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European Commission estimates energy-intensive sector will have accumulated allowances worth €7-12bn by the end of 2012 Some of Europe’s largest industrial companies gained billions of Euros from the carbon emission rules they lobbied fiercely against, new analysis reveals today. Ten steel and cement companies have amassed 240m carbon pollution permits from generous allocations, found the report by the carbon trading thinktank Sandbag , seen by the Guardian. The free permits, granted to the companies, with a market value of €4bn (£3.5bn) can be sold or kept for future use. The European Commission estimates that the entire energy-intensive sector will have accumulated allowances worth €7-12bn by the end of 2012 . “More and more businesses see that Europe’s future lies in a highly efficient economy with low pollution,” said Baroness Worthington, Sandbag’s founding director. “But a small group of carbon fat cat companies are trying to stop this, in spite of making billions from a windfall of free pollution permits.” Steelmaker ArcelorMittal leads the list of companies in the report, with a current surplus valued at €1.7bn, followed by cement giant Lafarge. Tata Steel, in third place with a surplus valued at €393m, last month announced 1500 job losses at its plants in Lincolnshire and Teesside , blaming emissions regulations as well as the economic downturn. Karl-Ulrich Köhler, chief executive of Tata Steel’s Europe, said at the time: “EU carbon legislation threatens to impose huge additional costs on the steel industry.” Tata Steel declined to comment. The European Union emissions trading scheme (ETS) puts a cap on the carbon pollution emitted by energy and industrial companies. Those reducing their emissions can sell their spare permits to those who do not. But a combination of initial over-allocation by national governments and the economic decline has left the steel, cement, chemical, ceramic and paper sectors with many more permits than they need. The industries have lobbied hard against calls from governments including the UK for the tightening of the ETS and other emissions targets. Eurofer, the lobby group representing all of Europe’s steel makers, said last month: “To remain competitive in the free, global steel markets, European steel needs … legislation that does not harm its competitiveness. But we are gravely concerned that EU Climate Change policy will do precisely that .” Cembureau , which lobbies for the cement industry, takes a similar line, stating : “It would be irresponsible to shift the [emissions] goal posts .” In the UK, the government has proposed incentivising low-carbon innovation by setting a British floor price for carbon from 2013. But this is opposed by the CBI, whose director general John Cridland said : “It risks tipping energy-intensive industries over the edge .” The government made some concessions to energy-hungry businesses, promising to produce plans later in 2011 to compensate them for any competitive disadvantage . However, independent analysis by Bloomberg New Energy Finance found that the carbon permits held by the steel industry would cover its emissions for the next 12 years. “If the steel sector [on aggregate] did not sell any of its surplus, it would not have a need to purchase emissions until 2023,” said Guy Turner at Bloomberg NEF. The Sandbag report, based on public data, also found that nine of the 10 “carbon fat cats” bought between them 24.4m carbon permits from the cheaper international market, mainly from companies in China and India. These can be used within the EU’s trading scheme, enabling the companies to retain the more valuable EU’s ETS permits. Furthermore, despite the European companies claiming that tougher emissions rules would drive business overseas, some were paying overseas steel and cement companies for their international carbon permits. “Purchasing carbon offsets from foreign competitors would not seem to be the actions of businesses genuinely concerned that the ETS will drive business abroad,” said Worthington. Not all companies are resisting tightening of the EU’s ETS. Five major energy companies, including Britain’s Scottish and Southern Energy, last week called for spare permits to be withdrawn from the ETS , a proposal supported by Sandbag. “Failure to do so could severely hamper business incentives to invest in low-carbon technologies, as the price signal will be skewed in favour of fossil-based solutions,” their statement said. The Guardian contacted all the companies named by Sandbag. Those who responded argued that the surplus permits arose from decreased production and might be needed when the economy recovered. They argued that without protection, steel and cement making would be driven to countries with less CO2-efficient manufacturing practices. Many called for global regulation of emissions. One company gave specific information about how it uses its surplus: “As part of our corporate responsibility strategy, we have decided that any sale of such surplus allowances will be reinvested into projects aimed at the improvement of our energy efficiency footprint, as this will help to reduce our overall CO2 emissions.” said spokesperson for ArcelorMittal . Erwin Schneider, at steelmaker ThyssenKruppe , said: “Companies make decisions based on expected future developments. Any earnings from the past will either have been reinvested already or paid out to shareholders. Therefore it seems to be very misleading to use historic numbers to address our future position.” Emissions trading Manufacturing sector Corus Arcelor Mittal Tata Europe Scottish and Southern Energy Energy industry Carbon emissions Climate change Pollution European Union Damian Carrington guardian.co.uk