Last year, to help combat global warming, Europe started charging industry for the right to spew hot air, the Wall Street Journal reports. For the first time on such a scale, governments slapped limits on the carbon-dioxide emissions of power plants, steelworks and other factories. Companies exceeding the caps have to buy CO2 "allowances" that trade on a European market.

Because CO2 emissions now carry a cost, Germany's largest utility, RWE AG, is spending to improve the efficiency of its aging coal-fired power plants, including its biggest power station here in the country's industrial heartland.

Carbon dioxide also is padding the profits of RWE and other utilities, because they have been able to raise electricity rates to more than cover the new costs. Manufacturers that use a lot of juice are fuming. "The utilities get a huge amount of windfall profits, and the energy users get windfall costs," complains Markus Weber, a manager responsible for CO2-allowance trading at steelmaker ThyssenKrupp AG.

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