US regulatory overreach threatens chemical industry competitiveness – ACC CEO

Joseph Chang

19-Jan-2024

NEW YORK (ICIS)–US regulatory policies are proliferating in a power vacuum and holding the chemical industry back, adding roadblocks to the government’s own sustainability agenda, said the CEO of the American Chemistry Council (ACC).

The US chemical industry enjoys major structural advantages – a positive tax climate, energy abundance and over $1 trillion in stimulus from the Inflation Reduction Act (IRA), the CHIPS and Science Act (semiconductors) and the Infrastructure Investment and Jobs Act, he said.

“There are tremendous opportunities for us. However, some government policies being put forth are holding us back – for example, in permitting and regulatory overreach. And then throw in some overzealous billionaires on top of that and we have a toxic cocktail,” said ACC CEO Chris Jahn at a meeting of the Societe de Chimie Industrielle in New York.

The trade group is not opposed to regulation itself but is focused on “smart regulation”, he added.

REGULATORS FILL VACUUM LEFT BY CONGRESS
With a highly divided and dysfunctional Congress that “does not legislate often anymore”, there has been an explosion of regulatory activity. In the last 20 years, the number of regulations on the chemical industry has roughly doubled, he pointed out.

“Congress leaves a vacuum, regulators fill it,” said Jahn, who added that regulatory burdens have increased across all sectors, from manufacturing to energy to banking.

Tracking regulatory activity under each of the last three Presidents from Inauguration Day to 12 May in the third year of their first term (12 May 2023 for Biden), the costs associated with final rules implemented were $363.6 billion under Biden, far outpacing the $6.0 billion under Trump and $213.3 billion under Obama, according to the ACC using government figures.

“Specifically for the US chemical industry, there are 13 regulations in the queue right now with a cost to the economy of $7 billion annually, according to the administration’s own numbers,” said Jahn.

“That has the potential, if this goes forward, of limiting access to essential materials… This can impact inflation and economic growth, and perhaps more importantly, impact our ability to compete with China,” said Jahn.

“The US is now the second largest chemical producer in the world, but China is three times bigger. And so this helps our competitors overseas if we continue down this path,” he added.

ACC CAMPAIGN TO ‘CONNECT THE DOTS’
The ACC aims to advance its campaign “Chemistry Creates, America Competes” in this election year, targeting 12 battleground states. The focus is to educate regulators and legislators on just how vital the industry is to the government’s key initiatives, he noted.

“We are in the ‘connecting the dots’ business. What I mean by that is that there is not a single person at EPA (Environmental Protection Agency), at OSHA (Occupational Safety and Health Administration), at Commerce who’s really worried about the impact of these regulations,” said Jahn.

“They’re so narrowly focused on looking at the specific chemical, the specific air issue, the specific water issue, that they do not think at all about the real world impact of their actions,” he added.

FIVE CHEMISTRIES UNDER THREAT
As an example, the EPA is looking to restrict or ban five chemistries that go into the manufacture of automobiles and semiconductors, he pointed out.

Back in mid-December, the EPA announced that it had started the 12-month prioritization process to determine whether vinyl chloride monomer (VCM), acrylonitrile (ACN), aniline and two other chemicals should be designated as high priority substances.

Jahn also pointed to the EPA in April 2023 proposing to tighten standards for chemical plants producing ethylene oxide (EO), chloroprene, benzene, butadiene (BD), ethylene dichloride (EDC) and VCM.

EO is used to sterilize over 20 billion pieces of medical equipment per year, he said.

“This matters because regulations, once they’re in place, typically do not go away. This can create barriers to entry for small firms and make it harder for larger firms to do business. But really it’s going to kill innovation that would help us tackle the world’s biggest challenges,” said Jahn.

For the five chemicals under review, the process will take years with no decision in the next 2-4 years, he said.

“The good thing for us is that we’ve learned what the EPA is looking for – the data, the information they need. We have a better feel for what can be helpful to them in the process, and they’ve learned to, so maybe that accelerates things a little bit. But this will be years and years of evaluation before any decision is made,” said Jahn.

UP AGAINST BEYOND PETROCHEMICALS
The ACC is going up against a number of groups being funded by Beyond Petrochemicals, a group launched in September 2022 with $85 million in funding from former New York City Mayor Michael Bloomberg’s philanthropic foundation that aims to block the expansion of more than 120 proposed petrochemical and plastics projects concentrated in Louisiana, Texas and the Ohio River Valley, and work to establish stricter rules for existing plants.

“If Mayor Bloomberg really cared about climate and really wanted to do something about that, we would make more [chemicals] in the US – not less. We are cleaner than anywhere else in the world and more efficient,” said Jahn, who also pointed out that Beyond Petrochemicals is also against advanced or chemical recycling of plastics.

In an October 2023 report by Beyond Petrochemicals and International Pollutants Elimination Network (IPEN), they called chemical recycling a “dangerous deception” that in addition to decades of failure, produces large quantities of hazardous waste, releases toxic air pollution, threatens environmental justice and contributes to climate change.

“What [Beyond Petrochemicals] is doing is giving this money to local groups to make it appear as if it is a grassroots effort – that these people are coming out of the woodwork and trying to address this on a local basis. These are hand-to-mouth organizations that he is now turbocharging with his money to drive his agenda,” said Jahn.

The ACC is countering this with its “Chemistry Creates, America Competes” campaign launched in September 2023.

“So far. I’d like to think we’ve been very successful. This Bloomberg effort has been going on for over a year, and not one single member of the ACC has had a permit impacted by their initiative,” said Jahn.

The ACC aims to work with the administration and the EPA to partner on “smart regulations”.

“We don’t have to ban everything, we don’t have to regulate to zero. We can do things to protect the environment but also produce the materials we need in the US,” said Jahn.

The ACC plans to activate people in 12 key battleground states that will determine the next presidency, and run political advertising campaigns to push back against over-regulation.

EU DE-INDUSTRIALIZATION
The ACC CEO pointed to the EU and the de-industrialization taking place there as a result of higher energy costs and increasing regulations as a cautionary tale.

“They have done this to themselves. They have driven up their cost of energy, driven [down chemical production] and that’s not coming back,” said Jahn.

“We’ve seen how this movie ends, so we have to make sure we don’t go down that track. If we want to make more things in this country rather than in China and avoid the fate of Europe, we need a more thoughtful approach,” he added.

Even if there is a change in government after the presidential election in November, there will still be policy risk, the ACC CEO said.

“For example, if Trump were to win, you would just see the pressure we face in Washington just go to the state level. We’re still going to have those policy challenges,” said Jahn.

Focus article by Joseph Chang

Thumbnail shows red tape, a symbol of excessive bureaucracy and regulations. Image by Shutterstock. 

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