San Francisco Frontiers - German chemical giant BASF urges overhaul of EU carbon scheme

In response to growing complaints, the EU will later this year undertake a broad review of its Emissions Trade System (ETS), which was set up in 2005 to help tackle climate change.

The scheme has heavy polluters pay for the greenhouse gases they emit, obliging them to buy allowances that are capped in number, sold in auctions and tradeable.

But criticism is mounting from some member states, including Germany and Italy, as well as major firms that the ETS is an added burden at a time industry is already struggling.

Adding his voice to the concerns, BASF chief executive Markus Kamieth said there are "currently quite a number of weaknesses in the ETS system".

"We are advocating that we take another close look at this, asking how we can design it so that it becomes more flexible," he told journalists late Monday.

While stressing that he supported the "basic idea" of the system, he added: "The framework conditions are so strict that in the end it will cost us many jobs, a lot of value creation, and probably also resilience."

BASF is among the world's biggest chemical companies, and a key supplier to industries ranging from automotive to agriculture.

Calls for the ETS to be eased have grown more urgent since the Iran war sent energy costs soaring.

EU chief Ursula von der Leyen in March promised updates to the system, including "a more realistic trajectory" for cutting emissions and the allocation of "free emission allowances" -- currently set to be phased out by 2034 -- "beyond 2035".

Critics have urged an even greater overhaul.

Kamieth also warned of more supply chain disruptions from the Iran war later this year.

"In addition to inflationary pressure, which will certainly lead to weakening demand, there will also be supply chain problems and disruptions," he said.

"A manufacturer can't build a car if they're missing one component."

E.Walker--SFF