Chemicals: ETS will cut investment by 1.5 billion
At Federchimica’s private meeting, companies expressed a more cautious outlook. A further 3 per cent decline in production is forecast for this year. Buzzella: “Energy costs are unsustainable; there is a lack of awareness in Europe.”
The ETS (Emissions Trading Scheme) will soon cost chemical companies 1.5 billion euros a year, up from the current 600, all of which will be taken away from investment. Unless the review of the system currently under discussion at the EU takes a favourable turn (the reform proposal is on the agenda for the end of the week), this remains the reality. And Federchimica’s president, Francesco Buzzella, yesterday, on the sidelines of the private meeting, pointed out that ‘the problem is not competition, but competition between systems operating under different rules. Compared with our competitors, we suffer from asymmetry in terms of regulation, energy policy, taxation, state aid, technology and trade.”
The list of grievances from the chemical industry is long, but the most critical issues are the ETS (Emissions Trading Scheme), energy costs and red tape. In a sector such as the chemical industry, which combines high energy intensity with a heavy reliance on natural gas – including as a raw material – ‘energy policies can no longer be viewed as merely a component of the sustainable transition, but as the strategy for reshaping the entire industrial base. “The first pillar to be reviewed is the ETS, which imposes a rising cost on Italian chemical companies,” explains the president of Federchimica. “Today in Italia, the ETS for the chemical sector alone costs 600 million euros, which is equivalent to the sector’s entire expenditure on research and development. However, the forecast is that this cost will rise to as much as 1.5 billion euros in a few years’ time. These are resources that are being diverted away from investment. CBAM, meanwhile, is the other side of the ETS coin: at present, it mainly concerns raw materials, basic products and certain high-carbon semi-finished goods, whilst it does not yet apply across the board to finished products. It is also a complex mechanism, still in its early stages, the effectiveness of which has not yet been properly tested before proceeding with the accelerated phase-out of free allowances. In this way, we are penalising companies twice over and encouraging them to move their production elsewhere. The second pillar is the energy security and diversification policy. The third pillar is the industrial decarbonisation policy.’
According to a study carried out by Roland Berger for Cefic (the European Chemical Industry Council), plant closures over the last four years – from 2022 to 2025 – have reduced European production by 9 per cent; there has also been a 90 per cent drop in investment in the chemicals sector. It is not just a matter of closures; there is also a decline in the propensity to invest in Europe. It is no coincidence that an instant survey of 100 member companies revealed that 27 per cent – almost a third of firms – will reduce their investment (7 per cent significantly, 20 per cent moderately), whilst 31 per cent will see no change, and the remaining 23 per cent will increase their investment (20 per cent moderately, 3 per cent significantly). Investment will focus in particular on digitalisation (35 per cent), energy efficiency and self-sufficiency, as cited by 18 per cent, operational efficiency (47 per cent), research and innovation (35 per cent), skills and training (27 per cent), products and markets (15 per cent) and sustainability (10 per cent). “These days, the talk is mostly of consolidation and all-round optimisation. However, when volumes are lacking, this means giving up part of production and consolidating it across fewer sites,” explains Buzzella. The automotive crisis in Europe is leading to numerous plant closures and job cuts, and is the most visible sign of ‘European deindustrialisation: Europe is dismantling, piece by piece, the industry that has always been the cornerstone of European social policies,’ continues the president of Federchimica. Europe now accounts for 8 per cent of car production, employing around 13 million people. But as we are seeing, cars are increasingly coming from Asia. Every car produced in Asia contains components manufactured in Asia. The car crisis therefore has a twofold impact: both on the manufacturing sector, which is shifting to Asia, and on the chemical industry.” Could tariffs be the solution?
Not quite, according to Buzzella: “I’m not in favour of tariffs; they’re short-sighted measures. But we need to recognise the crisis, reorganise ourselves, put in place measures to encourage investment, review levies such as the ETS – which is completely anachronistic – and then we need to protect our supply chains. If we let a few years slip by, we risk losing key parts of the industry. We must try to protect the industry in the short term and envisage a future in which industry regains its central role. In China, let’s not forget that the chemicals sector is among those that have received the highest levels of state subsidies.” In Italia, overall, chemical production today is 13 per cent lower than in 2021. Since 2022, the loss of capacity linked to the announced closures of European chemical plants has increased sixfold, resulting in a reduction of 37 million tonnes, equivalent to 9 per cent of European production capacity. Looking ahead, chemical production in Italia is forecast to contract further in 2026 (-3%) and to recover slightly in 2027 (+0.5%). The recovery in industrial demand will be slow, partly due to unresolved issues arising from asymmetries in energy costs.
Returning to the instant survey, when asked about their main concerns regarding the impact on their business, 43 per cent of companies cited the conflicts in Ukraine and the Middle East. However, it is competition from China that represents by far the main cause for concern, cited in 51% of cases – a sharp increase from 29% last year. The challenges do not stem solely from the external environment: as many as 42 per cent of businesses cite the burdens arising from the EU’s health, safety and environmental policies, whilst 30 per cent highlight the disadvantages associated with the ‘Sistema Italia’, linked above all to the inefficiencies of the public administration but also to the judicial system and taxation. Certainly, as Buzzella explains, ‘the enormous disadvantage in energy costs weighs heavily on competitiveness. European natural gas prices are much higher than those in the United States and China. Suffice it to say that gas prices in Europe are 3.3 times higher than in the US. In Italia, the situation is even more critical.’
