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.

This derives from an anticipated over-allocation of allowances to this sector under the National Allocation Plan, amounting to 13.13Mt 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.