Dies ist eine HTML Version eines Anhanges der Informationsfreiheitsanfrage 'Meeting between BASF, CEFIC and SG'.

Meeting with 
 BASF and 
Ref. Ares(2020)7729037 - 18/12/2020
Online, 5 November 2020, 10h30-11h15 
Decarbonisation of the chemical sector 
As part of the European Green Deal, the Commission proposed in September 2020 to 
raise the 2030 GHG emission reduction target, including emissions and removals, to at 
least 55% compared to 1990. After looking into actions required across all sectors, 
including increased energy efficiency and renewable energy, the Commission will now 
begin the process of making detailed legislative proposals by June 2021 to implement and 
achieve the increased ambition, including revising and possibly expanding the EU 
Emissions Trading System (EU ETS) which will enter its phase 4 in 2021 (until 2030).  

Indirect ETS compensation  
The Commission adopted in September 2020 the revised ETS-related State aid 
 in the context of the system for GHG emission allowance trading post-2021. 
They will enter into force on 1 January 2021 with the start of the new ETS trading period, 
replacing the previous Guidelines adopted in 2012. 

Some chemicals sub-sectors have repeatedly expressed concerns about losing 
eligibility for State aid
 and presented their arguments as part of the public consultation 
held between 14 January and 10 March 2020. Petrochemicals (NACE 20.14), which are 
at the origin of many important value chains and account for over 25% of total EU 
chemicals sales, and fertilisers (NACE 20.15), which account for about 5% of EU 
chemicals sales, are the most prominent among them. Both these sub-sectors have lost 
eligibility as a result of the revision. The consultation nevertheless allowed for slight 
favourable adjustments as concerns eligibility for some industrial gases (part of NACE 
20.11) and for the manufacture of some plastics in primary forms (part of NACE 20.16).  

The result of the revision reflects a difficult compromise between addressing the risk 
of carbon leakage, on the one hand, and minimising competition distortions
maintaining the incentives for a cost-effective decarbonisation of the chemicals industry. 

For the two main sub-sectors that will lose eligibility, adverse consequences cannot be 
ruled out: 

  EU petrochemicals may be expected to further lose international 
competitiveness especially vis-à-vis the US and the Middle East (both of which 
benefit from advantaged feedstock and energy); 

  For  fertilisers, although electricity is not the main cost element, it nevertheless 
impinges on international competitiveness. This comes against the background of a 
high trade intensity (31.8%) and of competition coming mainly from countries with no 
effective carbon reduction schemes and  - as is the case notably of Russia - practicing 
an unfair and discriminatory system of pricing for natural gas (the major feedstock 
for the production of nitrogen fertilisers).  

Carbon Border Adjustment Mechanism (CBAM) 
The European Green Deal proposes the introduction of a Carbon Border Adjustment 
Mechanism (CBAM) for selected sectors by 2021, if differences in levels of ambition 
worldwide persist. This would be an alternative to the measures addressing the risk of 
carbon leakage in the EU Emissions Trading System. 

The intention to introduce a CBAM was reconfirmed as part of the recovery plan for 
Europe and in September during the State of the Union address by President von der 
Leyen at the European Parliament Plenary. CBAM and a proposal for CBAM as own 
resource is part of the ‘Fit for 55’ package
. According to the Commission’s Work 
Programme 2021, the impact assessment and a legislative proposal are to be finalised in 
Q2 2021. A public consultation was launched in July (and ran until 28 October 2020). This 
will provide evidence for designing the options and assessing the impacts.  

Commission services are currently working on a variety of options for CBAM. Main issues: 
Topics for discussion 

Meeting with 
 BASF and 
Online, 5 November 2020, 10h30-11h15 
  Choice of instrument (e.g. carbon border tax on imports, the inclusion of importers in 
the EU’s Emissions Trading System or the surrender by importers of notional 
Emissions Trading System allowances).  

  WTO-compatibility and avoiding CBAM being seen as a measure to increase the 
EU’s international competitiveness. 
  The precise articulation of CBAM and EU ETS measures. 
The CBAM could raise between EUR 5 and EUR 14 billion per year depending on the 
number of sectors covered and the design of the measure. This includes the additional 
revenue from auctioning due to the abolition of free allocations under the EU Emissions 
Trading System. 

The EU Hydrogen Strategy 
The EU Hydrogen Strategy presents a way forward in transforming the potential of 
hydrogen into concrete benefit for society and industry. The priority for the EU is to 
develop renewable hydrogen, produced using mainly wind and solar energy, even if 
other types of hydrogen will be used over a transition period. Renewable hydrogen is the 
most compatible option with the EU’s climate neutrality and zero pollution goal in the long 
term and coherent with the concept of an integrated energy system. The Hydrogen 
sets ambitious targets of production of 10 mln tonnes of renewable hydrogen 
and capacity of 40GW of electrolysers by 2030. The industrial users of hydrogen are 
important for the creation of renewable hydrogen markets.  

As part of the Commission’s recovery plan, funding instruments of Next Generation EU, 
including the Strategic European Investment Window of the InvestEU programme and the 
ETS Innovation Fund, will enhance the funding support and help bridge the investment 
gap for renewables generated by the COVID-19 crisis. 

The  Energy System Integration Strategy (8 July 2020) highlights the essential role of 
renewable and low-carbon fuels, including hydrogen, in hard-to-decarbonise sectors and 
in particular in a number of industrial processes and transport modes, such as aviation 
and maritime.  

The  European Clean Hydrogen Alliance was launched the same day as the 
Commission’s Hydrogen Strategy. The key objective of the Alliance is an investment 
agenda supporting an ambitious deployment of hydrogen technologies until 2030

In the next few months, the Alliance will present a pipeline of potential projects that could 
deliver the objectives of the EU Hydrogen Strategy. Early engagement of industries is 
important for delivery of a solid project pipeline.
 The Declaration of the Alliance, 
signed by all organisations that join the Alliance, outlines the basic principles, being a 
focus on climate neutrality and renewable hydrogen, and the fundamental principles of 
openness, partnership, inclusiveness, diversity and transparency. There will be an 
exchange of letters between the Commission and the organisations that will have an 
active role in the organisation of the Alliance, confirming the mutual understanding of the 
principles and working methods. These organisations are: ACEA, CEFIC, ENTSO-G, 
European Heating Industry, SolarPower Europe, WindEurope and Hydrogen Europe. The 
letters have already been sent to the mentioned organisations. 

We have opened a call for applications for thematic roundtables which could meet for 
the first time on 25 November before the EU Hydrogen Forum on 26-27 November

Low carbon industries Alliance 
The new Industrial strategy announced a future industrial alliance on low-carbon 
industries. The Alliance would be tasked with delivering large projects to deploy 
breakthrough technologies in the EU
. The Alliance would bring together energy-
intensive industries, among these the chemical sector and other stakeholders committed 
to working towards climate-neutrality and circularity by 2050. DG GROW is working with 

Topics for discussion 

Meeting with 
 BASF and 
Online, 5 November 2020, 10h30-11h15 
the European industry associations to develop the framework for the Alliance and to 
secure commitments from companies to participate 

