Fertilizers Europe believes the European Commission’s “Fit for 55” Climate Plan “falls way short” of what is needed by not recognizing the need for competitiveness of European industry, the Brussels-based organization that represents the majority of Europe’s major fertilizer producers said earlier this month.

The E.C. on July 14 put forward its plans for its Carbon Border Adjustment Mechanism (CBAM), a move designed to put European Union (E.U.) companies on an equal footing with competitors outside the bloc with weaker carbon policies (GM July 23, p. 31; March 26, p. 35).

The measure initially will be applied to imports of goods considered to be at high risk of carbon leakage: fertilizers, cement, aluminium, iron and steel, and electricity generation and will be phased in from 2023, with full implementation from 2026.

With growing carbon costs, not borne by major global competitors, co-existence of CBAM and free allowances under ETS is a pre-condition for the successful transformation towards low carbon future of the E.U.-based fertilizer industry, said Fertilizers Europe.

While acknowledging the Commission’s attempt to reinforce Europe’s decarbonisation efforts, the fertilizer manufacturers’ organization believes the current version “increases carbon leakage risk rather than stimulating decarbonization.”

Competitiveness and availability of renewable electricity and technology is needed to give industry the perspective and confidence to invest in low-carbon technologies, it said.

Fertilizers Europe Director General Jacob Hansen said the European fertilizer industry supports the E.C’s Green Deal’s ambition of climate neutrality by 2050 and is committed to play its part.

“Through investments in low-carbon technologies and production of green and blue ammonia, our sector can play a vital role in the decarbonisation of the economy. On top of this, our sector will spearhead efforts to reduce nutrients losses to the environment and support the farmers in reducing their climate impact while maintaining the harvest,” he said.

But Hansen warned that the road to get there is “very challenging” and “tremendous efforts and capital investments will be required to move from fossil to renewable based production.”

Hansen said greater E.U. climate ambition calls for “better carbon leakage measures and not the contrary.” He pointed out that in recent weeks, Europe has seen surging prices of gas and ETS carbon costs – all putting competitive pressure on the European fertilizer manufacturing sector.

He warned the “Fit for 55” package will only add to this pressure.

“Clearly, effective carbon, and investment leakage measures are needed to attract the necessary capital and ensure that the future sustainable investments are made in Europe,” said Hansen.

“A CBAM will be a step towards bringing importers on a level playing field but allocating free allowances to CBAM sectors at the same level as other sectors, at least until 2030, is absolutely crucial for the competitiveness of the fertilizer industry,” he said.

“While CBAM levels imports, it, together with the rest of ‘Fit for 55’ package, does nothing to secure E.U. export competitiveness, quite the contrary. With high value fertilizer products manufactured in Europe, the industry’s exports capabilities can only be maintained if an appropriate ‘levelling’ mechanism is in place to ensure its competitiveness on the global market,” Hansen warned.

As one of the sectors being clearly short on ETS allowances, the revision of the ETS legislation resulting in further reduction of ETS allowances and lowered benchmarks is also a great concern to him.

“The economic reality is that these proposals will squeeze the competitiveness of the industry and make investments in decarbonization so much harder,” said Hansen.