Download Energy and Climate Change as an opportunity for the chemicals

Energy and Climate Change as an opportunity
for the chemicals industry in Europe
Mikael Karlsson
President, European Environmental Bureau
PO Box 4625
Stockholm SE 116 91
Sweden
e-mail: [email protected]
Thank you for inviting me to deliver some comments on the topics of this conference.
At least three important observations can be made concerning climate change.
First: The scientific picture is getting more and more troublesome. Taking just one example and
looking at the so-called reasons for concern, severe risky effects assessed in 2001 to occur at 3-5
degrees global warming, are now judged to occur already at 1-3 degrees global warming.
Secondly: Climate change is the most important topic, in many EU countries, among voters up
front EP election, even in polls made under the economic crisis.
Thirdly: Last week, I heard Commissioner Dimas talking about the fast that EU and US have set
up a joint working group on harmonisation of cap and trade systems. That is just one example
that the US is on the move on when it comes to climate change.
Evidently, the issue of climate change will not disappear from the agenda, not even George W
Bush could kick it off the agenda, not even the war on terror… Actually, not even the present
economic crisis has stopped policies to combat climate change, on the contrary – new policies
are under development.
It is very likely that more and more will be demanded by and from politicians, consumers and
business, in EU as well as in other parts of the world.
Climate change mitigation and adaptation require changes of two principal kinds – of
technologies and of behaviour or lifestyles. In combination, this implies changes of structures
and systems, actually of more or less our whole economy.
We live in an age of environmental concerns, problems and solutions.
These systemic changes, which to some extent are taking place already, and which inevitably
will continue to follow the coming decades, are creating threats and opportunities.
Many of the technological solutions that are needed are related to the use of chemicals.
Therefore, chemicals industry is right in talking about being an enabling industry, even if much
activity carried out by Brussels-based chemical branch organisations, when they lobby for
business as usual, is actually counteracting sustainable development, and – I dare to say – longterm competitiveness.
It would be too straightforward for me to talk in detail about the business opportunities offered
by these trends, but there is need to innovation in most sectors.
Basically, we must to switch most of the energy base from fossil to renewable in the coming
decades. Emissions of EU greenhouse gases must decrease even more than 30 percent between
1990 and 2020, something that is fully possible.
In housing, we need materials that capture direct solar energy, such as commercial photoelectric
cells, and materials that help reducing energy need, for instance improved insulation materials. In
the transportation sector there is an urgent need for commercial fuel cells and for taking
measures that dramatically increase fuel efficiency, an area in which new materials in tyres and
material that can replace metals will play a role.
In the industrial sector as such, energy efficiency must increase substantially. That is the best
strategy in order to meet not only more demanding climate policies, but also both increasing
energy prices in general – and believe me, they will increase over time – and even stronger
competing industries in emerging countries with low labour costs.
The idea that energy prices will go down substantially, and remain on low levels the coming five
to fifteen years, seems to be nothing more than a dream, and risks to be a very costly dream for
industry, including the chemicals industry, if it leads to business as usual.
Business as usual is not an option. The trends following climate change will be even stronger,
and they are paralleled with globalisation of economies and thereby globalisation of trade,
financial systems and – eventually – politics and cultures, including patterns of demand and
supply. Growing industries in emerging economies are considered to be a threat in this context
and the worst way of meeting that is with protection and business as usual. The geopolitical
shifts that are taking place are more or less inevitable.
Trying to compete in the long run on markets for bulk chemicals, without tying these in modern
clusters closely to high-knowledge, high-competence, high-tech production is very risky.
Winners will be those who adapt, and who step by step start to move early.
What would then be a responsible public policy in this case?
Business as usual until the rest of the world takes united action? No, without leaders the risk is
too high that policies will be caught in a Catch 22, with accelerating climate change as result
leading to both severe adverse effect and – first then – panicking policies that are more costly.
Instead, politics should be progressive and stimulate increased efficiency and ambitious emission
cuts. Policies should help prepare markets today for changes that more or less inevitably will
occur tomorrow.
Therefore, if needed, EU should continue to go ahead of other regions, of course while
respecting the difficulties at hand. Relatively strict policies might not only be a key to stimulate
competitiveness, they might even be necessary to maintain competitiveness. We must not forget
that emerging economies – and their industries – are preparing to meet the environmental
discourse, both due to increasing prices on e.g. energy and increasing market demands.
But wouldn’t ambitious climate policies in Europe lead to carbon leakage? Well, in theory it
might, and in practice that might be right in some cases, but not in general. Empirical evidence of
that is missing. And will is necessary be a fact in a few years that new factories in emerging
economies will have much weaker climate profile than new factories in OECD countries?
I did look carefully into the claim that environmental policy is bad for competitiveness in the
case of REACH, and what I saw was clearly a cry for the wolf – costs were many times
overestimated. This has been true also in a number of other cases, and if I take my home country,
Sweden, which has been in the forefront of environmental policy for many years, the claims of
industry of loosing market shares are seldom seen in reality.
On the contrary, the best example in Sweden of negligent environmental policy relates to of car
manufacturing. At present, companies, workers and municipalities are paying a quite high price
since the need for improving fuel efficiency – the Swedish car fleet is the least climate friendly
in the whole European Union – has been overlooked for decades.
To summarise, well-balanced but strict environmental policies can contribute to enhanced
competitiveness over time. In my view, this will be in particularly true when it comes to
combating climate change. EU policies that really set a full price on greenhouse gas emissions –
including for instance auctioning of emission rights – will be the best incentive structure for the
development of our economy, and will help industry – including chemicals industry – to grasp
the business opportunities following the enormous change of systems that will take place the rest
of this century.
Truly accepting this fact is the first step for to become winners tomorrow, helping out in making
chemicals industry a true enable of sustainable development.