INSIGHT: Carbon control - avoiding the worst

07 December 2009 13:46  [Source: ICIS news]

By Nigel Davis

LONDON (ICIS news)--The carbon reduction goals likely to be set at the Copenhagen UN climate change summit will lead to additional costs for chemical producers, but how will companies avoid the worst?

Sector companies produce a great deal of CO2, and they use a lot of energy. They would be hit hard by higher energy costs; further moves to cut carbon would also cost them dear.

But the argument that some chemical products ultimately help to reduce carbon emissions is well made. Building that consensus - that the chemicals industry is part of the solution to global warming rather that one of its main perpetrators - has been, and will continue to be, vitally important.

In some parts of the world, large scale chemicals makers could be fighting for their very survival if carbon reduction targets produce a particularly hostile operating environment. Cost (of production) is not everything, but it is close to it.

That fact is brought home particularly in petrochemicals where the shift of large parts of the business to feedstock rich, and cost advantaged, parts of the world continues.

Adding a further carbon burden on each tonne of product made could well drive more from the game.

The industry has taken an outwardly impressive global approach to Copenhagen. The International Council of Chemical Associations’ (ICCA’s) eight principles for reducing greenhouse gas emissions lay out the industry’s store. It makes sense to focus on the ‘largest, most effective and lowest cost abatement opportunities’.

Producers based in Europe, the US and Japan particularly would dearly like to see a level playing field where they are rewarded rather than penalised for the carbon reduction goals they have achieved and might achieve in future.

Producers have put forward their proposals to the European Commission (EC) for consideration in the benchmarking scheme that is likely to underpin the next phase of Europe’s carbon emissions trading scheme (the ETS).

Market distortions brought about by differing carbon reduction requirements could lead to a widespread shift in industrial production and companies are right to be concerned about this potential ‘carbon leakage’.

As much as they fear the additional cost burden, however, they are also mindful of the opportunities that the widespread move to reduce carbon emissions could have for some businesses.

Chemicals used in construction and transport will help reduce carbon emissions. At its core, the chemical industry knows how to improve efficiencies, recover and recycle. Its products and processes can help sectors and consumers reduce their carbon footprint.

The industry is well prepared for the COP 15 conference. The McKinsey study carried out for the ICCA on the contribution chemicals make to carbon reduction lays out much of its argument.

Chemistry has an important role to play in enabling sustainable solutions, is the conclusion of a book written by Robert Kandel which looks at how the European chemicals industry can deliver solutions to mitigate climate change.

According to the European trade federation Cefic, Kandel’s book, which is published on the Cefic website, “challenges people who think they know everything about climate change; it challenges people who think climate negotiations are but a remake of the Good, the Bad and the Ugly”.

The industry makes its case in Copenhagen at a side event to the climate conference on 17 December.

Chemicals are not good, bad or ugly. They need to be managed and controlled effectively. The chemical industry has the tools and the technologies to provide climate change solutions. It must fight, however, to ensure that those solutions can be applied effectively on a global basis.

To discuss issues facing the chemical industry go to ICIS connect

By: Nigel Davis
+44 20 8652 3214

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