The UK government gave a controversial Russian cargo airline carte blanche to emit thousands of tonnes of carbon in Britain’s skies without charge – the day after Russia invaded Ukraine.

Volga-Dnepr Airlines was handed 8,700 free credits under Britain’s Emissions Trading Scheme (ETS) in 2022, waiving an estimated £690,000 bill. A spokesperson for the Department of Energy Security and Net Zero (DESNZ) has now confirmed that its predecessor, the Department for Business, Energy and Industrial Strategy, issued the credits on 25 February 2022 – the day after Russia launched its full scale invasion of Ukraine.

The ETS is supposed to penalise big polluters, including airlines, for their carbon dioxide emissions. Companies have to buy a pollution permit for each tonne of carbon they emit, with permits traded in an open market.

But the scheme has been criticised by environmentalists because complicated exemptions see some of the worst offenders effectively let off the hook, given thousands of these permits free of charge.

Volga-Dnepr Airlines is a Russian cargo airline that owns a fleet of specialist planes with extra-large holds. The Ukrainian government has sanctioned the firm, saying: “The company operates in sectors of strategic importance for the Russian government and provides high material (transport, logistical and other) support for actions that undermine or threaten the territorial integrity, sovereignty and independence of Ukraine.”

Alexey Isaikin, who owned the airline at the time that the British government paid it the carbon subsidies, has since been placed on sanctions lists around the world, including by Britain in June 2022.

The UK described the firm at the time as “a Russian transport company with significant air operations that is contracted by the Russian government to create air bridges that carry critical goods”, saying it “is or has been involved in obtaining a benefit from or supporting the government of Russia”. Volga-Dnepr itself, however, managed to avoid sanctions thanks to a management buy-out. The company is still sanctioned in other countries including Canada, which confiscated one of its planes earlier this year to give to the Ukrainian government.

In November, the Ukrainian military news outlet Defense Express published an investigation claiming Volga-Dnepr planes had been flying military equipment from China into Russia. Volga-Dnepr has denied involvement in Russia’s war in Ukraine. The airline did not respond to openDemocracy’s requests for comment.

Labour MP Lloyd Russell-Moyle, a member of the Energy Security and Net Zero Select Committee, said openDemocracy’s revelations highlighted concerns with the Emissions Trading Scheme as a whole.

“Does the ability to trade these items aid reduction of CO2, or just help companies on the government handout list?” he asked.

And he added: “I am surprised that the government didn’t act quickly to reverse these things.”

Green MP Caroline Lucas said it was “shameful enough that this government is letting airline companies get away with their reckless polluting for free, and forcing the cash-strapped, austerity-burdened public to pick up the tab”.

But she said, it is “even more unforgivable” that a company so close to the Russian government was getting such support. “Not one penny of UK taxpayers’ money should be subsidising the fossil-fuelled interests of foreign dictators – the Emissions Trading Scheme’s free pollution permits need urgently investigating.”