INSIGHT: The challenge of carbon control

12 January 2007 16:37  [Source: ICIS news]

By Nigel Davis

Chems stuck in a hard placeLONDON (ICIS news)--Europe’s energy intensive industries are caught between a rock and a hard place. The European Union’s (EU’s) drive to cut greenhouse gas emissions will hit them hard.

Some European nations may seek quick wins to meet national targets but the pressure will be on firms that process materials to make further cuts.

The European Commission (EC) this week unveiled proposals to cut EU greenhouse gas emissions by 20% by 2020 if there is no international agreement and by 30% in the case of a climate change agreement among developed countries.

Its energy policy package encompasses energy efficiency, security of supply, energy technologies and key competitive aspects of Europe’s energy markets.

Raising energy efficiency has been on the chemical industry agenda for years. Remember energy accounts for more than 50% of the variable costs of production of most materials.

But as the EU policies develop, chemical companies are more than likely to have to pay more for primary energy. They will also be pressed hard to become more energy efficient and to reduce their carbon footprint.

Some companies will gain – the likes of Rhodia and Ineos Fluor certainly as they obtain carbon emission reduction credits for newly applied carbon abatement technology – but most will not.

The knee jerk reaction from the sector on release of the new energy plans could have been expected. But was it necessary?

The sector is worried about its international competitiveness. In an ideal world the playing field would be level but in reality it is not.

Europe’s leaders must understand that big industry needs support. The industrial world is changing fast and Europe is striving to move towards a low carbon economy. In doing so, however, it does itself no good if it pulls the rug from under sectors that contribute so much in terms of wealth creation and the goods that myriad industries need.

European civil servants and politicians have come to better understand the role of chemicals in modern life as they have put together the Reach legislative package. But the message has to be hammered home that energy and industrial competitiveness run hand in hand.

That does not have to mean that countries or industrial sectors can continue to be profligate with energy. Increased energy efficiency can put them in good stead.

The argument is not so well made for the reduction of carbon emissions. But if a proper cost is put on carbon and trading mechanisms made to work effectively, then great strides are possible.

For Europe to strike out on its own to further curb carbon dioxide emissions and improve energy efficiency could be largely ineffective in global warming terms. The message it sends out, however, is that Europe expects its industries to become more efficient and to further reduce their carbon footprints.

The true challenge is not technical or indeed related to energy markets but political.

“I believe we can be more creative in finding effective and workable policies well beyond the EU borders while avoiding the cumbersome UN process,” said director general of the European chemicals trade group Cefic, Alain Perroy, this week.He is right.

But the chemicals sector can also be more creative in its approach to global warming.

The clever companies embrace the concept and seek out opportunities to be more forward looking.

In the UK this week companies in the Confederation of British Industry (CBI) created a Climate Change Task Force which included companies as diverse as supermarket chain Tesco, British Airways, BP, BT and steel producer Corus. It met for the first time on Friday (12 January).

“Climate change poses a challenge to business, as a major source of emissions, but it also presents significant opportunities,” CBI director general Richard Lambert said.

“Business needs to be at the heart of the debate to ensure it can play its role effectively alongside other key players," he added.

The climate change group looks as much towards the opportunities presented by the EU’s more proactive climate change policy as towards the threats.

The chemical industry would do well to show that it is willing to think along similar lines.

By: Nigel Davis
+44 20 8652 3214

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