Industry Scenario Europe’s ETS Revision Proposal Risks Cutting Industry, Not Emissions: Cefic

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The European Chemical Industry Council (Cefic) has raised concerns that at a time when the chemical sector is struggling with high energy costs, severe global competition and a lack of conditions needed for decarbonization, the proposal falls short of addressing increasing CO₂ costs in the short and medium-term.

Brussels/Belgium – The recent proposal for a review of the EU Emissions Trading System (ETS) raises fundamental concerns across large parts of the European chemical industry. At a time when the sector is grappling with high energy costs, fierce global competition and a lack of enabling conditions needed for decarbonization, the proposal falls short of addressing escalating CO₂ costs in both short and medium-term, without addressing the underlying barriers to industrial transformation.

Positive aspects like the flattened reduction trajectory and the possibility of using international carbon credits are being fully offset by a drastic conditioning of free allocation. By removing the carbon leakage protection companies benefitted from so far and instead imposing investment requirements coupled with additional bureaucracy, the Commission’s proposal is disconnected from the realities that industry is facing on the ground: no business case nor enabling conditions.

Commenting on the publication, Markus Kamieth, Cefic President, said: “Europe’s industry is losing ground at an alarming pace. Today’s proposal is a missed opportunity to provide a realistic pathway for industrial transformation and restore confidence in Europe as a place to invest and produce. It could have provided relief before and after 2030 and thereby strengthened the business case for investments in low-carbon solutions. Instead, it deepens uncertainty and adds pressure at the very moment Europe needs decisive action to stop competitiveness from deteriorating, and to incentivise investment in transformation. Every missed opportunity makes it harder to reverse the downswing, and increases the risk that investment, production and innovation leave Europe for good.”

For large parts of the chemical industry, the conditions needed to transform are still not in place, including affordable energy, adequate infrastructure, scalable technologies and functioning markets for low-carbon products. Without these conditions, additional ETS costs cannot drive the investments needed to decarbonize and instead risk adding further pressure to Europe’s industrial competitiveness.

The proposed revision is particularly troubling at a time when Europe has already lost 10 % of its chemical production capacity, putting more than 100,000 direct and indirect jobs further at risk. Intensifying global competition leaves companies unable to pass on additional costs, weakening their position against global competitors. This is critical for chemical companies of all sizes, but for SMEs, these additional pressures can become a matter of survival.

Europe’s chemical industry has demonstrated its commitment to transform. Between 1990 and 2022, the industry reduced emissions by more than 60 % while increasing production by more than 43 %. Achieving the next phase of emission reductions will require investments of tens of billions of euros in low-carbon technologies before 2030. Yet recent figures show that investments by the European chemical industry dropped by 86 % in the past year – a stark indication that the sector is losing ground in global competition and that confidence in Europe as a place to invest and produce is fading.

As discussions now move to the European Parliament and Member States, we call on policymakers to address these shortcomings. The pace of ETS cost increases must match the delivery of the enabling conditions needed for transformation. Without this, the transition remains out of reach for a large part of the industry. Companies should not be forced to make investment commitments in exchange for regulatory support when the conditions required to deliver those investments are not in place. Effective protection against carbon leakage will remain essential as long as carbon costs in Europe exceed those faced by international competitors.

The urgency is unprecedented and immediate relief for industry is needed well before 2030. Europe is rapidly approaching a tipping point where lost production capacities, dismantled value chains and foregone investments can no longer be recovered, and beyond with Europe’s climate goals will become increasingly difficult to achieve.

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