Germany’s chemicals remains sceptical as EU agrees on carbon import levy

LONDON (ICIS)–Germany’s chemical producers’ trade group VCI remains sceptical as the EU on Tuesday announced a provisional agreement on the carbon border adjustment mechanism (CBAM).

With CBAM, imports into the EU of products from certain emissions-intensive sectors would face an import levy.

“CBAM and chemicals, that does not fit”, said VCI’s director general Wolfgang Grosse Entrup.

EU-based processors of the affected imports would have to cope with even higher prices, he said.

Furthermore, CBAM would involve additional bureaucracy and create legal uncertainties, he said.

“Our companies are now faced with a thicket of bureaucratic procedures,” he said.

The US, on the other hand, was taking a completely different approach as it was promoting green products and production processes.

“In the future, green products will be produced there much more cheaply than in Europe,” said VCI’s director general.

However, VCI was relieved that, at least in its initial stages, CBAM would include only a few chemical products, such as ammonia or hydrogen.

Germany’s economic affairs minister Robert Habeck welcomed the provisional agreement between the European Council (the 27 member states), the European Parliament (EP), and the European Commission – the EU’s executive body – as an important step for climate protection, and an important step to maintain the EU’s competitiveness.

Under the provisional agreement, CBAM will initially cover specific products in some of the most carbon-intensive sectors: iron and steel, cement, fertilisers, aluminium, electricity, and hydrogen, as well as some precursors and a limited number of downstream products.

It could begin to operate from October 2023 onwards, subject to final confirmation of the agreement by ambassadors of the EU member states, and by the EP, and its adoption by both institutions.

CBAM is meant to function in parallel with the EU’s Emissions Trading System (ETS), to mirror and complement its functioning on imported goods.

It will gradually replace the existing EU mechanisms to address the risk of carbon leakage, in particular the free allocation of ETS allowances.

Front page picture: The European Commission vice president in charge of climate policy, Frans Timmermans; archive image
Source: Xinhua/Shutterstock