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Europe’s Chemical Sector Seen In Decline

Competitiveness: Industry calls for more R&D funding, energy policy revamp

by Alex Scott
November 24, 2014

The European chemical industry’s share of the global chemicals market has shrunk from 32% in 1993 to 17% in 2013, and the decline won’t be checked unless a series of far-reaching measures are put in place, according to a report by the British advisory firm Oxford Economics.

The report was commissioned by CEFIC, Europe’s largest chemical industry association. It found that the European industry is losing ground because of an erosion in competitiveness versus other world regions. The erosion is most apparent in petrochemicals and, to a lesser degree, polymers, Oxford Economics found.

Oxford Economics identified that the decline can be turned around only with a hike in R&D and the introduction of an efficient European energy policy. Instituting these and some other European Union policy changes could add $43.5 billion annually to the sector’s income, helping it to hold on to its share of the global chemicals market, the advisory firm found. Such initiatives would also create more than half a million new jobs over the next 15 years.

The most important near-term initiative for improving the European chemical industry’s competitiveness would be the introduction of a “coordinated, competitive energy policy” featuring a single European energy market that would replace the currently fragmented market, according to Oxford Economics. Such a policy would make a major contribution toward reestablishing the industry’s competitiveness, relaunching investment, and stimulating research and innovation, said Jean-Pierre Clamadieu, Solvay’s CEO and newly appointed CEFIC president, at a press briefing in Brussels.

Overhauling the EU’s fundamental approach to public R&D spending, meanwhile, would have a major long-term impact on the European industry’s competitiveness. CEFIC suggests in its summary of the report that this could be achieved by diverting public R&D money from academia into industry.

“Other world regions invest 18% of public money into basic research and the rest in innovation: the opposite happens in the EU,” CEFIC states. The “EU must decide on its strategy: knowledge creation only or reaping its benefits and turning them into European growth.”

Additional funding for industry R&D would enable the sector to introduce innovations in the coming years in chemistry-related fields including lightweight vehicles, energy storage, carbon dioxide avoidance and storage, and resource use reduction, CEFIC states.

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