1 ENERGYzing the European chemical industry HLG Chemicals Ad-hoc group Energy, Feedstock and...

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ENERGYzing the European chemical industry

HLG Chemicals

Ad-hoc group Energy, Feedstock and Logistics15 January, 2008

P Claes, Essenscia

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1. Energy is vital to the chemical industry - as raw material and fuel

2. Industry’s essential need: Access to competitively-priced electricity and gas

3. Impact of climate and energy policies on EU competitiveness

4. Energy efficiency is of prior importance for the industry

5. Chemical products help to save energy

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3. Impact of EU climate and energy policy on competitiveness




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The chemical industry is a large energy consumer

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For chemicals, energy is more than a fuel

EU chemical* industry energy consumption by source

Source: Eurostat *including pharmaceuticals

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Energy costs and energy policy matter for important building blocks of the chemical industry

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Energy is vital to the chemical industry – as raw material and fuel

Chemical industry is the most important energy consumer among manufacturing sectors

Energy serves not only as fuel but also as feedstock: oil and gas are used as raw material for higher value added products.

The chemical industry is globally active, highly integrated and depends on very energy intensive building blocks

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EU electricity prices: A disadvantage in global competition

General Industrial Power Price (in €/MWh)

15

19

30

47

58

63

64

70

90

99

121

0 20 40 60 80 100 120 140

Saudi Arabia

Russia

China

USA

France

Switzerland

United Kingdom

Spain

Netherlands

Germany

Italy

EU

ave

rag

e *

= 4

5

Sources: Prochemics based on Information from IEA; Eurostat; EIA (2006).

EU range *

(*) Estimates for the European chlor-alkali industry

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Electricity prices traded in the European exchanges are on the rise

EEX SPOT-Mix Electricity Prices (Dec. 2006)

0

10

20

30

40

50

60

2001 2002 2003 2004 2005 2006 F 2007 F 2008

€/M

Wh Increase 2001-2006 ~ +110%

Source: Prochemics based on Information from EEX (electricity base prices).

Note: These prices do not necessarily reflect prices paid by chlorine producers.

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EU gas prices: A disadvantage in global competition

USA: $7.20

Canada: $7.10UK: $8.65

Belgium: $8.50

Russia: $1.50

Qatar: $1.80

Trinidad: $1.65

Japan: $8.70

South Korea: $8.80

China: $6.30

India: $3.70

Bolivia: $1.85

Argentina: $4.85

Iran: $1.25

Saudi Arabia: $0.75

Oman: $1.00

Ukraine: $3.60

Belarus: $3.15

Mexico: $6.85

Brazil : $4.90

Germany: $7.60

Libya: $1.00

Source: ACC

Global Natural Gas Costs – 1st Quarter 2007($US per million BTUs)

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Industry’s essential need: Access to competitively-priced electricity and gas

Energy prices are key to competitiveness

While oil has in principle global price levels, electricity and gas remain national/regional markets (gas has the potential to become a global market)

EU electricity and gas prices are a competitive disadvantage for EU industry

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3. Impact of climate and energy policies on EU competitiveness




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Competitive energy markets are essential

EU energy markets are not competitiveAccess to grids, gas storage and cross-border connections for non-incumbents difficultFew energy suppliers dominate the markets

Third package is an important stepCefic supports the EC Third Package and call for its rapid adoption and implementation.Cefic calls for improvements to the Third Package in key areas to ensure its effectiveness.Cefic calls for transitional measures until energy markets are competitive.

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Electricity price largely determined by national policies

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Source: Prochemics based on Information from DGEMP of the Ministiere de l’Economie, de Finances et de l’Industrie, France (2003).

Note: These prices do not necessarily reflect prices paid by chlorine producers.

Climate change policies cause energy prices to rise

Impact of CO2 costs on electricity prices

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What drives electricity prices… ?

