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The document analyzes how German energy-intensive industries generated €4.5 billion in windfall profits from the EU ETS between 2008 and 2014 due to free emission allowances intended to prevent carbon leakage. It highlights that the German government missed out on €29.7 billion in auctioning revenues during this period. The brief identifies the iron and steel, refineries, cement, and petrochemicals sectors as the primary beneficiaries, specifically naming ThyssenKrupp and ArcelorMittal as top earners. It concludes that these subsidies reduce incentives for decarbonization and recommends phasing out free allocations in favor of auctioning to fund climate innovation.

The document argues that the EU Emissions Trading System (EU ETS) has provided excessive subsidies to German heavy industry through free allowances, resulting in €4.5 billion in windfall profits for companies like ThyssenKrupp and ArcelorMittal from 2008 to 2014. It contends that these allocations cost the German government €29.7 billion in lost auction revenues and stifle innovation by reducing the incentive to decarbonize. The briefing recommends phasing out free allocations in favor of 100% auctioning and investing the proceeds into low-carbon technologies.

The document analyzes the financial impact of 'carbon leakage' rules within the EU ETS in the Netherlands from 2008 to 2014. It finds that energy-intensive industries generated over €1 billion in windfall profits through surplus allowances, offsets, and cost-pass through to customers. Specifically, Tata Steel, Shell, and Chemelot are identified as major beneficiaries. The brief highlights that the Dutch government missed out on at least €6.4 billion in auctioning revenues due to free allocations, which it argues reduces incentives for industrial decarbonization. It recommends phasing out free allocations, introducing a tiered approach to carbon leakage, and increasing investments in climate-friendly innovation.

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.

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.

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 report argues that the EU ETS has failed to incentivise emissions reductions in the cement sector, instead acting as a production subsidy for high-carbon clinker. Due to coarse free allocation rules and an inaccurate carbon leakage list, the sector has accumulated significant allowance surpluses, with five major companies receiving nearly €1 billion in free allowances between 2008 and 2014. This has led to 'reverse carbon leakage,' where emissions are imported into the EU through clinker exports. The authors recommend introducing more granular production thresholds for allocation, a tiered system for leakage protection, and additional non-ETS policies to support carbon capture and non-Portland cement innovations.

The document discusses the conclusion of negotiations to link the EU ETS and the Swiss ETS, warning that the lack of transparency regarding the agreement's terms makes it unclear if the EU's 2030 domestic emission reduction targets will be undermined. It argues that linking could allow foreign allowances to enter the EU market, potentially contradicting the goal of achieving a 40% reduction through domestic means. The author outlines several conditions the agreement should meet to be acceptable, including the exclusion of international offsets from 2021 and the application of the Market Stability Reserve to the Swiss scheme.

Carbon Market Watch asserts that the EU ETS is currently ineffective, citing a carbon price drop below €6 per tonne as evidence. The organization calls for a steeper Linear Reduction Factor—suggesting an annual decrease of at least 4.2% to achieve decarbonisation by 2040—and the permanent cancellation of surplus allowances. It further argues that the concept of 'carbon leakage' is unsupported by evidence and that the proposed €160 billion in free pollution permits for heavy industry hinders low-carbon investment and risks creating windfall profits.

The policy brief examines the risks of including the LULUCF sector in the EU's 2030 climate framework, specifically the danger that carbon sinks could be used to reduce the decarbonization efforts of sectors like transport and manufacturing. It identifies four primary reasons why LULUCF is unfit for integration with other climate instruments: high data uncertainty (32% compared to 1% for fossil fuels), incomplete accounting methods that allow for over-crediting, the non-permanence of biological carbon stores, and the need for carbon removals to be additional to, rather than replacements for, emission reductions. The author highlights specific accounting flaws, such as 'Gross-net accounting' and 'forest management reference levels' (FMRL), which may allow Member States to generate unearned credits. Additionally, the brief criticizes the assumption of biomass carbon neutrality, noting that emissions from burning wood are often unaccounted for in the EU ETS or ESD. The document recommends that LULUCF be maintained in a separate pillar, that land-use offsets be prohibited, and that biomass sustainability criteria be strictly enforced.

