EMISSIONS TRADING allocations announced by the Environmental Protection Agency (EPA) this week could be a boon for industries in an economic downturn, it has been claimed.
The allocations - which specify the amount of greenhouse gas emissions individual businesses are allowed to emit before facing punitive costs - were based on a pilot scheme covering three years from 2005 to 2007 - some of the best years of the recent Irish economic boom, particularly in high energy sectors such as the cement industry.
But with housing output expected to be down by as much as half this year, it has been estimated that cement manufacturing could be down by a quarter on what it was during the boom years.
As a result, manufacturers will be able to sell their unused allocations on the international emissions trading market, resulting in windfall gains of millions of euro.
For example, a cement manufacturer with an individual allocation of 500,000 credits who uses just 75 per cent of that amount, would be able to sell on 125,000 on the international market at a price of about €20 per credit. This would result in an income of €2.5 million.
Similarly, if there was to be a downturn in sales of Guinness manufactured by Diageo at St James's Gate in Dublin, the company would be within its rights to sell off any unused part of its 73,912 credits, at €20 per credit.
Potentially, the windfalls will be repeated for each of the five years of the current scheme which lasts until 2012, unless economic growth picks up to pre-2008 levels. More than 100 companies in three sectors, power generation, cement and general industry are part of the scheme and all may sell on unused allocations.
A number of companies which have been excluded from the emissions trading scheme have complained that it is unfair as they have no allocations to sell.
Donal Ó Riain, of the "green" cement company Ecocem, said his company offset some 240,000 tonnes of carbon emissions each year by using a "green" manufacturing cement process. But he said that as a "green" producer he was excluded from the scheme.
"No matter how 'green' I get, I am not allowed any allowances, so in effect the State is subsidising the polluter, not the clean industry," Mr Ó Riain.
Mr Ó Riain said his company was at an effective disadvantage to other cement firms as a result of the scheme. While "green" energy companies such as wind farms had also been excluded from the emissions trading scheme, renewable energy was subsidised by the State. "There are two points here. Companies knew the pilot programme was going to be a base line, so there was no incentive for them to reduce their carbon footprint in those years. So from that point of view it was a failure.
"Secondly, these companies, those involved in high greenhouse gas emissions, are now about to be awarded with a windfall bonanza," he said.
Ken Macken, of the EPA, defended the scheme saying the allowances were "a burden" rather than a bonus. He said the allocations were based on an average of 87 per cent of the emissions during the pilot period 2005 to 2007. If companies did not reduce their greenhouse gas emissions they would be forced to buy additional credit on the open market, he said.
He said he accepted there would be a number of anomalies in the system. But he insisted that overall the reduction in allowances would result in companies having an economic incentive to reduce their greenhouse gas output by investing in clean technologies.
