At a recent webinar “The Race to Zero – The US Inflation Reduction Act (IRA) and the EU Green Deal Industrial Plan” organised by Dow Polyurethanes, Cefic Director General Marco Mensink and Marcel Moeller, Global Sustainability Director, Dow Polyurethanes discussed the impact of the US Inflation Reduction Act (IRA) and the EU Green Deal Industrial Plan (GDPI) on the industrial transformation.
“The US IRA has put industrial policy back on the radar exactly when we needed it.”
Marco Mensink, Cefic Director General
While both initiatives aim to push forward the transition to climate neutrality, their approach is fundamentally different. Europe puts more emphasis on the CAPEX support while US prioritises OPEX for eligible companies. This raises the question about competition between two regions for green investments.
“We know that competition is not a bad thing, it can also stimulate, it can also accelerate.”
Marcel Moeller, Dow Polyurethanes Global Sustainability Director
Speed is a key element in the whole discussion about transition as we have 2050 as a deadline to become climate neutral. Two important elements will play a role in determining the pace of the transformation. One, is OPEX support: supporting industries with their daily operational expenses, such as energy costs, will help create and support the business cases for the transition.
The second element is the ability to efficiently install enough capacity of and run the necessary technologies we need for the transition, ranging from electrolysers to chemical recycling.
It’s not just about competition between regions but also about companies: the front runners in this transition are likely to win the most.
“This is not the time to de-risk; now is the time to risk. The ones who dare will win.”
Marco Mensink, Cefic Director General
Infrastructures and location will be key drivers for the transition. However, industries that take the initiative and act early will possess a distinct competitive advantage in terms of securing funding, receiving support, and gaining access to new markets. In other words: it is important to be at the very front of the transformation, to invest early and lead the change. To be in the front-runners group.
“Our view of the future is regionalisation, not globalisation”
Marco Mensink, Cefic Director General
The conversation also touched upon important geopolitical shifts ongoing in the world, and in particular the movement from globalisation to regionalisation.
The movement from a globalized world to one comprised of distinct competing regions is expected to be one of the most crucial trends of the upcoming decades. We are already witnessing countries such as the US and Europe bringing back production within their borders. This fundamental change will further highlight the importance of energy security and a stable supply of critical materials in the regions where customers require them, so as to avoid dependency.
“It’s going to be the connection to your customer that will make you survive, the proximity to your customers, the certainty that you can deliver.”
Marco Mensink, Cefic Director General
What will this mean for chemical companies? Large companies will have to strategically evaluate if they want to be a local player in a specific area or have a leg in each region where they will be supplying materials locally.
One thing is certain though: a strong and thriving chemical industry providing essential building blocks for many climate neutral and circular economy technologies is indispensable for the 2050 goals.
“The industry will be an enabler for a more sustainable tomorrow. There is a huge opportunity in this for the chemical industry to position itself really as an enabler of that sustainable transformation.”
Marcel Moeller, Dow Polyurethanes Global Sustainability Director