OUTLOOK '11: Regulation to dictate Europe petchem competitiveness

31 December 2010 15:36  [Source: ICIS news]

By Franco Capaldo

Regulatory outlook for Europe chemicalsLONDON (ICIS)--The chemicals, plastics and rubber industries already operate in a challenging regulatory environment and 2011 will be no different, with policy expected to dictate the European market's success and competitiveness against the rest of the world.

The correct implementation and enforcement of regulations will not only be of high significance for the achievement of health and environmental objectives demanded by EU legislation, but is also vital so that Europe can continue to challenge in a growing chemicals market in which it is rapidly losing share, especially to the fast-expanding economies in Asia.

For authorities and companies in the European chemicals industry, the main regulatory challenges are the correct implementation of Reach (registration, evaluation, authorisation and restriction of chemicals) and CLP (regulation on classification, labelling and packaging of substances and mixtures), as well as enforcement legislation on energy efficiency and emission reductions.

On the deadline of 30 November 2010, a total of 4,300 substances were registered under the EU’s Reach chemicals regulation, including 900 not sold in Europe when the regulation became law.

The legislation, which puts the onus on businesses to show that the chemicals they use are safe, was designed to promote better health, safety and environmental protection in the EU.

The European Chemicals Agency (ECHA) said that by the first phase Reach registration deadline - which applies to most hazardous substances manufactured or imported in quantities of one tonne/year or more per company, and substances very toxic to the aquatic environment manufactured or imported in quantities of 100 tonnes/year or more per company - 24,675 registration dossiers had been successfully submitted.

The Reach deadline marked only the beginning of the regulation process and the work is far from over as the ECHA could require companies to carry out more tests in 2011, or update registration dossiers or evaluate further uses of substances. In addition there are two further registration deadlines - in 2013 and 2018 – under which industry participants will be required to register chemicals produced or imported in lower volumes.

Although Reach has no precedent in the history of the chemical industry and was a major step forward in the safe use of chemicals, concern has been expressed by some chemical producers and companies that some industrial supply chains could be disrupted by the registration process and that important industrial production could move outside of the EU because of the Reach registration requirements.

However, despite Reach being a challenge to the industry, the regulation has begun to be recognised as a model for chemicals management globally and being the first to implement this type of system has put Europe ahead of others, and has the potential to give it an advantage in terms of competitiveness as it fights for market share.

Meanwhile, for Europe’s energy-intensive refining and petrochemical industries, EU climate, environmental and energy legislation has also become a major challenge.

The European Commission’s Energy 2020 strategy, which outlines the steps it believes member states need to take to build a sustainable energy future, has been prepared ahead of the first EU summit on energy on 4 February 2011 with the expectation of turning policy recommendations into concrete legislative proposals over the next 18 months.

The strategy has primarily been driven by Europe’s climate change control goals – with the aim to sharply reduce carbon dioxide emissions (by 20% by 2020) and produce 20% of its energy needs from renewables.

If Europe's chemical industry wants to remain competitive, companies will need to satisfy these new regulations and become more sustainable by either investing further into their research and development (R&D) programmes and improving their efficiency, or by cutting production levels.

In addition the EU’s emissions trading scheme, which has led to refining being exposed to a 25% loss of its free CO2 allowances, has seen European companies having to accept further costs; in some instances the additional costs of purchasing permits to emit carbon dioxide could even push marginal producers into an uncompetitive position, causing widespread closures.

Unless there is a global agreement on the reduction of greenhouse gas emissions and the creation of a level playing field, the distortion of legislation between global markets could lead to Europe seriously falling behind other regions, with the risk of future operations being located outside Europe.

To discuss issues facing the chemical industry go to ICIS connect


By: Franco Capaldo
+44 (0)20 8652 3214



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