Sandbag Briefing – The Case of ArcelorMittal
Summary This briefing examines how the world’s biggest steel company, ArcelorMittal, is set to become the largest1 beneficiary of the EU Emissions Trading Scheme. By 2012 the company is set to have 80 million permits to pollute which it does not need and which it was given for free. If sold, these will make over £1 billion in windfall profits by 2012, paid for in part, by UK power consumers. The briefing goes on to make the case Lakshmi Mittal, the CEO of the ArcelorMittal and also Britain’s richest man, should choose to forgo windfall profits and opt instead for climate philanthropy. Cancelling the 80 million surplus permits would be equivalent to Denmark, host nation of the forthcoming climate talks, producing no carbon for a whole year. Such a commitment would make Mittal the world’s foremost climate change philanthropist. We have produced this briefing using European Union verified data on the emissions and allocations received by polluting installations across Europe under the EU ETS. To enable us to isolate polluting installations belonging to ArcelorMittal we have used data provided by Carbon Market Data2 who have carefully matched all EU installations to the parent companies which own them. Background: The EU Emissions Trading Scheme In 2005 the EU implemented the world’s first large scale emissions trading scheme, know as the EU ETS. The scheme put in place an emissions cap on heavy industrial sectors and power generators within the EU. For each tonne of carbon that polluters were allowed to emit, an emissions permit (EUA) was issued. These permits were given out for free to companies who, to comply with the scheme, had to make sure they had enough permits to cover their pollution. The theory was that the cap would result in a shortage of permits and would mean companies either had to cut their carbon emissions, or buy extra permits, thereby paying for emissions reductions elsewhere. For the first three years of the scheme, known as Phase 1, things did not go to plan. Following intense lobbying and high profile claims that the scheme would harm business and mean job losses, the cap on emissions was set too high and therefore too many permits were issued. Arcelor3 also launched an unsuccessful attempt to block the trading scheme. As it turned out, most companies found themselves in a position to sell surplus permits on the market generating windfall profits, until the price of carbon reached zero. Thus the great potential the scheme had for cutting emissions was not achieved; instead the scheme became a cash cow for many of the businesses it covered. The EU ETS is now into Phase 2 of trading which will last until the end of 2012 and the problem of windfall profits continues. This time around industrial companies are 1
ArcelorMittal has by far the largest number of surplus permits in the year 2008 and is thus eligible for the largest windfall, although in % terms its allocation is not the greatest in the steel sector. 2 EU ETS companies database http://www.carbonmarketdata.com/ 3 Arcelor launched the court case before its merger with Mittal Steel. http://www.carbonoffsetsdaily.com/topstories/dj-3rd-update-eu-crt-arcelormittal-co2-emissions-case-invalid-3136.htm
the main beneficiaries. Even before the recession they had many more permits than they needed. With 2009 one of the worst years on record for industrial production, these companies will now be sitting on vast numbers of unused emissions permits. If these are sold we will see a repeat of the huge windfall profits from Phase 1, and if not, the permits will be banked to allow future pollution undermining the integrity and ambition of the EU’s post 2012 climate targets. The Case of Arcellor Mittal One company stands out as the biggest beneficiary of the EU Emissions Trading Scheme – the world’s largest steel company, ArcelorMittal. It’s CEO and major shareholder Lakshmi Mittal is the UK’s richest resident,...
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