Carbon leakage myth buster

The document argues that the EU ETS 'carbon leakage' rules, which provide free emission allowances to prevent companies from relocating to countries with weaker climate policies, have instead generated over €3 billion in windfall profits for UK energy-intensive industries from 2008 to 2014. These profits were primarily driven by cost-pass through, surplus allowances, and the use of low-cost international offsets. The brief highlights that the UK government missed out on at least €16.3 billion in auctioning revenues due to these free allocations, reducing funds available for the low-carbon transition. It specifically identifies Tata Steel, Lafarge, Hanson Cement, and Total as the highest profiting corporations. The author recommends phasing out free allocations, introducing a tiered leakage approach, and increasing the share of auctioned allowances to 100% to avoid further subsidies for pollution.

• Energy-intensive companies in the UK generated approximately €3.1 billion in windfall profits from the EU ETS between 2008 and 2014. These profits were derived from three main sources: cost-pass through (€2,035 million), selling surplus allowances (€1,010 million), and using international offsets (€58 million).
• The free allocation of pollution permits resulted in a significant loss of public revenue for the UK government. Between 2008 and 2014, the government issued 1.3 billion free permits, missing out on at least €16.3 billion in potential auctioning revenues that could have supported the low-carbon transition.
• Specific UK corporations profited substantially from the EU ETS carbon market. Tata Steel earned the most with approximately €871 million, followed by Lafarge (€164 million), Hanson Cement (€128 million), and Total (€122 million).
• The document asserts that claims of reduced competitiveness due to the EU ETS are unsubstantiated for certain firms. For instance, Tata Steel's difficulties are attributed to low demand and Chinese 'dumping' rather than the EU ETS, despite the company making over €800 million from the system between 2008 and 2014.

APA

Carbon Market Watch (2016). Carbon leakage myth buster. https://carbonmarketwatch.org/wp-content/uploads/2016/03/Carbon-leakage-myth-buster_UK_WEB-1.pdf

Chicago

Carbon Market Watch. Carbon leakage myth buster. 2016. https://carbonmarketwatch.org/wp-content/uploads/2016/03/Carbon-leakage-myth-buster_UK_WEB-1.pdf.

Wikipedia

{{cite report |author=Carbon Market Watch |title=Carbon leakage myth buster |date=March 2016 |url=https://carbonmarketwatch.org/wp-content/uploads/2016/03/Carbon-leakage-myth-buster_UK_WEB-1.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{carbonmarketwatch2016carbon, author = {{Carbon Market Watch}}, title = {{Carbon leakage myth buster}}, institution = {Carbon Market Watch}, year = {2016}, month = mar, url = {https://carbonmarketwatch.org/wp-content/uploads/2016/03/Carbon-leakage-myth-buster_UK_WEB-1.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }