Strengthening the EU Carbon Market and ETS


Background

The European chemical industry supports the Paris Climate Agreement and a strong action on climate change in line with the scientific advice provided by the Intergovernmental Panel on Climate Change (IPCC). Cefic also supports the European Green Deal and Europe’s ambition to become climate neutral by 2050 and the European chemical industry has the ambition to become climate neutral by 2050. 

The European chemical sector plays an instrumental role in delivering the technologies and solutions to reach EU’s goal to reduce greenhouse gas emissions and combat climate change. Along with other European climate policies and measures, carbon pricing is essential to provide economic agents, such as buyers and investors, with a clear long-term signal that guides them towards low-carbon solutions. The EU Emissions Trading System (ETS) plays a significant role in this respect, as it covers some 52% of all EU emissions. The European chemical industry supports the EU ETS, the world’s first major carbon market, as a key instrument aiming to achieve agreed emission reductions at the lowest cost.  

Carbon provisions need to be effective

An energy and carbon-intensive sector, the European chemical industry is in fierce competition with producers in other world regions. Largely dependent on trade, it needs effective carbon provisions – such as performance-based free allocation or payments to compensate companies for carbon costs contained in their electricity bills (so called indirect cost compensation). To realise the huge emission reduction potential that the chemical industry holds, fostering innovation and the use of low-carbon technologies are also required. Today, energy costs in the EU are often higher than in other industrialised regions. Higher European carbon costs will inevitably erode margins and hinder the industry’s ability to provide a sufficient return on investments in the long term. This would make non-EU countries a more attractive place to invest and, consequently, impact adversely on jobs and growth prospects in Europe. 

Cefic’s position

The ETS revision as proposed by the Commission in the ‘Fit for 55’ package, has to set the framework for emission reduction measures in the next five years as well as help create the breakthrough technologies in the years after. In our views, the present review of the EU ETS might be the most crucial change to the EU ETS so far, and therefore, we have to get it right. To help invest in breakthrough technologies, all revenues generated by the EU ETS need to return to the economy to support emission reductions.  

We work actively with the European Commission, with the Alliance of Energy Intensive Industries – which represents over 30 000 European companies and four million jobs – and with other stakeholders in order to achieve a fair and efficient reformed ETS that enables the most efficient companies to manufacture and grow in Europe.  

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Position paper and supporting documents

Treatment of GHG emissions under the IED | Cefic position

Solutions for a well-functioning, fair and effective EU Emissions Trading System | Cefic position

The European Council Conclusions of October 2014 provided detailed guidance to prevent the risk of carbon leakage after 2020.

ETS review | Cefic Position