Securing the Competitiveness of the European Chemical Industry

High energy and feedstock costs present the European chemical industry with major challenges. Moreover, to achieve climate and environmental objectives, production processes must be redesigned to be circular and climate-neutral. Because of that, the energy-intensive sector is at a critical juncture. The new paper "Unpacking Competitiveness: Shaping Markets as the Way Forward for the European Chemical Industry" aims to conceptually unpack these competitiveness challenges. Additionally, the authors analyse circular economy measures and their potential contribution to boosting competitiveness in a changing global landscape.

Dr. Lukas Hermwille, Co-Head of the Transformative Industrial Policy Research Unit at the Wuppertal Institute, and Miriam Ruß, a former researcher at the Wuppertal Institute, state in their paper: Historically, the EU chemical industry has been able to compensate the disadvantages of high energy and feedstock costs through deeper integration and industrial symbioses in "Verbund"-clusters – a form of collaboration in which one company’s waste becomes another’s raw material. However, cost disadvantages are growing and it proves increasingly difficult to close the gap without major investments in innovative technologies. Therefore, a stable political framework is crucial to reduce the investment-stifling uncertainty that currently plagues the sector. Establishing markets that value not only the products’ physical properties but also their environmental attributes, such as embedded CO2 emissions and circular material content. Hence, mandatory quotas and lead markets could support the competitiveness of sustainable products. The authors also recommend manufactures pay attention to the "circular performance" of their products: in future, the recyclability of materials will be an increasingly important factor in the materials selection process.

"The transformation of speciality chemicals with its estimated 75,000 products is a particularly daunting challenge: While specialty chemicals are still Europe's competitive strength, they are technically very difficult to recycle. Moreover, their production is almost completely dependent on integrated fossil supply chains," explains Hermwille. To ensure the competitiveness of the chemical industry in a decarbonised economy, the speciality chemicals must be decoupled from fossil feedstocks. This requires targeted investments in research and development. The authors also recommend further exploring "chemical leasing" as a business model. It allows producers to retain material ownership and to capture value from some of the economy-wide efficiency gains accruing further down the value chain.

The publication was produced as part of the TRANSIENCE project, in which researchers analyse the twin transition of decarbonisation and circularity. To this end, they characterise and assess circularity principles and measures vis-à-vis decarbonisation. The paper is available free of charge via the link below. 

The TRANSIENCE project has received funding from the European Union’s HORIZON EUROPE Research and Innovation Programme under grant agreement No 101137606.