Briefing for Executive Vice-President Vestager
Meeting with CEFIC
13 January 2021
SUMMARY
The meeting is with a
CEFIC (European Chemical Industry Council) CEO delegation ,
at their request,
led by the new President, […], CEO of BASF.
CEFIC represents medium and small sized chemical companies across Europe, which
provide 1.2 million jobs and account for about 17% of world chemicals production.
Virtually all large global and local chemical companies with production facilities in
Europe are CEFIC members (including companies headquartered abroad – United
States companies).
Date: 13/01/2021 at 17:30-18:30, virtual
Purpose of the meeting:
Information exchange on topics of relevance for the
industry which is under pressure to undergo profound transformation needed to
meet
Green Deal objectives on the one hand, and comply with the ambitious
objectives set out in the new
Chemical Strategy. Such fundamental change will take
time and require
cooperation between market players (e.g. standard setting,
inovation, etc.). Cefic wants to hear your views on how this can be achieved and
what kind of assistance we can offer (e.g. guidance on antitrust cooperation, state
aid etc.).
Cefic has already had a similar meeting with EVP Timmermans, and Commissioners
Breton, Kyriakides and Sinkevicius. They will also meet EVP Dombrovskis earlier on
the same day to discuss elements falling within his portfolio (carbon border
adjustment, trade measures, WTO aspects of the chemicals strategy for
sustainability, relationship with China, sustainable finance).
Format : BASF’s CEO will open with some remarks.
The rest of the meeting is a Q&A
format around the below topics:
o Green deal and competition policy
o Chemical sustainability strategy and industry roundtable
o Cooperation on Innovation
o Race Towards renewables
o EEAG
o Digital
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Briefing for Executive Vice-President Vestager
Meeting with CEFIC
13 January 2021
Q UESTIONS FROM CEFIC
Question 1 – Greening Competition Policy
Cefic argues for the need for a “rebooted” competition framework within which the
industry can work on the
massive investments needed for the implementation of and
innovation for the Chemical Strategy and Green Deal, including the climate neutrality
target, innovation and circular economy.
They would like to ask to what extent the Green Deal will impact competition policy and,
conversely,
how competition policy can help drive innovation as industry will n eed to
cooperate in many new ways to meet these goals in this timeframe. This includes State
aid, antitrust rules and to a lesser extend merger rules.
They will ask in practice to shape a safe competition framework within which the
industry can work on the implementation of and innovation for the Chemical Strategy
and climate-neutrality target. EVP Timmermans was open to this idea; They hope MV
can support it as well.
They will ask MV to name a key person in her team who could advise further on such a
sectoral approach, competition law constraints in cooperation and alliances.
KEY MESSAGES
Thank them for their contribution to our call on how competition policy can better support
the Green Deal.
For the Green Deal to become a reality, everyone, private and public, has to play their part.
On our side, we are gathering all the good ideas and proposals for wha t we might be able to
do better. We are currently analysing your and the more than 150 other c ontr ibutions we
have received and
would like to invite you to our conference on 4 February, where we wi l l
discuss the various ideas in more detail.
On the need for a reboot. Competition policy has a significant role to play to support an
efficient green transition. The enforcement of competition policy has traditionally played an
important
complementary role in the implementation of effective environmental policies.
But competition policy primary goal is to promote and protect competitive ma rkets, a nd
hence deliver efficient outcomes for the benefit of citizens.
Competition policy is not in t he
lead when it comes to fighting climate change and protecting the environment. Ther e a r e
better, much more effective ways, such as regulation and taxation.
We are bound by the Treaties and the case law of the EU Courts, therefore this wi ll be a n
evolution rather than a revolution from our perspective – a
refinement rather than a
reboot.
On the need to cooperate. We
understand that traditional industries will need to make
considerable progress if the target of zero carbon is to be met within a useful t im efram e. Sometimes, individual firms will not have what it takes to make that progress on thei r own,
and
may need to co-operate with others.
Such co-operation is less likely to raise
competition issues if it takes place between firms at different levels of the value chain
rather than between competitors. Co-operation between competitors can be more
problematic, because it may reduce the choice of solutions tha t a re devel oped and l ead
firms to limit their development ambitions in the knowledge that others will be applying the
common solution.
Safeguards can be built into such co-operation in order to mitigate such
risks; however, self-assessment of co-operation under Article 101 TFEU, including the
safeguard measures, must by nature be done on a case-to-case basis.
Cefic
should not hesitate to get in touch with COMP to discuss concrete ideas.
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Briefing for Executive Vice-President Vestager
Meeting with CEFIC
13 January 2021
NECESSARY FACT S AND FIGURES
On 22 September, you launched the debate on competition policy and the European
Green Deal with a speech in the European Parliament.
The public consultation ran from 13 October to 20 November. DG COMP has received
more than 150 contributions that are currently being analysed.
The Greek and Dutch national competition authorities have initiated their own
discussions on sustainability considerations in competition policy.
