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The document examines the tension between WTO non-discrimination rules and national climate policies, such as renewable energy subsidies and carbon pricing. It analyzes recent WTO disputes over local content requirements and proposes solutions including authoritative interpretations of GATT Article XX, the use of regional trade agreements (RTAs) to test new rules, and increased institutional coordination between the WTO and UNFCCC.

The document argues that free pollution permits intended to prevent carbon leakage have instead generated significant windfall profits for Finnish corporations while depriving the government of substantial auctioning revenues.

The report analyzes the compatibility of Carbon Market Clubs (CMCs)—networks of emissions trading schemes (ETSs) sharing rules and services—with various 'climate clubs' consisting of governments, cities, and businesses. It explores whether standardized CMC services, such as mitigation value assessments and international asset reserves, can reduce transaction costs and political barriers to linking diverse carbon markets. While the Paris Agreement's Article 6.2 encourages voluntary cooperation, the report finds that political concerns over sovereignty, environmental integrity, and the 'not invented here' syndrome often outweigh technical efficiencies. Case studies of the EU ETS, WCI, RGGI, and ICAO illustrate the tension between the desire for centralized control and the economic benefits of networked markets.

Carbon Market Watch asserts that the proposed 2.2% annual emission reductions in the EU ETS are inadequate to meet the 2°C or 1.5°C warming targets, potentially leading to 2 billion tonnes more CO2 than the EU's Paris pledge. The briefing highlights that carbon prices remain too low to drive decarbonisation and that free permit allocations have allowed heavy polluters to profit, with over 24 billion euros made between 2008 and 2014. To address these failures, the author recommends steeper emission cuts, phasing out free allowances, and ensuring the next trading period starts at actual emission levels.

The report proposes 'Inclusion of Consumption' (IoC) as a way to ensure carbon prices are reflected in the cost of materials like steel and cement, which are currently shielded by free allowance allocations in emissions trading schemes. By adding a charge to the consumption of these materials based on benchmarks, the IoC aims to incentivize material efficiency and innovation without harming competitiveness. The authors argue that IoC is administratively feasible, compliant with WTO law, and qualifies as an environmental regulation under EU law.

The policy brief examines Article 10c of the EU ETS Directive, which allows lower-income Member States in Central and Eastern Europe to grant free emission allowances to the power sector provided they invest the equivalent value in energy system modernisation. The author argues that this mechanism has largely subsidised coal power and fossil fuel infrastructure rather than diversifying energy mixes, citing examples in Poland, the Czech Republic, and Romania. It highlights failures in transparency, public consultation, and additionality, specifically noting investments in the Belchatow power station. The brief recommends that the post-2020 revision implement a competitive bidding process for all investments, exclude coal from eligibility, and ensure open public consultation to align the mechanism with EU decarbonisation goals.

The document reports that Swedish energy-intensive industries generated approximately €729 million in windfall profits from the EU ETS between 2008 and 2014. These profits were driven by the surplus of free emission allowances, the use of low-cost international offsets, and cost-pass through to customers. The brief highlights that the Swedish government missed out on at least €1.9 billion in auctioning revenues due to these free allocations. It specifically identifies SSAB, Preem, and Cementa as the highest profiting corporations. The author argues that the risk of carbon leakage is unsubstantiated and that the current system reduces incentives for industrial decarbonization, recommending a phase-out of free allocations in favor of full auctioning.

The document argues that the EU ETS "carbon leakage" rules have led to massive windfall profits for French industrial companies while depriving the government of significant auctioning revenues. Between 2008 and 2014, French energy-intensive companies generated approximately €2.7 billion in windfall profits, with Bersillon, Total, and Lafarge being the top beneficiaries. The brief contends that these subsidies reduce incentives for decarbonization and that the Paris agreement will mitigate future leakage risks. It recommends phasing out free allocations in favor of 100% auctioning and implementing a tiered approach to target support only where truly necessary.

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 study examines how fragmented climate policies, where some regions implement carbon taxes while others do not, lead to 'carbon leakage'—the relocation of emissions to non-participating regions. It distinguishes between industrial carbon leakage (ICL), driven by fossil fuel price changes, and terrestrial carbon leakage (TCL), driven by land-use changes. The findings indicate that TCL is the dominant form of leakage until 2050, primarily due to deforestation in non-participating regions as food and bioenergy production shift away from participating areas. The research concludes that the total leakage rate decreases as the size of the climate coalition increases, but even the most inclusive fragmented scenarios fail to limit global temperature rise to below 2°C by 2100.

The Union of Concerned Scientists (UCS) submitted a public statement to the EPA supporting the Clean Power Plan (CPP) while advocating for a mass-based emissions trading approach for states subject to a federal implementation plan. UCS argues that a mass-based system provides greater certainty for achieving emissions budgets and better integration with future carbon markets. The document provides detailed recommendations for both rate-based and mass-based models, including the expansion of eligible zero-emission resources to include distributed generation and energy efficiency. It also proposes modifications to the Clean Energy Incentive Program (CEIP) to broaden project eligibility timelines and ensure benefits reach low-income communities. Additionally, UCS emphasizes the need to protect voluntary renewable energy markets and suggests implementing interim compliance provisions to prevent emissions deficits.

The document examines the risks of using agricultural soil carbon sequestration as carbon offsets. It highlights technical failures in measurement, reporting, and verification (MRV), the non-permanence of biological carbon compared to fossil carbon, and social risks such as land grabbing and the marginalization of small-scale farmers. The author argues that 'Climate Smart Agriculture' often serves as greenwashing for agribusiness corporations. Instead of carbon markets, the report recommends using National Adaptation Plans (NAPs) and Nationally Appropriate Mitigation Actions (NAMAs) to prioritize food security, tenure rights, and sustainable rural livelihoods.