Blog post

BLOG - Level playing field or minefield?

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March 28, 2013

The Dutch chemical industry has high and laudable sustainability ambitions. The self-declared goal is to produce twice as much added value with half the contribution from fossil fuels in a few years’ time. On balance, that will mean they will only be using a quarter of the amount of oil per euro of added value. When I first heard this, I thought: That bar is too high. My second thought was: But it needs to be. And my third thought was: What can LEI do to help?

Less oil per euro is achievable by using bio-energy and biobased raw materials. Bioplastics are hot, certainly since Coca-Cola transformed its PET bottles into ‘plant bottles’. Bioplastics are not necessarily biodegradable - preferably not, in fact, when they contain cola. But for that very reason they are recyclable. And because they are made from sugar or starch, they are ‘regrowable’.

The chemical industry is not making life easy for itself with these lofty ambitions. As a result, it has entered a different game where there are few certainties. This is a game which LEI has been familiar with for a long time.

To start with, volumes and prices of sugar and other biobased raw materials are volatile and seasonal. Imports of sugar-based raw materials into the EU are tied to import levies for agricultural products. A sugar factory stands idle for part of the year; inconceivable for a chemicals factory. Chemical companies are even considering investing in agricultural land themselves to ensure security of supply. New raw materials offer opportunities, such as the development of a ‘chemical beet’ in place of the (overbred) sugar beet.

Some of the raw materials for bioplastics will also need to be secured from the food and bio-energy market. Here, the position of bio-energy is a thorn in the side of the chemical industry, which regularly demands a ‘level playing field’. As a result of the government’s climate objectives, bio-energy receives stimuli in the form of subsidies and minimum quotas. Both lead to higher prices for raw materials. The chemical industry enjoys no such privileges, to its chagrin.

But does it really want those kinds of privileges? The world of bio-energy does not represent a stable future. We know of alarming examples from that world. We see many bio-energy companies incurring losses as soon as the subsidies end, sometimes even sooner. Subsidies are cut when they are too successful, such as the ministerial decree on electricity production and environmental quality (MEP) - forerunner of the current sustainable energy subsidy scheme SDE+- and the German exemption from duty on biodiesel. And minimum quotas for biofuels have been repeatedly revised downwards over the years, according to the whims of policymakers, resulting in overcapacity and despair among producers.

The chemical industry is seeking assurances about investment terms of up to 20 years. But the level playing field they are asking the government for will prove to be a minefield - quite apart from the question of whether messing with the underlying agriculture and energy policy is really worth the trouble. The chemical industry is trying to change the rules of the game. It seems to me far more effective to get to know the rules which apply to the new playing field of the biomass raw materials markets, and to build a new way of working on that. LEI is ready to assist them with knowledge of these raw materials markets and decades of experience with the rules that go with them. The opportunities are huge - and the need is pressing.