Nearly €100 billion in free carbon permits given by EU to big polluters

Nearly €100bn (£86bn) in free carbon permits have been granted by the EU to big polluting industries over the past nine years, according to a WWF analysis. The group said the free allowances “are in direct contradiction to the polluter pays principle”.

From 2013-21 free pollution permits worth €98.5 billion were given to energy-intensive sectors including steel, cement, chemicals and aviation. This is on top of the €88.5bn that the EU’s Emissions Trading Scheme (ETS) has charged polluters, mostly coal and gas power stations, for their CO2.2 emissions.

Furthermore, WWF said, the free permits were not linked to climate conditions, such as increased energy efficiency, and some polluters were able to make billions in profit by selling permits they did not use.

The EU has given out more free carbon permits than it has sold to polluting industries

The European Commission describes the ETS as “A”. cornerstone of EU policy To combat climate change and its key tool to reduce greenhouse gas emissions cost-effectively”. The number of carbon emission permits is reduced annually, which has driven up the permit price in recent years and encouraged companies to reduce their emissions.

Carbon emissions covered by the ETS have fallen by 37% since their introduction in 2005, thanks largely to the development of renewable energy. But WWF said the free allowances had weakened the ETS and that emissions from heavy industry had not fallen. The analysis also found that at least a third of the revenue raised from the ETS was not spent on climate action, a figure that would drop to almost half if projects to increase the efficiency of burning fossil fuels were excluded.

Negotiations are ongoing between the European Parliament, the Council and the Commission on the reform of the ETS. The possible dates for the end of the free allowances are from 2032 to 2036. The free allowances were originally justified to deal with the potential risk that industrial companies might move production outside the EU to avoid carbon taxes, but WWF said there was no evidence for this. ,

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“The analysis shows that for the past decade, the ETS was based on the ‘polluter-doesn’t-pay principle’, giving up billions and billions of revenue that EU countries could have invested in industrial decarbonisation Could,” said Romain Laugier. WWF’s European Policy Office and lead author of the report. “EU negotiators must end the free allowances as soon as possible, and in the meantime ensure that the companies receiving them meet strict conditions on cutting their emissions.”

Alex Mason, also at WWF, said: ‘If taxpayers are losing tens of billions in revenue, industry should use that money to invest in technologies, certainly not doing anything or even That one should not even take advantage of free perks. ,

The amount raised by ETS is growing rapidly as the post-Covid recovery has increased economic activity and raised the ETS carbon price. In 2022, ETS is expected to raise around €33bn.

WWF said that 100% of it should be invested in climate action to justify the urgency of the climate crisis and the carbon tax to citizens. The report found that €25bn in ETS revenue had gone directly to the exchequer from 2013-21.

Another €12bn was “doubtful” because it was used to fund new fossil fuel infrastructure in countries including Germany, Poland, Hungary, the Czech Republic and Croatia. “It’s very bad for the climate because it locks consumers into expensive, unreliable fossil fuels,” Laugier said.

“It’s really important to show citizens that the ETS is tackling climate change,” he said, noting the strong yellow vest Oppose Against a vehicle fuel tax hike in France in 2018. WWF said a strict definition of climate action that excludes fossil fuels was needed to guide how ETS revenue is spent.

The report does not include the UK, which left the EU in January 2020. But before Brexit, UK companies were reaping huge profits by selling additional free carbon allowances to Germany, France, Italy and Spain as well.

A 2021 Evaluation from Carbon Market Watch The report states that steel, cement, petrochemical and refinery companies made windfall profits of up to €50bn between 2008 and 2019. In addition, some industrial companies that had to buy carbon permits have subsequently received government compensation for the cost.

“There has been no evidence of industries deciding to move their production elsewhere due to increased carbon prices,” Laugier said, meaning that the potential risk of losing around €100 billion to governments is well above the reality. Was placed. The EU is also looking at imposing a border tax on high-carbon imports from outside the bloc.

The report concludes: “We have little time left to keep global temperature rise to 1.5C and prevent uncontrolled climate change, and how we spend public money is critical. The release of free allowances under ETS appears to have been a serious policy failure.”

The European Commission has been contacted for comment.

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