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Tajani wants better cooperation between the European Union and chemical industry leaders.
Sales figures reflect an even greater drop and reinforce the point that the 27-country region has lost its global leadership position. The European Union now represents only 24.0% of worldwide chemical sales, down from nearly one-third 10 years ago. Asia now represents almost half, or 44.5%, of world sales. China has risen most rapidly in recent years, to 22.2% of chemical sales, thanks to growth that kept up through the recession. IN A TURBULENT regional business, com-
panies are looking for new approaches to stay ahead. “The chemical industry is being hit by many discontinuities, including large swings in growth, exchange rates, and oil prices,” Andreas Kreimeyer, BASF’s executive director of research, told the EPCA audience. “We need to find a suitable business model to match these changes.” In his final comments as president of CEFIC, Christian Jourquin, chief executive officer of Solvay, emphasized the need for the European chemical industry to maintain its competitiveness. He said the sector Chemical executives place hope in some is putting great hope in an EU initiative, GOVERNMENT PROGRAMS but lament others known as Europe 2020, that promises new PAIGE MARIE MORSE, C&EN MUNICH policies to foster innovation and modernize Europe’s industrial base. The program, which was adopted this GOVERNMENT GENERALLY plays a biga petrochemical sales meeting may be too summer and was a recurring topic at both ger role in the lives of Europeans than it optimistic a barometer. The managementannual meetings, focuses on industrial does in those of Americans. For businessoriented CEFIC meeting was decidedly enterprises as the engine of growth for people working in a research-intensive, more somber in tone and seemed to reflect the combined countries of Europe. The yet potentially dangerous, industry such as the tepid recovery shown in the group’s strategy lays out plans to boost economic chemical manufacturing, that outsized role statistics. Although CEFIC forecasts that growth in the region while also improving can be both blessing and curse. European chemical production volumes employment, productivity, and social deThe benefits and burdens of government will be up 9.5% in 2010, the boost will not velopment in member countries. policy were in evidence during industry be enough to overcome the declines of Antonio Tajani, vice president of the gatherings earlier this month that focused 2008 and 2009, when volumes were down European Commission, the executive body on Europe’s future. Presentations and side3.3% and 11.4%, respectively. of the EU, reinforced this new focus at the line discussions at the annual CEFIC meeting, calling it a “revmeetings of the European Chemolution” that will have a major SHIFTING FORTUNES The European Union’s share of ical Industry Council (CEFIC) in impact on the chemical industry. global chemical sales has declined while China’s has increased Rome and the European Petro“Before the crisis,” he asserted, chemical Association (EPCA) in the EU was “favoring banking European Union Budapest presented a bifurcated and financial businesses. Now we North America view of the government’s role in are favoring industry, small and Asia (except Japan & China) altering the course of the chemimedium enterprises, and entreJapan cal industry there. preneurs. Without these, there “Europe is well on its way are no jobs; there is no growth.” China to recovery,” concluded Tom The Europe 2020 plan has Latin America Crotty, EPCA president and a priorities with particular releRest of Europe ■ 1999 ■ 2009 director at Ineos, after observing vance for the chemical industry. Other regions that EPCA attendance was at its It increases the R&D investment 0 10 20 30 40 highest level ever—2,300 deltarget to 3% of the EU’s gross Percent of global chemical sales egates. He called the figure “the domestic product, compared NOTE: Global chemical sales were $1.6 trillion in 1999 and $2.6 trillion in 2009. most reliable economic indicawith the 1.85% achieved in 2009. Figures for the European Union include the 27 countries that now make up the EU. tor” of industry recovery. If R&D spending reaches this SOURCE: European Chemical Industry Council But attendance figures from level, the EU estimates, employ-
MIXED BLESSINGS IN THE EUROPEAN UNION
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ment will rise by 3.7 million jobs, including more than 1 million in research. Climate and energy goals in the plan have been combined into a 20/20/20 target correlating to a 20% reduction in greenhouse gas emissions, a 20% level for energy from renewable sources, and a 20% increase in energy efficiency. The chemical industry offers important tools for prog-
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For a look at differences between the U.S. and Europe on environmental issues, click on this story at www.cen-online.org.
