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Can someone clarify why British Steel had to receive a UK government loan for this sum of 120 million pounds?

Did British Steel need this money to buy ETS allowances, or were these fines for not buying allowances previously? Or both? I understand that a large portion of industrial (non-power-generating) companies still receive free allowances (44.2% in 2018, 37.1% in 2019). Also steel manufacturing appears to qualify for the carbon leakage exemption, which gives 100% free allowances. So, how did British Steel ended up owing 120 million pounds in ETS?

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    This seems to be something more for business than for politics. What political aspect of it are you interested in? – Trilarion May 22 at 21:36
  • @Trilarion: I think government bailouts are a legitimate topic here. As is ETS. I've discovered the answer in the meantime (and it's also political!) but since people seem to dislike me self-answering I'll let someone else discover it (too) and get credit for it. – Fizz May 22 at 21:40
  • Was no critic, just seeking a bit of clarification. – Trilarion May 22 at 21:48
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    @Trilarion the situation is entirely political in its making, unfortunately :( – Moo May 22 at 21:58
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Part of the problem is that EU companies are annually issued free carbon tax credits to a certain amount to satisfy obligations under the Emissions Trading Scheme - these can be traded or "cashed in" against ETS allowances for emissions.

The EU recently suspended free credit issuances to British companies, in preparation for Brexit, but did not release those companies from their obligations for meeting allowances, and thus British Steel now faces a large emissions bill rather than it being covered in whole or in part by free credits (previous years saw British Steel covered 100% by free credits, with an excess in credits that it could trade - those previous years excess credits would have covered this years bill, but were instead traded on the expectation that this years free credits would be issued).

This isn't wholly the EU's 'fault', as British Steel could easily have not traded excess past credits, but equally there was very little notice of the EU suspending free credit issuance to British companies, so this was potentially difficult to foresee. Equally, it was the British governments choice to remain part of the ETS beyond the original Brexit date.

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    Indeed. And if someone needs a source gov.uk/government/speeches/… That source also says "The Withdrawal Agreement negotiated with the European Union allows for full and continuing membership of the EU ETS until the end of December 2020. Therefore, once ratified, we will have the full legal basis immediately to issue free 2019 allowances." Also, UK steel makers made a lot of money in the past by selling their free allowances bbc.com/news/science-environment-35994279 – Fizz May 22 at 21:54
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    @Fizz yup, the point of being able to trade credits is so the scheme acts as a reward for cutting emissions against the expected output your corporation is predicted to have - British Steel wasn't doing anything wrong by trading past credits (there are some articles out there that frame it that way), it was doing exactly what was intended: cashing in on reducing its own emissions. – Moo May 22 at 21:57
  • The second paragraph is all one huge sentence. You should maybe break it up a bit to make it easier to read. – rghome May 23 at 9:08
  • A concrete consequence of constantly kicking the can down the road. This is the sort of thing that needs to be part of the public consciousness. It would be good if the source was edited into the answer as comments are less permanent. – Jontia May 23 at 11:55
  • good answer, especially covering the fact that all parties involved have not exactly covered themselves in glory. – Orangesandlemons May 23 at 12:32

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