INEOS is calling on Europe's politicians to make an 'eleventh-hour' intervention to save the chemical industry. During a session entitled, ‘Building European supply chains for economic resilience: the case of the chemicals sector’, Rob Ingram, CEO of INEOS O&P Europe, addressed the European Commission’s Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs (DG GROW) – it plays a key role in strengthening industrial competitiveness and economic resilience across the EU.
Here is the full text of his speech
The chemical and plastics industry is of strategic importance to Europe, providing vital raw materials for virtually all value chains:
- From medical and pharmaceutical to aerospace and transportation
- From food and agriculture to information technology and communications
- From defence and security to leisure and entertainment
- From water treatment and waste-water disposal to wind turbines and solar panels
However, this industry in crisis. Closures are being announced almost monthly.
During 2023-2024 alone, more than 11 million tonnes of capacity has been announced for closure affecting 21 major sites across Europe.
Our industry is facing many headwinds, including low demand, and global over-capacity.
However, the key challenge is that Europe is no longer competitive compared other parts of the world.
We face high electricity costs; high gas costs; and we are uniquely exposed to a punitive CO2 tax.
To illustrate this point, a typical cracker in Europe will pay about €150M more per year in gas, power, and CO2 costs than it would if that plant was located in the US Gulf Coast. It is therefore hardly surprising that European producers are struggling to compete.
Then, as if these challenges were not enough, we are now seeing changes in tariff levels between the EU and the US which support imports into Europe, whilst simultaneously punishing exports from Europe.
Bold action is needed, and it is needed now, if a viable European chemicals and plastics industry is to be maintained.
So, there are four key questions to consider…
- What is needed?
- How can this be funded?
- Is it worth the effort?
- What does success look like?
What is needed?
Firstly, steps must be taken now to restore competitive energy prices – as a minimum, green levies must be removed, and grid fees reduced.
Secondly, there needs to be relief of carbon taxes and a complete re-structuring of the system.
As an immediate action, you need to stop the ship from sinking – Free Allocations must be frozen at current levels, and action must be taken to reduce the price of CO2 certificates.
Ultimately a system is needed which rewards emissions reduction without destroying industry and forcing it overseas. But we cannot delay addressing the problems with EU-ETS whilst a workable replacement is defined. So as a minimum you must not let the situation deteriorate further while a long-term solution is being identified.
In addition to action on gas, power and CO2 costs, rules relating to investment support have to be relaxed, both at EU level and at Member State level, so that companies can continue to invest in the regeneration, modernisation, and decarbonisation of existing assets, as well as investing in new assets and new technologies.
Furthermore, trade protections and/or trade compensation mechanisms must be introduced to ensure a level playing field for European industry.
And finally, definitive action should be taken to reduce and simplify regulations. This is of particular importance for Small and Medium Sized Enterprises.
How can this all be funded?
Well, according to your own website, the EU Innovation Fund contains approximately €40B; the EU Modernisation Fund has close to €60B available; and the current EU-ETS scheme raises more than €40B additional funds every year. These funds can and should be re-defined and re-directed: the Innovation Fund and Modernisation Fund must be made fit-for-purpose:
Selection criteria should be amended so that they are relevant for our industry, and funds should be made available for investment projects which have already started, not only for new projects that are still on the drawing board.
Many projects which would improve reliability, efficiency, competitiveness, or emissions have had to be put on-hold due to affordability – and these projects will not be re-started without support, despite the fact that these are precisely the projects that Europe needs and should be supporting and encouraging.
Instead of investing in our assets, we are paying CO2 taxes. We cannot afford to do both.
The next question is whether it is worth the effort? Is the climb worth the view?
Chemicals and plastics is Europe’s 4th largest industry, employing more than 1 million people directly, and another 5 million people indirectly, and, as described in my introduction, it is an industry of strategic importance for Europe. One could argue that this is something of a justification in itself, but there is more.
Europe has a strength in innovation – whether that be new technologies, new processes, new products, or new applications.
But, we need a functioning industrial eco-system within which these seeds can develop and grow, otherwise investments will happen overseas, and innovation will follow the money.
To give a couple of examples: the Circular Economy, and Blue Hydrogen with Carbon Capture.
To develop a Circular Economy at scale for the plastics value-chain one needs chemical recycling to complement mechanical recycling. However, for chemical recycling to take-off in Europe we need regulations that are technology and material agnostic, and which support the use of existing assets and infrastructure.
We also need to stimulate a market pull for Circular Economy products to ensure that first movers have a chance of success, and that further investments are forthcoming.
And importantly, we need to enforce the same standards for circular and sustainable products at our borders as those imposed on domestic European production.
For Blue Hydrogen with Carbon Capture, this needs to be recognised as THE most viable option to decarbonise existing chemical production assets. Green Hydrogen is sexy, and makes a good headline, but is just too expensive to be much more than a niche product.
Europe should be leading the Circular Economy, and needs to be pioneering Blue Hydrogen and Carbon Capture.
How to measure success?
It is clear that the path we are currently on leads to decarbonisation through deindustrialisation. This is the ultimate lose-lose scenario: Europe loses jobs, income, and strategic independence; whilst global emissions actually increase as production moves to territories with lower emissions standards, and products are then shipped half-way round the world to meet demand back here in Europe.
So, the first measure of success, and the only one that really matters at the moment, is to see decisive action now – before year-end – before it is too late.