Chemical industry urges EC to develop “transition pathway” to meet Green Deal’s targets
Leaders from the EU chemical industry issued an "urgent call" to the European Commission (EC) to work together to develop an industry "transition pathway" to sustain the massive investments required to meet the objectives of the EU Green Deal.
"This 'transition pathway' would set out the conditions for a successful deployment of innovative technologies in order for the EU chemical industry to meet the objective of becoming climate neutral by 2050," trade association Cefic said in early December.
Announced in December 2019, the Green Deal aims to make Europe a climate-neutral continent by 2050. As an interim step, the EC in July 2021 introduced the "Fit for 55" package that would cut the continent's emissions by 55% by 2030.
The call follows the release of a study on the business impacts of the EU Chemicals Strategy for Sustainability (CSS) by independent economic research consultancy Ricardo Energy & Environment on behalf of Cefic.
"The EU chemical industry supports the goals of the [CSS] and we are ready to work with the commission and member states to deliver on the policy goals just like we are already working on our industry's climate transition," said BASF Chairman and Cefic President Martin Brudermüller.
"The results of the first in a series of reports show that we have an enormous challenge ahead of us. To enable industry to transform, it needs a robust chemical industry transition pathway. I am inviting European policymakers and EU member state governments to work with us and turn the CSS into a genuine growth and innovation strategy," he added.
The study found that 12,000 substances, which could account for up to 43% of the European chemical industry's total revenue, might be within the scope of two upcoming EU legislative proposals alone: changes to the Classification, Packaging, and Labelling Regulation (CLP) and the application of a Generic Risk Approach (GRA). After applying different weighting factors to account for uncertainty around definitions and criteria in the CSS, the study concluded that 28% of the industry's estimated revenue will most likely be impacted, Cefic said.
A third of the 28% could potentially be substituted or reformulated, according to the companies that participated in the study. The ability of companies to substitute potentially affected products, however, will largely depend on the details of the upcoming regulations, on what could be technically and economically feasible, and especially on how customers will react to the substitutes or reformulated products, Cefic said. The downstream sectors expected to be impacted the most are adhesives and sealants, paints, and washing and cleaning products, it added.
"The role of the chemical industry is to supply downstream customers with crucial materials to meet the targets of the Green Deal. The EU chemicals industry is a major supplier of all manufacturing industries and essential and strategic value chains, including pharmaceuticals, electronics, electric vehicle batteries, and construction materials. The intended policy changes coming with CSS will also create a significant ripple effect across many value chains relying on chemicals," Brudermüller said.
Pathway timelines, incentives needed
The proposed transition pathway should include timelines and measures for the industry to develop substitutes and focus on products for which substitutes could be available first, according to Cefic. To achieve that, the pathway should build on proven and established approaches such as the risk assessment under the Registration, Evaluation, Authorisation, and Restriction of Chemicals (REACH) legislation, it added.
Incentives will be needed to create markets for these new chemicals, combined with a doubling down on enforcement of REACH and product-safety legislation for imports, according to Cefic. The package should be complemented by a strong innovation agenda to accelerate the development of safe and sustainable-by-design alternatives, it said.
Cefic believes the transition pathway should also address the other three transitions that the chemical industry has to undergo: climate neutrality, digitalization, and circularity. "Access to abundant and competitive low-carbon energy, development of relevant infrastructure, as well as new market opportunities related to sustainable products are key conditions to ensure that industry continues to thrive during the transition," Cefic said.
The study's economic analysis concludes that even when exemptions are considered, a heavy net impact remains and regardless of the scenario considered, this would represent a net market loss of at least 12% of the EU industry's portfolio by 2040.
Since this was the first of a series of studies, only two of the measures proposed by the CSS have been assessed so far, Cefic said. The cumulative impact of all other changes proposed by the strategy will be bigger, it said. The potential effect of these changes on EU chemical exports has not been examined, and this could add significantly to the overall impact, Cefic added.
The study is based on contributions from more than 100 companies together representing 67% of EU chemicals output in 2019. Data from the companies participating in the study will be used as an input to the EC's impact assessments on the CLP and REACH, Cefic said. The next report is expected to be published in the second quarter of 2022, it added.
--Original reporting by Sotirios Frantzanas, Chemical Week.
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