Cefic Europe Energy Policy Energy Policy: Energy Prices are the Achilles Heel of Europe's Industry, Cefic President Says

Editor: Dominik Stephan

Giorgio Squinzi, President of the European Chemical Industry Council Cefic, adressed the Euoepan energy policy at a press briefing in Birmingham. "I look upon energy prices as an Achilles heel of EU industry," said Squinzi in Birmingham.

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Cefic President Giorgio Squinzi comments on energy policy during its spring 2011 economic outlook press conference in Birmingham, United Kingdom, on June 23, 2011. (Picture: Cefic)
Cefic President Giorgio Squinzi comments on energy policy during its spring 2011 economic outlook press conference in Birmingham, United Kingdom, on June 23, 2011. (Picture: Cefic)

Birmingham/England – In his speech Giorgio Squinzi, Cefic's president, invited the EU's politicians and manufacturers to take a global view at the energy policy. "We are in a rapidly globalised chemicals market, and energy policy must reflect that reality," Squinzi said in Birmingham. He added a strong appeal to politicians and manufacturers to put a strong emphasis on research and development as innovations in the industry could help to overcome energy supply and emission problems.

Energy policy has even become more urgent after the earthquake in Japan and the unrest in the Middle East, he said. But also the European Commission's roadmap for a low carbon economy in 2050 adressed the need for action for energy and innovation policy.

Energy at Affordable Prices is Needed to Keep Europe's Production Alive

According to Squinzi, energy and energy prices are the Achilles heel of Europe's industry. This is of even bigger importance for the chemical industry, due to it's high energy consumption. "Europe’s industrial electricity bill is considered higher than that in many developed and developing markets. So to keep production in Europe, energy must be affordable," said Squinzi in Birmingham.

"Base chemicals, energy and feedstock together can exceed 50 per cent of total production cost, and on average amount to 40 per cent of costs," Suinzi said. "The industry, accounts for 12 per cent of total energy demand and for one third of all industrial energy (and feedstock) use in the European Union."

Squinzi Sceptical About Over-Ambitious Emissions-Reduction Plans

Squinzi also addressed the EU emissions policy, as energy use is responsible for much of the industrial emissions. Squinzi is sceptical about plans to cut carbon dioxide emisions by significantly more than 20 percent (the self-set goal of the European union) till 2020. "Data show that global CO2 emissions reached an all-time high in 2010, while emissions in the European Union fell by a remarkable eight per cent.," Squinzi said. "That is an impressive performance by many of Europe’s big energy users. It shows not only that Europe can play a strong part in tackling global warming, but has effective policies in this regard. However, many other states clearly lack both the determination and the policies to make a difference."

"Europe, nevertheless, remains determined to lead the battle. On June 21 EU governments considered a European Commission Roadmap intended to take us to a competitive low-carbon economy by 2050." Squinzi, nevertheless is sceptical if other nations are as eager as Europe to implement drastic cuts in their fossile fuels consumption. "Targeting greater CO2 reductions when other markets outside of the European Union are dragging their feet would be a lonely and bold move. But it would not necessarily be the right one (...). There are sound reasons why we should stick to what industry and policymakers previously agreed."

Squinzi mentioned the special needs and worries of the chemical industry. Competitive pressures and characteristics of the industry should be taken into account when discussion further reducing carbon-based emissions.

  • The chemical industry faces a global competition. It can not rely on only dealing with local customers and has to deal with a growing product share from the emerging markets.
  • Setting new goals could prove very cost intensive for the industry. " As things stand, a potential worst case scenario is several billions of euros per year [covering 12 chemicals benchmarks] in direct and indirect costs to be incurred during 2013-2020, depending on the emissions price."
  • Also energy and feedstock uncertainities already pose a threat to the EU's chemical branch. Further pressure comes from the political aftermath of the nuclear accidents in Fukushima/Japan and the instable situation in several Middel-Eastern and North-African states.

But, Squinzi continued, the chemical industry knew about its responsibilities: "The chemicals industry already has every reason to cut its carbon emissions. It is a big energy user, as I said before, accounting for 12 per cent of EU energy demand and one third of its industrial energy use (energy and feedstock)." The pressure that increasing energy costs put on producers has been one of the driving forces to improve energy efficiency. Squinzi said that during the energy consumption of the chemical indutry has remained more or less stable during the past 20 years, although production outputs rose by about 69 percent.

Strict Energy Policy could Force Europe's Industry to Go Abroad, Causing Back Door Emissions

A lot of this improved efficiency in the chemical industry came from what Squinzi calls "one-offs", steps that annot be repeated or extrapolated into the future - as switching from coal to gas. Nevertheless Cefig tries to meet these challenges, as Squinzi said. He especially mentioned Cefic's CARE+ energy saving programme, co-funded by the European Commission.

Squinzi was also sceptical that, if further restrictions could drive more and more production into countries that don't have the same ambitious goals as the European Union, this could ultimately lead to an overall increase of emissions.

Chemicals could nevertheless help to reduce energy consumption and thereby reduce greenhouse gas emissions, Squinzi emphasized: "A McKinsey study found that for every tonne of greenhouse gas (GHG) emitted by our industry, its products save over two tonnes of greenhouse gas emissions. They concluded that by 2030 – with the right policies under a global framework – the GHG emissions savings enabled by the chemical industry could rise to more than four tonnes for every one tonne of chemical industry emissions."

He also emphasizes that the European chemical industry still supports the goal to cut the EU's emissions by 20 percent until 2020. He is, neverthless, sceptical about the political framework that current administrations offer: "Policymakers say that a higher emissions target will lead to more innovation and create more green jobs, but that will not happen in the current EU policy environment." Especially profits from emission trading should be used to boost further researches in Europe.

Squinzi closed his speech with an appeal to politicians and manufactures to ensure reliable, safe and affordable energy and to keep the focus on developing new products and processes to reduce Europe's dependency from fossil fuels: "To achieve the goals of a low-carbon economy in Europe, more emphasis must be placed on research and development and the future innovations that will lead us to even more efficient energy use. China and the United States are putting their money on innovation, shouldn’t we? ETS revenues placed into R&D for the next “breakthroughs” that help mitigate climate change would be a step in the right direction," Squinzi said in Birmingham.