Oil companies profit unfairly from Emissions Trade
Oil companies profit unfairly from ETS, report says
Point Carbon - 03 July 2006
The European emissions trading scheme (ETS) earned oil companies BP, Exxon Mobil and Shell profits of £48.1 billion (€69.5 billion) during 2005, while British government hospitals were forced to spend £1.3 million, according to a report published by a UK-based think tank.
Open Europe, a business-funded research body with the aim of contributing “bold new thinking to EU policy” in the UK, published a report claiming the ETS is too expensive, and that it penalises UK installations unfairly while favouring larger installations over smaller ones.
The report, entitled “The EU Emissions Trading Scheme: an environmental and economic failure,” said the ETS gives away too many allowances with “perverse results.”
“Instead of auctioning off permits and allowing the market to operate, member states have handed permits out to firms according to 1960s-style national allocation plans (NAPs). This means handing permits free to individual firms on a variety of rather sketchy data. For example NHS hospitals have been forced to spend a total of £1.3 million buying up permits, and 18 UK universities are also net contributors. Ironically, large oil companies have made substantial profits from the scheme,” the report said.
Based on selling EUAs at an average price of €18.20 per tonne, the report estimates that BP, Exxon Mobil, and Shell each made £17.9 million, £10.2 million, and £20.7 million, respectively.
The report claims that UK businesses are being unfairly penalised compared to other member states in the scheme, with the UK likely to transfer £1.5 billion to other member states over the first phase of the scheme.
"Other member states (including some of the richest members) have given firms far more generous allowances based on future expectations. This means that UK firms have to buy permits from rival firms in other member states, costing the affected UK firms £470,000 in total during 2005,” it said.
The report also claims that the administrative cost of the scheme to UK companies could be as high as £62 million, and that the same objectives could be achieved at a lower cost with a carbon tax.