Europe’s chemical industry has issued a stark warning over the European Commission’s proposed revision of the EU Emissions Trading System (ETS).

 

This by arguing that the plan could weaken industrial competitiveness without delivering the conditions needed for faster decarbonisation.

 

The European Chemical Industry Council (Cefic) said the proposal fails to address mounting CO₂ costs facing companies already under pressure from soaring energy prices, global competition and a lack of infrastructure and technologies needed for the transition to low-carbon production.

 

While Cefic acknowledged positive elements, including a flatter emissions reduction trajectory and the potential use of international carbon credits, it said these measures are outweighed by what it described as a major shift away from existing carbon leakage protections.

 

The organisation warned that replacing current protections with stricter conditions on free allocation — including investment requirements and additional administrative burdens — risks increasing pressure on companies at a time when many lack a viable business case for transformation.

 

Commenting on the proposal, Markus Kamieth, Cefic President, said: “Europe’s industry is losing ground at an alarming pace. Today’s proposal is a missed opportunity to provide a realistic pathway for industrial transformation and restore confidence in Europe as a place to invest and produce. 

 

"It could have provided relief before and after 2030 and thereby strengthened the business case for investments in low-carbon solutions. Instead, it deepens uncertainty and adds pressure at the very moment Europe needs decisive action to stop competitiveness from deteriorating, and to incentivise investment in transformation. Every missed opportunity makes it harder to reverse the downswing, and increases the risk that investment, production and innovation leave Europe for good.”

 

Cefic said the proposed ETS changes come as Europe’s chemical sector is already facing significant losses, with the industry having shed 10% of its production capacity and more than 100,000 direct and indirect jobs placed at further risk.

 

The group warned that companies are struggling to absorb additional carbon costs as they compete with international producers operating under different cost structures. For smaller chemical companies, Cefic said, these pressures could threaten their ability to remain viable.

 

The organisation highlighted the sector’s past progress on emissions reduction, noting that between 1990 and 2022 the European chemical industry cut emissions by more than 60% while increasing production by more than 43%.

 

However, Cefic said the next stage of decarbonisation will require tens of billions of euros in investment before 2030 — at a time when confidence is weakening. According to Cefic, investments by the European chemical industry fell by 86% in the past year, signalling growing concerns over Europe’s attractiveness as a location for industrial investment.

 

As negotiations move to the European Parliament and EU Member States, Cefic is urging policymakers to align ETS cost increases with the delivery of the conditions needed for industrial transformation.

 

The organisation said companies should not be required to commit to major investments in exchange for regulatory support while affordable energy, infrastructure, scalable technologies and markets for low-carbon products remain insufficient.

 

Cefic also stressed that effective carbon leakage protection must remain in place while European carbon costs remain significantly higher than those faced by international competitors.

 

The group warned that the timeline for action is narrowing, with Europe approaching a point where lost production capacity, disrupted supply chains and missed investment opportunities may become impossible to recover — making climate targets harder to achieve as well.