If one wants to see why carbon-trading schemes retain so much popularity among the political class, this Times of London exposé explains it well. Britain’s richest man, Lakshmi Mittal, stands to get even richer over the next few years, thanks to the efforts of politicians in handing Mittal’s companies a raft of carbon credits. Mittal’s companies can’t possibly use them all for several years, and so Mittal’s production firms can continue their emissions levels while making a fortune on the futures markets:
LAKSHMI MITTAL, Britain’s richest man, stands to benefit from a £1 billion windfall from a European scheme to curb global warming. His company ArcelorMittal, the steel business where he is chairman and chief executive, will make the gain on “carbon credits” given to it under the European emissions trading scheme (ETS).
The scheme grants companies permits to emit CO2 up to a specified “cap”. Beyond this they must buy extra permits. An investigation has revealed that ArcelorMittal has been given far more carbon permits than it needs. It has the largest allocation of any organisation in Europe.
The investigation has also shown that ArcelorMittal and Eurofer, which represents European steel makers at European level, have lobbied intensively in Brussels. This has included threatening to move plants out of Europe at a cost of 90,000 jobs, and asking European commissioners to meet Mittal.
ArcelorMittal is now free to sell its surplus permits on the market or to hoard them for future use. The latter would allow it to avoid cutting greenhouse gas emissions for years, effectively undermining the point of the scheme.
Either way, the company will have gained assets worth around £1 billion by 2012. The eventual value could be much greater. Each carbon permit is currently worth about £12.70 but the European Union has said it wants to drive this price above £30.
And we come to the crux of the carbon-trading scheme: the ability of politicians to pick winners and losers. In any version of this system, the government issues credits to producers based primarily on the whims of the politicians and bureaucrats in charge. Cui bono? The politicians themselves, who get the benefit of the intense lobbying that will result when they control the means and costs of energy and production. Mittal obviously did made a fortune from his investment in lobbying efforts, and so did the politicians who benefited from them.
Lest anyone think that the American system will be purer, all one needs to see is the allocation of carbon credits by state under Waxman-Markey. Politically well-connected states do much better than Midwestern and Rust Belt states, which will pay through the nose for carbon emissions. It’s simply redistributionism through a particularly corrupt form of taxation and payoffs.
None of this comes as a surprise, of course. Politicians love any scheme that allows them to accrue power, and this one in particular, as the Tax Foundation explained this summer: