Why Europe needs an industrial strategy

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV.COM Ltd.

The chemical industry makes components for many clean energy sources. [Henry Burrows/Flickr]

Global investment in energy efficiency now outstrips investment in conventional power generation. Europe is at the forefront and recognises that energy efficiency represents a vast energy resource that is one of the most cost-effective ways of reducing greenhouse gas (GHG) emissions, writes Heinz Haller.

Heinz Haller is executive vice president and president of Dow Europe, Middle East, Africa and India, Dow Chemical.

In the chemical industry, we are proud to be central to these efforts – not just doubling our own energy efficiency since 1990, but creating solutions for others to use in reducing emissions, including high strength materials for wind turbine blades, components for solar power, efficient insulation for buildings and many energy storage innovations.

Our industry’s efforts are at the heart of Europe’s vision of sustainable economic growth. Our products save nearly three times as much CO2 during their lifetime as we emit for their manufacture. Yet our ability to continue supporting this vision in Europe is at risk because our competitiveness is threatened by an ever-more complex and costly regulatory burden.

It goes without saying that regulation can help to safeguard public health and the environment. But if it is not well designed, it can also stifle innovation, drive up costs, erode competitiveness and overwhelm even the most well run of companies. European Commission numbers show that in 2004, there were 940 pieces of regulation impacting the chemical industry.

Within eight years this had increased to 1,724, an increase of almost 100 new pieces of regulation per year. Commission figures also show that the cost of regulation for our industry has doubled over the same period – to the point at which it outstrips annual R&D spending.  This avalanche of regulation shows no signs of abating and it is seriously damaging our industrial performance and future growth.

Investment leakage damages Europe

This regulatory overload makes investing in Europe unattractive both for our industry and many others – leading to serious “investment leakage” and threatening Europe’s participation in global value chains.

The European chemical industry’s global market share has already halved from 32% to 15% over the last 20 years and industry investment is now eight times greater in the United States than in Europe. Given the huge increase in regulatory complexity and cost, this cannot be a surprise. Indeed the opposite, it is the predictable outcome of an automatic ‘reflex to regulation’ and a reality that must be addressed.

Energy efficiency and innovation are crucial to tackling climate change. If we want to become more energy efficient, then we will need the products of the chemicals industry to support these efforts. Around 1.2 million people are directly employed in the chemicals industry in Europe alone. If these jobs and innovative skills go elsewhere, this is a lose-lose situation for Europe, which not only impacts the industry and employment, but also weakens our own ability to tackle the great challenges of energy efficiency and climate change.

Needed: an industrial strategy

That’s why the chemical industry, including Dow and more than 125 other sectors, are calling for an EU industrial strategy. This is not a call for another Commission paper, but for an urgent and coordinated response to the competitiveness challenge facing our industries.

We are asking for a policy strategy that embodies four main elements: a shift of mindset, competitive input costs including energy, a positive embrace for new technologies, and a more dynamic approach to regulation that accepts risk and works out how it can be managed so that we can all enjoy the benefits.

For as long as I can remember, we as an industry have felt the need to focus on defending our current level of competitiveness from EU regulation that more often seems intended to prevent rather than enable industrial dynamism; and this needs to change. Instead, we need to start thinking about how we can make European industry more competitive, make our regulation more growth and innovation friendly, and deliver more of the high-quality employment and prosperity we are all looking for.

Crucially, we need policymakers to think of the European chemical industry as a partner to deliver solutions to societal challenges and an indispensable contributor to a safe and sustainable future.

We need a more joined-up policy and decision making process that allows this to happen and we need a dynamic and forward-looking industrial strategy to put Europe truly at the centre of global growth and prosperity.

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