EU Commission Failing to Enforce EU ETS Non-Compliance Penalties, FoIs Show
The European Commission is not actively attempting to enforce European Union rules designed to penalize carbon-emitting installation operators who don’t pay for their emissions, responses to Freedom of Information (FoI) requests filed by OPIS suggest.
The operators of two large installations — the coal-fired ISD Power plant in Hungary and the Liberty Ostrava steelworks in Czechia — broke EU law by not paying for 4.15 million metric tons and 1.3 million mt of carbon emissions respectively, which should have cost them hundreds of millions of euros.
But the FoI responses show that the Commission made little attempt to contact the two countries’ governments to ensure enforcement of EU rules.
Big emitters subject to the EU Emissions Trading System (ETS) are obligated to pay for their emissions on an annual basis by obtaining a European Union emissions allowance (EUA) to cover each metric ton of carbon dioxide equivalent (CO2e) they emit. The Commission oversees attempts by EU member states to compel non-compliant installation operators to cover late emissions payments and subsequent fines.
In the case of the coal-fired ISD Power plant — which was ultimately under the control of the Russian state, OPIS reported on August 22 — the Commission’s communication with the Hungarian government was sporadic, while the Commission sent no messages to the Czech government with respect to the non-compliant Liberty Ostrava steelworks.
Liberty Ostrava Steelworks, Czechia
The European Commission did not contact the Czech government regarding the Liberty Ostrava steel plant after it breached EU law by not paying for 1,281,302 metric ton of emissions, according to a response from the European Commission to a freedom of information request lodged by OPIS.
“The [Liberty Steel plant] did not surrender [allowances] for 2023 and shortly the Commission is going to request [an] explanation [from] the Czech government,” the European Commission wrote to OPIS on Aug. 18 in response to the FoI. “Please note that the national competent authority is first to investigate the case and impose the fines if necessary,” it added.
The installation operated by U.K.-based Liberty Steel did not surrender carbon allowances even though it was handed free EUAs that far exceeded those emitted by the steel plant, OPIS reported in May this year.
EU member states’ ETS authorities allocate such free allowances to domestic industrial operators in sectors considered difficult to decarbonize, such as steel and oil refining, which would be at a competitive disadvantage to imports from countries with no carbon prices.
Liberty Ostrava received over 3.3 million free allowances for 2023, but did not surrender any of them to cover its carbon emissions and comply with its legal obligations. Liberty Steel declined to say whether it sold the free allowances to other parties in exchange for cash.
Selling the 1,281,302 free EUAs that instead ought to have been surrendered to cover the steelworks’ emissions would have generated approximately €109 million ($121.18 million), while selling all of the 3.3 million free allowances handed to the installation would have netted Liberty Steel nearly €281.5 million ($327.5 million), using average OPIS-assessed benchmark EUAs prices for 2023.
Liberty Ostrava Allowances and Emissions Data (metric tons)
| Year | Free Allowances | Verified Emissions | Surrendered Allowances |
|---|---|---|---|
| 2024 | 0 | 39,615 | 39,615 |
| 2023 | 3,319,867 | 1,281,302 | 0 |
| 2022 | 3,319,634 | 2,380,156 | 2,380,156 |
| 2021 | 2,669,717 | 3,083,425 | 3,083,425 |
ISD Power, Hungary
Communication with the Hungarian government regarding the non-compliant ISD Power power plant stalled and only restarted after OPIS submitted a freedom of information request on June 13, 2025 with respect to the installation, which supplied electricity to the country’s largest steelworks.
The operator, owned by Russia’s state development bank VEB via proxies and currently undergoing liquidation, did not surrender sufficient allowances to cover 4.15 million metric tons of emissions over 2019-2023. As a result, the installation accrued over €655 million ($761 million) in missed carbon allowance surrenders and fines, OPIS reported in August.
ISD Power Kft. Erőmű Verified Emissions Data and Surrendered Allowances
| Year | Verified Emissions | Surrendered Allowances | Allowances Outstanding |
|---|---|---|---|
| 2023 | 355,528 | 228,500 | 127,028 |
| 2022 | 688,093 | 29,619 | 658,474 |
| 2021 | 866,342 | 33,728 | 832,614 |
| 2020 | 1,244,560 | 32,682 | 1,211,878 |
| 2019 | 1,364,188 | 42,414 | 1,321,774 |
| 2018 | 1,675,339 | 1,675,339 | 0 |
| 2017 | 1,503,450 | 1,503,450 | 0 |
On June 13, OPIS requested information on communications between the Commission and the Hungarian ETS authority regarding ISD Power’s persistent non-compliance. The Commission’s response, dated August 18, revealed that three letters were exchanged between the Commission and the Hungarian government:
- a letter from the Commission to the Hungarian government dated Nov. 30, 2023
- a reply from the Hungarian government to the Commission on Mar 5, 2024
- a follow-up response from the Commission on July 23, 2025
The Commission refused to provide the contents of the letters to OPIS, citing an ongoing EU Pilot dialogue between itself and the Hungarian government. The EU Pilot mechanism is a way for the Commission to resolve problems with member states in a timely manner before launching a formal infringement procedure. An informal exchange of this kind is meant to be finalized within nine months, according to the Commission website.
However, in the case of ISD Power, there was no response from the Commission for over 16 months after Hungary’s response, and the most recent letter from the Commission came over a month after OPIS’s request for information.
The Commission did not respond to requests for comment.
The 2025 Environmental Implementation Review by the European Commission showed that not implementing EU environmental laws is costing member states €180 billion in health costs and direct costs to the environment every year.
–Reporting by Nia Simeonova, nsimeonova@opisnet.com; Editing by Anthony Lane, alane@opisnet.com
© 2025 Oil Price Information Service, LLC. All rights reserved.