Industry windfall profits from Europe’s carbon market

The document analyzes how the 'carbon leakage' mechanism in the EU ETS allowed heavy industry in 19 European countries to earn over €24 billion in windfall profits between 2008 and 2014. It contends that these subsidies reduce incentives for decarbonization and deprive governments of auctioning revenues, while evidence for actual carbon leakage remains absent. The brief recommends phasing out free allocations in favor of 100% auctioning to fund low-carbon innovation.

• Energy-intensive companies in 19 European countries generated more than €24 billion in windfall profits from the EU ETS between 2008 and 2014. These profits were derived from three main sources: selling surplus free allowances (€8.1 billion), using low-cost international offsets (€0.6 billion), and passing non-existent carbon costs to customers (€15.3 billion).
• The iron and steel, cement, refineries, and petrochemicals sectors were the primary beneficiaries of the system. The cement sector specifically generated the highest profits by selling surplus free allowances on the market.
• Windfall profits were concentrated in five countries: Germany (€4.5 billion), the United Kingdom (€3.1 billion), Spain (€2.9 billion), France (€2.7 billion), and Italy (€2.3 billion). Spain recorded the highest profits from surplus allowances, exceeding €1.6 billion.
• The free allocation of permits resulted in a significant loss of public revenue. Between 2008 and 2014, governments issued 11 billion free permits, missing out on at least €137 billion in potential auctioning revenues.
• There is no empirical evidence to support the claim that the EU ETS has caused 'carbon leakage' (the relocation of production to countries with weaker climate policies). A 2013 European Commission study found no evidence of such relocation, and the Paris agreement is expected to level the global playing field after 2020.
• The current system of free allowances is projected to stall industrial emission reductions until 2030 because companies lack a sufficient price signal to invest in breakthrough low-carbon technologies.

APA

Carbon Market Watch (2016). Industry windfall profits from Europe’s carbon market. https://carbonmarketwatch.org/wp-content/uploads/2016/03/Policy-brief_Industry-windfall-profits-from-Europe’s_web_final-1.pdf

Chicago

Carbon Market Watch. Industry windfall profits from Europe’s carbon market. 2016. https://carbonmarketwatch.org/wp-content/uploads/2016/03/Policy-brief_Industry-windfall-profits-from-Europe’s_web_final-1.pdf.

Wikipedia

{{cite report |author=Carbon Market Watch |title=Industry windfall profits from Europe’s carbon market |date=March 2016 |url=https://carbonmarketwatch.org/wp-content/uploads/2016/03/Policy-brief_Industry-windfall-profits-from-Europe’s_web_final-1.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{carbonmarketwatch2016industry, author = {{Carbon Market Watch}}, title = {{Industry windfall profits from Europe’s carbon market}}, institution = {Carbon Market Watch}, year = {2016}, month = mar, url = {https://carbonmarketwatch.org/wp-content/uploads/2016/03/Policy-brief_Industry-windfall-profits-from-Europe’s_web_final-1.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }