Europe needs joint plan on electricity, hydrogen and CO2 networks for successful chemical industry transition – report

Joint planning of cross-border networks for electricity, hydrogen and carbon dioxide (CO₂) is crucial to help chemical industries in Europe remain competitive throughout the energy transition, showed a report by research and industry organisations from Germany and Belgium. 

Power grids must be updated as a prerequisite for electrification of the industries, and the timely buildout of a cross-border CO2 network infrastructure is “crucial to enable swift emission reductions in several industrial sectors,” said the report jointly written by chemical engineering and biotechnology network DECHEMA e.V. and researchers at VITO/EnergyVille. The organisations also argued that EU regulations such as the Carbon Border Adjustment mechanism (CBAM), which introduced a levy on carbon-intensive imports designed to support EU companies in international competition, must be improved.

The organisations also argued that EU regulations, such as the Carbon Border Adjustment Mechanism (CBAM), which came into effect this year, must be improved. The CBAM is designed to support EU companies in international competition by placing a levy on carbon-intensive imports.

“CBAM cannot guarantee a level playing field between European producers and other global regions, meaning that it will not protect industry from climate (EU ETS – Emissions Trading System)-related competitivity challenges and consequent carbon leakage,” the report said. It highlighted several options for regulatory reform in the EU, including lowering electricity prices, reforming the ETS, and introducing a system of green premiums where consumers or public authorities pay a premium for the recycled or green content in products. 

The chemical industry is one of the hardest sectors to decarbonise, as companies must make significant investments to convert entire production facilities, and climate-friendly alternatives to fossil fuels remain scarce and expensive. Carbon pricing is a key driver for the transition, but the EU and national governments have also moved to provide additional support to businesses in international competition, such as free allowances in the EU ETS. Germany has recently launched the next round of auctions for state support aimed at bridging the cost gap between sustainable and fossil technologies. 

The report focussed on the so-called Trilateral Chemical Region (TCR), a major chemical industry cluster spanning the Netherlands, Flanders in Belgium and North Rhine-Westphalia in Germany. The researchers said that global competition, weak domestic demand, costs associated with high energy prices and dependence on imports of raw materials like ammonia and fossil gas have weighed on the sector – as well as policies like emissions trading and EU and national regulations and other production factors. The chemical industry is also highly dependent on downstream sectors such as the automotive and building industry, which have been in recession in recent years, the report added. 

It also stressed that carbon pricing remains essential for making climate-friendly production processes competitive with conventional methods – including those using carbon capture and storage (CCS).