Study: emission trade could bring European electric utilities tens of billions of euros in extra profit

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The trading system for emissions of carbon dioxide in the European Union is set to bring European electric utilities massive windfall profits. Companies in Finland and the other Nordic Countries stand to benefit from the emissions trade.
     A fresh study indicates that the greatest beneficiary in the EU is Germany, whose utilities are set to take in revenues of up to EUR 45 billion from 2008 to 2012, which is the EU's second emissions trading period.
     The report, commissioned by the environmental organisation WWF, was produced by the renowned consultant firm PointCarbon.
     
The calculations are based on the assumption that an emission entitlement for one tonne of carbon dioxide would cost an average EUR 21 during the trading period. If the price increases, profit would also increase.
     Germany's place at the top of the windfall profits ladder is based on the fact that the country produces more electricity than any of the other countries in the comparison. This is based on both its large population, and the amount of heavy industry in the country.
     One of the peculiarities of the EU's current emission trading system is that electricity producers that pollute the most - the ones that use mainly coal power - also benefit from the system. This is because governments distribute emission quotas to electric utilities for free, and they add the market price of the emission entitlements that they have to the electricity that they sell.
     
Also getting windfall profits from the emission trading system are companies that produce their electricity in facilities that do not emit carbon dioxide. These include hydroelectric and nuclear power.
     Although they do not need emission quotas, the price of emission licences are reflected in the retail price of electricity that they sell. This is because it is the most expensive form of electricity production - usually coal power - that sets the price for all electricity.
     
Although Finland is not included in the PointCarbon study, calculations on the situation in Finland exist, based on figures put out by Suomen Elfi, a company which represents large consumers of electricity in industry and commerce, has calculated that Finnish electricity producers are set to earn EUR 9 billion during the coming five years if the price of emission quotas stays at about EUR 20 a tonne.
     This is approximately the equivalent of what was paid in bank subsidies during the recession of the 1990s.
     
Finnish electric utilities and those in the other Nordic Countries are set to make much greater windfall profits in proportion to their populations and the amount of electricity produced, than those in the larger countries.
     This is attributed to the production structure. The more a company is able to use hydroelectric power and nuclear energy in plants that have already been built, the greater the profit from electricity sold at a price that includes the additional costs of coal-based energy, which includes the price of emission rights.
     The greatest beneficiary in Finland is the nuclear and hydropower company Fortum, which recently invested some of its windfall profits from the emissions trading system into electricity production in Russia.


Previously in HS International Edition:
  New emission trading period could cost nearly as much as 1990s bank crisis (7.8.2008)

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