The green transition is relevant for many State aid rules to be reviewed by the end of
2021, such as the Guidelines on State aid for Environmental protection and Energy and
the Regional Aid Guidelines.
Contacts:
[…], COMP.01
[…]
[…], COMP.01
[…]
Updated on: 8 January 2021
1.1 Question 2: Chemical Strategy
Chemical Strategy. The new Chemical strategy de
facto establishes a completely new
chemical industry in Europe, in which the use of hazardous chemicals in minimized.
While this is a good development,
the challenge is that Europe is far ahead of the rest
of the world in such legislation which creates issues of level playing field and
competitiveness of the European Industry. How can we together ensure that with the
CSS, the European industry will lead the chemical industry worldwide and be
competitive on the global market? We believe setting global standards, even together
with China could be a pathway, do you see that as well? Challenge is that the Green deal
momentum may require companies / sectors to obtain a collective understanding on
strategic directions and gather relevant data which is not possible or very difficult under
current competition rules. How this could be facilitated? Will there be an overall impact
assessment on the sector? Can you advise?
KEY MESSAGES
The
chemicals strategy published on 14 October 2020 sets out an ambitious regulatory
agenda. The Commission wants to reinforce the regulatory framework on chemicals but also
to support the EU chemicals industry and its value chain in this important transition.
With 96% of manufactured goods relying on chemicals, the chemical industry is at the core
of almost all value chains and Green Deal solutions, such a s s olar pa nels, ba tter ies a nd
hydrogen.
On the level playing field for European chemical industry. The Commission strives to ensure
level playing field by
applying the same high environmental and healt h st andar ds for all
articles, whether they are imported, exported or produced for domestic use . To a c hieve
this, the Commission intends to, among other things,
refor m t he REACH (Regulation on
Registration, Evaluation, Authorisation and Restriction of Chemicals) authorisation s ystem
for chemicals. It has proven effective in achieving progressive substitution of substances of
very high concern but at a high cost to EU businesses as it only applies to uses in the EU.
To this end
the Commission will ensure better enforcement
o at our borders to make sure that EU businesses compliant wi th EU r ul es do not
suffer disadvantages compared to imports.
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Briefing for Executive Vice-President Vestager
Meeting with CEFIC
13 January 2021
o Through powers granted in the
new market surveillance regulation 2019/1020 (on
compliance of products)
which is expected to be a game-changer. National
authorities will have stronger powers to ensure effective ma r ket s urveillanc e of
products subject to EU harmonisation legislation sold offline and online, within their
territory. It will
enter into force on 16 July 2021.
o The chemicals strategy proposes a number of
measures to ensure better cont rols
by authorities, including by using digital tools. The Commission will, among other
things, propose a new system to audit the enforcement systems of the Member
States, target known areas where non-compliance causes high-risk, and make
proposals to further strengthen the principle of ‘no data, no market’.
On the need to cooperate. We fully understand that companies can sometimes obtain more
by joining efforts. And there are ways in which companies can cooperate without infringing
the competition rules. In particular,
the guidelines on Horizontal cooperation agre ement s,
provide detail guidance on what safeguards can be put in place to ensure that, for
example, standard setting agreements or exchange of information do not infringe ar t icle
101 TFEU.
As you know, the rules on horizontal and vertical agreements are currently under review.
We have been consulting public stakeholders and will do our best to increase the cl arity of
these rules and the predictability of their application. Likewise,
the call for public
contribution on relation to the Green Deal seeks to obtain information from the industries
in what concrete situations they have found that the competition rules stand on the way of
sustainable initiatives.
On the Impact Assessment. The Commission has concluded that there was
no need for an
impact assessment on the overall strategy, as the measures established in the Strategy were
based on extensive evaluations of our legal framework on chemicals.
However, we will have
impact assessments for the most significant legal proposals that will come as a result of the
implementation of the strategy. These will follow the Commission’s Better Regulation
guidelines, including an impact assessment and a consultation process with s takeholder s,
obviously in the most coherent and coordinated possible way.
Question 3: Round Table
The Chemicals Sustainability Strategy presents opportunities but also far-reaching
challenges. This is recognised in the Strategy arguing for a High-Level Round Table to
advise the Commission. Cefic warmly welcomes the idea and plans to be an active
participant at CEO level. Will MV take a role as well as we very much depend on a safe
competition environment?
KEY MESSAGES
Thank them for their involvement, the industry plays an important role.
The Commission is currently defining the mission and criteria for participation to the
Roundtable and will publish a call for participation in the coming weeks (there is no specific
target date).
There is no target date set for its start. We are doing the utmost to set it up in a timely
fashion and hope to have a first meeting in spring with a wide range of stakeholders
including industry, scientists, civil society and public authorities.
Industry exchanges, such as roundatbles, may prove useful i n coming up with the ri ght
strategy to face challenges such as twin transitions.
Safeguards can be built int o such co -
operation in order to mitigate any competition law enforcement risks; however, self-
assessment of co-operation under Article 101 TFEU, including the safeguard measures, must
by nature be done on a case-to-case basis.
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Briefing for Executive Vice-President Vestager
Meeting with CEFIC
13 January 2021
NECESSARY FACTS AND FIGURES
The
Chemical Strategy sets out non-regulatory measures for sustainability, which
include:
- developing safe and sustainable-by-design criteria for chemicals at EU level;
- a ban of most harmful chemicals for non-essential use and a phase out of certain
substances of concern;
- initiatives and funding to promote the development of green and smart technologies,
advanced materials, and innovative business models for low-carbon and low
environmental impact industrial production and use of chemicals;
- establishing an EU-wide safe and sustainable-by-design support network, to promote
cooperation and information sharing across sectors and the value chain;
- strengthening implementation and enforcement of European chemicals legislation to
ensure compliance for the whole life cycle of chemicals.
Contact:
[…], COMP E2
[…]
[…], COMP E2
[…]
Question 4: Cooperation on innovation
The Commission is encouraging the creation of
Alliances prompting new ways to
collectively develop and innovate. The Chemical Strategy applies to many sectors and
value chains.
How best can we safely work together? Cefic is interested in MV’s
expectations on thier lead in Hydrogen, Batteries and Low Carbon Industry alliances.
Could MV share some views on how we can cooperate within the framework of
competition policy?
KEY MESSAGES
On the need to cooperate. It is important to cooperate on research, development and
innovation at EU level – as opposed to fragmented research, development and innovation at
national level – especially when competing globally.
Cooperation between manufacturers to improve product quality and innovation is not a
problem under EU antitrust rules as long as it is necessary;
does not eliminate competition;
and the benefits are passed on to consumers.
For example,
cooperation on the development of common standards and shared
infrastructure would usually not be a problem, while collusion on price, output and
innovation would usually infringe the competition rules.
The
guidelines on Horizontal cooperation agreements, provide detailed guidance on what
safeguards can be put in place to ensure that, for example, standard setting agreements or
exchange of information do not infringe article 101 TFEU.
On industrial alliances. Industrial alliances are an important tool. They help look at all value
chain steps to identify technology needs, investment opportunities, or regulatory bar rier s.
Such value chain cooperation is especially important for the green transition and the circular
economy.
We are aware that the constituency of CEFIC has and is been very involved in different
initiatives (hydrogen, plastics, batteries). This is very impor tant a nd we l ook for ward to
continue this cooperation.
Important progress is already being achieved in the scope of the circular plastics alliance.
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Briefing for Executive Vice-President Vestager
Meeting with CEFIC
13 January 2021
NECESSARY FACTS AND FIGURES
The approved IPCEI on batteries includes seven Member States (Belgium, Germany,
France, Italy, Poland, Finland and Sweden) and 17 undertakings. It was pre-notified in
June 2019 (and therefore informally called the “Summer IPCEI”) and formally notified in
October 2019. Total State aid approved is nearly €3.2 billion (with approx. €5 billion
additional private investments).
Different CEFIC members participate in the approved battery IPCEI, including large
groups such as BASF, Solvay and Umicore as well as the Belgian SME Nanocyl.
The second ongoing IPCEI on batteries includes 12 Member States (Austria, Belgium,
Croatia, Finland, France, Germany, Greece, Italy, Poland, Slovakia, Spain and Sweden)
and nearly 50 undertakings covering the entire value chain. Notification took place at
the end of 2020 and a decision approving the IPCEI is scheduled in the next few weeks.
Also in the second battery IPCEI, there are participants from the chemical industry that
will develop innovative battery active materials
such as Borealis in Austria, Prayon in
Belgium, Arkema in France, or Fluorsid, Italmatch Chemicals and Solvay in Italy .
Contact: […], COMP H2
[…]
Updated on: 04/01/2021
Question 5: Race towards renewables
We believe there will be a race towards renewables. How can we secure industry that is
hard to decarbonize gets to the renewable electricity and hydrogen it needs? Are you
developing ideas on this? There are regulatory hurdles where EC can help to kicksta rt
industrial electrification and greening chemistry (EEAG – see below, and ETS Indirect
Compensation code for Hydrogen vs non compensation Basic Organic). If we don’t use
Hydrogen or electrify, we can’t decarbonise – and when we use hydrogen or electrify,
we need massive amounts of renewable electricity. We will ask MV to advise us how we
can start a structured dialogue with the services.
Question 6: EEAG
We will ask MV’s views on the review of the Energy and Environmental State Aid
Guidelines (EEAG), as today regulatory and RES surcharge systems or limited exemption
schemes in Europe remain a direct impediment to industrial electrification. We will
raise the need to support electrification of and the use of hydrogen in the industry in
line with Green Deal objectives and ask her views how to modernise the Energy and
Environment State Aid Guidelines and their implementation (how to address
reduction/removal renewable surcharges in EU Member States (DE and BE situation).
Questions 5 and 6 are linked. Below are key messages on the review of the ETS and of
the EEAG. Background material on each is at the bottom of this brief.
KEY MESSAGES ON EEAG…
We are planning to complete the review of our State aid Guidelines for environmental
protection and energy by end of 2021.
We have all Europe’s industries in mind – including those that are difficult to deca rbonise.
That is why the review also concerns the rules to compensate ener gy -intensive user s for
energy costs linked to decarbonisation policies.
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Briefing for Executive Vice-President Vestager
Meeting with CEFIC
13 January 2021
As to the chemical industries, we will duly take into account your contributions to the publ ic
consultation. Another round of public consultation is planned for s pring 2 0 21 ; we i nvite
CEFIC and members to contribute.
Aid for industrial decarbonisation
The EEAG already allow support for transformative investments that the industry has
identified as ways to continue reducing its CO2 emissions. I n pa rticular, the EEAG a l l ow
support for carbon capture and storage, energy efficiency, self-generati on of r enewable
energy and other decarbonisation investments. They also allow support for the recyc ling of
waste.
As laid out in the Green Deal Communication, the Commission will evaluate and revise the
relevant State aid rules and support a cost-effective and s ocially-inc lusive tr an siti on to
climate neutrality by 2050. The revision of the EEAG will aim to provide a clear, fully updated
and fit-for-purpose enabling framework for public authorities to support the effective
decarbonisation of industry in the context of the Green Deal and the New Industrial Strategy.
Changes in the rules will respect the important principles of State aid, such as proportionality
of the aid, ensuring necessity of aid and avoiding greenwashing, minimising undue
distortions of competition, and ensuring a level playing field in the single market.
Broader goals
Beyond these specific industry needs, the EEAG aims to lay the ground for public measures
to contribute to objectives of common European interest – such as decarbonisation – whi le
avoiding undue competition distortions.
Having said this, State aid rules can complement regulation but cannot replace it. Recall that
the Commission’s other legislative initiatives for the green transition a nd to i mprove the
regulatory framework for public and private investments already include a Hydrogen
Strategy and will also see a revised Renewables Directive.
Finally, commend the growing private-sector interest in renewables. Remind this was
promoted by State aid that has incentivised wide-spread deployment a nd br ought down
costs.
Private Power Purchase Agreements between renewable producers and large
energy/electricity consumers are becoming more and more frequent in many EU countr ies,
and any company can freely engage in them. This is also becoming easier, as these
agreements/products become more standardised and a market for intermediaries for such
agreements emerges.
… AND ETS
Recall that the addressing the risk of carbon leakage – the ETS goal – is an essential
component to complement the Green Deal policies and the European Industrial Strategy.
The ETS State aid Guidelines adopted on 21 September 2020 will allow Member States to
compensate some energy-intensive users for part of the higher electricity c osts r esulting
from the EU Emissions Trading System on the period 2021-2030 (“indirect emission costs”).
Question 7: Digital
Cefic would like to think how the industry can be a starting point for digital solutions. As
chemical industry we for sure have a significant purchase power to help steer
developments. We think there is a big potential here to explore for the new Industrial
Policy next year. We have a number of digital projects running – self driving trucks,
logistic pilots, predictive maintenance, use of big data for chemical trials/ testing. Two
of the largest supercomputers in private hands are in our sector. We are likely one of
the largest industrial purchasers of digital technologies in Europe. Can we help policy by
using this purchasing power? How will you involve industry in your digital strategy?
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Briefing for Executive Vice-President Vestager
Meeting with CEFIC
13 January 2021
KEY MES SAGES
In the short term, the biggest contribution that
CEFIC members can provide is
supporting the digitalisation of their value chains . While chemical industries are
typically large and advanced in terms of digital maturity, their vendors and customers
may be in very different situations – think e.g. about food or construction sectors.
CEFIC members could consider the possibility of engaging with the network of
European Digital Innovation Hubs, to support the take-up of digital technologies
like HPC or Artificial Intelligence across all relevant sectors.
CEFIC members (and other industrial associations) should be highly involved in the
future industrial policy. We believe it is important to open a dialogue with the
chemical industry to agree on the best ways to leverage the power of industrial data
in the context of the twin green and digital transition. Today, 80% of industrial data is
collected but never used. This is pure waste.
For this reason,
the Commission will be investing in industrial data spaces in the
Digital Europe programme, which will enable industries to better share an d reu s e
data. Such data spaces for example in manufacturing will offer a secure and trusted
means to make data available and easily accessible. We hope for involvement of
CEFIC members.
NECESSARY FACTS AND FIGURES
On 25 November, the Commission proposed a Regulation on European Data Governance
(Data Governance Act). On 15 December, the
Digital Services Act (DSA) and the Digital
Markets Act (DMA) were adopted. On 16 December, as part of its
Cybersecurity
Package, the Commission adopted a Directive on measures for high common level of
cybersecurity across the Union (revised NIS Directive or ‘NIS 2’) and a new Directive on
the resilience of critical entities (CER Directive).
