Sunday, 6 December 2009

Carbon credits bring Lakshmi Mittal £1bn bonanza

Jonathan Leake and Bojan Pancevski

LAKSHMI MITTAL, Britain’s richest man, stands to benefit from a £1 billion windfall from a European scheme to curb global warming. His company ArcelorMittal, the steel business where he is chairman and chief executive, will make the gain on “carbon credits” given to it under the European emissions trading scheme (ETS).
The scheme grants companies permits to emit CO2 up to a specified “cap”. Beyond this they must buy extra permits. An investigation has revealed that ArcelorMittal has been given far more carbon permits than it needs. It has the largest allocation of any organisation in Europe.
The investigation has also shown that ArcelorMittal and Eurofer, which represents European steel makers at European level, have lobbied intensively in Brussels. This has included threatening to move plants out of Europe at a cost of 90,000 jobs, and asking European commissioners to meet Mittal.
ArcelorMittal is now free to sell its surplus permits on the market or to hoard them for future use. The latter would allow it to avoid cutting greenhouse gas emissions for years, effectively undermining the point of the scheme.
Either way, the company will have gained assets worth around £1 billion by 2012. The eventual value could be much greater. Each carbon permit is currently worth about £12.70 but the European Union has said it wants to drive this price above £30.
The disclosure comes on the eve of the Copenhagen climate conference, whose main aim is to extend schemes such as the ETS into a global system for trading carbon.
Details emerged from an analysis of the community independent transaction log, the EU system for logging the carbon permits issued to factories and power stations covered by the scheme in Europe.
Anna Pearson, an expert on the ETS who carried out the analysis, said: “Between 2008 and 2012 ArcelorMittal stands to gain assets worth £1 billion at today’s prices for scant effort. For them, the ETS has been turned into a system for generating free subsidies.”
ArcelorMittal, which is based in Luxembourg and has more than 80 steel plants around Europe, has confirmed Pearson’s figures. The ETS covers 10,000 industrial installations, responsible for 40% of the EU’s greenhouse gas emissions.
“Following intense lobbying and claims that the scheme would harm business, the cap on emissions was set too high and too many permits were issued,” said Pearson, who performed her analysis for Sandbag, which campaigns to improve carbon trading.
ArcelorMittal was given the right to emit 90m tonnes of CO2 each year from its plants in the EU from 2008 to 2012. However, the company emitted just 68m tonnes last year. That was partly due to the recession, but Pearson believes its allocation of 90m was already too generous. This year ArcelorMittal’s emissions are predicted to plummet to 43m tonnes.
A spokesman for the company said: “The extra surplus arose when actual steel production fell way below forecasts because of the unexpected global economic crisis. As the world returns to growth, we expect to use them up.”
However, Pearson estimates that by 2012 the company will have accumulated surplus permits for 80m tonnes of CO2 — equivalent to the pollution generated annually by the whole of Denmark.
Details of ArcelorMittal’s lobbying emerged from freedom of information requests made by Corporate Observatory Europe to the European commission. They include two letters from Mittal himself, in December 2006 and April 2007, requesting meetings with Günter Verheugen, the commissioner for enterprise and industry, and Stavros Dimas, the environment commissioner.
In another, in January 2008, ArcelorMittal threatened to relocate if made to pay for carbon certificates.
The business is 43% owned by Mittal, who tops The Sunday Times Rich List with a fortune of £10.8 billion. He lives in a Kensington mansion bought for £70m in 2003.
The revelations support the criticisms of carbon trading by Professor Jim Hansen, director of Nasa’s Goddard Institute for Space Studies, who supports the alternative idea of a direct tax on carbon. He said: “The corporates see emissions trading as a huge opportunity to boost profits.”
Pearson said she had written to Mittal on behalf of Sandbag asking if ArcelorMittal would “retire” the carbon permits — meaning they could not be used by anyone else.
“If the company were to rip these up it would be a great act of philanthropy and set an excellent example,” she said.
An ArcelorMittal spokesman said: “ArcelorMittal’s surplus carbon credits are an asset which will only grow in importance,” he said.