GPCA ’22: US clean energy plan better positioned for investment than Europe’s – BASF chief

Tom Brown


RIYADH (ICIS)–The US’ recently passed clean energy funding and subsidy plan is likely to create a more productive climate for investment than the European Green Deal, which takes a more punitive stance for business on how to develop the sector, BASF CEO Martin Brudermuller said on Tuesday.

Speaking at the GPCA annual forum taking place in Riyadh, Saudi Arabia, this week, Brudermuller welcomed the approach taken by the US government in implementing the Inflation Reduction Act (IRA), despite criticism this week from European Commission Ursula von der Leyen.

Representing an answer to the European Green Deal, the $369bn policy framework includes tax breaks for projects and a more generous subsidy framework than in the European Commission plan.

The approach is likely to be more conducive to encouraging new clean energy investment projects, Brudermuller said, contrasting it with a European approach he claimed is more focused on enforcing than encouraging business transformations.

“The European Green Deal… is not encouraging to generate these business cases, while the IRA in the US is the opposite, it is creating a business case to facilitate transformation, whereas in Europe you generate regulation to enforce transformation,” Brudermuller said.

“I think it is no surprise that most probably the American way will be the more successful,” he added.

Other players at the event also endorsed the US policy framework.

“What the US has done with IRA is really good, other countries can look to that,” said Al Muthir Al Kharusi, CEO for strategy & transformation at OQ.

Ursula von der Leyen criticised the IRA framework in a speech delivered in Bruges, Belgium, on 4 December, stating that the measures are “raising concerns” in Europe, criticising what she characterised as the “America first” slant of the measures.

The IRA tax breaks could shift development of raw materials and key components such as electric vehicle batteries to the US, away from transatlantic supply chains she said, while warning that the extent of subsidies could spark an arms race in the funding packages offered by different regions.

“There is a risk that the IRA can lead to unfair competition, could close markets, and fragment the very same critical supply chains that have already been tested by COVID-19,” she said.

According to Brudermuller, moving toward net zero has become more rather than less difficult for the chemicals sector, he said, in the wake of soaring energy costs in Europe that have prompted widespread production curtailments and shutdowns, and the weakening economic picture.

The current environment, characterised by “more headwinds than tailwinds” for the sector, according to Brudermuller, increases the need for clear and coherent regulatory frameworks for companies to work within.

“We all have to stand together as a chemicals industry to fight for pragmatic, clear rules that enable economic business cases for us and for our customers,” he said.

“Politics often have dreams, but without pragmatic rules, we as an industry cannot deliver on what is intended,” he added.

Brudermuller stressed the need for realism among chemicals firms such as Gulf producers that may be at a relatively early stage of looking at clean energy transition targets compared to European players.

“You can be carried away from this topic and you are far away from economics,” he said.

“You have to make a detailed plan, I think just talking about a target and not having underlying projects to achieve it is not possible,” he added.

Front page picture: BASF’s CEO speaking to delegates at the GPCA annual forum on Tuesday
Source: GPCA

Focus article by Tom Brown


ICIS Premium news service

The subscription platform provides access to our full range of breaking news and analysis

Contact us now to find out more

Speak with ICIS

Now, more than ever, dynamic insights are key to navigating complex, volatile commodity markets. Access to expert insights on the latest industry developments and tracking market changes are vital in making sustainable business decisions.

Want to learn about how we can work together to bring you actionable insight and support your business decisions?

Need Help?

Need Help?