German Chemical Makers Say Carbon Costs Damage Europe’s Edge

Core Viewpoint - German chemical companies are expressing concerns that high carbon allowance costs are undermining Europe's competitiveness, prompting calls for adjustments in the emissions trading system to support struggling industries [1][3]. Group 1: Industry Concerns - Leading firms such as BASF SE and SKW Stickstoffwerke Piesteritz GmbH are advocating for exemptions in the emissions trading system as costs are expected to rise with the phase-out of free certificate allocations starting next year [1]. - The chairman of SKW Piesteritz highlighted that carbon prices in Europe are five times higher than in other regions, posing a significant threat to the industry's survival, even more so than previously high gas prices [2]. - The chemical sector is intensifying lobbying efforts against the EU's climate policies due to ongoing crises, with German chemical plants operating at only 72% capacity in Q2, marking the lowest level in over 30 years [3]. Group 2: Government and Policy Response - The German ruling coalition is supporting struggling industries, with Chancellor Friedrich Merz advocating for more flexibility in the EU's 2035 ban on new combustion-engine vehicles to aid automakers [4]. - The European Commission is working on enhancing the Carbon Border Adjustment Mechanism to protect domestic industries, but the current review will not address the chemical sector [4]. - BASF SE has stated that the existing carbon market scheme is detrimental to the competitiveness of energy-intensive basic material production in Europe, warning that failure to reform the CBAM could lead to increased relocation of emission-intensive production [5].