The head of BASF has warned the European Union needs to update its “obsolete” emissions trading scheme and reconsider the phaseout of free credits to avoid disaster for the chemicals industry.
European chemicals makers were at a competitive disadvantage to the rest of the world as the bloc was “the only region in the world” where industries had to pay for their carbon dioxide emissions, which has raised energy costs, Markus Kamieth, chief executive of the chemicals major, told the Financial Times in an interview.
European industrial producers have emission reduction mandates in the form of carbon permits they have to purchase from the Emissions Trading System. The price of these permits adds to their costs, even though each company also receives a certain amount of free permits every year. Brussels, however, plans to phase the free permits out in a bid to advance its net-zero ambitions.
BASF is paying “triple-digit millions” for carbon permits every year, Kamieth told the Financial Times, and “it’s going to compound over the next year dramatically if there is no change and reform to the ETS”. According to the executive, total European company spending on these permits could hit 1 billion euro by the 2030s unless the system is revised.
What’s more, the so-called carbon border adjustment mechanism that the EU devised last year and it entered into effect this year is not helping matters. It was devised precisely for that reason, aiming to put low-cost importers into Europe on a more equal footing with local companies but instead, it is only likely to add to their costs as imports become more expensive due to the additional costs associated with CBAM compliance.
Kamieth’s message echoes urgent warnings from the EU chemicals industry association—of which the BASF CEO is president—that the industry was facing a disaster.
“The sector is under severe stress and breaking. The rate of closures has doubled in a year, and even worse, annual investments are half and close to zero. On both sides, the speed is accelerating, not slowing. We need decisive action this year, with impact at factory floor level,” Marco Mensink, director-general of the European Chemical Industry Council said last week.
By Irina Slav for Oilprice.com
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