The New Industrial Strategy for Europe, published in March 2020 recognised the
importance of working together with representatives from industry, inclu d ing SMEs , and other relevant stakeholders with a view to enabling Europe’s transition towards a
greener and more digital industry.
The implementation of the Strategy is well on track. For example, the following
initiatives, announced in the Strategy, aim at involving industrial partners to strengthen
the Digital Single Market:
An inclusive and open
Industrial Forum will i.a. contribute to assessing the risks and
needs of industry aiming at the digital transformation of industrial ecosystems.
Industrial alliances (e.g. on
Industrial Clouds and Platforms), where identified as
necessary, can help industry develop the technologies to meet their goals, e.g. by
pooling together the knowledge of SMEs, big companies, researchers and
governmental and institutional partners to help remove barriers to innovation and
improve policy coherence.
The European industry’s focus in particular on research and innovation will result in
digital solutions that are innovative in their product concepts, production techniques,
etc., and that can be offered at a better price and with a greater choice.
Preserving and promoting competition will encourage businesses to produce, will boost
the economy and will increase Europe’s competitiveness on global markets, whereas
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Briefing for Executive Vice-President Vestager
Meeting with CEFIC
13 January 2021
lack of competition may lead to lower output, higher prices and reduced purchasing
power.
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Briefing for Executive Vice-President Vestager
Meeting with CEFIC
13 January 2021
2
BACKGROUND INFORMATION
2.1 EEAG Revision
EEAG revision process - The current Energy and Environmental Aid Guidelines (EEAG)
were adopted in 2014. Their validity was prolonged until 31/12/2021 to allow for a
comprehensive revision. A public consultation was launched in November 2020 until
07/01/2021 to gather input from stakeholders, including businesses and industry
associations. The Commission is assessing the stakeholders’ contributions and feedback
and will on that basis draft revised EEAG, which will themselves be subject to 8 week
public consultation in Q2 of 2021.
2.1.1 State of play
Under the current EEAG, Member States can compensate companies in several chemical
subsectors for energy costs resulting from charges that finance decarbonisation policies.
The validity of the current EEAG was extended until the end of 2021 and their review is
ongoing, focusing on two main areas:
(i)
Review of the compatibility criteria for environmental protection
(ii)
Review State aid to energy intensive users to compensate for energy costs
linked to decarbonisation policies
Empirical work and a first round of public consultation are currently under finalisation
and will inform the drafting of the impact assessment and of the first draft of the revised
guidelines. These draft guidelines will be the object of a second round of public
consultations in Spring 2021. The internal approval of the Impact assessment is expected
in autumn 2021 and the adoption of the revised Guidelines is expected by end 2021.
Both CEFIC and the company BASF, which holds the Presidency of CEFIC, have submitted
a contribution to the consultation on the EEAG Inception Impact Assessment.
2.1.2 CEFIC position
With regard to rules on energy intensive users, CEFIC notes that chemicals are highly
energy intensive and at the base of critical value chains for the transformation of the EU
economy. As market prices are often set at global level, the updated EEAG should take
into account EU’s global competitiveness. The EEAG should put conditions in place that
encourage electrification initiatives, safeguard EU electricity costs and create a level
playing field within Europe so to lower the need for state aid. The EEAG should not only
allow but even oblige member states to exempt industrial installations from EU and
national policy costs (e.g. feed-in tariffs and grid surcharges), in order to safeguard a
level playing field. A review of the criteria for the eligibility of energy intensive users
should go beyond a simple update of the current list, mirroring the list of the ETS
guidelines, or a mere referencing to the Taxonomy criteria: this risks undermining
transformation and efficiency efforts of numerous companies that would be left out.
With regard to the broader review of the EEAG, CEFIC states that they should be clear
and predictable in order to avoid investment uncertainties, and the aid should be
technology-neutral, cost-efficient, temporary and sufficiently flexible. The EEAG should
stimulate early adoption of innovative solutions in industry. The EEAG should also
enable financial instruments (e.g. carbon contracts-for-difference), to de-risk these
investments while maintaining an EU level playing field.
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Briefing for Executive Vice-President Vestager
Meeting with CEFIC
13 January 2021
2.1.3 BASF position
The transformation of the chemical industry requires large quantities of renewable
electricity at competitive prices. Existing exemptions to energy and electricity ta xation
must be preserved and improved. Exemptions based solely on electro-intensity of a legal
entity provide a significant disadvantage for integrated companies with some energy
intensive processes. In the short term, there should be reductions for green Hydrogen
projects based on a value added below legal entity level, i.e. at process level. In the mid-
term, energy intensive users either buying or self-consuming power must receive
exemptions from renewable energy source charges. The eligibility for such reductions
should be based on: (i) sectoral electro-intensity and exposure to international trade; (ii)
the intrinsic energy intensity of a given sector or process, rather than whether a legal
entity reaches a specific threshold and (iii) accepting different ways of renewable energy
source integration (grid-procurement, on-site generation or hybrid set-ups). BASF also
calls for an explicit inclusion of policy measures such as carbon contracts for difference.
