EU Refiners’ Carbon Costs Could Almost Triple in 2021

This article first appeared on the BNEF mobile app and the Bloomberg Terminal.

  • Carbon prices cost refiners €0.15 per barrel in 2020
  • They could face a carbon cost of €2.05 per barrel by 2030

Despite some respite after a horrid year for European refinery margins, increasing carbon costs will soon hit refiners hard. Surging carbon prices cost refiners €0.15 ($0.18) per barrel of throughput in 2020, which may hit €0.39 in 2021, according to BloombergNEF.

European refiners face growing pressure as the EU pledges to lower emissions by 55% by 2030. Greater climate ambitions will translate to a steeper decline in the free allocation of emissions allowances for the sector, and higher prices. The double whammy for refiners may lead to a carbon cost of €2.05 per barrel by 2030.

In response, refiners will need to take a more active approach toward carbon management, investing more in decarbonization projects and potentially hedging more against carbon price volatility.

Increasing carbon costs will disadvantage European refiners like Saras, Total and Shell, as players in other regions face lower, or no, emissions costs, and imports are exempt from any additional emissions cost under the current carbon border adjustment mechanism.

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