the main beneficiaries. Even before the recession they had many more permits than they needed. With 2009 one of the worst years on record for industrial production, these companies will now be sitting on vast numbers of unused emissions permits. If these are sold we will see a repeat of the huge windfall profits from Phase 1, and if not, the permits will be banked to allow future pollution undermining the integrity and ambition of the EU’s post 2012 climate targets.
The Case of Arcellor Mittal
One company stands out as the biggest beneficiary of the EU Emissions Trading Scheme – the world’s largest steel company, ArcelorMittal. It’s CEO and major shareholder Lakshmi Mittal is the UK’s richest resident, and one of the world’s richest men. The company is the EU’s 5th biggest polluter4 but rather than being asked to cut its emissions under the scheme, it has been allowed to increase them.
In 2008, ArcelorMittal had over 14 million surplus permits equivalent to the annual emissions of Luxembourg5, or a windfall of over €200 million. With global steel production dropping by over 37% in 20096, we estimate that this could grow to 40 million for that year meaning surplus permits equivalent to a windfall of €560 million. By the end of 2012 ArcelorMittal is likely to control surplus permits equivalent to 80 million tonnes of carbon, or put another way, more than the annual emissions of nation hosting this month’s climate change talks, Denmark7. Selling these permits which ArcelorMIttal was assigned for free, could make the company around £1 billion.
Could Mittal have the makings of a great philanthropist?
As the major stakeholder of Arcellor and its CEO, Lakshmi Mittal has enormous influence over what happens to the company’s surplus permits. One option which he has is to retire the permits and thereby securing global emissions cuts equivalent to Denmark emitting no carbon for a whole year. If the current prime minister of Denmark were to make such a commitment, the world would most certainly stand up and take notice.
Famously a donor to the Labour party, Mittal even has considerable power when compared to Secretary of State Ed Milliband MP who is in currently in charge of the UK’s response to climate change. Between now and 2012, if Lakshmi Mittal c a n c e l s a l l h i s s u r p l u s e m i s s i o n s p e r m i t s h e w i l l d e l i v e r 8 0 % o f t h e e m i s s i o n s reductions that the whole UK has promised. 8
A century ago a man named Andrew Carnegie was the most powerful man in the steel industry but he is now more renowned for his work to tackle poor education and illiteracy, key challenges of the 20th Century. Today Bill Gates is famous for his work to tackle malaria, HIV and international poverty but he has no equivalent in the
4 5 6 7 8 ArcelorMittal comes behind RWE, EON, Vattenfall and Enel. It is just ahead of EDF in its 2008 emissions. European Environment Agency: Luxembourg emissions 14.9 MTCO2 Source: World Steel Association monthly production figures. European Environment Agency: Denmark’s 2007 emissions were 74.9 MTCO2 The UK CCC reports the total UK carbon budget as 3018 MT CO2 for the period 2008-2012, with annual 2008 emissions by DECC estimated as 624MT CO2, this would mean the UK cutting a total of 100MTC02 from 2008 levels to comply with its carbon budget.