EU Pledges State Aid, Trade Tools to Help Chemicals Industry
(Bloomberg) -- The European Union pledged to use its trade defense powers and state aid measures to shield the continent’s chemicals makers from high energy costs and intensifying US and Chinese competition — a sign of the strain that one of the bloc’s most important industries is under.
The European Commission announced a strategy on Tuesday that would involve identifying critical chemicals at risk from what the bloc’s members deem unfair competition and setting up critical production sites to attract investment. Along with national governments, the bloc’s regulatory arm has been under pressure from the industry to prevent plant closures, eliminate investment barriers and ease regulatory pressure.
The long-awaited pledge for an overhaul comes just a day after Dow Inc. said it would shutter three plants in the continent, cut hundreds of jobs and take charges of as much as $790 million. The EU has seen an alarming loss of its share of the global chemicals market over the past decade. US plants are benefiting from the nation’s cheap energy bonanza at a time when Europe’s access to Russian gas has been severely reduced due to the war in Ukraine.
“Chemicals is the mother of all industries, with over 96% of manufactured goods relying on chemicals,” EU industry chief Stephane Sejourne said. “Today’s action plan on chemicals is our business plan to secure this critical sector’s future in Europe.”
Europe’s chemicals makers are heavily reliant on trade with the US, sending 37.7 billion euros of chemicals products across the Atlantic in 2023, according to the European Chemical Industry Council, better known as CEFIC. The trade group says the industry accounts for 1.2 million jobs.
Commission President Ursula von der Leyen has made competitiveness of Europe’s industry a key policy priority during her second term in office, vowing to support energy-intensive manufacturers during the bloc’s massive green overhaul.
The challenge she’s facing has become even bigger due to Trump’s reversal on US climate goals, the risk of a tariffs-driven trade war, and worries about Chinese subsidies.
The EU’s share of the global chemicals market stood at 13% in 2023, a drop of 15 percentage points in two decades, according to CEFIC.
As part of its strategy, the commission plans to update state aid rules to lower electricity costs for more chemical producers under the bloc’s carbon market. It also pledged fiscal incentives to boost demand for clean chemicals and proposed a package to simplify EU rules on chemical, cosmetic, and fertilizing products.
The plan for the chemical industry also sets out a future use case for per- and polyfluoroalkyl substances, or PFAs, that are also known as forever chemicals.
While stressing its commitment to minimize the emissions of those substances, the commission said it allow their continued use in “critical applications under strict conditions where no alternatives are available”.
“Our industry in Europe continues to face difficult market dynamics, as well as an ongoing challenging cost and demand landscape,” Dow chief executive Jim Fitterling said in a statement on Monday.
(Updates with trade data in fifth paragraph.)
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