Industry windfall profits from Europe’s carbon market 2008-2015
Author: Agnese Ruggiero & Femke de Jong
November 2016
28 p.
Carbon leakage, Free allowances, Windfall profits


This report interprets the findings of an updated CE Delft study that shows how energy-intensive companies in 20 European countries have massively profited from their pollution because they are deemed at risk of “carbon leakage”. “Carbon leakage” refers to the hypothetical situation where companies transfer production to countries with weaker climate policies in order to lower their costs. Under the current EU Emissions Trading System (EU ETS) rules, industrial companies that are believed to be at risk of “carbon leakage” are awarded free emission allowances.

Overall, heavy industry has been able to make over €25 billion from the EU ETS during the 2008-2015 period. Windfall profits occur when industrial companies are over-subsidised for their pollution. This can happen by receiving too many free emission allowances which are then sold for a profit on the market, from using international offsets and from making consumers pay for non-existent carbon costs. The update also contains country sheets showing the sectors and companies that have profited the most from the EU ETS between 2008 and 2015.

Key recommendations:

  • Deliver a more meaningful carbon price signal that rewards green innovators
  • Phase out the free allocation of pollution permits
  • Target free allowances only to those that really need it
  • Annually reduce the amount of free allowances that an installation receives (benchmark) in line with the overall decarbonisation pathway of the EU ETS
  • Invest more auctioning revenues in climate friendly innovation and support frontrunners that want to invest in breakthrough technologies
  • Assist local communities and workers in regions impacted most strongly by the ongoing transition to a decarbonised economy by setting up a Just Transition Fund
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