EUROPEAN UNION CHEMICAL SECTOR TRANSITION POLICY BRIEF

The EU chemicals sector faces a critical investment window until 2030, requiring over EUR1tn by 2050 to achieve net zero. The document argues that decarbonisation must address scope 3 emissions—which account for 60% to 80% of total emissions—through demand reduction, circularity, and alternative feedstocks. Key policy recommendations include expanding the Carbon Border Adjustment Mechanism (CBAM) to include polymers and organic chemicals, implementing Carbon Contracts for Difference (CCfDs) for low-carbon hydrogen, and strengthening the EU Taxonomy to better incentivise low-carbon basic chemicals production.

• The EU chemicals sector requires massive investment by 2030 to meet 2050 net-zero goals, as approximately 53% of primary production capacity in the EU27 will need reinvestment by 2030. This transition is estimated to require over EUR1tn in investment by 2050, necessitating a 50% increase in capital expenditure over business-as-usual levels.
• Scope 3 emissions are the dominant source of greenhouse gases for the chemicals sector, ranging from under 60% to over 80% of total emissions. These are primarily linked to fossil feedstocks and end-of-life treatment, such as the incineration or landfilling of plastics and fertilizers.
• The EU's current carbon pricing and regulatory frameworks have not yet effectively driven decarbonisation, with the chemicals sector receiving free allocations for most emissions under the EU ETS. The document suggests that the Carbon Border Adjustment Mechanism (CBAM) should be expanded by 2030 to include polymers and organic chemicals to prevent carbon leakage and maintain competitiveness against producers in countries like China.
• Decarbonisation depends on shifting from virgin fossil feedstocks to alternative carbon sources, including biomass and captured CO2. The EU has an aspirational goal that at least 20% of carbon used in chemical and plastic products comes from sustainable non-fossil sources by 2030.
• Low-carbon hydrogen is essential for producing basic chemicals like ammonia and methanol. The EU targets 10 million tons of green hydrogen production yearly by 2030, and the document recommends using Carbon Contracts for Difference (CCfDs) to bridge the cost gap between renewable and fossil hydrogen.
• Circular economy policies and demand reduction are critical for reducing the volume of virgin feedstock. Specifically, the EU targets a 20% reduction in fertilizer use and a 100% recyclability objective for the packaging market, though the European Court of Auditors has warned that the EU risks missing its 2025 and 2030 plastic recycling targets.

APA

Gargallo, J. M. V. (2023). EUROPEAN UNION CHEMICAL SECTOR TRANSITION POLICY BRIEF. Climate Bonds Initiative. https://www.climatebonds.net/files/documents/publications/European-Union-Chemical-Sector-Transition.pdf

Chicago

Gargallo, Juan Manuel Viver. EUROPEAN UNION CHEMICAL SECTOR TRANSITION POLICY BRIEF. Climate Bonds Initiative, 2023. https://www.climatebonds.net/files/documents/publications/European-Union-Chemical-Sector-Transition.pdf.

Wikipedia

{{cite report |last1=Gargallo |first1=Juan Manuel Viver |title=EUROPEAN UNION CHEMICAL SECTOR TRANSITION POLICY BRIEF |publisher=Climate Bonds Initiative |date=November 2023 |url=https://www.climatebonds.net/files/documents/publications/European-Union-Chemical-Sector-Transition.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{gargallo2023european, author = {Gargallo, Juan Manuel Viver}, title = {{EUROPEAN UNION CHEMICAL SECTOR TRANSITION POLICY BRIEF}}, institution = {Climate Bonds Initiative}, year = {2023}, month = nov, url = {https://www.climatebonds.net/files/documents/publications/European-Union-Chemical-Sector-Transition.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }