Europe’s mighty chemicals industry is in decline — but France is pitching a plan to get it back on track.
Once one of the jewels of European manufacturing, the chemicals’ sector has been plunged into a deep malaise over recent years, at least in part because of a surge in energy costs. The crisis reached fever pitch when even German heavyweight BASF said last year that it would be making a multibillion investment in China, as it had found business tough in its home market.
In a bid to keep the business in Europe, Paris wants the European Union to declare 15 key chemical compounds “strategic,” copying similar EU policies for raw materials and medicines.
The idea is to protect the sector to ensure Europe remains self-sufficient in chemicals used in everything from fertilizer production to plastics manufacturing.
France, a top global chemical producer, warns the sector is facing a “major crisis,” citing a 12 percent drop in production between 2019 and 2023, which it blames on rising energy costs and “fierce or even unfair competition from non-EU countries.”
“Regarding petrochemistry alone, by 2035, about 20 steam crackers may be shut down, affecting 50,000 jobs, if no collective action is taken,” reads the draft proposal obtained by POLITICO.
The proposed “Critical Chemicals Act” would identify 15 molecules as “strategic,” bringing them under an EU “strategic project” label to enable funding access. The idea borrows from the Critical Raw Materials Act — under which “strategic projects” can benefit from faster permitting procedures and additional funding — and the Critical Medicines Act.
Those “strategic” molecules are to be the building blocks for other industries, with substances like ammonia and methanol supporting agriculture and energy, and ethylene, propylene, butadiene and benzene serving the petrochemical industry.
France is Europe’s second-largest producer of chemicals with a turnover of €108.5 billion in 2023, according to the European Chemical Industry Council (CEFIC). Europe is the second-largest chemicals producer in the world after China.
According to the proposal, the act should also create support schemes for chemical plants that need investment to decarbonize and modernize, as well as for chemical plants whose closure would “jeopardize European sovereignty.”
The act is an “opportunity to acknowledge this needed [green] transition and support frontrunners in this matter,” said Noémie Jégou, chemicals policy officer at the European Environmental Bureau (EEB), highlighting the energy-intensive sector’s contribution to climate change. “But we must ensure strategic priorities do focus on non-toxic and clean chemicals and do not come at the expense of human health and the environment.”
CEFIC, for its part, welcomed France’s concern for the chemicals industry — but said further work is needed to “refine and confirm that this is the right approach.”
Competing chemicals
The past few years have seen steady job cuts in the chemical sector, most recently at Dow. CEFIC warned last month that Europe’s chemical industry is at a “breaking point”: Over 11 million tons of capacity have already been announced for closure affecting 21 major sites, it said.
France points to the gap in energy and feedstock costs between the EU and other industrial regions, due largely to soaring gas prices following Russia’s invasion of Ukraine in 2022. The paper also complains of “sometimes unfair” competition from non-EU producers — citing Europe’s struggling polyvinyl chloride (PVC) industry as an example — and of a contraction in the activity of downstream markets for chemical products, like the automotive industry.
German Chemical Industry Association President Markus Steilemann has accused Brussels of “regulating Europe into a standstill,” describing it as the “epicenter of bureaucracy.”
France, too, hints at the need to simplify EU green rules, urging that incoming laws on chemical safety and forever chemicals “take into account the competitiveness of the European chemical industry.” Non-EU imported chemicals should also “abide by high-level standards in place in the EU regarding the protection of the environment and human health,” the paper states.
The EEB’s Jégou acknowledged the industry downturn but insisted it remains “in a very competitive situation.” And while she welcomed the proposal’s pledge not to compromise environmental protections, the NGO is “concerned about potential conflicts between some molecules’ strategic status and their environmental and health impacts,” singling out the proposal’s focus on PVC and flame-retardant materials.
CEFIC said it shared France’s objective of “preserving the production of chemicals in Europe for which resilience is crucial” — but has reservations about the proposal’s definition of strategic molecules. It argues that “not only basic building blocks are at risk” but “some key derivatives as well.”
“It is also difficult to determine if similar measures to the Critical Raw Materials Act and the Critical Medicines Act would benefit the chemical sector, given the limited experience,” the lobby added, calling for a “deeper reflection of the measures that would help the sector” after the upcoming publication of the Clean Industrial Deal.
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