Environmentalists decried the
windfall profits enjoyed by European utilities that received carbon permits for free under the region's greenhouse gas cap-and-trade program but still passed the costs along to consumers.
Now it's being reported that steelmakers are also benefitting handsomely from the
European Union Emission Trading Scheme (EU ETS) because they received too many free carbon permits last year -- permits worth roughly $1.2 billion based on 2008 carbon prices, according to
Reuters.
The industry's gain is attributed to aggressive lobbying that pursuaded EU governments to allocate more permits to steel and less to utilities, which comprise the lion's share of permit buyers. The steel industry maintains the surplus was caused by lower production because of the economic recession but Reuters pointed out that despite the fall in production, its emissions were virtually unchanged from the year before.
With production forecast to drop further in 2009, this year's surplus could be even bigger, according to New Carbon Finance.
The situation illustrates the balancing act facing governments designing and implementing cap-and-trade systems to reduce greenhouse gas emissions. Environmental groups are calling for emitters to buy the carbon permits in auctions while industry groups haggle for free permits to defray the costs of transitioning from carbon-intensive fuel sources and processes.
Though the U.S. has been widely panned for being late to the climate change party, it also stands to benefit from the lessons learned in the EU ETS.
President Barack Obama signaled interest in a 100 percent permit auction during his campaign, but in recent weeks, press reports suggest he's softening his stance. White House Science Advisor John Holdren, in an interview with the
Washington Post, said "whether you get to start with that (a 100 percent auction) or get there over a period of time is something that's being discussed."
