Free Carbon Permits for E.U. Utilities Could Yield Windfall Profits

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OAKLAND, Calif. -- The
distribution of free carbon emissions permits to European Union
utilities has the potential to yield the companies windfall profits,
according to a new report.

The profits could top $100 billion for power companies in the
United Kingdom, Germany, Spain, Italy and Poland between 2008 and 2012,
the report from WWF and Point Carbon found. The EU plans to start
selling the carbon permits for its Emissions-Trading Scheme (ETS) in
2013.

The report comes as the U.S. and other countries explore their own
cap-and-trade systems to create a market-driven approach to reducing
GHG emissions. All three U.S. presidential candidates favor a
cap-and-trade arrangement utilities would have to buy the emissions
permits at auction.

"We have long been critical of the ETS design faults that provide
cash for coal in the name of emissions reduction," said Sanjeev Kumar,
WWF emissions trading scheme coordinator. "But Europe's experience
should be a stark warning to the rest of the world on the danger of
free allocations of pollution permits."

Until 2013, German power companies, in particular, stand to gain
the most even though the industry is highly dependent on
emissions-intensive coal. The report found that the free allocation
reduced the incentives for dirty power plants to invest in low
emissions technology.

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