Estimation of Carbon Costs in the Chemical Sector

The study examines how carbon pricing affects the chemical sector by analyzing individual production processes to identify specific leakage risks. Using Germany as a representative example, it finds that while most chemical sub-sectors face moderate cost increases, certain basic chemicals—such as calcium carbide, chlorine, and soda ash—experience significant cost increases relative to their net production value. The report suggests that for some substances, like chlorine, high transport costs and risks may mitigate leakage, while others may require tailored policy instruments such as conditional free allowances or state aid.

• For most chemicals, the cost increase from carbon allowances and electricity is limited, or international trade is restricted by expensive or risky transport, meaning higher European carbon prices are unlikely to cause production relocation or leakage.
• Certain basic chemicals face high cost increases relative to their net production value, specifically PVC, Soda, and Ammonia, as well as calcium carbide, which the authors state would warrant significant leakage concerns if the analysis is confirmed.
• The chlor-alkali process for producing chlorine and sodium hydroxide is particularly sensitive; under the assumed CO2 price of 20 Euros/t, production costs under full auctioning would increase by 146% relative to the net production value.
• For Stage 3 carbon-intensive products, cost increases relative to net production value at 20 Euro/t CO2 are 15% for PVC, 5.5% for polyethylene, and 5.3% for polypropylene.
• At an aggregate level, the 'basic chemicals' sub-sector has the highest cost increase of all chemical sub-branches, while other sectors like pharmaceuticals and pesticides show very low increases (0.2%).
• The authors propose that leakage concerns can be addressed through specific instruments including state aid, conditional free allowance allocation, or internationally coordinated border adjustments.

APA

Marscheider-Weidemann, F., & Neuhoff, K. (2008). Estimation of Carbon Costs in the Chemical Sector. Climate Strategies. https://climatestrategies.org/wp-content/uploads/2014/11/chem-report031208-final.pdf

Chicago

Marscheider-Weidemann, Frank, and Karsten Neuhoff. Estimation of Carbon Costs in the Chemical Sector. Climate Strategies, 2008. https://climatestrategies.org/wp-content/uploads/2014/11/chem-report031208-final.pdf.

Wikipedia

{{cite report |last1=Marscheider-Weidemann |first1=Frank |last2=Neuhoff |first2=Karsten |title=Estimation of Carbon Costs in the Chemical Sector |publisher=Climate Strategies |date=3 December 2008 |url=https://climatestrategies.org/wp-content/uploads/2014/11/chem-report031208-final.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{marscheiderweidemann2008estimation, author = {Marscheider-Weidemann, Frank and Neuhoff, Karsten}, title = {{Estimation of Carbon Costs in the Chemical Sector}}, institution = {Climate Strategies}, year = {2008}, month = dec, url = {https://climatestrategies.org/wp-content/uploads/2014/11/chem-report031208-final.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }