Carbon abatement in the European chemical industry: assessing the feasibility of abatement technologies by estimating firm-level marginal abatement costs

As many other industries, the chemical industry has to strongly reduce its' carbon emissions, for which various abatement technologies exist. We study the economic feasibility of these abatement technologies by estimating the Marginal Abatement Cost (MAC) of CO2 emissions for 24 firms in the European chemical sector over the period 2015–2020. We estimate the firm-level MAC by using a quadratic directional output distance function (DDF) model. We find a median MAC of 429 €/t CO2, which is significantly above current carbon prices, indicating that most firms in this industry prefer to use carbon allowances instead of reducing their own emissions. We conclude that carbon abatement in the chemical industry is only likely when the carbon price is significantly higher or when financial support is provided for certain abatement technologies, such as renewable hydrogen and bio-based ammonia.