German Chemical Makers Say Carbon Costs Damage Europe’s Edge

(Bloomberg) -- German chemical companies said high costs for carbon allowances are damaging Europe’s competitiveness, adding to a cacophony of sectors pushing for climate measures to be eased to help ailing industries.

Leading firms including BASF SE and ammonia producer SKW Stickstoffwerke Piesteritz GmbH are calling for carve-outs in Europe’s flagship emissions trading system, under which costs are set to rise as of next year when a free allocation of certificates will start to be phased out.

“We are paying carbon prices five times higher than anywhere else in the world — and that is killing us,” said Petr Cingr, chairman of SKW Piesteritz. To Cingr, the issue poses a bigger threat to the industry’s survival than gas prices, which have retreated substantially from records three years ago. 

Chemical producers are stepping up their lobbying efforts against the European Union’s climate scheme as the sector has endured several years of crisis and faces the risk of further production cuts, closures and shifts abroad. Germany’s chemical plants operated at just 72% capacity in the second quarter, the weakest level in more than 30 years.

The country’s ruling coalition has thrown its weight behind protecting struggling industries recently, with Chancellor Friedrich Merz pushing the European Union to be more flexible in its 2035 ban on new combustion-engine vehicles in a bid to support automakers.

While the European Commission is working on improving its tool to protect domestic industries — the Carbon Border Adjustment Mechanism — its review will not include chemicals. 

A spokesperson for BASF SE said the current carbon market scheme is highly damaging to the competitiveness of energy-intensive basic material production in Europe and that not reforming CBAM could further increase the relocation of emission-intensive production. Essen-based Evonik Industries AG said the situation risks further accelerating deindustrialization.

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