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EUROPE’S(LOW+CARBON(TRANSITION:(UNDERSTANDING(THE(CHALLENGES(AND(OPPORTUNITIES(FOR(THE(CHEMICAL(SECTOR(
Spring(2014(
Contents(
▪ MoEvaEon(of(the(project(
▪ Competitiveness of the European chemical industry!
▪ What could be done to reduce emissions while maintaining or increasing competitiveness?!
▪ Implications and next steps!
MoEvaEon(
In#the#long*run#(2050)#low*carbon#economy#makes#economic#sense#and#is#necessary#• Economic'equilibrium'models'affirm'value'of'
low5carbon'economy''• However,'equilibrium'models,'scenarios'and'
roadmaps'must'not'be'mistaken'for'a'transition'plan'
In#the#short*run#(2030)#concerns#ab0ut#cost*competitiveness#dominate#• The'shale'gas'price'differential'between'US/EU'• Electricity'cost'differentials'• Demand'growth'within'the'existing'business'
models'driven'by'Asian'emerging'middle'classes'
Transition#dilemma#• Incremental'changes'vs.'disruptions'of'business'models'• Strategy'within'or'outside'existing'industry'boundaries'• Policy'aspiration'level'and'policy'risk''
European(chemical(sector(as(interesEng(case(
Competitiveness#
Security#of#Supply# Sustainability#
• Major'demand'growth'in'Asia5Pacific'• Subsidized'petro5chemicals'in'
Middle5East'• Shale'gas'boom'in'USA'• No'global'carbon'price'reflecting'
externalities'• Varying'regulation'density'and'policy'
risks'
• Climate'science'firming'up'on'fundamental'risks'from'climate'change'
• EU'roadmaps'aiming'for'massive'decarbonisation'until'2050'
• Complex'dialectic'between'regional'ambition'and'global'alignment'
• Political'will'potentially'shifting'rapidly'in'face'of'perceived'environmental'crises'
• Europe'heavily'dependent'on'oil'&'gas'imports'with'associated'price'risks'
• No'global'gas'market'• Unclear'robustness'of'shale'gas'boom'
How$to$balance$poles$in$this$complex$context?$
Methodology(
ImplicaEons(and(next(steps(Context(and(opportuniEes(
Policy(context(and(public(debate(
▪ Mapping!of!current!poli0cal!situa0on!and!resul0ng!constraints!
▪ 5!segments!▪ One!representa0ve!deep7dive!
product!for!each!segment!▪ Broad!compe00veness!
assessment!
Industry/(compeEEveness(context((chapter(1)(
▪ Historical!improvements!▪ LCA!view!of!abatement!!▪ Compe00veness!impact!▪ Integra0on!complexity!
Abatement/(technical(context((chapter(2)(
Industrial(agenda(for(Europe(
ImplicaEons(for(2030(package(
▪ What!do!the!chemical!industry!conclusions!mean!for!the!2030!package?!
▪ What!are!the!implied!demands!and!success!criteria?!
Process(going(forward(
▪ What!process!would!industry!and!policy!makers!prefer!to!bring!this!to!successful!conclusions?!
Industrial(themes(
▪ What!industrial!themes!are!aIrac0ve!for!Europe!to!pursue?!
Possible(future(roles(of(Europe(
▪ What!role!should!Europe!play!going!forward?!
▪ What!is!the!long7term!direc0on?!
Resilience/robust+(ness(of(themes(idenEfied(
▪ How!robust/resilient!are!the!themes!against!!possible!shocks/trends?!!
Contents(
▪ Mo0va0on!of!the!project!
▪ Competitiveness of the Europeanchemical industry(
▪ What could be done to reduce emissions while maintaining or increasing competitiveness?!
▪ Implications and next steps!
Key(acEvity(metrics(for(the(chemical(industry(
810
11 8
4646
GVA(EURbn!
135!
31(
8(
25(
Gross(output(EURbn!
529!
26(
13(
11(6!
44!
100%!=!
Capex(EURbn!
22!
5(16(
Emissions2,3!MtCO2e!
215!
23(
12(8(
46!
7(
Employees2!Thousands!
1,157!
28(
14(
10(
38!
Germany!France!Italy!UK!Other!EU271,!2011,!percent!
0.5%(1.2%(
X! Share!of!total!European!economy!
1.0%(4.7%(2.2%(
1!Total!chemical!industry!excluding!pharmaceu0cals;!2!Data!for!2010;!3!Includes!scope!1!and!2!emissions!SOURCE:!IHS!Economics;!Eurostat;!EEA;!CEFIC!
Historical(growth(of(the(chemical(industry(across(regions(
North(America
2011
453
2000
402
1990
206
LaEn(America
2011
145
2000
73
1990
41 Africa
2011
20
2000
16
1990
9
Middle(East
2011
68
2000
23
1990
9
EU27
2011
529
2000
378
1990
258
Asia+Pacific
2011
1,332
2000
444
1990
196
World2
2011
2,635
2000
1,360
1990
730
3.8(%(p.a.(
3.5(%(p.a.(
9.6(%(p.a.(
6.3(%(p.a.(
10.3(%(p.a.(
4.0(%(p.a.(
6.1(%(p.a.(
Total!gross!output1,!EURbn,!nominal!
1!Total!chemical!industry!excluding!pharmaceu0cals;!2!Also!includes!European!non7EU27!countries!(not!shown!on!page)!SOURCE:!IHS!Economics!
25%
1995
23,185
30%
51,081
+3.7%
2011
EU27 Asia7Pacific North!America Middle!East Other
20%
1995
934
32%
2,675
+3.7%
2011
706
+2.0%
2011
19%
1995
305
32%
Growth(comparison(with(GDP(
European(chemical(sector1(
EURbn,!nominal!
European(GDP,(all(sectors( GVA'Gross(output'
+5.1%( +6.8%( +5.4%(World:' World:' World:'
X( Absolute!EUR!growth!p.a.,!%!
EU27:'EU27:' EU27:'
1!Total!chemical!industry!excluding!pharmaceu0cals!SOURCE:!IHS!Economics!
Trade(balance(of(European(chemical(industry(by(value(
Total( 19.8(
Innova0on/!high7value!products!
21.8!
Customer/!service!inten7!sive!products!
71.0!
Regional!products/!processing!
2.4!
Feedstock7!intensive!products!
70.4!
Energy7!intensive!products!
73.0! 73%!
0%!
4%!
72%!
15%!
4%(
EU27(trade(balance(2011,!EURbn(
Net(exports/(gross(output!
0
2
4
6
8
10!
5!
0!2011!
20!
23!22!
28!
21!24!
2005!
27!
31!29!
33!
23!
2000!
25!
17!19!
24!22!
1995!
18!17!16!
6!7!
35!
30!
25!
20!
15!
1990!
8!
Historical(trade(balance(and(uElity(price(trends!
EU27(trade(balance1!EURbn!
UElity(price,!!EUR/mmbtu!EURc/kWh!
Gas!price3!Electricity!price2!
Trade(balance(by(segment!
Europe!maintains!a!trade!balance!surplus!in!chemicals!corresponding!to!~4%!of!total!domes0c!produc0on!
1!Total!chemical!industry!excluding!pharmaceu0cals;!2!Wholesale!price!for!Germany;!3!Average!German!import!price!SOURCE:!IHS!Economics;!Enerdata!
Employment(trends(in(the(European(chemical(sector(
7
24!
7(10( 10(
14(
28(
Other!
Poland!
Spain!
Italy!
UK!
France!
Germany! Thousands!Thousands!
+2.1%(p.a.(
1,157!
2010!2005!
1,296!
2000!
1,439!
1995!
1,587!
430
New!out7sourced!jobs1!
Net(jobs(lost(
230+290(
Direct!jobs!!lost!!
1407200!
Translates(to(~1%(total(decrease(p.a.(
1!Es0mate!based!on!OECD!STAN!Input7Output!data!of!value!and!labor!numbers!for!service!sectors!vs.!chemical!industry!SOURCE:!CEFIC!Chemdata!Interna0onal;!Eurostat;!OECD!
Direct(jobs(lost(in(relaEon(to(new(outsourced(jobs,(1995+2010(
Directly(employed(in(the(European(chemical(industry!!
DefiniEon(of(segments(based(on(product(feature(mapping(
Bulk
Energy intensive products
Feedstock intensive products
Regional pro-ducts/processing
Customer/service intensive products
Innovation/high-value products
Pigments
Textile chemicals & dyes Industrial cleaners Imaging chemicals
Chlorine-based polymers
Industrial gases Chlorine-based chemicals
Rubber elast. & chem.
Inorganics
Polymers and additives Petrochemicals1
Pharma fine chemicals
Electronic chemicals
Specialty paper chem.