As the review of the EEAG is ongoing and at a rather early stage, we advise not to enter
into the discussion on the content of the possible new rules. CEFIC and BASF should be
encouraged to further express their views in the public consultations forthcoming, and
we will take them into account in the review process.
Contact: On ETS, […], COMP B3
[…]
On EEAG, […] COMP B3
[…]
Updated on: 22/12/2020
2.1.4 EEAG review challenges for decarbonisation support
The revision should result in a future-proof enabling framework for public authorities to
help reaching the EU environmental and energy objectives in a cost effective manner
with minimum distortions of competition and trade within the Union.
As far as the review of compatibility criteria for environmental protection to promote
the green transition is concerned, the scope of the EEAG should be widened, by
organising the rules around broader policy objectives, such as climate neutrality,
circularity, pollution reduction, etc. instead of focussing on specific technologies, making
scope for further technological innovations. Also, possibly the revised EEAG should allow
for additional forms of aid, including operating aid like carbon contract for difference.
To maintain a level playing field, the extended scope of the EEAG needs to be
accompanied by a certain number of safeguards to ensure that the aid: (i) is effectively
directed where it is needed (no crowding out of private investment, no greenwashing),
and (ii) is limited to what is needed to achieve the environmental goals in order to be
cost-effective, minimise the cost to the taxpayer, and improve acceptability.
Possible safeguards on which feedback has been requested are: the requirement to
quantify environmental benefits obtained thanks to aid; the requirement to grant aid
through competitive bidding processes; maximum aid intensities; the broadening of
support to competitors, etc.
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Briefing for Executive Vice-President Vestager
Meeting with CEFIC
13 January 2021
2.1.5 Decarbonisation aid in current EEAG
The EEAG allow aid for:
Carbon capture and storage projects (CCS), aid can be granted aid under the EEAG also
for a CCS project linked to an industrial plant. Eligible costs are defined as the funding
gap and all cost savings from the reduced need for ETS allowances have to be deducted
from the aid.
Aid for investment improving
energy-efficiency, for increased circularity and for
decarbonisation (including through electrification): The EEAG allows in general for aid
for investments improving environmental protection beyond applicable standards.
Eligible costs correspond to the difference between investment costs for conventional
production (i.e. carbon intensive production, more energy intensive or consuming more
primary raw materials) and investment costs for the more environmental friendly
production. Aid intensities range between 30% or 40% (for large undertakings in non-
assisted areas) and 100% (if aid granted on the basis of a competitive bidding process).
Bonuses are possible for SMEs and eco-innovations. The Commission indicated in the
SEIP Communication that it would also examine the possibility of calculating the aid
based on a funding gap approach.
The Commission has also recently approved a Dutch support scheme (SA.53525) for
decarbonisation, including low carbon hydrogen production, in which beneficiaries
obtained support per ton of CO2 emission avoided. The scheme provided for specific
safeguards ensuring that the electricity used to produce the hydrogen was itself low
carbon only. Beneficiaries were selected in a competitive bidding process ensuring the
proportionality of the aid.
Aid for hydrogen production: The EEAG allow for both investment and operating aid for
renewable hydrogen production. Specific guidance on this support has been provided in
the recently published RRF guidance templates on renewable energy.
Contacts:
[…], DG COMP H2
[…]
Updated on: 08/01/2021
3
REWIEV ING THE ETS GUIDELINES
3.1 Eligibility of sectors
CEFIC represents, among others, the following two non-eligible sectors: 20.14
Manufacture of other organic basic chemicals and 20.11 Manufacture of industrial
gases. CEFIC argues that:
The analysis of eligibility was carried at NACE-4 level, which represents a very wide
group – analysis at prodcom level would be more suitable;
Interchangeability of fuel: crackers integrated on refining sites would be eligible for
compensation, because sector 19.20, i.e. refined petroleum products, is eligible,
while other crackers are not;
The Manufacture of other organic basic chemicals needs investment in
electrification in order to meet the Green Deal objectives. Crackers are at the start
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of the value chain for many products in Europe, therefore compensation for indirect
costs is necessary.
Approach
The Commission based its assessment on certified data, which only exist at Nace-4
level (and not at prodcom level);
Regarding interchangeability of fuel, the Guidelines foresee compensation only for
the eligible products. When an installation produces several products, the Member
States can only compensate for indirect costs related to the production of eligible
products;
Regarding eligibility: ETS Guidelines aim at reducing the risk of “carbon leakage”.
The revised ETS Guidelines target aid only for sectors the most at risk of carbon
leakage due to high indirect emission costs and strong exposure to international
trade.
