Cefic, to which Petrochemicals Europe belongs, signed together with 16 other associations representing energy-intensive sectors a statement urging EU decision-makers to reform the EU Emission Trading System (ETS) in such a way that it preserves the European industry’s competitiveness.

The ETS reform has now entered the trilogue negotiations’ phase between the Parliament, the Commission and the Council. The alliance encourages EU decision-makers to ensure that enough allowances are available to industries exposed to “carbon leakage”, that the ETS does not discriminate between EU energy-intensive sectors and that a strong clean energy innovation fund is established. The so-called “tiered approach” could have especially a detrimental impact on the crackers in the petrochemical industry. It could indeed cost around €400 – 500 million per year from 2021 to the European petrochemicals industry alone. Although the tiered approach lost momentum in the Council, the tiered cross-sectoral compensation factor (CSCF) is still included in the Proposal. The CSCF would mean that even best performing companies in EU ETS carbon leakage would bear significant carbon costs.

This issue is of particular importance to the petrochemical sector, which is confronted with a proven case of “investment leakage”. The last steam cracker was built in Europe 20 years ago whereas major investments are being made in the US and the Middle East. As an energy-intensive industry, oil and gas as feedstock and energy account for more than 80% of the petrochemical industry’s production costs. Energy prices in Europe are considerably higher in Europe than in the rest of the world, which constitutes a competitive disadvantage. Since it is a commodity business, petrochemicals are highly exposed to international competition and the industry cannot pass on costs to customers.

For further information, please read Cefic’s article and the statement.