Calculation of additional profits of sectors and firms from the EU ETS 2008-2015
Sander de Bruyn, Ellen Schep, Sofia Cherif, Thomas Huigen
December 2016
44 p.
Free allowances, Windfall profits


This study has calculated the additional profits that sectors and companies have made from the EU ETS from 2008 to 2015, distinguishing between three types of profits:

  • Profits from overallocation of free emission allowances. In many sectors/ countries, free allowances have been granted in excess of verified emissions, allowing industries to generate additional profits by selling this surplus in the market.
  • Profits from using CDM/JI credits for compliance. Companies were entitled to a certain extent to use cheaper CDM/JI credits for compliance. This has created additional profits since many companies have used these credits for compliance and sold the saved freely obtained allowances on the ETS market.
  • Profits from passing through the opportunity costs of freely obtained allowances. There is ample empirical evidence that companies have been able to pass through (part of) the carbon costs in product prices. Although the allowances were granted free of charge, the majority of sectors were thus able to pass through the opportunity costs of these allowances in product prices, thus making so-called windfall profits.

Profits in each of these categories from 2008 to 2015 have been calculated for 15 sectors (in general the most polluting ones) in the 20 EU countries that are also part of the OECD. The analysis in this study differs from those in earlier studies on this subject by our having corrected the allocation of waste gases to the iron and steel industry, which have been transferred to the electricity sector on a statistical basis. In our view, this yields a more accurate estimate of the extent of overallocation to the iron and steel sector compared with other studies.

Our results show that between 2008 and 2015 European industry received additional profits amounting to over 7.5 billion euros through overallocation.

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