Industrial giants cash in on carbon

Some of Europe’s largest industrial companies gained billions of euros from the carbon-emission rules they lobbied fiercely against, new analysis has revealed.

Ten steel and cement companies have amassed a stockpile of 240-million carbon-pollution permits as a result of generous allocations, a report by carbon-trading think-tank Sandbag has found. The free permits granted to the companies have a current market value of €4-billion and can be sold or kept for future use.

The European Commission estimates that the whole energy-intensive sector will have accumulated allowances worth €7-billion to €12-billion by the end of 2012.

“More and more businesses see that Europe’s future lies in a highly efficient economy with low pollution,” said Barony Worthington, Sandbag’s founding director. “But a small group of carbon fat-cat companies are trying to stop this, in spite of making billions from a windfall of free pollution permits.”

Steelmaker ArcelorMittal leads the list of companies in the report, with a surplus valued at €1.7-billion, followed by cement giant Lafarge. Tata Steel, in third place with a surplus valued at €393-million, last month announced 1 500 job losses at two plants in the United Kingdom, blaming emissions regulations as well as the economic downturn.

Karl-Ulrich Kohler, the chief executive of Tata Steel’s European operations, said at the time: “EU carbon legislation threatens to impose huge additional costs on the steel industry.” Tata Steel declined to comment.

The European Union emissions trading scheme (ETS) puts a cap on the carbon pollution emitted by energy and industrial companies. Those reducing their emissions can sell their spare permits to those who do not. But a combination of initial over-allocation by national governments and the economic decline has left the steel, cement, chemical, ceramic and paper sectors with many more permits than they need.

The industries have lobbied against calls from governments for the tightening of emissions targets.

Eurofer, the lobby group representing all of Europe’s steelmakers, said last month: “To remain competitive in the free global steel markets, European steel needs — legislation that does not harm its competitiveness. But we are gravely concerned that EU climate-change policy will do precisely that.” Cembureau, which lobbies for the cement industry, takes a similar line, stating: “It would be irresponsible to shift the [emissions] goalposts.”

The Sandbag report, based on public data, also found that nine of the 10 “carbon fat cats” it highlighted between them bought 24.4-million carbon permits from the cheaper international market, mainly from companies in China and India.

These can be used within the EU’s trading scheme, enabling the companies to retain the more valuable ETS permits. Furthermore, in spite of the European companies claiming that tougher emissions rules would drive business overseas, some were paying overseas steel and cement companies for their international carbon permits.

“Purchasing carbon offsets from foreign competitors would not seem to be the actions of businesses genuinely concerned that the ETS will drive business abroad,” said Worthington.
Not all companies are resisting the tightening up of the EU’s ETS.

Five major energy companies, including Britain’s Scottish and Southern Energy, last week called for spare permits to be withdrawn from the ETS, a proposal supported by Sandbag. “Failure to do so could severely hamper business’s incentives to invest in low-carbon technologies, as the price signal will be skewed in favour of fossil-based solutions,” it said.

All the companies named by Sandbag were contacted. Those who responded argued that the surplus permits arose from decreased production during the recession and might be needed when the economy recovered. They argued that without protection steel and cement-making would be driven in countries with less CO²-efficient manufacturing.

Erwin Schneider, at steel maker ThyssenKruppe, said: “Companies make decisions based on expected future developments. Any earnings from the past will either have been reinvested already or paid out to shareholders. It seems to be very misleading to use historical numbers to address our future position.” —

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