By Tanay Dhumal

April 17 (Reuters) - The European Union's increasingly stringent environmental regulations are saddling global chemical companies with more than $20 billion in annual costs, according to the trade association, European Chemical Industry Council (CEFIC).

WHY IT'S IMPORTANT

Firms like Dow DOW.N and LyondellBasell LYB.N have been reassessing their European footprint, including shutting down some facilities, as they tackle weak demand, high input costs and rising regulatory pressure.

CONTEXT

The EU is preparing to phase out free carbon emissions permits and expand its list of restricted chemicals, according to industry analysts and the CEFIC.

Analysts and companies anticipate more financial hit for chemical firms from these measures.

The looming U.S. tariffs could further disrupt the market, potentially leading producers to relocate or expand U.S. capacity to avoid import costs.

KEY QUOTE

"$(A)$ key concern is that the proposed regulatory shift could lead to the loss of key raw materials, for which there are no ready replacements," said Pedro Serret-Salvat, PPG's PPG.N EMEA President.

BY THE NUMBERS

In its report, CEFIC stated up to 10% of a chemical firm's capital spending in Europe is now on regulatory compliance alone.

BASF has 250 employees solely dedicated to managing paperwork for the EU's REACH chemicals regulation, the German chemical giant told Reuters in a statement.

Financial penalties levied for emitting greenhouse gases are also mounting.

While just 73 out of the 917 companies reported their purchased carbon credits in 2023, it still accounted for 1.32 billion euros in costs that year, data complied by environmental non-profit firm Carbon Disclosure Project $(CDP)$ showed.

Chemical maker Celanese CE.N forecasted an annual hit of $10–12 million from the removal of free allowances, according to its CDP report.

WHAT'S NEXT

"I expect we continue to see additional chemicals banned in the EU, similar to what has historically occurred," said Morningstar analyst Seth Goldstein.

(Reporting by Tanay Dhumal in Bengaluru; Editing by Leroy Leo)

((Tanay.Dhumal@thomsonreuters.com; Twitter: https://twitter.com/TanayDhumal;))