The sector eligibility was established both based on quantitative and qualitative criteria.
In particular, the selection was based on the following objective quantitative
parameters:
Indirect Carbon Leakage Indicator (“ICLI”) of at least 0.2. The ICLI is the product
resulting from multiplying a sector’s trade intensity with third countries by their
indirect emission intensity. It is the strongest indicator of carbon leakage, as
recognised by the ETS Directive;
Indirect emission intensity of at least 1kgCO2/EUR, calculated as the ratio of indirect
emissions over the Gross Value Added;
Trade intensity above 20%.
Trade
Indirect
Indirect
carbon Overall
intensity
emission
leakage indicator assessment by
intensity
(> 0.20?)
the consultant
(>1?)
Manufacture
of 49%
0.390
0.191
Low risk
other organic basic
kgCO2/€
chemicals
Manufacture
of 6%
15.091
0.917
Low-medium
industrial gases
kgCO2/€
risk
The
Manufacture of other organic basic chemicals was eligible for compensation under
the previous ETS Guidelines, but is excluded from the list of the revised Guidelines.
According to the consultant’s analysis, despite a competitive worldwide market, the
sector presents a low-medium risk on the market characteristics criterion based on the
recovery of exports in recent years. The sector also presents a low-medium risk on the
profits margins criterion, based on a reduction in profitability and investment due to the
apparent loss of competitiveness, potentially as a result of high energy costs in Europe
compared to regions which benefit from cheaper energy and carbon prices. However,
the impact of indirect carbon costs on the sector’s profit margins will be limited
compared to other energy prices, so the consultant assessed it as low risk.
The
Manufacture of industrial gases was not eligible for compensation and is also
excluded from the eligibility list of the revised Guidelines due to the very low trade
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intensity and long-term indexed contracts, guaranteeing a substantial amount of cost
pass through. According to the consultant’s analysis, the sector presents a low-medium
risk, based on the ability of the sector to pass on higher electricity costs to its
downstream customers. This pass through will be constrained by the ability of the
downstream sectors to absorb additional costs without relocating, but the sector still
benefits from a low international competition and good bargaining position over its
customers.
3.2 CO2 factors
Some CEFIC members believe that a national CO2 factor in France disadvantages French
industries compared to their German competitors.
The CO2 factor is calculated to reflect indirect CO2 costs passed through in electricity
prices. Under the previous Guidelines, a common CO2 factor was used for the Central-
Western Europe region (France, Germany, Belgium, Netherlands, Luxembourg, and
Austria). When revising the Guidelines, the Commission followed the same methodology
to define the geographic regions for CO2 factors. Recent increases in renewables and
some recent nuclear unavailability led to a general decrease of price convergence
between France and other countries (such as Germany). Therefore, French power prices
do not meet the price convergence criteria anymore and the CO2 factor for France is
calculated at national level.
The Guidelines foresee a Midterm review in 2025 of three elements: CO2 factors,
geographic zones and efficiency benchmarks. This introduces the possibility to take into
account any significant change in power price convergence between France and
Germany.
4
CEFIC’S POSITION ON “COMPETITION POLICY SUPPORTING THE GREEN DEAL ”
CEFIC appreciates the review of EU competition policy, which should be aligned with the
Green Deal objectives and support the required industrial transformation. Without an
adaptation of the competition policy framework, EU industrial competitiveness would
be at risk. Competition policy would need to support innovation, which is key for the
success of the industrial transformation, via both
competition and
cooperation.
The required industrial transformation will imply massive investment (according to a
DECHEMA analysis, EUR 27 billion per year until 2050). This will only be possible if
private investment is enabled and
public sector support is sufficiently available.
State aid: CEFIC calls for a firm and stable State aid framework to enable companies in
the chemical sector to transform in line with the Green Deal objectives. Companies
would need access to abundant clean and affordable energy, allowing them to compete
in Europe and globally. State aid would need to be further mobilised to facilitate this
transformation. The State aid framework should enable
compensation mechanisms for
greenhouse gas reduction measures, as the latter would otherwise put EU industries at a
competitive disadvantage in the global and EU market.
Mergers: The Green Deal, together with the economic recovery from COVID-19, may
result in an increase in mergers. EU rules do already provide for taking the global market
as reference market into account. The reform of competition policy should give this
global context a greater weight than today.
Antitrust: There is a need to review antitrust rules to
facilitate cooperation as required
by the Green Deal objectives. Actual and perceived competition law barriers to
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legitimate industry collaboration need to be lifted. To move the chemical industry
towards a circular economy will require cooperation across sectors and different value
chains. An appropriate competition law framework should be available to enable
companies to engage in such effort. In particular, CEFIC calls for:
clear and detailed
sustainability-specific guidelines, including examples, to assist
business to self-assess legitimate industry cooperation;
specific stand-alone competition law guidance for climate change and other
sustainability initiatives. At a minimum, a sustainability-specific section in the
revised 2010 Horizontal Guidelines;
a clarification on which types of
cooperation the Commission would consider
necessary and proportionate to pursue public interest objectives related to climate
and environmental goals, and therefore fall outside the scope of application of
Article 101 TFEU (
Wouters ruling) and/or which types of cooperation should be
assessed under the exemption criteria in Article 101(3) TFEU.
