LONDON (ICIS)--The EU's latest emissions reduction target will make carbon pricing more expensive, denting the competitiveness of energy-intensive industries like chemicals, and its cost should be shared among all economic sectors, according to the director general at trade group Cefic.
In a written response to ICIS, Marco Mensink said the EU's Green Deal is a "hugely challenging" enterprise for chemicals, arguing a “careful balance” has to be struck so European industry is not negatively affected by policies derived from the recently approved Green Deal.
The European Commission published this week a new target for the reduction of greenhouse gases (GHG) emissions by 2030; the EU’s executive body now wants its 27 member countries to reduce emissions by 55%, compared with 1990 levels, up sharply from the previous 40%.
The Commission, presided by German national Ursula von der Leyen, said in a document leaked (read it in full here) to EU-focused news outlet Euroactiv this week that efforts to tackle the coronavirus pandemic “must not hasten or worsen” the fight to slow down climate change.
Chemicals is at the centre of this on two fronts; on the one hand, the industry’s production plants are large consumers of energy to power their operations and, on the other, the materials it produces can help lower that energy consumption in sectors from transport to housing.
NEW CHEMICALS WORLD
Cefic’s Mensink said the EU’s push for a decarbonised industry is “quite ambitious”, adding that if the targets are realised it would mean that “the world as we know it” in the chemicals industry would completely change.
But for European chemicals to remain competitive, compared with other large producers like the US, where feedstocks and energy costs are cheaper, or China, where regulatory burdens are less strict, the EU should make all economic sectors share the burden of carbon costs, he said.
The EU’s Emissions Trading System (ETS) has been a pioneer in introducing levies for carbon emissions, but it is mostly energy-intensive, polluting industries that buy or sell emissions allowances.
“[The EU should be] Striking a balance where not only industry but all sectors of society carry their weight in emissions reductions [and that] will bring us the time to innovate and create the markets and demand for our products,” said Mensink.
“The underpinning need for huge volumes of renewable electricity should be central in the first years of action [as well as] the rollout of the hydrogen economy ... We are at a crossroads in the history of our industry in Europe. It is very exciting and yet hugely challenging at the same time.”
At the European Petrochemical Association (EPCA) annual meeting in 2019, the former EU Commissioner for Trade and former director general of the World Trade Organization (WTO), Pascal Lamy, said carbon pricing would be the “silver bullet” in coming decades to address climate change.
ALL ABOUT THE GREEN
The Commission’s president push to fight global warming is backed by the recently approved Green Deal, which aims to fully decarbonise the EU by 2050.
While the pandemic may have turned attention from climate change in the short term, it may end up being an ally for Von der Leyen's plans.
At a marathon summit in July, the 27 heads of state and government agreed a €750bn Recovery Fund which will transfer large sums to those countries most affected by the pandemic, with Italy and Spain at the top.
For the first time, money will also be distributed as grants – as well as loans at competitive rates – but the investments undertaken will have to be linked to the green economy; transport, housing, industry, and urban planning being at the centre of it.
Spain’s chemicals trade group FEIQUE said in July the sector would hugely benefit if the funds are actually allocated to the green economy; its director general Juan Labat said to ICIS the Recovery Fund was a once-in-a-generation chance to finally diversify the Spanish economy away from services.
“Supported by the Green Deal Recovery package, the EU will move fast forward and companies will jump on the opportunity. For our sector there are enormous opportunities in this transformation,” said Mensink.
“We need to make sure the enormous spending is done in a way that benefits all European companies, regions and countries. Here lies a major challenge. This transformation will be far from easy and we are only at the start.”
That transformation of a fossil fuels-based, energy-intensive industry would happen if breakthrough technologies are developed, said Mensink.
The efforts the chemicals industry would need to make are immense; Mensink said that, among others, by 2030 new technologies like bio- or carbon dioxide (CO2)-based chemistry, chemicals recycling, or electric crackers would need to be rolled out.
It is here where Cefic hinted at how chemicals firms’ financial burdens coming from the state could be softened, although it did not go as far as its German peer VCI, who often demands a reduction in corporation tax rates.
“We will need to invest. A careful balance needs to be struck by policymakers to develop regulations influencing behaviour without taking away the funds that we need for innovation and investment,” said Mensink.
“The fact that breakthrough technologies do not develop along linear reduction curves needs to be taken into account.
“The core question is therefore not only how we secure the investments in new technologies, developed and deployed in Europe, but also how we use the opportunities of the renovation wave of buildings, the redesign of cars, etcetera, as key markets for the European companies.”
Cefic’s director general said the EU should clarify what impact each of the Green Deal measures would have in different economic sectors.
That way, he concluded, the bloc could make sure that chemicals gets “the opportunities, time and breath” to develop the necessary reforms for a new way of undertaking industrial activities.
Front page picture: EU Commissioner for
Energy Kadri Simson at a press conference in
Brussels this week
Source: John Thys/AP/Shutterstock
Interview article by Jonathan Lopez