Oil giants set to make millions from Grangemouth refinery closure

Exclusive: Jim Ratcliffe's Ineos group in line for multi-million pound ‘pollution permits’ windfall as government called on to act

Grangemouth plant. Photo: Ineos.

Business bosses at the Grangemouth oil refinery are set to earn a windfall profit of £6 million when they close the plant next year.

The closure of Grangemouth will cost 400 jobs and has been described as a “hammer blow” to workers and the local community. 

But it could prove lucrative for the refinery’s owners, PetroIneos – a joint venture between oil giants Ineos and Petrochina – which could make millions through a loophole in the government’s net zero policy.

A Democracy for Sale investigation with the Ferret has found Petroineos could earn around £6m from the sale of hundreds of thousands of free pollution permits it will be given by the UK Government next year.

Because Grangemouth is expected to shut down between April and June 2025 many of these permits will never be used and can be sold to other companies for a profit.

As we previously reported, Tata Steel is set to earn millions under the same policy after the closure of Port Talbot steelworks halfway through the year left the firm with a surplus of permits. 

Five more firms in billionaire Jim Ratcliffe’s Ineos group have also received similar windfalls of excess permits worth around £35 million, our investigation has found. 

Critics said it was “sickening” to hear that Ineos could potentially pocket millions in profit while “hard-working staff are forgotten”. 

A spokesperson for Ineos told Democracy for Sale that it "fully complied with the rules of and reporting requirements” of the scheme, which the Department for Energy Security and Net Zero (DESNEZ) said it was reviewing “to make the system as robust as it can be”. 

The UK’s emission trading policy is supposed to force big polluters to purchase a “pollution permit” for every tonne of carbon they emit - in a bid to incentivise companies to bring down emissions.

But government gives away millions of these permits for free to protect firms from competitors in countries with weaker climate laws, it claims.  

Grangemouth will receive a full year’s worth of free permits in 2025, which could leave Petroineos with a surplus of around 180,000 unused permits when the plant closes, according to experts. 

Each permit is currently worth around £37 so these permits would be valued at more than £6.6m at today’s prices.

Our investigation also found that companies in the Ineos group have received almost 7 million free pollution permits worth £350m, based on annual average carbon prices, over the past four years. 

This includes 600,000 permits awarded to five different Ineos firms which didn’t actually need them, because emissions were lower than expected. 

These five Ineos companies – which have not broken any rules – could have sold the surplus permits for a windfall profit of around £35m or transferred them to other firms in the Ineos group.  

One subsidiary that makes chemicals was given 12 times more permits than it needed. Ineos Manufacturing (Hull) Ltd received 174,000 free permits to cover emissions of just 14,000 between 2021 and 2023, according to government data in the Emissions Trading Registry. 

Another firm — Ineos Acetyls UK Ltd — was handed 200,000 more permits than it needed over the same period. 

An Ineos pipeline business that brings oil onshore from the North Sea received 50,000 excess permits in 2021 and a further surplus of 17,500 in 2023. 

Ineos’ Grangemouth chemicals plant — which is separate to its refinery — was also allocated 25,000 surplus permits last year. 

A Financial Times investigation revealed that Ineos was over-allocated 148,000 permits for a Teeside chemicals plant that the company had already started decommissioning.

The former leader of Scottish Labour, Richard Leonard, said there was a “history of Ineos and Jim Ratcliffe” taking public money to “help generate vast profits at the expense of the workers and their communities”. Leonard called for the loophole in the policy to be closed.

Under the current policy, Grangemouth will receive its permits for 2025 on the 28th February next year. DESNEZ is currently considering proposals to prevent companies receiving permit windfalls in the year in which they close industrial sites. But these changes are not confirmed and there is no public timeline for their implementation. 

Scottish Greens MSP, Gillian Mackay, who grew up near the Grangemouth refinery, said the closure will be “devastating for the workers who will lose their livelihoods and the community”.

“Ineos should not be allowed to profiteer from any free permits, and the UK government must do everything it can to stop this from happening,” Mackay said. 

A spokesperson for the department told Democracy for Sale:  “While we cannot comment on the credits of individual operators, the UK Emission Trading Scheme is helping us deliver our mission for clean power by 2030. We are reviewing free allocation rules to make the system as robust as it can be, while continuing to support UK businesses through the transition to net zero.”