BASF Presses Berlin on Carbon Costs While Building Out Its Growth Pipeline

BASF has taken its case directly to the top of the German government, with chief executive Markus Kamieth and Covestro counterpart Markus Steilemann appealing to Chancellor Friedrich Merz for changes to the European emissions trading system. The push, reported by the FAZ, is aimed squarely at capping the cost burden on the chemicals industry — and for shareholders it frames a question that runs parallel to the company's operational news flow: how much breathing room will policy leave for investment?

At the heart of the intervention is a warning on certificate costs. Kamieth reckons BASF's outlay for emissions allowances could climb to EUR 1 billion by the end of the next decade. The two executives object in particular to planned investment conditions attached to allowances that are handed out free of charge for the time being, and they want a shallower reduction path than the one currently envisaged.

A Clash Between Competitiveness and Climate Targets

The proposal therefore cuts both ways: it targets potential extra costs and, at the same time, the strings attached to any relief. The political tension sits between industrial competitiveness and the pace of decarbonisation, with the EU aiming to cut net emissions by 90% versus 1990 levels by 2040. A shallower trajectory would shift how that effort is spread over time, and any deal in Brussels or Berlin would have to square industry's demands with that headline goal.

The sums involved in free allocation explain why the lobbying is so intense. Carbon Market Watch puts the annual value of free certificates to energy-intensive industry at roughly EUR 39 billion — a figure that underscores just how much the affected sectors have riding on the rules. For BASF, the prize is planning certainty as much as cash: a reform that delivers durable, long-term rules would let the group map out both its cost base and its investment programme with greater confidence.

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Operational Milestones Pile Up

While the policy debate grinds on, BASF has kept its own transformation moving. An industrial heat pump is slated to supply up to 500,000 tonnes of CO2-free steam a year from mid-2027, a concrete route to reshaping the group's energy supply provided it starts up on schedule and hits its designed output.

The company's commercial pipeline has also produced a run of announcements. On Wednesday, BASF reported that Australia's APVMA had approved Luximax for use on Australian rapeseed; by the company's account it is the first Group 30 herbicide registered for the crop in that market. A day earlier, BASF signed a letter of intent with ParagonCorp to explore possible collaboration in scientifically grounded cosmetic innovation. And on Thursday came recognition rather than regulation: BASF, together with Stellantis and L&L Products, picked up an SPE Automotive Innovation Award for a composite tunnel reinforcement developed for the 2027 Jeep Grand Cherokee.

Those projects sit at very different stages of maturity, a distinction that matters when weighing the headlines. The Australian approval is granted. For the electronics-materials production site in Nanjing, an investment agreement signed on Tuesday with the Nanjing Jiangbei New Area sets out a plan, with commissioning targeted by the end of 2028. The ParagonCorp arrangement, by contrast, commits the parties to nothing more than an examination of whether cooperation makes sense.

Guidance Is the Yardstick

The financial benchmark against which all of this will be judged is EBITDA before special items. BASF raised its 2026 forecast to between EUR 7.4 billion and EUR 7.8 billion a little over a week ago, and that corridor is where the operating story for the full year will be settled.

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Set against it, the product announcements add a longer-range dimension: an approved use can open commercial doors, and an agreed production site can lay the groundwork for future revenue. Both gain weight for investors only if they translate into economically viable business. Execution is the obvious counterargument — the Nanjing plant still has to be built and brought on stream by the end of 2028, and any delay would push back the point at which shareholders can count on contributions from it. The ParagonCorp tie-up will be judged on whether the review yields concrete joint projects.

Market backdrop adds a further variable. BASF shares fell 2.9% in a broad selloff, with Reuters attributing the wider losses to worries about AI stocks and possible restrictions on AI data centres. That kind of environment can hit the stock regardless of company-specific progress, as the latest session demonstrated. Even so, the constructive case rests on two pillars: hitting the upgraded earnings range and converting approvals, applications and site agreements into real commercial value. Should BASF miss its targets or see agreed projects stall, the more cautious reading would carry the day.

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