Industry windfall profits from Europe’s carbon market

The document assesses the impact of 'carbon leakage' rules within the EU ETS from 2008 to 2014, finding that free pollution permits resulted in over 4 billion in windfall profits for heavy industry. It highlights that these subsidies benefit specific sectors like iron, steel, and cement, and primarily accrue in countries such as Germany and the UK. The brief contends that these rules reduce incentives for decarbonization and deprive governments of approximately 137 billion in potential auctioning revenues. It recommends phasing out free allocations in favor of 100% auctioning to align with the polluter-pays principle and the global landscape following the Paris agreement.

• The most significant windfall profits by sector were captured by iron and steel (8.0 billion), cement (4.7 billion), refineries (4.4 billion), and petrochemicals (1.6 billion). The cement sector specifically profited most from selling surplus free allowances.
• The document asserts that 'carbon leakage'—the relocation of production to countries with weaker climate policies—is a hypothetical threat with no evidence of actual occurrence. It notes that the Paris agreement levels the global playing field as 188 countries have submitted climate commitments.
• Free allowances are argued to stall industrial emission reductions by removing the price signal needed for companies to invest in efficiency or breakthrough technologies. Consequently, industrial emissions are not projected to decrease until 2030.

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.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.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.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.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }