Europe’s carbon-intensive industries still reap excessive benefits from the carbon market, according to the NGO Carbon Market Watch. EURACTIV France reports.
The question of free carbon quota allocations has periodically made it onto the negotiation agenda since the EU launched the carbon market ten years ago, as a way to force 11,000 industrial sites to reduce their CO2 emissions. This is a particularly burning issue now, with the reform of the quota system currently under way.
While all quotas were initially free, this has changed: in theory, free quotas should now be the exception and auctioned sales the rule. But this does not take into account the intense lobbying of the sectors involved, which argue that their role as job creators and their position in Europe’s industrial fabric should entitle them to free quotas.
“Studies financed by lobby groups, like those behind the fertiliser industry, show that certain sectors must continue to obtain free quotas in order to remain competitive,” Carbon Market Watch stated.
€27 billion bonus
The carbon market entered its third phase in 2013, during which only industries genuinely exposed to the risk of delocalisation, a problem also known as “carbon leakage”, are entitled to free quotas.
But according to the NGO Carbon Market Watch, which commissioned an investigation on the subject by the expert group Delft, businesses can turn these free quotas into hard currency. Between 2008 and 2014, businesses cashed in €27 billion from free quotas.
If a company possesses too many quotas, they can sell them on the carbon market. And the existence of this market pushes up the price of the final product: the cost of the CO2 quotas necessary to produce one tonne of steel must be added to the cost of producing the steel itself. According to Delft, over a dozen industries benefit from this situation to make “undue profits”.
In total, the carbon-intensive industries have made an extra €15 billion of profit, thanks to the fact that the carbon market has bumped up the price of their products. France handed out 100 million surplus carbon quotas between 2008 and 2014, worth a total of €800 million, Delft reported.
France’s €10 billion gap
The surplus of quotas has brought enormous gains for the cement sector, including Lafarge. But it is steel company ArcelorMittal and oil refiner Total that are seen as the biggest winners of the system.
According to the experts’ calculations, the price increases associated with the carbon market have brought windfall profits for these companies: €862 for Bersillon, a branch of ArcelorMittal, €298 for Total and €176 million for Lafarge.
“The French government lost €10.4 billion in revenue, by giving away 866 million tonnes of quotas between 2008 and 2014,” the Delft study stated. The government collected €435 million by selling quotas over this period, half of which was invested in climate projects.