THE COLLAPSE of boom-time construction in Ireland has put the cement industry in a position to make up to €226 million in windfall profits from the sale of surplus credits for its carbon emissions.
Irish Cement, whose plants in Platin, near Drogheda, and Mungret, in Limerick, could earn €105 million and €43 million respectively, Quinn Cement in Ballyconnell, Co Cavan, €52 million and Lagan Cement in Kinnegad, Co Westmeath, €26 million.
This derives from an anticipated over-allocation of allowances to this sector under the National Allocation Plan, amounting to 13.13 million tonnes of carbon dioxide (CO2), according to Euroconstruct, which monitors construction trends in Europe.
The plan, drawn up by the Environmental Protection Agency (EPA) in March 2008, was based on an assumption that the demand for cement would increase by 30 per cent between 2007 and 2012. But Euroconstruct predicts it actually will fall by 64 per cent.
The allocation of allowances under the EU Emissions Trading Scheme (ETS) was made at no cost to the companies. The allowances were based on a report prepared for the Department of the Environment by ICF Consulting and Byrne Ó Cléirigh, which assumed a high-growth scenario for the cement industry.
By 2007, a year after this report was compiled, the cement industry was already experiencing a downturn in demand and the Economic and Social Research Institute was also forecasting a slowdown in economic growth. Demand dropped 20 per cent between 2007 and 2008.
As 55 per cent of cement production in Ireland was being used for house building, the contraction in this sector confirmed that cement demand would decrease. Yet the Environmental Protection Agency went ahead with the allocation plan assuming a high-growth scenario in the five years to 2012.
The agency’s programme manager Ken Macken said the allocations were based on “historical emissions, not projections” following extensive public consultations.
Under the ETS, some 10,000 energy-intensive plants in the EU – representing about 40 per cent of total emissions – are able to buy and sell permits to emit CO2. Industries covered by the scheme include electricity generation, steelmaking and cement production. An emissions cap is defined for each individual plant, via national allocation plans by member states and approved by the European Commission.
Companies that exceed their quotas can buy unused credits from those that are better able to cut their emissions.
More recent forecasts have predicted that carbon prices could more than double as the ETS moves towards its third phase and targets become more stringent. Allowances would then become more scarce as emitters “bank” them for the next trading period, from 2013.
Donal O’Riain, founder of Ecocem – which produces low-carbon cement from the slag left over from steel production – said the windfall profits of €226 million for the traditional cement industry was a “pure waste of public money”, amounting to a subsidy of €18.50 per tonne.
“The ETS, intended to reduce/penalise CO2 emissions, is actually providing a huge subsidy for the production of polluting cement. This is sufficient to create serious competitive distortions due to the relative disadvantage for producers of low-carbon cement,” he said.
Last May, Minister for Energy Eamon Ryan said he intended to impose a “temporary windfall tax” on profits made by electricity suppliers from free carbon credits, to raise an estimated €75 million per year. Mr O’Riain said this should now be extended to the cement industry.
But Cement Manufacturers Ireland (CMI), the industry association, said its carbon allowances needed to be viewed in the context of “ongoing environmental improvements” by its member companies Irish Cement, Quinn Cement and Lagan Cement.
It said the three companies had responded to the EU Emissions Trading Scheme (ETS) by investing in “improving energy efficiency and fossil fuel substitution” as well as introducing “low carbon eco-efficient CEM II cements” to the Irish market.
€15.59Carbon prices have fluctuated between €8 and €30 per tonne, with the current price at €14 per tonne and this is expected to rise over the period to 2012. Last June, the Department of the Environment estimated that it will increase to €15.59 per tonne next year