Carbon Market Watch

For fair and effective climate protection.

Press statement: Cement industry made €5 billion in pollution windfall from EU’s carbon market

30 Nov 2016

BRUSSELS 30 November 2016. The European cement sector has earned over 5 billion euros from the EU’s Emissions Trading System (EU ETS) according to updated windfall calculations taken from 2008-2015. The findings from independent analysts at CE Delft highlight the urgent need to drastically curb the volume of free pollution permits handed out to carbon-intensive sectors under the EU ETS.

The over generous handouts of free pollution permits under the EU ETS have allowed industries to profit to the tune of €25 billion across the European Union. The cement industry in particular has reaped huge financial benefits from the system that is supposed to disincentivise pollution, not pay for it.

At least three cement multinationals themselves have confirmed in their annual reports that they received payouts of over €2 billion by receiving too many pollution permits for free.

Agnes Brandt, Senior EU Policy Officer, Carbon Market Watch commented:

“The findings once again bust open the industry myth of carbon leakage. When high carbon industry gets a free pass to pollute, low-carbon technologies cannot get a foothold in the market. Policymakers must ensure that cement companies pay for their pollution in order to unlock the huge potential for emission cuts within this sector.”

The EU ETS reform provides an opportunity to correct the failings of the system by setting a higher carbon price and moving from subsidising industry pollution to investment in low-carbon innovations. The cement sector is divided on the reform with a split between the incumbent, dominant companies and the low-carbon innovators.

Donal O’Riain, founder of Ecocem, a low-carbon cement producer said:

“Without deep reform, the EU ETS will continue to reward the technical status quo instead of driving the transition to low carbon technology. The cement sector is losing valuable time and postponing real changes to its business model. If the opportunity for ETS reform is flunked this time, the sector will have lost the battle to decarbonise by 2050.”

New study by InfluenceMap finds that the industry has engaged in intense lobbying around the EU ETS with the aim to shape it to suit its existing carbon intensive practices.

Dylan Tanner, Executive Director, InfluenceMap commented:

“It is not surprising the cement sector is choosing to weaken the climate policies that could threaten its current business model. However, they end up undermining the ambition of the whole regulatory process and we think investors should be concerned about the correlation between negative lobbying and companies’ unwillingness to transition.”

Both reports are launched at an event Unsticking the cement sector’s low-carbon potential, Wednesday 30 November, 8:30-10:30 Leopold Hotel, Brussels.

-ENDS-

 

Media contacts:

Agnes Brandt, Senior EU Policy Officer
agnes.brandt@carbonmarketwatch.org
+32 483 227571

Kaisa Amaral, Press Officer
kaisa.amaral@carbonmarketwatch.org
+32 4 850 768 90

Notes to editor:

  • Policy brief: Industry windfall profits from Europe’s carbon market (November 2016)
  • Policy brief: Cement’s pollution windfall from the EU ETS (November 2016)
  • Report: European Cement and Carbon Pricing Regulatory Risk (Influencemap)
    Policy brief: The climate friendly transition of Europe’s energy intensive industries

Cement companies in 20 European countries profited from the EU ETS in three ways:

  • Windfall profits from surplus: €2.7 billion. Industries have received more emission allowances for free than they actually need, and were able to sell the surplus for a profit on the market.
  • Windfall profits from offsets: €0.1 billion. The price for international offsets is much lower than the price for emissions allowances. Industries have bought international offsets to comply with their targets, and are able to sell their remaining free allowances for a profit on the market.
  • Windfall profits from cost-pass through: €2.1 billion. Industries have generated profits by letting their customers pay the price for freely obtained emission allowances.

Most of these windfall profits were accrued in Spain (€1,124 million), Italy (€895 million), Germany (€446 million), France (€425 million).

The annual reports of LafargeHolcim, Heidelberg-Italcimenti and Cemex show that they have profited by €1,100, €630 and €350 million respectively from the EU ETS.

Key recommendations to ensure the EU ETS drives cement decarbonisation:

  • Deliver a meaningful carbon price that rewards green innovators
  • End the free allocation of CO2 allowances to the cement sector
  • Introduce benchmarked border levelling in combination with 100% auctioning as the most effective approach to tackle ‘carbon leakage’ in the cement sector
  • Replace the clinker benchmarks with a cement benchmark to incentivise the uptake of low-carbon clinker substitutes
  • Invest more auctioning revenues in climate friendly innovation and support innovative industry frontrunners.

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