as ‘carbon leakage’.

But an overallocation led companies in the 19 countries studied to sell them for a profit, according to the report carried out by independent consultants CE Delft.

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Industry also bought cheaper international offsets to meet their targets, and were able to sell the remaining allowances or passed on ‘non-existent’ costs to the consumer.

Carbon Market Watch calculates these practices, which it called a “pollution windfall”, deprived member states of at least €137 bn in auction revenues.

EU policy director at the Brussels-based group, Femke de Jong said: “Instead of making the polluter pay, energy-intensive companies are allowed to pollute for free under the EU ETS.

“Even worse, they are able to profit from their pollution to the tune of billions. It’s European taxpayers that are picking up this bill as governments forego scarce public money.”

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The ETS is slated for reform from 2020 as the Commission seeks to curb freebies for industry and reduce a glut of credits that has pushed prices to €5 lows – insufficient to incentivise lower-carbon alternatives to fight climate change.

By contrast, the EU’s innovation fund, the NER 300, has paid out just €2.1bn. Capitalised by 300 million EU ETS allowances, it has financed carbon capture and storage projects in Norway and solar plants in Italy.

MEP Bas Eickhout of the Greens called for the handing out of free allowances to be “phased out rapidly.”

“Environmental and health related costs induced by industrial activities should not be borne by society, but by the ones that cause them. This is not at all the case under the current EU ETS,” he said.

De Jong said there was no evidence to back up relocation threats by industry.

“In light of the Paris Agreement that helps to level the playing field to cover over 95% of global emissions, the concept of overgenerous allocation of free pollution permits in the EU ETS can no longer be entertained by decision makers,” she said.

Last week, the Paris-based OECD think tank also dismissed the threat of carbon leakage. Tariffs and market size were more likely to shape differences in trade between rich and emerging economies than green policies, it said.

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