Emissions trading rules will hit industry hard

Ludwigshafen, Germany - The planned auctioning of emissions certificates poses a threat to the competitiveness of energy-intensive industries, which will not be able to pass on the higher costs to our customers, a senior BASF official has warned.

According to Dr. Harald Schwager, BASF SE executive director, the move will push energy-intensive production and the associated jobs to non-European countries where climate protection and – more so – the cost of CO2 certificates or CO2 taxes is not an issue. This, he noted, is not the way to serve the interests of climate protection.

According to the plans to date, companies will be expected not only to continue lowering their emissions, but also to bid at auction for the rights to emit greenhouse gases, with the industry-auctioned proportion to rise to 100% by 2020.

For the chemical industry this would mean a massive increase in costs. Assuming a certificate price of Euro35 per tonne of CO2, annual costs would be more than Euro2 billion in Germany after 2020 and almost Euro9 billion in the EU. Bidding for certificates would cost BASF alone as much as Euro450 to Euro600 million (depending on the CO2 price - 30/40 EUR/t).

Industry is calling for an exemption on auctioning for exposed sectors, i.e. areas with a relocation risk. A decision with such vast economic implications must not be delayed.

“Our standpoint is that the chemical industry is an exposed sector,” said Schwager. To avoid compromising the economic and ecological benefits of Verbund production at many European chemical production sites, basic chemical production and the main value chains based on it need to be included.

To ensure that climate protection targets are met nonetheless, the proposal is that certificates be issued free of charge on the basis of technological standards (Best Available Technology); only those with leading-edge technology would be entitled to claim free certificates. “This ensures that energy-intensive industries do their bit for climate protection within the emissions trading system,” Schwager concluded.