April 12 (Bloomberg) -- ArcelorMittal and Tata Steel Ltd. were given 62.4 million more free carbon permits than the two steelmakers used last year, the most of any European companies.
The European Union allowances, awarded by governments, are worth 839 million euros ($1.1 billion), assuming a value of 13.45 euros each, the average price on London’s ICE Futures Europe exchange of the December 2011 contract in the 12 months to expiry. That’s a 36 percent increase in permits from a year earlier, according to preliminary EU data compiled by Bloomberg.
Europe’s flagging economy sapped demand for metals, cement and power last year, increasing an oversupply of allowances held by companies. The entire carbon program had 2.1 billion euros worth of spare allowances last year, according to Bloomberg calculations. Factories and power stations got 153 million more emissions permits than needed. Emissions dropped 2.5 percent across Europe, according to the data.
“This decrease in CO2 emissions surprised most analysts and might be due to the economic stagnation in Europe,” Cedric Bleuez, managing director at Carbon Market Data in Paris, said yesterday in a statement. That’s “combined with the effect of energy efficiency and renewable energy policies,” which reduces emissions from power generation, he said.
ArcelorMittal Surplus Rises
ArcelorMittal’s surplus rose 47 percent to 47.3 million permits last year. The company, the world’s largest steelmaker, has had the highest surplus of all the installations in the program since trading started in 2005. Almost 13,000 factories and power stations in Europe must comply with the bloc’s emissions trading system by handing in carbon permits each year.
“This is a pure regulatory windfall, there are many examples of windfalls that have been clawed back,” Per Lekander, an analyst for UBS AG in Paris, said by e-mail. “It’s not fair to make money on a financial asset given for free.”
European permits for December have fallen 59 percent in the last year and were at 7.17 euros as of 4:30 p.m. in London. Lekander forecasts permits to slump to as low as 3 euros because of an oversupply in the market. He said free allocations had been “overly generous.”
ArcelorMittal spokesman Giles Read in London did not return a call seeking comment. Bob Jones, a spokesman for Tata Steel in London, wasn’t immediately able to comment on the allowances. Tata is India’s biggest steel producer.
The program’s second phase, which operates in the five years through 2012, distributed free allowances to help companies manage their costs. Those free allowances will be reduced from next year. Any spare permits can be sold into the market or saved for use in later years.
RWE AG and Vattenfall AB were the two biggest emitters last year and were required to purchase the most allowances, the preliminary data show. RWE emitted 55 million metric tons of carbon dioxide above its quota, which would have cost about 739 million euros at the average price, while Vattenfall produced 31 million tons more.
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