Cefic Views on Market Pull Measures: Making the business case for low carbon, circular products

The chemical industry provides solutions that are essential to meet Europe’s climate-neutrality and circularity goals, but there are still insufficient demand incentives for more costly sustainable products. As such, Cefic published a view paper highlighting if and how ‘market pull’ measures could support the business case for chemical companies to transition to low-carbon and circular products.

In its paper, Cefic indicates both supply and demand side measures are needed, considering the magnitude of required investments for the transition, estimated at 800 billion Euro per year by Mario Draghi. These measures must operate under a set of principles and conditions to ensure their success and target the right product features:

To drive sustainability and competitiveness in the chemical industry, effective demand-side measures are important. These measures should create incentives at scale quickly, without placing undue burdens on companies. They must be based on clear, harmonised definitions and standard methodologies, ensuring consistency and enforceability.

• EU producers should have a fair share of new market opportunities, and criteria for market pull measures must be well-chosen to avoid being counterproductive. The measures need to be adapted to the diverse value chains within the industry, as a one-size-fits-all approach won’t work.
• Positive, incentivising measures are more likely to succeed than punitive ones: encouraging sustainable practices through rewards will be more effective than imposing penalties.
• Demand-side measures will not work without the supply-side being addressed, as supply-side challenges (e.g. costs of energy and of regulation) are the main hurdle to Europe’s competitiveness while pursuing green initiatives.

In conclusion, when designing demand creation policies, EU policymakers should consider these principles and conditions to create a supportive environment that fosters innovation and growth while ensuring that the industry can meet its sustainability goals. A second paper detailing concrete policy options is currently under development.