ress in these areas, several speakers at both meetings pointed out. “We are at a turning point, with old technologies on life support,” noted Jeremy Rifkin, president of the Foundation on Economic Trends and adviser to European
Commission President José Manuel Barroso, at the EPCA gathering. “The solution— which includes everything from renewables, to materials, to storage technologies, to smart grids—will need new chemicals.” Rifkin’s tone of cooperation and opportunity was echoed at the CEFIC meeting, where the EU’s Tajani told the audience that “the chemical industry is very important for Europe 2020.” BUT SEVERAL attendees at that event
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were skeptical of Tajani’s message. He drew stern looks from panel members, including CEFIC leadership, and even some snickering among the seated industry crowd. For many, Tajani represents an EU regulatory burden that has been disproportionately heavy on chemical producers. “The most important need for the European chemical industry is better regulations,” warned Giorgio Squinzi, CEO of Italy’s Mapei Group and incoming CEFIC president, noting that a whopping 168 regulations exist for regional producers. The primary regulation impacting European companies right now is the Registration, Evaluation, Authorization & Restriction of Chemical substances (REACH) program. This phased program targets chemicals that were in use before regulations were updated in 1981. It requires companies to submit detailed paperwork and, in some cases, conduct animal testing to determine toxicity. The first deadline for chemicals registration is Nov. 30, and many firms are struggling to meet it (C&EN, June 7, page 30). Seated near Tajani on the dais, CEFIC’s Squinzi called the REACH requirements “onerous,” although he confirmed that “the industry will do its job” and comply with them. “But the EU must remove the bureaucratic obstacles, or it will be increasingly difficult for the small and mediumsized enterprises in our industry,” he said. And the resource demands of REACH have proven to be significant. “Many companies take resources from research and development to meet REACH deadlines,” noted Hubert Mandery, CEFIC’s director general and a former BASF executive. “I know of one member company that estimates its REACH cost at 700 [million] to 800 million euros”—$1 billion or more— “from now until final deadlines in 2018. Imagine what they could do if they could
put that money into research,” he said. The greenhouse gas reduction targets managed under the EU’s Emission Trading Scheme are another challenge for the industry. ETS is a cap-and-trade system that requires companies to buy allowances to cover their greenhouse gas emissions. CEFIC claims that European chemical producers have managed to cut emissions by 42% from 1990 to 2008 while increasing production volumes by 69%. But executives say they are overwhelmed by the costs and record keeping required, especially in the absence of a global agreement—and in the expectation that reduction targets will be raised. “We need action by other big economic areas,” Squinzi warned. “Otherwise a further reduction will mean a big loss in competitiveness in Europe that we cannot afford.” Tajani agreed on this point and emphasized that the EU is willing to engage with industry on climate change. As an alternative, Solvay’s Jourquin proposed incentive-based targets. “Instead of unilaterally raising the emission reduction bar from 20% to 30%, which could mean the end of some of our activities, why not create incentives for the most efficient technologies, processes, and products that will deliver [results] fast?” he asked. Indeed, one theme of the meetings was positive motivation as a new tool for progress. “We have to go from punishment to opportunity,” Rifkin said at the EPCA meeting. “There are ways to make opportunities that combine the carrot with the stick in an intelligent way.” He cited environmental tax programs in Scandinavia that require high payments for emissions but then reserve the funds for each company to use in upgrading its emissions reduction systems. “We need to incentivize a company to move from laziness to innovation,” he said. A RENEWED FOCUS on innovation seems like a good fit for the European chemical industry as it moves to the next stage of development. “Innovation is a prerequisite for sustainable growth,” BASF’s Kreimeyer said, noting that “the future will be defined more by functional materials rather than new molecules.” He stressed the need for European producers to focus on specialty products and systems rather than the basic chemicals of the past. At the same time, Kreimeyer cautioned companies not to “develop expensive solutions that many cannot afford.” He cited
examples of biobased refineries and fuelcell-powered cars that offer solutions at prices above what the consumer will bear. Jeffrey Sachs, a professor at Columbia University and director of the Earth Institute, encouraged the industry to be “problem solvers.” At the EPCA meeting, he suggested efforts to improve fertilizer and pesticide efficiency, develop renew-
able energy, and resolve pollution issues in developing regions. A key take-away from the two events was that the European chemical industry has clear challenges that can be met only with technology and research. “You are a source of some of the problems,” Sachs admonished industry leaders, “but also a big part of the solution.” ■
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