Embattled Liberty Steel Failed to Pay for Carbon Emitted by Czech Plant

Liberty Steel has not fulfilled its legal obligation to surrender carbon allowances to pay for the carbon emitted in 2023 at its Liberty Ostrava steel plant in the Czech Republic, even though the operator was handed free allowances that far exceeded its emissions, OPIS has learned.

The plant owned by the UK-based company emitted 1,281,302 metric tons of carbon in 2023 and was handed 3,319,867 free EU carbon allowances (EUAs) by the Czech government at the start of the year, according to European Commission data. However, it did not surrender any of those allowances to cover its emissions by the deadline of September 30, 2024, sources familiar with the matter have confirmed.

The financially embattled steel operator owned by Indian businessman Sanjeev Gupta has repeatedly declined to answer questions about whether it opted to use its 2023 free allowance allocation for a different purpose rather than fulfil its legal obligation to surrender some of those allowances to cover emissions in 2023 at the Ostrava steel plant. Liberty is currently trying to sell the 3.6 million metric tons per annum plant after idling its blast furnaces in 2023 and appointing an insolvency administrator.

Potential other uses for the free EUAs could have involved surrendering the allowances to cover emissions at another installation or monetizing the EUAs by selling the allocation on the secondary market operated by the Intercontinental Exchange (ICE).

Selling 1,281,302 free allowances would have generated approximately €109 million ($121.18 million) in cash, taking the average  OPIS-assessed benchmark EUAs price in 2023 of €85.43. OPIS-assessed benchmark EUAs prices in 2023 ranged between €69.22 and €100.34.

Free allowances are handed out on an annual basis by EU member states’ Emissions Trading System (ETS) authorities to domestic industrial operators in “hard-to-abate” economic sectors such as steel and oil refining that are difficult to decarbonize. The free allowance system is intended to prevent such operators’ products being at a disadvantage to imports from countries where
competitors do not face levies on carbon emissions.

As a result, industrial operators such as Liberty Steel do not have to cover most of their emissions by buying EUAs via primary market auctions on the EEX exchange or on the ICE-operated secondary market.

Often free allowance allocations to operators exceed their installations’ actual emissions. As a consequence, operators simply hand back free allowances to domestic ETS authorities by the compliance deadline, and can then bank or sell any surplus allowances. However, this process did not occur in the case of the Liberty Ostrava plant in 2023.

Liberty Ostrava Allowances and Emissions Data (metric tons)

Source: European Commission data

A spokesperson for the European Commission confirmed that installation operators who fail to meet the compliance deadline must pay a penalty of €100 per overdue allowance, which means that the steel plant owner requires €128.1 million to pay the fine.

“Member states must impose a penalty of €100 euro for each ton of carbon dioxide equivalent emitted for which the operator has not surrendered allowances,” the spokesperson added. “The payment of this penalty will not release the operator or aircraft operator from the obligation to surrender an amount of allowances equal to those excess emissions when surrendering allowances in relation to the following calendar year.”

Until the European Commission tightened up the free allocation system last year, installation operators continued to receive free allowances even if they had breached their obligations to surrender EUAs to cover emissions in previous years by the annual deadline. If the rules had not been tightened last year, Liberty Ostrava might have received another round of free allowances from the Czech ETS authorities in 2024.

“As of last year there is a new rule in force that blocks the allocation of free allowances to installations that are not compliant,” said the Commission spokesperson.

“There is a legal obligation for all ETS compliance entities to surrender an amount of allowances equal to their verified emissions in the previous year before the compliance deadline,” the European Commission spokesperson said.

Ostrava up for Sale, Multiple Liberty Steel Accounts Unfiled

Although blast furnaces at the Ostrava plant are idled, the installation’s ETS operator holding account is still open, and some low-emitting hot strip mill operations have resumed, according to Ukrainian think tank and consultancy GMK Center.

However, Liberty Steel has appointed an insolvency administrator to sell the plant, Czech financial news outlet Faei reported in February, with the first round of a tender process scheduled for last month.

Liberty Steel’s finances have been under great scrutiny in the wake of the collapse in 2021 of Greensill Capital, which lent around $5 billion to companies owned by Sanjeev Gupta.

Gupta is currently being prosecuted in the U.K. for failing to file 76 company accounts and is subject to a Serious Fraud Office investigation, which began in 2021. The SFO is a non-ministerial U.K. government department tasked with
combating financial crime.

Liberty Steel is a part of GFG Alliance, which includes mining, energy and aluminium businesses as well as steel, and “generates approximately $6 billion in revenue and employs over 16,500 people across the world,” according to its website. Gupta is GFG Alliance’s executive chairman.

Spokespeople for GFG Alliance have repeatedly declined to comment with respect to the use of the free allowances handed to Liberty Ostrava in 2023 and did not respond this week to follow-up questions about the allowances and the tender process for selling the steel plant.

TAMEH Power Plant Failed to Surrender Emissions

The coal- and metallurgical gas-fired TAMEH Czech power plant supplying electricity to the Liberty Ostrava steelworks also failed to surrender EUAs to cover its emissions of 1,110,904 metric tons of carbon in 2023, the Czech government confirmed via email this week.

TAMEH Czech was jointly owned in 2023 by ArcelorMittal, the world’s second largest steel producer, and Polish energy producer and distributor TAURON Group. Both companies have not replied to requests for comment.

If TAMEH Czech had fulfilled its obligation to buy EUAs to cover the plant’s emissions, it would have cost approximately €84 million, using the €79.32 average price of OPIS-assessed benchmark EUAs between the beginning of 2023 through to the compliance deadline of September 30 last year. By not meeting the deadline the operator must now pay the €100 per allowance fine, or €111.1
million.

TAMEH Czech Power Plant Allowances and Emissions Data (metric tons)

Source: European Commission data

“We can confirm that the emission allowances for 2023 have not been surrendered,” said a spokesperson for the Czech Republic’s Ministry of the Environment. “The obligation to surrender these allowances remains…and this obligation applies to the operator.”

TAMEH Czech, which remains the operator, is now owned by Czech energy services provider UCED, a part of the CREDITAS Group belonging to billionaire Pavel Hubáček. UCED bought the power plant in October 2024 from ArcelorMittal and TAURON Group after TAMEH Czech declared itself bankrupt because of non-payments by Liberty Ostrava, according to domestic media reports.

CREDITAS Group did not reply to a request for comment.

Reporting by Anthony Lane, alane@opisnet.com
Data work by Guadalupe Ruiz, gruiz@opisnet.com
Editing by Humberto J. Rocha, hrocha@opisnet.com

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