Can a carbon tax revitalise the European chemical industry?

The European chemical industry can reduce carbon dioxide emissions and improve its competitiveness in domestic markets through carbon taxing of goods sold.

Private and public stakeholders are in pursuit of how carbon-related price signals can drive global emissions reduction. It is a divisive subject within the European industry given legislation can harm the competitiveness of local manufacturing assets and increase the region’s dependence on imports.

However, Nexant’s analysis shows the European chemical industry could benefit from a carbon tax on traded goods - the most transparent mechanism is to implement a tax per ton of traded chemical. Carbon emissions can be estimated per ton of product and the price on emissions set by the cost of capturing one ton of carbon dioxide (CO2).

Imported goods would be taxed at the EU border based on the estimated volume of emissions per ton of goods sold at port of origin – e.g., fuel mix and best available technology. Individual European producers are not responsible for reducing emissions upstream of their feedstock or downstream of their product. However, importers should be responsible for their procurement value chain and taxed on a well-to-product basis.