Realist, not conformist analysis of the latest financial, business and political news

The EU Forces British Steel To Beg For A £100 Million Government Loan

It’s entirely possible that the European Union will declare a loan to British Steel as being illegal state aid. Even as it is the European Union’s own silly intransingence that leads to British Steel having to ask the government for said loan.

The background here is the system of cap and trade permits for carbon dioxide emissions. The EU has a system whereby those who currently emit are given permits to allow them to emit. The number of such permits then dropping over time. The permits can be traded. So, through this mechanism it will be the cheapest to eliminate emissions which go first, the people holding those permits can profit from selling them to others. It’s not a perfect system by any means but it does work. Nearly as well as the best available system, the carbon tax.

OK, but the EU is now refusing to allow British companies to take part unless a Brexit deal is arranged and in place.

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] British Steel is seeking a £100 million Government loan after failure to pass a Brexit deal left it out of an EU-wide carbon trading scheme, according to reports. The company is in talks with Whitehall about securing the funding, Sky News said. British Steel is understood to be seeking the loan because of the EU’s decision to suspend usual permits for UK-based companies, under its carbon emissions trading system. The EU is suspending the permits until a withdrawal deal has been ratified. [/perfectpullquote]

Note what isn’t being said here:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] British Steel is seeking a £100m loan from the government in order to meet EU emission rules. Previously, the company could have used EU-issued carbon credits to settle its 2018 pollution bill. However, the steel maker has been affected by a European Union decision to suspend UK firms’ access to free carbon permits until a Brexit withdrawal deal is ratified. [/perfectpullquote]

As they’re not getting their allocation of free permits they’ve got to go out and buy more in the market.

But note the duplicity. The EU could, logically enough, say you’re out of the system so no free permits and also no need to deliver permits. Or they could, equally logically, say that you’re staying in the system as a whole so here’s your permits. But that’s not what they’re doing. They’re removing half the system, the free permits, but insisting upon the other half, the delivery of them.

Lucky we’re leaving really for who would want to stay members of a system that screwed people with this sort of nefarity?

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