German Chemical Makers Say Carbon Costs Damage Europe’s Edge

(Bloomberg) — German chemical companies say the high costs of carbon allowances are hurting Europe’s competitiveness, adding to the cacophony among sectors pushing for easing climate measures to help troubled industries.

Leading firms, including BASF SE and ammonia producer SKW Stickstoffwerke Piesteritz GmbH, are calling for new regulations in Europe’s flagship emissions trading system, where costs are expected to rise by next year when the allocation of free certificates begins to be phased out.

“We are paying five times the carbon price compared to other parts of the world, and it is killing us,” said Petr Cingr, president of SKW Piesteritz. According to Cingr, this problem poses a greater threat to the survival of the industry than gasoline prices, which fell significantly from records three years ago.

Chemical manufacturers are stepping up lobbying efforts against the European Union’s climate plan as the industry has been enduring a crisis for several years and risks further production cuts, closures and offshoring. Germany’s chemical plants operated at just 72% capacity in the second quarter; this was the weakest level in more than 30 years.

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

While the European Commission is trying to develop its instrument to protect domestic industries – the Carbon Border Adjustment Mechanism – its review will not include chemicals.

A spokesman for BASF SE said the current carbon market scheme was extremely damaging to the competitiveness of energy-intensive base material production in Europe and that failure to reform CBAM could further increase the displacement of emissions-intensive production. Essen-based Evonik Industries AG said the situation risked further accelerating deindustrialization.

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