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Despite radical changes introduced to the European carbon market in 2013, our new report today reveals that hundreds of millions of excess carbon allowances continue to be issued, with a disproportionate share of these being awarded for free to Europe’s “Carbon Fatcat” companies.

Sandbag Dragon

In order for companies to emit greenhouse gases they need a Government issued carbon allowance but far too many are being created. Sandbag analysis, which forms part of a wider review of the emissions trading policy reveals the excess allowances available reached 2.1 billon at the end of 2013 and is growing by as much as 13 tonnes a second. Just 10 companies emitting one tenth of Europe’s greenhouse gases account for over a fifth of the massive surplus that has accumulated. Sandbag calls these companies Europe’s “Carbon Fatcats.”

ArcelorMittal continues to top Sandbag’s Carbon Fatcat leader board with a massive 93 million tonne surplus, almost twice its annual emissions. Last year, because allocations of free allowances are now based on carbon efficiency benchmarks the giant steel company faced a shortfall in allowances compared to emissions. This means they can no longer rely on getting a free pass under the ETS going forward. Sandbag estimates it will nonetheless take a further 10 years before Arcelor’s surplus will have been whittled away and it will finally be forced to pay for some of its emissions.

On the other hand, Europe’s giant cement companies are revealed as still benefiting from growing surpluses. All 5 cement companies in the top 10 saw their surpluses grow last year and this trend looks set to continue until at least 2021.

Sandbag’s report finds that changes introduced to date, though welcome, are not sufficient to address the ETS’s significant problems, the most obvious of which is the build up of a massive excess allowances that is suppressing prices and dissuading companies from investing in clean technology. In new modelling, also released today, Sandbag suggests that the already massive 2bn surplus is likely to balloon to more than twice that size by 2020 unless solutions are introduced quickly.

The report is issued ahead of the European Council meeting on October 23-25th at which it is hoped new ambitious climate targets for 2030 will be agreed. These are essential as Europe’s emissions are falling and targets set to date are not keeping pace. Sandbag is calling on the new team of policymakers in Brussels to get control of the surplus that is wreaking havoc on Europe’s carbon market. Today it laid down a challenge to the new Energy and Climate Commissioner, Miguel Cañete: either pass strong new laws within the next 12 months or scrap the failed trading policy and do something else instead.

The reports’s lead author, Damien Morris, commenting on the findings, said:

“New legislation to reform the ETS is already on the table, but it remains weak and there is a lot of unjustified resistance from industry. Our research finds that, like the Carbon Fatcats, most manufacturing sectors face no net costs under the scheme until 2020, and in fact have been subsidised to the tune of €4.3 billion across the period. This is not how you cost effectively get to a low carbon economy.”

Baroness Worthington, Founder and Director of Sandbag, who will officially launch the report from the Green Growth Summit in Brussels on Wednesday, added:

“We've been saying for years fix the emissions trading scheme and we know changes can be made because they have been in the past. But sadly the incentives for investment in green growth are still not there. It has now got to the stage where the ETS is so broken we are recommending ditching it unless problems are sorted out with new laws within the next 12 months.”

For more information please contact: Damien Morris damien@sandbag.org.uk or Alex Luta alex@sandbag.org.uk (+44) 02071 486377

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Notes to Editors:

  1. Our report is available here.

  2. The analysis underpinning the estimated 13 tonnes per second increase, leading to a doubling of the current surplus by 2020 is outlined in a supporting paper available here.

  3. The Carbon Fatcats featured in the report are the top 10 companies in the EU ETS ranked in terms of cumulative EUA surpluses, as of 2013 (excluding offsets).

 

Table Key [1] Adjusted for waste gas transfers.

[2] Without past offset use.

[3] Using a carbon price of EUR 5.65 (average 2014 December futures).

[4] Using annual average of front December futures for EUAs, and the spread between EUAs and CERs

[5] Assuming offset entitlement completely exhausted.


  1. Sandbag’s annual ETS report will be officially launched by Baroness Worthington, speaking at the 3rd Green Growth Summit in Brussels on Wednesday October 15th 2014.

  2. Also launched today is our new cover page to the Sandbag website which features a counter showing the surplus of allowances increasing second by second. We calculate it has been increasing at a rate of roughly 13 tonnes a second since January of this year. Visit it at www.sandbag.org.uk/carbonpricing/data/surplus_counter