Losing the lead is Sandbag’s 4th annual report on the Environmental Outlook for the EU ETS – following on from ETS S.O.S. (2009), Cap or Trap? (2010) and Buckle Up! (2011). This report again uses latest emissions data to examine how the ETS is performing on the ground and makes recommendations for urgent reforms. In particular, it highlights that existing proposals to reform the scheme inadequately account for the change in demand for allowances since the caps were last set (2.2Gt), and the effects of industrial overallocation on the cap (0.9Gt). This report also updates our list of Carbon Fatcat companies accruing the largest surpluses of free allowances within the scheme.