The European power sector saw a record increase in renewables generation in 2015, yet CO2 emissions fell by only an estimated 0.5% due to offsetting increases in coal generation in several countries and a rebound in electricity demand. While the UK experienced a collapse in coal generation, this was countered by growth in the Netherlands, Spain, and Poland. The report forecasts a further 21% drop in EU ETS emissions from 2014 to 2020, suggesting the EU is on track to surpass its 20% economy-wide CO2 cut target.

The document assesses the progress of Germany's Energiewende, noting that while renewable energy shares have grown, coal still provided 42% of power production in 2015. It highlights the economic tension between the 'big four' utilities and decentralized renewables, the social and political challenges of phasing out hard coal and lignite, and the influence of industry unions in blocking a proposed climate levy on power plants in favor of a capacity reserve.

The document warns that the Paris climate treaty risks failure if it allows 'hot air' (non-real emission reductions) to be used for compliance. Drawing on failures of the Kyoto Protocol's CDM and JI mechanisms, and the oversupply of permits in the EU ETS, the author advocates for the cancellation of surplus permits, the creation of a robust international accounting system to prevent double counting, the end of carbon offsetting in favor of direct finance for developing countries, and the exclusion of non-permanent land use offsets from carbon markets.

The document argues that production-based emissions accounting allows the EU to outsource manufacturing and claim emissions reductions while domestic consumption drives emissions elsewhere. It introduces the Carbon-CAP project, which evaluates over 30 policy instruments across sectors like transport and food to complement existing production-focused policies. These instruments are assessed based on effectiveness, scope, economic equity, and political/legal acceptance to avoid rebound effects and emissions shifting within the global economy.

The policy brief warns that the EU's 2030 commitment to reduce emissions by at least 40% below 1990 levels could be undermined by a projected surplus of up to 4.5 GtCO2e in the EU Emissions Trading System (EU ETS) and 1.5–1.7 GtCO2e in the Effort Sharing Decision (ESD). If these 'hot air' allowances are carried over, the effective emission reductions for 2030 could drop to 32%. The author recommends the permanent cancellation of at least 2 billion EU allowances by the end of 2020 and the prohibition of pre-2020 reductions in the 2030 ESD, while calling for robust international accounting and eligibility criteria under the Paris agreement to prevent similar issues globally.

The document challenges the justification for granting free carbon allowances to EU industries to prevent 'carbon leakage' (production relocation). It argues that there is no compelling evidence of such leakage and that free allocations instead create windfall profits for companies, disincentivize low-carbon innovation, and deprive the public of auctioning revenues. The brief recommends a transition to 100% auctioning of allowances and a more stringent, transparent criteria for the carbon leakage list to ensure only truly high-risk sectors receive support.

Carbon Market Watch recommends that the ICAO GMBM exclude high-risk offset projects, including fossil fuel power plants, nuclear facilities, large-scale hydropower, and certain industrial gas destruction projects. The brief highlights that these project types often lack additionality, cause severe social and environmental harm, or suffer from non-permanence. It cites existing exclusions in the EU ETS and other jurisdictions as precedents for maintaining high quality standards in aviation's climate response.

The Corporate Leaders Group (CLG) advocates for the phase-out of fossil fuel subsidies by 2025, arguing that these subsidies create perverse incentives that undermine carbon pricing and hinder the transition to a low-carbon economy. The document highlights that eliminating these subsidies could reduce global greenhouse gas emissions by 13% and free up significant government resources, particularly in developing countries where subsidies often exceed healthcare spending. CLG supports the Fossil Fuel Subsidy Reform Communiqué, which calls for transparency, ambition in timeframe, and targeted support for the poorest populations during the transition.

The policy brief identifies the EU ETS as currently ineffective due to a massive oversupply of pollution permits and a carbon price too low to incentivize low-carbon investment. It proposes four primary interventions: cancelling at least 2 billion surplus allowances in the Market Stability Reserve by 2020, increasing the linear reduction factor to at least 2.6% to align with 2050 decarbonisation goals, implementing a one-billion allowance ceiling on the Market Stability Reserve to account for technological progress, and shortening trading periods to five years to increase responsiveness to market and scientific changes.

The study finds that approximately 75% of Joint Implementation (JI) offsets likely did not represent additional emission reductions, potentially increasing global GHG emissions by 600 million tonnes of CO2 equivalent. The analysis highlights systemic failures in additionality testing, the prevalence of retroactive crediting, and the lack of international oversight in Track 1 projects, particularly in countries with significant Assigned Amount Unit (AAU) surpluses like Russia and Ukraine.