The European Union could be cornered into offering its heaviest polluting industries another 10 years of free carbon credits to retain business.
A decade ago the EU set in motion a plan to tackle climate change by asking heavy industries to pay for every tonne of CO2 they produced. However, after extensive lobbying it was conceded that the polluters could have free permits.
The Emissions Trading Systems (ETS) expires in 2020 and it was hoped by environmental campaigners that a future version would considerably cut free allocations to encourage companies to turn to green technology to lower carbon emissions.
However, an EU report seen by Reuters showed that regulators are considering drafting a new law that will offer free credits covering between 20 and 100 per cent of firms’ carbon emissions, if they are likely to relocate to do business elsewhere.
The free permits could be allotted to sectors including steel and chemical producers that have been playing the relocation card to areas with less strict emission limits.
A way of handing out allowances could see emission intensity broken down into very high, high, medium and low-carbon, Reuters said, so that industries are entitled to respectively 100 per cent, 80 per cent, 60 per cent and 30 per cent free permits.
Another option is to give all sectors 30 per cent of emissions free.
“It's almost an insurance policy for the Commission to show it has considered all the options,” said Marcus Ferdinand, analyst at Thomson Reuters Point Carbon.
EU heavy industry argues that any change to the existing arrangement would disadvantage them, particularly given that any new global climate deal is unlikely to make significant requirements of other countries to cut their emissions.
Government officials are meeting in Bonn, Germany, from June 1-11 to work on a global climate deal that countries hope to agree within six months.