Industry threats to relocate over carbon targets exposed as 'misleading'

Steel manufacturing

Steel giants like ArcelorMittal have excess pollution emission permits that they could sell for a windfall profit

Heavy industry has pleaded for special treatment since the European Emissions Trading System was set up, but a new report suggests their complaints were exaggerated

Steel and cement giants Arcelor Mittal and Lafarge are lobbying hard against tougher carbon targets at the same time as making millions in windfall profits from surplus carbon permits, new research shows.

Under the EU trading scheme, set up in 2005, companies are allowed to emit carbon dioxide (CO2) up to a certain level, beyond which they must buy extra permits to cover the excess emissions.

According to a report from Corporate Europe Observatory (CEO), the steel and cement sectors lobbied the EU for free CO2 permits, claiming they would be forced to relocate to other parts of the world if they did not receive concessions - a threat known as 'carbon leakage'.

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

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

EU must 'reconsider'

CEO says the EU should now reconsider its decision to provide more free allowances to big polluting industries in the next phase of the EU trading scheme starting in 2013.

It says the fact that they could make huge windfall profits shows threats of relocation and job losses were 'scaremongering' and ensured the EU's trading scheme gave significant subsidies to some of Europe's worst polluters.

'The Commission has given in far too easily to industry lobbying and pressure from national governments and promised free permits. It must now claw back its promise and ensure that industry contributes its share of the EU's urgently needed carbon cuts,' said CEO research coordinator Oliver Hoedeman.

The UK Government watchdog the Climate Change Committee (CCC) agreed and said there should be a clampdown on 'over generous concessions':

'Where there are energy-intensive companies subject to competition in global markets (i.e. competition from firms operating in countries without carbon constraints), then we see that there may be a case for issuing free allowances.

'However, if there is to be special treatment of some sectors, then the Committee has emphasised the need for this to be limited to those clearly shown to be subject to global competition, and need not necessarily go so far as 100 per cent issuing of free allowances,' said CCC chief economist Adrian Gault.

He continued: 'The need for special treatment to be clearly limited reflects a concern that special pleading can otherwise lead to blanket and over generous concessions.'

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