Paints, coatings and inks Construction chemicals
Oil field chemicals Water chemicals
Mining chemicals
Catalysts
Specialty agrochemicals
Enzymes
Functional specialties Functional materials
Food/ feed ingredients
Synth. lubricants & additives
High
Medium Low
Medium
High
High High
Medium
High
Medium Medium
Low
Medium
Medium
Low Medium
Medium Medium
Medium
High
Low
Low
Low High
Low
Energy intensity
Low
Global
Global Global Global
Global
Regional Global
Global
Global
Global Global
Global
Global
Regional
Regional Regional
Regional Regional
Regional
Global
Global
Global
Global Global
Global
Trade intensity
Regional
Low
Low Low Low
Low
Low Low
Low
Low
Low Low
High
High
High
Low Low
Medium Medium
Medium
High
High
High
Medium High
High
Value density
High
Low
Low Low Low
Low
Low Low
Low
Low
Medium Low
High
High
Medium
Medium Low
Medium Medium
Medium
High
Medium
High
Medium High
High
R&D intensity
High
Low
High High
Medium
High
Low Medium
High
Low
High High
Medium
Low
Low
High High
Medium Low
Medium
Low
Low
Low
High Low
Low
Feedstock intensity
Medium
1!Petrochemicals!can!be!split!into!more!subcategories!
ProducEon(cost(comparison(USD/ton!(except!carbon!fiber)!
533
+39%
404
-54%
191
+78% 1,058
878 868
Raw!materials!(net!of!!by7product!credits)
Electricity
Other!variable!cost1
Labor
Maintenance!and!plant!overhead!
SG&A
2,089
+25% 2,774 2,610 2,555 2,480 2,268 2,153 2,283
+27% 3,141 2,899 2,896
1,879
+28% 2,944 2,874 2,593 19723!
31735!26730!+35%(
Energy(intensive(products:((Polyvinyl(chloride((PVC)2!(
Feedstock(intensive(products:(Polycarbonate(
Customer/service(intensive(products:(Polyalphaolefins(
Regional(products/processing:(Rigid(polyurethane(
Europe!generally!has!a!cost!disadvantage!compared!to!other!regions,!mostly!driven!by!raw!materials!and!electricity!vs.!the!US!and!Saudi!Arabia,!and!by!labor,!maintenance!and!SG&A!vs.!China!
InnovaEon/high+value(products:((Carbon(fiber9!USD!/!kg!
3! 4! 5! 6! 7!7! 8!
NOTE:!Results!modeled!based!on!market!prices!of!u0li0es!and!benchmarked!data!by!process!and!country;!1!Includes!mainly!fuel!for!heat!and!steam,!but!also!catalysts,!addi0ves!etc.;!2!Raw!material!costs!can!be!nega0ve!as!chlorine!produc0on!generates!by7product!revenue!from!caus0c!soda;!3!Inland!carbide!with!electricity!from!coal;!4!Ethylene!with!electricity!at!market!price;!5!Coastal!carbide!with!electricity!at!market!price;!6!Asahi!7!buy!BPA;!7!Phosgene!7!buy!BPA;!8!Phosgene!–!buy!phenol;!9'Estimate.'!!!!SOURCE:!McKinsey!margin!models!
4063,141
2,283!
SG&A
286!
Maintenance!&!plant!overhead!
205!
Labor Other!variable!cost!
13!
Electricity
14!
Raw!materials
11!
Examples(of(cost(differences(between(Europe(and(other(regions(
533
136878
3!
SG&A Maintenance!&!plant!overhead!
45!
Labor
18!
Other!variable!cost
84!
Electricity
65!
Raw!materials
Poly+urethane(USD/ton!output(
PVC(USD/ton!output!
SOURCE:!McKinsey!margin!models!
Assessment(of(compeEEveness(by(region(
Other(crucial(factors(
Region(Local(demand(growth1(Cost(posiEon(
Business(climate,((ease!of!doing!business4/!corrup0on5(
EU27(
US(
China(
Saudi(Arabia(
25750%!disadvantage!compared!to!other!regions!
21!/!12!
274%!10740%!advantage!vs.!Europe!
4!/!19!
>10%!
Higher!cost!than!EU!for!some!products,!up!to!50%!lower!cost!for!others!
96!/!80!
~8%!Cost!advantage!(up!to!>50%)!for!bulk!chemicals!
IntegraEon/(resilience(
Overall,!highly!integrated!and!mature!industry!
Highly!integrated!and!mature!industry,!new!investments!ongoing!
Less!mature!industry,!not!yet!fully!op0mized!!
Less!mature!industry,!more!narrow!range!of!chemicals!produced!
26!/!63!
Access(to(skilled(labor,(skilled!labor2/!educa0on3!
17!/!14!
6!/!25!
44!/!54!
31!/!39!
ConvenEonal(economics(
173%!
High! Medium! Low!Level!of!compe00veness:!
NOTE:!Europe!represented!by!Germany!in!rankings;!1!Calculated!as!produc0on!minus!net!exports!between!201172016!using!data!from!IHS!Economics;!2!Rank!in!“Availability!of!scien0sts!and!engineers”,!World!Economic!Forum!(WEF);!3!Rank!in!“Quality!of!the!Educa0onal!System”,!WEF;!4!Rank!in!the!World!Bank’s!ease!of!doing!business!index!2013;!5!Rank!in!Transparency!Interna0onal’s!corrup0on!percep0on!index!2013!SOURCE:!World!Bank!Doing!Business!2014;!IHS!Economics;!WEF!Global!Compe00veness!Report!201372014;!Transparency!Interna0onal!
0
50
100
150
200
250
2020!2016!2012!2008!2004!2000!
Investment(trends(for(Europe(and(the(US(
Actual(and(announced(investments(compared(to(exisEng(producEon(volume1!Petrochemicals!only,!USD/ton!
! Translates'to'capacity'growth'of'~20%'201352018'for'petrochemicals'(~50%'of'industry)'
! Petrochemicals'likely'to'benefit'most'from'shale'gas'–'lower'growth'for'other'segments'
! Too'few'announcements'after'2018'to'make'projections''
US!
EU27!
1!Data!for!petrochemicals!only,!excludes!inorganics!and!special0es.!Includes!new!investments!and!maintenance!capex!(maintenance!calculated!as!1.5%!of!replacement!value),!excludes!cost!of!plant!conversion!(Europe!has!heavily!converted!chlorine!plants!and!the!US!has!converted!crackers)!
SOURCE:!McKinsey!models!
Contents(
▪ Mo0va0on!of!the!project!
▪ Competitiveness of the European chemical industry!
▪ What could be done to reduce emissions while maintaining or increasing competitiveness?(
▪ Implications and next steps!
European(chemical(industry(emission(and(producEon(level1,(index!1990!
Historical(GHG(emission(reducEon(development(
140!
120!
100!
80!
60!
40!
20!
0!
+21%
+49%
2011 2000 1990
Produc0on,!tons
Scope!1!emissions,!tCO2e!
EU(emission(price!EUR/tCO2!
0
5
10
15
20
25
30
2013!2012!2011!2010!2009!2008!2007!
▪ Emission!intensity!reduced!by!~60%!199072011,!or!4%!per!year!
▪ N2O!reduc0ons!account!for!two7!thirds!and!CO2!for!one7third!
1!Es0mated!based!on!petrochemical,!ammonia,!and!nitric!acid!produc0on!!SOURCE:!EEA;!ICIS!ATEC;!UNFCCC!
IntroducEon(to(PVC(
13
13 9
9
8
4
6
16 22
Pipe(and(fihngs((
Window(frames(
Rigid(profiles(
Rigid(film(Flooring(
Flexible(film(&(foil( CoaEng(
IntroducEon(to(PVC(
▪ PVC!(polyvinyl!chloride)!is!the(third(most(common(plasEc!in!the!world!aqer!polyethylene!and!polypropylene!
▪ Its!strength,!durability!and!flexibility!allows!for!a!broad(range(of(applicaEons,(especially!for!long7term!use!in!outdoor!construc0on(
▪ Cost+effecEve(material!compared!to,!e.g.,!aluminum!and!wood!
▪ Mainly!produced!from!ethylene!and!chlorine!
Key(facts((
▪ EU(producEon(of(~6(million(metric(tons(in!2012!
▪ ~70%(consumed(by(the(construcEon(sector(
▪ Consolidated!market!where!the!top(6(manufacturers(produce(75%(of!PVC!resin!in!Europe(
▪ Energy(intense(producEon(of(chlorine(main!driver!of!total!PVC!emissions!of!~12(MtCO2e(
▪ ~360,000(tons(recycled(2012((of!~272.5m!tons!post7consumer!waste)!
PVC(applicaEons,(percent!
Used!for!construc0on! Partly!used!for!construc0on! Other!applica0ons!
Other,(e.g.(
Cables(
Flexible(tubes( Medical(Roofing(
Rigid(sheets(
ENERGY!INTENSIVE!PRODUCTS:!PVC!
A
SOURCE:!Analysis!based!on!industry!reports!and!interviews!
Overview(of(value(chain(and(associated(emissions(
Total!
