Cefic warns ETS reform risks deindustrialisation

In our 30 June article, we reported Cefic’s position paper “The Future of the ETS, priorities for the chemical industry”, which called for a slower cap decline, stronger carbon leakage safeguards, no extra conditionality on free allocation, and better use of ETS revenues to support low carbon investment. The new 17 July statement responds to the Commission’s draft law, arguing that while the cap trajectory is flattened and the use of international carbon credits is opened up, these positives are “fully offset by a drastic conditioning of free allocation”.

Cefic says the proposal removes the carbon leakage protection companies have relied on and replaces it with investment requirements and extra bureaucracy, at a time when “no business case nor enabling conditions” exist for large scale decarbonisation. President Markus Kamieth warns that “Europe’s industry is losing ground at an alarming pace” and calls the proposal “a missed opportunity to provide a realistic pathway for industrial transformation and restore confidence in Europe as a place to invest and produce”.

The organisation notes that Europe’s chemical sector has already cut emissions by more than 60% since 1990 while increasing production by over 43%, but that achieving the next phase of reductions will require tens of billions of euros in low carbon investments before 2030. It highlights that chemical industry investment in Europe fell by 86% in the past year and that around 10% of production capacity has already been lost, putting more than 100,000 direct and indirect jobs at further risk.

Linking back to the priorities we set out in our June article, Cefic reiterates that the pace of ETS cost increases “must match the delivery of the enabling conditions needed for transformation” – affordable energy, infrastructure, scalable technologies and markets for low carbon products – and that “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 carbon leakage protection, it says, “will remain essential as long as carbon costs in Europe exceed those faced by international competitors”.

As the ETS revision now moves to the European Parliament and member states, Cefic is urging policymakers to adjust the proposal so it drives industrial transformation rather than plant closures, warning that Europe is “rapidly approaching a tipping point where lost production capacities, dismantled value chains and foregone investments can no longer be recovered”.