European companies are concerned – in various ways – about the upcoming revamping of the EU’s emissions trading scheme (ETS), the key instrument the bloc has been implementing since 2005 to curb emissions from heavy-polluting sectors including the cement, steel-making, and chemicals industries.
As the European Commission is expected to propose an amended ETS plan on July 15, European companies that have invested in low-carbon operations fear a weakening of the scheme.
Others, such as some chemicals and steelmaking giants, call for a complete overhaul of the carbon pricing mechanism to save Europe’s heavy industry from constantly rising carbon prices at a time when European firms are already at a competitive disadvantage compared to the U.S. or China, due to the much higher energy costs.
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A weakening of the ETS could actually reward polluters, according to Sweden-based steelmaker SSAB, which has invested billions of euros in replacing coal with hydrogen in operations.
If the EU weakens the ETS, as feared by SSAB and other early movers in electrification and the use of hydrogen in operations, “Companies that have not invested might actually get an advantage,” Helena Norrman, executive vice president of communications at SSAB, has told Reuters.
But chemicals giants, including BASF, have warned that the EU would be killing the industry if carbon prices continue to rise.
Earlier this year, before the Middle East crisis hiked energy prices again, the head of BASF warned the European Union needs to update its “obsolete” emissions trading scheme and reconsider the phase-out of free credits to avoid disaster for the chemicals industry.
European chemicals makers are at a competitive disadvantage to the rest of the world as the bloc is “the only region in the world” where industries have to pay for their carbon dioxide emissions, which has raised energy costs, Markus Kamieth, chief executive of the chemicals major, told the Financial Times in an interview in February.
Last month, BASF and steelmaking giants ArcelorMittal, ThyssenKrupp, and Voestalpine in a letter to the EU, seen by Politico, called for “immediate action to halt the escalation of ETS-related costs and avoid further damage to Europe’s manufacturing base.”
By Tsvetana Paraskova for Oilprice.com
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