Contact:
[…], COMP E2
[…]
[…], COMP E2
[…]
Updated on: 21/12/2020
5
THE CHEMICAL INDUSTRY IN THE EU
Main source:
2020 Facts & Figures of the European chemical industry (Cefic)
EU in a global perspective
The EU chemical industry accounted for EUR 565 billion of turnover in chemical sales
in 2018, representing 16.9% of global chemicals turnover, second only to China
(35.8%) and ahead of the USA (14%) in third place.
The market share of the EU in global chemical sales dropped by half in 1998-2018.
Global sales tripled, but the EU benefited less than other regions. Growth in the EU
remains low, mainly due to mature markets and an ageing population. Additional
factors: high energy prices, lagging innovation, currency appreciation, high labour
costs, regulatory and tax burdens.
EU chemical sales
EUR 565 billion in 2018 (source: CEFIC).
Of this, 60% is “base chemicals”: chemical elements, inorganic acids, bases, alkalis
and other inorganic compounds; petrochemicals; polymers, plastics.
“Specialty chemicals” represent 27%: paints and inks, plant protection products,
dyes and pigments, auxiliaries for industry (glues, oils, gelatine).
Finally, “consumer chemicals” represent 12%: soaps and detergents, perfumes and
cosmetics.
Breakdown by EU country
More than 60% of sales generated in four EU MS: Germany, France, Italy, and the
Netherlands (in descending order).
Imports/exports
Domestic sales, within the EU country of production, dropped by 60% in 2008-2018
and now represent 13% of chemical sales.
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Intra-EU sales grew by 36% in the same period and now account for 58% of total EU
chemical sales.
Extra-EU sales grew by almost 50% in that period and now represent 29% of sales in
2018.
Contribution to EU industry
The EU manufacturing industry consists of 2.1 million enterprises. Of these, 28 000
operate in the EU chemical sector, representing 1.4% of the total.
With EUR 553 billion, the chemical industry is the fourth leading sector in
manufacturing (behind automotive, food production, and machinery & equipment),
accounting for 7.6% of EU manufacturing turnover (source: Eurostat SBS Data 2015
and Cefic analysis 2019).
The chemical industry generates 1.1% per cent of EU GDP (source: CEFIC,
https://www.chemlandscape.cefic.org/country/eu/).
Chemicals, including pharmaceuticals and rubber and plastics, is the third largest
employment sector in the EU, employing 3.3 million people (source: Eurostat SBS
Data 2015 and CEFIC analysis 2019).
Contact:
[…], COMP E2
[…]
Updated on: 18/12/2020
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CEFIC PARTICIPANT LIST
[CVS provided CEFIC]
[…], BASF (Cefic President)
[…], Dow
[…], ExxonMobil
[…], DuPont
[…], Shell
[…], LyondellBasell
[…], Covestro
[…]Celanese
[…], essenscia
[…], Cefic Director General
[…], BASF Sherpa to Cefic President Brudermüller
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CV – [ …]
[…]
[…]
Age
[…]
Current position
Chairman of the Board of Executive Directors and Chief Technology Officer (CTO), BASF
SE, President of CEFIC
Former positions
[…]
Education
[…]
CV […]
[…]
President of Dow Europe,
Chair of the CEFIC Industrial Policy Programme Council
[…]
[…].
Education:
[…]
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CV – […]
[…]
Director of INEOS Group
Board member of CEFIC Excom, Chlorine & Halogens
[…]
CV – […]
[…]
Vice President at Shell International E& P
Chair of the CEFIC Product Stewardship Programme Council
[…]
CV – […]
[…]
Senior Vice President of Lyondellbasell
[…]
Education:
[…]
Professional career:
[…]
CV – […]
CEO of Covestro
President of PlasticsEurope
[…]
Education:
[…]
Professional career:
[…].
CV – […]
[…]
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Vice President, Cellulose Derivatives Business at Celanese,
Specialty Chemicals representative (CEFIC)
[…]
Education:
[…]
Professional career:
[…]
CV […]
[…]
Vice President of SABIC Europe
[…]
Education:
[…]
Professional career:
[…]
CV – […]
[…]
Managing Director of Belgian Federation for Chemistry and Life Sciences
Industries (essenscia)
Education:
[…]
Career:
[…]
CV – […]
Director General of CEFIC
[…]
Education:
[…]
Professional career:
[…]
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CV – […]
[…]
Director Communications & Government Relations BASF Group,
Head of Brussels Office, Belgium
[…]
Professional Career
[…]
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