Europe’s chemical industry faces a € 1.5 billion carbon bill
KARLSRUHE, GERMANY (ICIS) – In 2021, EU chemical producers under the EU cap-and-trade system could face a carbon bill of € 1.5 billion – more than double the 600 million euros billed last year – due to a decrease in the amount of documents and an increase in the price of emission allowances.
The European chemical industry accounted for 8% of emissions covered by the EU Emissions Trading System (EU ETS) in 2020. To protect it from high costs and competition from non-European producers, the industry has received most of its allowances for free, thus limiting the need. to negotiate actively within the framework of the program.
Following a reform of the EU ETS in 2018, lawmakers significantly tightened the system and European carbon prices began to rise significantly. Overall, the chemical sector’s bill has increased significantly to reach around € 600 million in 2020.
The start of the fourth EU ETS trading period in 2021 also marked a significant change in the number of allowances allocated free of charge to all industrial sectors. With a significant downward revision in chemical industry benchmarks of up to -24% for the 2021-2025 free allocation period, ICIS expects the number of free allowances to decrease significantly from 2020 to 2021, which will lead to a further increase in the short position of the sector. to, on average, 35m in the next few years.
In addition to the significant reduction in free allowances, EUA prices reached a record high above € 45 / tCO2e in 2021, generating a significant carbon bill of over € 1.5 billion per year for the chemical industry.
The EU’s Green Deal adds more price uncertainty. The climate law, signed on April 22, 2021, includes a target of reducing net greenhouse gas (GHG) emissions by 55% compared to 1990.
ICIS Analytics predicts a scenario greater than 90 € / tCO2e possible by 2030 if the legislator goes ahead with its very ambitious proposals.
A longer version of this article will be published in ICIS Chemical Business on Friday, May 7 as part of the ICIS Top 100 Chemical Distributors.