Cement and Steel Industries Misled EU about ‘Carbon Leakage’

by | May 25, 2010

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A new report alleges that the European cement and steel industries threats of relocation and increased global emissions, otherwise known as carbon leakage, were exaggerated, when they requested special treatment under the European Union’s Emissions Trading Scheme (ETS), reports The Guardian.

According to a report from Corporate Europe Observatory (CEO), Arcelor Mittal and Lafarge are lobbying hard against tougher carbon reduction targets, which could increase from 20 percent to 30 percent by 2020, at the same time as they are making millions in profits from surplus carbon permits, reports The Guardian.

The report finds that recent figures show that the industry has benefited from a huge surplus of CO2 emissions permits at the end of the second phase of the EU’s emissions trading scheme (ETS) in 2012.

In April last year, there were reports that European steel companies were awarded far more carbon credits than they needed and were reaping a windfall in profits, receiving a surplus of credits worth about $1.2 billion, based on 2008 carbon prices.

According to a new report released by Sandbag Climate Change and Carbon Market Data, ten organizations, primarily in the steel and cement industries, including ArcelorMittal, and Lafarge could share a surplus of €3.2 billion ($4.4 billion) of pollution permits by 2012 under the ETS. This is more than double the EU’s investment of €1.5 billion ($2 billion) in renewable energy and clean technology.

Under the EU trading scheme, set up in 2005, companies are allowed to emit CO2 up to a certain level or cap, then they must buy extra permits to cover the excess emissions.

The steel and cement sectors lobbied the EU for free CO2 permits, claiming they would have to relocate and there would be massive job losses.

According to the report, Arcelor Mittal, which could profit by more than £1 billion ($1.4 billion) from selling its surplus permits, told the EU Commission that 90,000 jobs were directly at risk in Germany alone, reports The Guardian.

However, CEO says companies including Lafarge and Arcelor Mittal ‘exaggerated’ the damage that the carbon trading system would cause to EU competitiveness.

CEO’s report shows how these companies have lobbied to retain these benefits in the next phase of the ETS (2013-2020) by using the same threats of relocation, increased global emissions, and job losses.

CEO recommends that the EU should reconsider its decision to provide more free allowances to heavy-emitting industries in the next phase of the EU trading scheme starting in 2013.

The Climate Change Committee (CCC), the UK government’s watchdog, agreed and told the newspaper that there should be a clampdown on “over generous concessions.”

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