In a file picture taken on 2 January 2009, heavy smoke billows from the chimney of the a factory in Pietarsaari, Finland. Photo: AFP
Australian-owned company NZ Steel was the biggest beneficiary of a government scheme to shield exporters from paying for their carbon emissions last year, followed by Methanex.
NZ Steel reported to the Environmental Protection Authority (EPA) that it made 1.3 million tonnes of carbon dioxide emissions from its Glenbrook Steel Mill in 2023.
It claimed 1.8 million free carbon credits from the government in 2023, under a system called industrial allocation.
Even at 2023's lowest carbon price of $37 a tonne, the free credits given to NZ Steel (owned by Bluescope) would be worth $66 million, based on its 1.8 million tonnes allocation.
The freebies under the Emissions Trading Scheme are designed to protect emissions-intensive activities such as steel, methanol production and fertiliser-making, that may be competing with overseas rivals who don't have to pay a carbon tax. The scheme is designed to stop these companies moving overseas in pursuit of laxer climate pricing or losing business to offshore rivals that don't pay the same price on pollution.
As well as claiming most of the value of their carbon emissions, companies can also claim the added cost on top of their energy bills from carbon pricing. The idea is that electricity and gas providers pass these costs on to big energy users, such as manufacturers.
But in 2022 the Tiwai Point smelter saw its subsidy slashed by an estimated $60m worth of credits, because the government concluded it was paying Meridian so little for its electricity that it wasn't affected by the carbon price.
The electricity subsidy helps explain why some companies claim more free credits in a year than they need to cover their direct emissions.
Companies can sell any surplus carbon credits to other emitters at the market price (currently around $50 a tonne) or bank them for future use.
The EPA's latest list shows how many free credits the government gave to companies in 2023 - and how many tonnes of emissions each company reported producing.
Methanex's allocation of just under 1 million tonnes of free units would be worth at least $36m at 2023's lowest carbon price.
Fletcher Building received got 0.6 million tonnes, worth at least $22m.
Tiwai Point aluminium smelter's owner received about the same as Fletcher Building, 0.6 million tonnes.
'Not the end of the story'
Carbon policy expert Christina Hood said this year's allocations were not the end of the story, with Tiwai Point wanting to get back some of the benefit it lost.
"The Tiwai smelter could soon get around an extra 1 million tonnes a year, worth over $50m annually, for the cost impact of the ETS on its electricity bill," Hood said
"It's going to be hard sell for the government to explain why a $50m annual subsidy to our largest electricity user makes sense when electricity supply is stretched and prices are high."
Ed Millar, a researcher at the Centre for International Corporate Tax and Accountability Research, has been tracking the value of the subsidy over its lifetime.
He said the total value in 2023 was about $359m, based on the average carbon price throughout the year.
"This is a 26 percent decline on the previous year, driven by a decline in both the total allocation and the price of units," he said.
"Over the last decade, we estimate the total value of industrial allocation has reached almost $2 billion. As emissions unit prices rise, so too do the value of those industrial allocations."
In contrast to the millions of tonnes given away under the scheme, the government was not able to sell any carbon credits to other polluters at government auctions last year, because demand wasn't high enough to prompt companies to bid.
The Climate Change Commission has warned that there are too many carbon credits floating around in the market, and the surplus could jeopardise the country's chances of meeting its climate targets.
The free allocations are being reviewed this year to address problems which resulted in too many freebies being given out, because of outdated emissions assumptions.
The results of the review won't show up in companies' allocations until next year.