Studies

CO2 - Germany's "Titanic"?

With the beginning of the next trading period for emission certificates (NAPIII) forecasted in 2013, energy intensive industries in Germany will be facing a considerable increase of CO2 costs that will increase further by 2020. A goetzpartners analysis of 120 industries and their 550 plants has revealed that the cement, steel and iron industries, together with refineries must prepare for massive reductions in their EBITDA margins.

Based on three possible scenarios, goetzpartners has forecasted the likely margin developments of the industries mentioned above:

1. Scenario: “As Is”: Germany keeps to its target to reduce CO2 emissions by 30% by 2020, compared to 1990 levels. Simultaneously, a conservative price development of 13 €/t in 2013 and up to 15 €/t for CO2 certificates in 2020 is assumed.

2. Scenario: “Nuclear Scenario”: Germany will increase its reduction target to 40% by 2020, compared to 1990 levels. The operating time of the nuclear plants in Germany will be extended, thus leading to an overall lower demand for CO2 certificates. With this scenario, a price increase for CO2 certificates  from 13 €/t in 2012 to up to 17 €/t in 2020 is assumed.

3. Scenario: “Beyond COP15”: Germany aims to reduce CO2 emissions by 40%, compared to 1990 levels, but at the same time to continue the nuclear phase-out. As the discontinuation of this source of energy production cannot be compensated completely by renewable energies, the conversion of fossil energy to power will increase. Due to a higher demand for certificates, this scenario assumes a price increase for CO2 certificates from 13 €/t in 2013 to up to 19 €/t in 2020.

According to goetzpartners' analysis, the first scenario will in 2020 lead to a reduction of the EBITDA margins of 41% in the refinery industry, 62% in the cement industry and 87% in the iron and steel industry. Scenario 3 could even lead to a reduction in EBITDA margins of up to 52% in the refinery industry, 78% in the cement industry and even 110% in the iron and steel industry.

German companies are facing significant challenges regarding CO2 costs which they have no other choice but to react to now. goetzpartners suggests various ways of overcoming these challenges.

(Study available in German language)