1.973.5!
0.9+1.0(1.071.1!071.4!
End7of7life!
071.47!
Addi0ves!
<0.16!
Processes!
~0.15!
Chlorine!
1.271.34!
Ethylene!
0.570.63!
Direct!Indirect!End7of7life!
Overview(of(emissions(across(PVC(value(chain!
PVC!product!
▪ Processed!PVC!compound!
Emis+sions(
Per(ton(of(virgin(PVC(produced2,((tCO2e)!
Total(European(emissions8((MtCO2e)!
Feedstock( Manufacturing(
Value(chain(
End+of+life(soluEons(
▪ Gas!with!high!intraregion!trade!
▪ In!Europe!mainly!produced!from!naphtha(
Ethylene! Chlorine!
▪ Gas!produced!from!electrolysis!of!brine!
▪ Short!trans7porta0on!range!
PVC!
▪ Globally!traded!
▪ EDC!(liquid)!and!VCM!(liquified!gas)!are!intermediates!
▪ EDC!and!VCM!are!traded,!albeit!in!smaller!volumes!today!
PVC!precursors1!
Recycling!(~260,000!tons,15%)!
Inciner7a0on!
ProducEon(of(PVC(
PVC!compound!
▪ Blended!with!5750%!addi0ves!
▪ Globally!traded!▪ Can!take!form!of!pellets!
Land7filling!(majority)!
~272.5!million!tons!of!post7consumer!waste!Addi0ves!
2.372.6! 1.471.6! 0.470.5! <0.1! ~0.470.59!0.570.6! 5.275.8! ~0.2! <0.1! 0!
4.775.1!
6.076.7!
10.7+11.8(Total:(
AENERGY!INTENSIVE!PRODUCTS:!PVC!
1!Ethylene!dichloride!(EDC)!and!vinyl!chloride!monomers!(VCM);!2!For!one!ton!of!PVC!resin!as!amount!of!addi0ves!varies!greatly!between!applica0ons.!Transporta0on!emissions!included!in!chain;!3!Emissions!from!naphtha!produc0on/!extrac0on!and!from!ethylene!produc0on!through!conven0onal!cracking,!0.29!ton!ethylene/!ton!of!PVC;!4!Data!for!diaphragm!cells,!similar!electricity!requirements!for!diaphragm!and!membrane!according!to!CEFIC.!0.73!ton!chlorine/!ton!PVC;!5!Include!chlorina0on!to!EDC!(53%!direct!chlorina0on!and!47%!oxychlorina0on,!only!~60%!of!emissions!accounted!for7!rest!to!HCl),!EDC!cracking!to!VCM!and!bulk!polymeriza0on!to!PVC;!6!Assumed!addi0onal!5%!on!weight!basis,!assumed!average!emissions!from!chemical!industry!(166m!tons!CO2!emissions!from!~400m!tons!produced).!Excludes!plas0cizers;!7!Shows!range!from!0!(landfilling)!to!1.4!(incinera0on)!tCO2/!ton!PVC;!8!Lower!range!presented!in!bubbles!assuming!15%!recycling,!upper!range!assuming!no!recycling;!9!Assuming!15%!of!waste!incinerated!NOTE:!Analysis!based!on!produc0on!of!6m!tons!2012.!Indirect!emissions!75785%!lower!in!France,!represen0ng!~13%!of!EU!27!market!SOURCE:!Analysis!based!on!industry!reports!and!interviews!
Key(abatement(levers(across(the(value(chain(
Improve(process(and(energy(efficiency(
▪ Con0nuous!efficiency!improvements!in!mul0ple!process!steps!leading!to!a!25%!reduc0on!by!2030!(~2%!p.a.)!▪ Examples!may!include!improved!polymeriza0on!techniques!and!decomposi0on!of!GHGs!
Switch(to(green(energy((throughout(the(value(chain(
▪ Non7fossil!energy!share!of!total!electricity!produc0on!to!be!increased!!from!today’s!46%!to!~70%2,!reducing!CO2!emissions!from!electricity!genera0on!by!~50%!!
Use(bio+ethylene(as(feedstock(
▪ Can!technically!subs0tute!petrochemical!based!ethylene!completely!
▪ Bio7ethylene!based!on!ligno7cellolosic!biomass!required,!with!uncertain!feasibility!in!near!to!mid7term!horizon!
▪ Breakthrough!dependent!on!local!condi0ons,!technology!mature!and!economic!viability!
