Prosperity – Financial implications of climate change
Climate change: risk or opportunity?
Limiting greenhouse gas emissions creates opportunities as new technologies and energy-efficient products are developed, but it also poses risks for organisations, investors and stakeholders. Regulations designed to combat climate change leading to unilateral financial burden increase costs that impact on industry’s global competitiveness.
The sector is an energy-intensive industry, using energy not only as fuel but also as raw material. For many years, the chemicals, plastics and life sciences industry has made strenuous efforts to improve energy efficiency and to reduce its overall carbon footprint. Given that Belgian chemical installations are already world class in energy efficiency, any further improvement will require relatively higher investments per unit of energy, that are not necessarily economically viable.
The chemicals and plastics industry is a provider of energy-efficiency and energy-saving solutions throughout the economy, such as light-weight composites for automotive applications, packaging solutions, thermal insulation materials, high-tech materials for wind mills, etc. Climate targets can thus create market opportunities for the sector, provided that maintaining production in Europe is profitable in an international context.
The chemical sector operates globally and thus faces international competition. Competitive conditions are therefore key to maintain and extend production in Europe. At European level, the Emissions Trading Scheme (ETS) has a direct impact on the use of fossil energy and on price-setting in the electricity sector, leading to indirect costs for industry. As internationally competing industries cannot pass their carbon costs on to consumers, there is a significant risk for carbon leakage shifting investments to non-European, less regulated regions.
Climate policies overly subsidised renewable energy to favour their use which led to a significant increase in industry’s energy costs. The increasing share of intermittent sources of sun and wind in the energy mix also leads to other additional costs for back-up capacity, for balancing and for adaption work on the grid.
To continue to deliver innovative global climate solutions, the sector requires an energy policy aiming at a win-win for the climate and economy, setting achievable ambitions and competitive costs which will and stimulate further investments.