Main messages  
  Chemicals are the building blocks of low-carbon, zero pollution, energy- and resource-
efficient technologies, materials and products. A sustainable, competitive and 
innovative chemicals production capacity is a pre-requisite of a deep transformation 
and decarbonisation of the industrial ecosystems.  
 Switching to using renewable hydrogen in chemical production processes would be a 
decisive step in decarbonising the sector and achieving climate neutrality and the zero 
pollution goal. The chemicals sector is one of the focus sectors already in the first 
phase of the decarbonisation of the existing hydrogen production (2020-2024).  
  The Commission welcomes BASF and CEFIC to the European Clean Hydrogen 
Alliance. We would also like to thank CEFIC for taking up responsibilities within the 
Alliance and the thematic roundtable for industrial applications.  
  While the Commission sees important benefits in expanding the use of the EU 
Emissions Trading System, it will look into how to set up transitional arrangements 
or a pilot period before seeing any expansion
. As the existing EU ETS has shown, 
the development of a new market requires setting up functioning monitoring, reporting 
and verification systems.  
 The possible impact of a strengthened cap on the availability of free allocation for 
industry and risks of carbon leakage will be properly assessed
 The EU stands ready to support the chemical industry’s efforts towards 
decarbonisation, including through support to development and improving market 
readiness  and uptake of promising technologies:  
 For 
Horizon Europe working in synergy with the Innovation Fund under 
the EU ETS and the InvestEU Fund will become important enabling tools in this 
  CEFIC’s members should therefore be encouraged to engage with the relevant 
national authorities to be able to benefit from the funding available under the 
Recovery and Resilience Facility.  
  The chemical industry is one of the key energy-intensive industries that we wish to 
involve in the Alliance on Low-carbon Industries. 
  The EU will continue to address the risk of carbon leakage for industrial sectors highly 
exposed to such risk:  
  Free allocation and indirect cost compensation under the ETS will continue in 
phase 4 of the ETS.  
  The Commission is looking at introducing a carbon border adjustment 
mechanism (CBAM) in certain sectors as an alternative to the current measures to 
address carbon leakage. The Commission will table a proposal by June 2021. We 
are currently working on a variety of options (e.g. which sectors, social, economic 
and environmental impacts of the instrument, administrative and compliance costs, 
feasibility, WTO-compatibility).  
Topics for discussion 

Meeting with 
 BASF and 
Online, 5 November 2020, 10h30-11h15 
EU industry is not in a position to absorb the additional costs and negative 
competitiveness impacts of a higher climate ambition. 

  The use of cost-effective instruments is one of the guiding principles of Europe’s 
climate policy as illustrated by the central role played by the EU Emissions Trading 
System. In many sectors, the cost of decarbonisation has declined substantially, 
making this transition feasible, at manageable costs.  
 Industrial sectors are already exploring viable technologies for climate-neutral 
production. Most of them have developed roadmaps that show a transition is possible. 
What is the impact of the proposed increased climate ambition on the free 
allocation for industry?  

  Depending on the risk of carbon leakage, industrial sectors may receive free emission 
allowances up to 100% of the relevant benchmark value. The benchmark values are 
currently being revised and many will be reduced by the maximum foreseen in the 
ETS Directive, which is -24 %.
 This is due to significant reductions in greenhouse gas 
emissions that were reported by the concerned industry sectors. 
How is the ETS strengthening expected to impact carbon prices?  
  The price of ETS allowances is determined by the market and depends on many 
other factors such as the overall design of the system, market expectations and 
behaviour. Changes in the design of the system (such as the envisaged strengthening 
of the emissions cap) can be expected to affect the carbon price.  
  The envisaged strengthening of the ETS is expected to create the necessary long-
term carbon price signal and drive further decarbonisation. Higher ETS prices mean 
more resources for Member States to use wisely to support decarbonisation efforts.  
  The regime of free allocation for industry, which so far has proven to be an effective 
way to address the risk of carbon leakage, will continue. Any possible impact of the 
strengthening of the EU ETS on the availability of allowances for free allocation will be 
duly assessed in the context of the impact assessment in view of the legislative 
proposal of June next year. 
Why can a Carbon Border Adjustment Mechanism not be combined with free 

  Combining CBAM and free allocation would lead to windfall profits for the EU 
producers. If importers would be required to buy allowances while domestic firms would 
get part of their allowances for free, it could be conceived as unfair competition
Hence, it would be WTO-incompatible. 
How will you select sectors to which CBAM may apply? 
  In our impact assessment, we will focus on sectors where there is a greater risk of 
carbon leakage. We will pay attention to the feasibility and legality of the measure as 
well as its economic, social and environmental impacts.  
Are there risks of relocation for downstream industries?  
  It is too early to talk about the potential impact on particular sectors and respective 
downstream industries. This will largely depend on both the final design of the 
measure and the specific products
 to which it would apply. These aspects are part 
of the Commission’s ongoing impact assessment.   
Topics for discussion