Carbon trading to net £1bn for UK's richest man

Steel manufacturing

Manufacturing companies like ArcelorMittal have excess emission permits that they could sell for a windfall profit

Airlines also likely to see profits double under the next phase of the EU Emissions Trading Scheme

The UK's richest resident, Lakshmi Mittal, majority owner of the steel company ArcelorMittal, could make more than £1 billion over the next two years from the EU's Emission Trading Scheme.

The trading scheme, set up in 2005, allows companies to emit CO2 up to a certain level, beyond which they must buy extra permits to cover the excess emissions.

According to analysis from the campaign group Sandbag, Mittal's company has a large excess of emission permits that could rise to 80 million tonnes-worth of carbon emissions by 2012 - the equivalent of Denmark's total annual carbon emissions.

If sold these could net Mittal more than £1 billion.

Intense lobbying

Sandbag says that intense lobbying by companies like ArcelorMittal meant the EU set the emissions cap in the trading scheme too high.

This meant industrial sectors such as metals, cement and glass manufacturers were given too many emission permits, allowing them to sell the allowances on for a profit.

A spokesperson for ArcelorMittal said some of the excess permits they currently owned were because the company had bought extra permits out of fear it might have a shortage.

In theory, the EU's trading scheme is meant to set lower caps over time. However, Sandbag says the cap for the second phase of the trading scheme running between 2008-2012 has also been set too high.

Unfair profits

Sandbag's head of policy, Anna Pearson, said companies like ArcelorMittal should not be allowed to generate such high profits on the back of a scheme envisaged to reduce carbon emissions.

‘European politicians need to sign up to more ambitious targets and tougher limits on pollution in Europe and under the EU Emissions Trading Scheme so that in future, industrial companies like ArcelorMittal actually have to cut their emissions rather than being handed windfall profits. 

'The carbon market will only deliver what politicians ask it to, so it’s up to our leaders to make it tougher and to enable it to make a much greater contribution to tackling climate change,’ she said.

Aviation sector

Another big benefactory of the EU's trading scheme could be the aviation sector.

A report from The Carbon Trust, due to be  published tomorrow, will say that some airlines could increase their profits by 20-40 per cent because of free allocations of emission permits from the EU.

According to the report, airlines will pass on the costs of buying carbon permits to passengers, even though more than 80 per cent of the permits will be given to the aviation sector for free.

However, it does suggest operators in the short haul leisure sector could lose out due to the greater price sensitivity of their customers.

Useful links

The Carbon Trust

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