Money for nothing

14 June 2010

The European Commission has quietly put a figure on the vast windfall that some of the most polluting corporations in Europe will get, courtesy of the badly thought out European Union emissions trading system (ETS), writes Stephen Gardner. And what a whopping windfall it is. Steel firms, petrochemical companies, cement makers and the like are in line to share up to £10.2 billion as they cash in unused carbon credits given to them for free. The ETS was trumpeted as a clever way to cut greenhouse-gas emissions, but, as Eurocorrespondent has pointed out before, there were two crucial flaws. First, governments were allowed to hand out carbon credits to their favourite industries, leading to massive over-allocations to big polluters that threatened to relocate if they didn't get huge surpluses. Second, those polluters can carry the unused allowances over from the current phase of the ETS (2008-2012) to the next (2013-2020). The Commission now admits that because of the over-allocation, combined with the sudden drop in emissions caused by the recession, up to eight percent of the free 2008-2012 allowances could be carried over. This would be 766.5 million allowances, which presently retail at about £13 a throw. One big winner will be French cement firm Lafarge, whose UK plants, while shedding jobs, stacked up a 1.4 million allowance surplus in 2008 alone (£18.2 million at current prices). But this pales beside London-based non-dom Lakshmi Mittal. His ArcelorMittal empire gained four million unearned allowances (or £52 million) in 2008 even before the recession really started to bite. The Commission is now putting out arguments about increasing the EU's emission reduction targets up to 2020. All well and good, but should this happen, demand for carbon allowances will go up, meaning the windfall for the biggest polluters could even double. A version of this article was previously published in Private Eye.

 

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