Implement(new(technology(in(chlorine(electrolysis(
▪ Con0nue!shiq!from!mercury!cell!electrolysis!towards!more!energy!efficient!membrane!cell!and!ODC!electrolysis!
▪ Compared!to!mercury!cell,!membrane!cell!has!~25%!lower!emissions.!In!ODC!technology!emissions!are!~40%!lower!than!mercury!cell!emissions!
Increase(recycling(rates(with(focus((on(pipes,(fihngs(and(window(frames(
▪ Composite!structures!containing!at!least!70%!of!PVC!can!be!recycled!using,!e.g.,!the!VinyLoop1!process!
▪ Availability!of!used!PVC!a!short!term!barrier!given!life0mes!of!up!to!50!years!and!more!
▪ Large!poten0al!from!installed!base!in!the!coming!decades!from!lead!and!cadmium!free!produc0on!since!the!1980’s(
Recycling!
Land7filling!
Incinera0on!
PVC(product(Ethylene( Chlorine( PVC(PVC(precursors( PVC(compound(
AddiEves(
AENERGY!INTENSIVE!PRODUCTS:!PVC!
1!Partnership!between!Solvay!and!Serge!Ferrari;!!2!Based!on!Enerdata!Emergence!case!SOURCE:!Analysis!based!on!industry!reports!and!interviews!
Shik(to(renewable(feedstock(
Shik(to(green(energy(
Global(emission(reducEons(
Process(and(energy(efficiency(
Recycling/(re+use(
Frozen(technology(20302(
Total(emissions,(2030(
Go(to(more(green((energy(mix(
▪ Green!energy!share!of!total!electricity!produc0on!to!be!increased!from!today’s!46%!to!~70%,!reducing!CO2!emissions!from!electricity!genera0on!by!50%3!
Use(bio+ethylene(as(feedstock(
▪ 50%!of!ethylene!replaced!with!bio7ethylene!by!2030,!with!40%!emission!reduc0on!per!ton!output!▪ Uncertainty!around!technology!maturity!and!economic!viability,!but!research!ongoing!
Improve(other(processes(
▪ 1.572%!process!and!energy!efficiency!improvement!annually!un0l!2030,!!poten0al!in!electrolysis!step!assumed!be!50%!less!given!amount!of!electrochemical!energy!needed!
▪ In!line!with!industry‘s!20%!target!of!reduced!energy!consump0on!for!resin!producers!by!2020!
Implement(new(electrolysis(technology(
▪ Replace!mercury!cell!capacity!(20%!of!European!capacity)!with!membrane!cell!or!ODC!technology!▪ Average!electricity!consump0on!in!membrane!cell!electrolysis!23%!lower!than!in!mercury!cells,!in!
ODC!42%!lower!
Increased(use(of(recycled(PVC(in(producEon(
▪ Lower!limit:!2m!tons!PVC!recycled,!conserva0ve!pace!compared!to!industry!target!of!800,000!tons!recycled!in!2020!
▪ Upper!limit:!75%!of!pipes!&!fixngs,!50%!of!window!frames!and!on!average!25%!of!other!applica0ons!produced!with!recycled!PVC!
Global(potenEal4(▪ Likely!that!others!will!follow!if!a!breakthrough!in!bio7ethylene!produc0on!occur!▪ Poten0al!from!expor0ng!electrolysis!technologies!outside!of!Europe.!Less!likely!that!other,!
individually!less!impacyul,!process!efficiency!improvements!would!be!spread!▪ Further,!large!poten0al!from!showing!that!recycling!can!be!successfully!implemented!
Emission(reducEon(AssumpEons(
Overview(of(total(emission(reducEon(opportunity(by(2030(
+45+55%(
6.578!
10725!
1.371.5!
2.272.6!
1.872.4!
0.270.4!
0.370.6!
14!
Direct!! Indirect!
Scope((1(+(2(
Scope((3(
AENERGY!INTENSIVE!PRODUCTS:!PVC!
MtCO2e,!2030,!assuming!levers!pursued!in!parallel1!
1!Individual!levers!have!larger!poten0al!if!pursued!alone;!!!!!2!Assuming!1.0%!produc0on!growth!from!2012;!!!!!!!3!Poten0al!reduced!to!account!for!in7house!energy!produc0on;!!!!!!!4!PVC!scope!SOURCE:!Analysis!based!on!industry!reports!and!interviews!
Mapping(of(abatement(opportuniEes(by(compeEEveness(impact(and(complexity(
Global!poten0al!
Product/materials!subs0tu0on
Shiq!to!green!energy
CCS
Enabling!downstream!emissions!!reduc0ons!
