Europe’s chemical industry supports the transition towards climate neutrality. Nevertheless, further transformation requires the enabling conditions including: affordable and abundant low-carbon energy, market pull measures for low-carbon products, energy and carbon storage capacity and transport infrastructures, strong carbon leakage protection, and effective protection against unfair competition. In their absence, the sector’s ability to deliver the transition will remain increasingly undermined by intense global competition from regions subject to less stringent climate rules and, lower energy costs, resulting in site closures in Europe.
In this context, the EU ETS must be urgently adapted well before 2030 into a more flexible, and industry-supportive framework reflecting industrial realities and enabling companies to remain competitive while progressing towards the EU’s climate objectives. The role of carbon cost should be mitigated for companies, as long as the climate transition is not yet technically and economically feasible. Without such adjustments, Europe risks losing industrial capacity without delivering any climate benefit, while increasing dependencies, and for reasons going beyond industry’s control.
A resilient and future-proof ETS should be anchored in a clear set of principles guiding any future revision. These include:
- A realistic cap trajectory,
- Strong carbon leakage safeguard,
- Appropriate benchmark values fully reflecting the situation of the chemical sector,
- Removal of the MSR invalidation rule,
- Avoid conditionality for carbon leakage mitigation,
- Integration of carbon removals and carbon circularity,
- Elimination of conflicting regulations through a coherent legal framework,
- Implementation of Article 6 of the Paris Agreement, and linking the ETS to similar schemes,
- Improved investment conditions driven by market demand for low-carbon goods, and ETS revenues fully redirected to industry.
During the ETS revision these elements should be negotiated and assessed separately, as well as in combination, particularly evaluating their impact on the competitiveness of industry.
Beyond the Commission’s intention to align the ETS framework with the 2040 climate target, including by extending the availability of free allocation beyond 2039, it is crucial to stress the need for urgent action to support the chemical industry during this challenging period and in the transition further.
Hence, industry requires a more realistic approach to what is technically and economically achievable in the short, medium, and long term reflecting on the key conditions that should lead to an improved ETS beyond 2030.