Development of the certificate prices and electricity prices in Germany – first trading period 2005-2006

Certificates

Electricity

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Use of renewables in the European chemical industry

Source: German Agency Renewable Resources

Use of renewables in the European chemical industry as raw material (2003)

Chemical Industry ~6.4 million t

Other industries ~2.6 million t

74.1 million t petrochemical and about 6.4 million t renewable raw materials are used in the EU-25 chemical industry in 2003, i.e. roughly 8% of the raw materials are renewable raw materials

6%8%

0%

2%

4%

6%

8%

1999 2003

EU-15 EU-25

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Energy efficiency is not only driven by high prices

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EU Chemical industry is leading in CO2 efficiency gains

Chemical industry greenhouse gas emissions per production: EU versus US

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0

2

4

6

8

10

12

14

16

18

20Switzerland

Japan

UK

Germany

Belgium

Spain

Portugal

USA

World

Australia

Africa

India

South Africa

China

Russia

Country CO2 / GDP efficiency indexed to Japan = 1.0

Data source: IEA 2006

To ensure overall GLOBAL sustainability….minimise measures that stimulate investment leakage to most CO2 inefficient regions

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Global comparison: EU chemical industry most energy efficient

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Energy efficiency is of prior importance for the industry

Energy and resource efficiency is a means for competitiveness

The chemical industry has decoupled production growth and energy use (e.g. technological breakthroughs, diffusion of CHP)

Timing of energy efficiency measures often depends on life-time of major assets rather than energy prices

The European chemical industry, overall, is more energy and CO2 efficient than other world regions. The current EU ETS design encourages growth in carbon-intensive countries. Delocalisation harms global environmental aims.

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Innovation in chemicals is contributing to fight climate change

Energy neutral housing

High-performance insulation materials

Solar panelling and photoelectric cells

Heat-absorbing wall-board material can reduce a building’s energy consumption by 15% to 32%

The “Three-Liter House”

Source: BASF

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Chemical products support other sectors to tackle climate change

Cutting back emissions in transport

Energy efficient tyres lower rolling resistance thereby reducing GHG emissions of cars by 5%

Lightweight, high-strength plastic components replace metal and save weight for greater fuel efficiency in cars

New jet aircrafts are making increased use of plastic and carbon fibre composite materials – achieving major emissions cuts in air transport

Making fuel cells commercially viable

Smart coatings reduce drag through the fouling of a ship’s hull

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Chemical products help to save energy

Chemical industry saves energy through innovative solutions for downstream users. Chemical products save at least twice the CO2 used in their production.

Curtailing growth of the chemical industry through absolute CO2 reduction targets harms global environmental aims.

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The way forward to ENERGYze the European chemical industry

ACTIONS NEEDEDCompetitive energy markets are essential: The

Energy Package must be strengthened, not weakened

Beyond what the Energy Package will achieve:Market dominance: Provide guidance to national regulators

on effective measures to prevent abuse of market power.Long-term contracts: Workable guidelines on long-term

contracts, enabling consumers to enter into long-term supply contracts.

Transitional measures to allow access to affordable energy for energy-intensive industries until energy markets are competitive.

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ACTIONS NEEDEDAs long as there is no international agreement on

climate policy, the EU ETS design must not put unilateral constraints on globally competing industry.

Special contribution of the chemical industry to energy and ghg efficiency in economy and manufacturing must be recognised.

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ACTIONS NEEDEDChemical industry uses renewable raw materials for some of

its processes and is an important actor with regard to the development of renewable energies.

EU legislation must not favour the use of renewable resources for energy generation over their industrial use

The promotion of renewable energies should adhere to key principles: cost-efficiency, sustainability, technology-neutrality

EU legislation should provide for national exemption measures for energy-intensive industries to alleviate the cost burden and thereby guard international competitiveness

1 ENERGYzing the European chemical industry HLG Chemicals Ad-hoc group Energy, Feedstock and...

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