The numbers speak for themselves: „The amount we spend each year on purchasing CO₂ certificates will move toward 1 billion euros by the end of the decade“, BASF CEO Markus Kamieth calculates. That’s 1 billion euros in costs that most of BASF’s global competitors don’t face. The resulting deterioration in the competitiveness of Germany’s and Europe’s chemical industries is, as Kamieth puts it, already „enormous“.

Yet the cost of carbon certificates is only one disadvantage. Another is that in other parts of the world – for instance in China – more green energy is already available at lower prices. European companies such as BASF, which has a strong foothold in China, benefit from that. But those gains are partly offset by the company’s equally large presence in Europe, where higher costs, including for CO₂, eat into margins. As a result, even the world’s largest chemical producer is currently facing little more than stagnating results.

What holds true for the chemical sector applies to all European companies competing globally: additional costs incurred only in Germany or Europe undermine competitiveness.

„This cuts to the very core of our industrial base“, says the BASF chief, who expects that the trend toward factory closures in Germany and Europe will accelerate further under the burden of the EU’s emissions trading system.

However, scrapping the European carbon trading system altogether – as Evonik CEO Christian Kullmann recently demanded – would be the wrong approach. Pricing emissions forces companies to move toward a greener transformation, which could ultimately prove an advantage in global competition. Still, it would make more sense to support firms on their path to climate neutrality by providing cheaper (industrial) prices for green electricity rather than burdening them with the cost of carbon certificates. In the end, that would likely benefit the carbon balance just as much as – if not more than – a poorly designed emissions trading scheme.