Chemical industry warns EC off conditions for free EUAs

The European chemical industry lobby, Cefic, has formally urged the European Commission to reconsider the inclusion of new conditions for accessing free emission allowances (EUAs) within the upcoming EU Emissions Trading System (ETS) reform. The industry warns that the proposed changes must focus on supporting emission abatement rather than creating insurmountable regulatory hurdles for manufacturers. This intervention comes as the sector navigates a volatile energy landscape characterized by fluctuating power prices and evolving rules for renewable fuels.

Europe’s chemical sector lobby, Cefic, has called on the European Commission to reconsider adding restrictive conditions to free emission allowances in its looming proposals to reform the EU ETS. The organization emphasized that the upcoming reform must be designed to support emission abatement efforts rather than creating "impossible" conditions for industrial players. This warning is a response to the EU executive's targeted review of renewable fuels of non-biological origin, which experts suggest may lead to a postponement of the hourly guarantee of origin (GO) launch, further complicating the regulatory environment for chemical producers.

The chemical industry's concerns are heightened by broader energy market trends, including Shell’s expectation that European gas demand will plateau until the end of the decade. This outlook, combined with recent surges in regional power prices—such as a 31% jump in Hungarian day-ahead prices to an 18-month high—places significant economic pressure on energy-intensive sectors. Additionally, Southeast Europe is facing "super dry" weather conditions with hydrological balances 2 TWh below the seasonal norm, which limits price upside relief and adds to the sector's operational uncertainty.

Further complicating the transition for the chemical industry are challenges in the renewable energy and financing sectors. The German PPA market is reportedly at a crossroads, risking becoming too unattractive for investors, while nearly 50% of Italian onshore wind farm permits are being rejected. Moreover, recent European Commission actions have barred EU-backed financing for new solar, wind, and storage projects in certain contexts, a move that critics argue could slow the energy transition and raise prices. Cefic’s stance reflects the industry's need for a stable ETS framework that facilitates decarbonization without undermining competitiveness amidst these various market and regulatory headwinds.