Shiq!to!renewable!feedstock
Process!and!energy!efficiency
Recycling/re7use IntegraEon(and(governance(complexity!
Factor'cost'
Single'process'
Cross1'process'
Cross1'country/'region'
Cross1'sector'
Impact(on(compeEEveness(
NegaEve(Puts'stress'on'
financial'performance'
PosiEve(Opportuni:es'for'growth(
Very(negaEve(Could'cause'segments'to'relocate'
Very(posiEve(Could'make'
segment'a'world'champion(
(
Neutral(No'major''effects'on'
compe::veness(
1!Given!the!highly!varying!emission!baselines!for!the!five!chemicals!and!thus!varying!absolute!abatement!poten0als!for!the!different!levers,!the!analyses!have!been!normalized!to!provide!indica0ve!ranges!of!the!total!opportunity.!For!the!scope!3!opportunity,!global!mul0plier!effects!are!excluded!in!this!calcula0on!
▪ >80%!of!total!poten0al!(including!scope!1,!2!and!3!emissions)!requires!integrated!ac0on1!▪ Substan0al!poten0al!from!other!levers!beyond!tradi0onal!process!efficiency!▪ Addi0onal!opportunity!to!contribute!to!global!emission!reduc0ons!▪ Despite!low!compe00veness,!there!is!significant!poten0al!even!in!bulk!segments!(PVC!and!polycarbonate)!that!would!not!harm!compe00veness!
Industrial(themes(for(the(chemical(industry(
Carbon(leakage(risk!
Factor'cost'
Single'process'
Cross1'process'
Cross1'sector'
Tradeoffs! CompeEEve(opportuniEes(stopped(by(non+economic(barriers(
Circularity!
InnovaEon(related(opportuniEes(Cross1'country/'region' Cross+sector(
collaboraEon!
Advanced((materials(innovaEon!
NegaEve(Puts'stress'on'financial'
performance'
PosiEve(Opportuni:es'for'
growth(
Very(negaEve(Could'cause'segments''
to'relocate'
Very(posiEve(Could'make'segment''a'world'champion(
Neutral(No'major'effects'on'compe::veness(
Impact(on(compeEEveness!
IntegraEon(and(governance(complexity!
65775
55765 50760
20730
40750
~0
40750 35745
Overview(of(emission(reducEons(
~50!
~30
~20
Isolated!Europe!
~45!
~40
~5
Differen70ated!global!ac0on!!
~50!
~40
~10
Level!playing!field!
~40
~30
~10
Historical!reduc0on!!pace!(scope!1!and!2)!
~50
Con0nued!fragment7a0on!
~10
Historical!reduc0on!!pace!(scope!1)
~60
~50
~10
~40
Reduc0ons!rela0ve!to!base!year!
Implied!reduc0ons!also!considering!produc0on!growth3!
Historical(1990+2010( Forward(looking(2010+2030(
X( Reduc0on!needed!2010730!!to!meet!80%!reduc0on!1990720504!
37+42%5(
Results!from!this!study2!
Scope(1(only( Scope(1(and(2((incl.(energy(efficiency(and(decarbonizaEon(of(power)(
PVC! PC! PU! PAO! CFRP!
CEFIC!study1!(different!baselines!by!scenario!due!to!varying!degrees!of!compe00veness!and!carbon!leakage)!
Percent!
1!CEFIC!report!“European!Chemistry!for!Growth”!(including!scope!1!and!2!emission!reduc0ons,!decarboniza0on!of!power,!and!different!compe00veness!and!carbon!leakage!assump0ons!by!scenario);!2!Includes!total!iden0fied!scope!1!and!2!abatement!poten0al,!whereof!approximately!60770!percent!is!es0mated!to!have!a!neutral!to!very!posi0ve!impact!on!compe00veness.!In!addi0on,!there!is!significant!scope!3!poten0al!that!is!not!shown!on!this!page;!3!Takes!into!account!the!frozen!technology!emissions!growth!resul0ng!from!increased!actual/expected!produc0on!volumes!during!the!period;!4!Assuming!same!CAGR!201072050;!5!Lower!range!including!scope!1!emissions,!higher!range!including!scope!1!and!2!emissions!!!SOURCE:!UNFCCC;!CEFIC!
Contents(
▪ Mo0va0on!of!the!project!
▪ Competitiveness of the European chemical industry!
▪ What could be done to reduce emissions while maintaining or increasing competitiveness?!
