European industries pocketed a windfall of at least €24 billion over 2008-2014 under the EU ETS, according to consultancy CE Delft, which said steel, cement, refineries and petrochemicals firms got the lion’s share.
The study, commissioned for green group Carbon Market Watch, updates and extends the scope of CE Delft’s previous findings. It focuses on 19 of the 30 nations covered under the ETS, and therefore the actual figures could be higher if all countries are taken into account.
While EU regulators have reformed the ETS to help prevent windfall profits, the European Commission warned in its post-2020 review proposal that the risk of creating them persists as governments will continue to hand out free units to guard against carbon leakage.
CE Delft broke down the windfall as follows:
- €8 billion of profits from countries handing out too many EUAs over 2008-2012 that industries were then able to sell on the market.
In 2013 this method was changed to an EU-wide allocation based on performance benchmarks and the Cross-Sectoral Correction Factor.
- Profits from using CDM/JI credits for compliance that allowed industrial firms to swap these cheaper units while selling on their freely obtained EUAs.
EU firms have almost exhausted their current quotas of international units, and the European Commission has proposed prohibiting additional units to be used for the 2021-2030 period.
- Passing through the costs of companies’ free EUA handouts to their customers.
In the impact assessment to its post-2020 review proposal, the Commission listed several studies on the extent to which various industrial sectors are able to pass through EUA costs.
The report is to be presented to lawmakers in the EU Parliament’s environment committee later on Tuesday as part of a webstreamed debate hosted by Carbon Market Watch on the post-2020 reform proposal.
The research highlights how lawmakers must act to prevent further exploitation of the EU ETS at the expense of European taxpayers, said Femke de Jong of Carbon Market Watch.
“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 forgo scarce public money,” she said in a statement.
Many industry lobbyists admit that the EU ETS will cost them little to 2020, but they are fearful that the post-2020 reforms will cripple their businesses as regulators plan to cut back their free carbon allowances while enacting reforms to raise EUA prices.
By Ben Garside – ben@carbon-pulse.com
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