By Europe’s Carbon Border Adjustment Mechanism (CBAM) has emerged as an unexpected threat to the Gulf’s 180 billion petrochemical industry, with analysts projecting 15 billion in annual costs once the tariffs fully phase in by 2026.
The CBAM Shock:
- Current Phase: An 8% tariff is applied to GCC exports of steel, aluminum, and fertilizers
- 2026 Projection: Full carbon pricing could add $80/ton to ethylene costs
- Most Exposed: Saudi Basic Industries Corp. (SABIC) faces $3.7B hit
Technology Race Accelerates:
- Carbon Capture: ADNOC investing $15B in Habshan CCUS project
- Electric Crackers: SABIC piloting world’s first large-scale e-cracker
- Hydrogen Transition: Oman allocating $140B for green hydrogen infrastructure
“The math is brutal,” said Wood Chemicals analyst James McVan. “Gulf producers must either decarbonize rapidly or lose their largest export market.”
Market Reactions:
- SABIC shares down 12% since CBAM details released
- GCC governments fast-tracking $45B in clean industry subsidies
- Asian competitors (India, China) gaining EU market share
With petrochemicals accounting for 35% of non-oil GDP, the Gulf faces an unprecedented challenge to its industrial model.