▪ Implications and next steps(
Possible(roles(of(Europe(–(should(Europe(consider(to(broaden(its(focus?(
Should(Europe(broaden(its(focus?(
Main!focus!today!
Reduce(own(emissions(and!resource!use!in!the!current!industrial!structure!▪ E.g.,!process!and!energy!efficiency!
Reshape(industrial(system(to!reduce!own!emissions!and!resource!use!▪ E.g.,!circularity,!cross7sector!collabora0on!
Provide(advanced(markets(for!novel!low7carbon!solu0ons!▪ E.g.,!fuel!effi7ciency!standards!for!vehicles!
Develop(global(soluEons(through!innova0on!oriented!policy!▪ E.g.,!advanced!materials!innova0on!
Current(policy(context(and(public(debate(
Carbon(policy(
Macro(economic(environment(
Governance(
▪ New!European!Commission!to!be!appointed!in!2014!▪ Na0onal!governments!play!increasingly!important!role!for!climate!and!energy!topics!▪ Carbon!agenda!cuts!across!responsibili0es!of!mul0ple!DGs!
▪ ETS!as!flagship!policy,!but!publically!debated!due!to!the!low!carbon!price!▪ Policy!approach!(targets,!metrics,!roadmaps)!largely!focused!on!reducing!own!emissions!by!adding!cost!to!emiIers!▪ For!consumer!sectors,!product!standards!(e.g.,!white!goods!labeling)!are!examples!of!non7cost7addi0ve!measures!
▪ Long!period!of!weak/nega0ve!economic!growth,!!specifically!in!southern!Europe!▪ Euro!crisis!and!financial!stress!on!both!governments!and!industries!▪ Protec0on!of!industries!and!jobs!major!policy!priori0es!
QuesEons(for(the(key(themes(
Circularity(▪ What!is!the!aIrac0veness!of!a!circular!system!for!Europe!and!the!industry?!
▪ What!chemicals!should!be!priori0zed,!and!how!could!the!transi0on!happen?!
Cross+sector(collaboraEon(
▪ How!could!cross7sector!collabora0on!be!accelerated!further?!▪ Would!policy!have!a!role!to!play!to!achieve!the!accelera0on?!
Advanced(materials(innovaEon(
▪ What!innova0ons!could!bring!the!most!value!and!sustainability!impact?!
▪ How!could!policy!speed!up!innova0on!without!undue!interference?!
CompeEEve(oppor+tuniEes(stopped(by(non+economic(barriers(
▪ What!are!the!key!barriers!that!prevent!change!today?!
▪ How!could!such!barriers!be!removed!without!excessive!policy!complexity?!
Mindset(shik(required(–(Governance(challenge(
Industry/ competi-tiveness context
Abatement/ technical context
Policy context
From To
▪ Protecting status quo and arguing for a global “level playing field”
▪ Taking advantage of rapid shifts
▪ Competitiveness is factor cost ▪ Competitiveness in a broader notion
▪ Product in focus ▪ End-solution functionality in focus
▪ European focus – cutting our own emissions
▪ Global focus – provide solutions for Europe and beyond
▪ Scarce opportunities - providing economic incentives
▪ Abundant opportunities – fostering creativeness and direction
▪ Forcing industry to do more ▪ Differentiated & cooperative approach
▪ Governance framework on EU level ▪ Integrated policy on EU, state, and local level to leverage a broader range of tools (e.g., fiscal policy)
▪ Focus on optimizing current internal structures
▪ Focus on cross-company and cross –industry optimization
▪ Climate as a driver ▪ Climate as a co-benefit
▪ Manufacturing ▪ Manufacturing and servicing
Next(Steps(by(ECF(
1. Discuss!implica0ons!of!study!with!industry!and!policy!stakeholders!(April7June)!� Bilateral!discussions!and!Workshops!!� Review!of!exis0ng!and!planned!ini0a0ves!on!circularity,!cross7sectoral!
op0miza0on,!material!subs0tu0on!etc.!!� Iden0fica0on!of!gaps!where!discourses/ini0a0ves!need!to!be!connected!
!2. Compare!success!factors!for!balancing!triple!objec0ves!across!industries!
(June7September)!� Link!to!2030!package!discussion!
3. !Establish!a!High7Level!Group?!(September?)!� Cross7stakeholder!playorm!to!think!systemically,!beyond!current!industry!
structures!and!business!models!� Analy0cal!capacity!to!explore!transforma0on!requirements!for!key!
opportunity!areas!� Capability!to!integrate!perspec0ves!on!industrial!policy,!climate!policies,!
resource!efficiency,!energy!markets,!trade!