Additional profits of sectors and firms from the EU ETS. 2008-2019

This study calculates the additional profits of EU ETS sectors and companies from 2008 to 2019 for the 15 most CO₂-intensive sectors plus aviation in 19 EU countries. Three types of profit are investigated:

1. Profits from overallocation of free emission allowances. Industry received free emission allowances in excess of demand resulting in additional profits worth an estimated € 1.6 billion between 2008 and 2019.
2. Profits from using cheaper international offsets for compliance, which companies were entitled to use to that end. This created additional profits worth € 3 billion between 2008 and 2019.
3. Profits from passing through (part of) the opportunity costs of freely obtained allowances into product prices. The design of the EU ETS, with its hybrid mix of free allocation and auctioning for emissions above benchmarks, creates plenty of scope for producers to pass through these costs. This generated additional profits worth € 26-46 billion between 2008 and 2019.

In total, the additional profits for the 15 sectors in the 19 countries were between € 30 billion and over € 50 billion in the period 2008-2019. In absolute terms, additional profits were highest in the iron and steel sector (€ 11.9-16.1 billion), followed by the cement industry (€ 7.1-10.3 billion) and refineries (€ 5.9-11.3 billion).

The study recommends that policymakers consider alternative means of preventing carbon leakage to ensure European industries decarbonise while remaining competitive on a global playing field.