The Green Deal of the EU is very bold and challenging
From an Article by Joseph Change, Independent Commodity Intelligence Service (ICIS), September 22, 2021
CHEAP RENEWABLE ENERGY NEEDED
A number of countries, along with the EU, have announced plans to become carbon neutral by 2050. However, now must come the heavy lifting, which will entail policy changes to enable this transition, the CEO of BASF said.
“We are living in a world that is putting out ever-[greater] ambitions. It’s a race of ambitions. It’s so easy to put out a new target. But the ‘how’ is the most important thing, and that is probably lacking currently in this discussion – very much also in Europe with the Green Deal. And that is really where the challenges are,” said Brudermuller.
The EU’s European Green Deal was unveiled in mid-July with a set of proposals to cut net greenhouse gas emissions by at least 55% by 2030 versus 1990 levels, on the way to becoming climate neutral by 2050.
“I’m not worried about our own capabilities – we have the technologies, we have the courage, we have also the financial background to do this,” said Brudermuller. However, making decarbonisation a success will require two key elements – customer buy-in, as products will be more expensive than they are today, and the policy framework by governments, he pointed out.
“It is very much [about] the framework conditions we get from politics to operate in. So that is… the regulations part on one side, and the price scheme for getting access to cheap renewable energy [on the other],” said Brudermuller.
RENEWABLE ENERGY TAX AND OFFSHORE WINDFARM
In Germany, one particular issue is the country’s renewable energy tax (EEG surcharge), he noted. Today this is EEG surcharge is 6.5 euro cents/kilowatt hour (kWh) with some partial exemptions for energy intensive industries. The tax is meant to finance the expansion of renewable energy.
In May, BASF and utility RWE unveiled a plan to build a 2 gigawatt (GW) offshore wind farm off the northwest coast of Germany to provide BASF’s Ludwigshafen site with green electricity for CO2-free production processes such as electric cracking from 2030. This would reduce CO2 emissions at Ludwigshafen by 2.8m tonnes/year, according to BASF.
However, the project would not be feasible without support from policymakers, said Brudermuller. “In Germany there are particular levies and taxes that really make the landscape not very attractive currently. We have competitive production of renewable energy but if it arrives at the company, it becomes very expensive,” said Brudermuller.
“We have addressed this, and I have a very big hope that the new German government that is coming after the elections in late September will really tackle the issues,” he added.
The key feedstock for the transformation is renewable energy capacity. Far more is needed to enable meaningful decarbonisation, the CEO pointed out. BASF’s largest site in Ludwigshafen would require at least three times more electricity by 2035 – around 20 terrawatt hours (TWh), which equates to about 15% of the total wind power generated in Germany today, said Brudermuller at the unveiling of the plan with RWE in May.
Germany in May announced a target of a 65% reduction in CO2 emissions by 2030, 88% by 2040 and close to net zero emissions by 2045 – a far more ambitious timeline than that of the EU. “Without the availability of sufficient volumes of electricity from renewable sources at competitive prices, this transformation will not be possible – not for us and not for society as a whole in Germany and Europe. Without a rapid and systematic expansion of renewable energy capacity, great political dreams will be shattered,” he said.
“We need much more capacity of renewable energy, which is also partly roadblocked by regulations. So this is the big job where I have to say we need a new way of cooperation between politics and industry,” said Brudermuller at the ICIS event.
MEETING THE CHALLENGE
Overall, the CEO is optimistic the chemicals industry will be able to meet the challenge of decarbonisaton, or as BASF calls it, carbon management.
“I am proud that the BASF team is committed to reduce our carbon emissions quite fast and drastically. We can master these challenges as companies but also as the chemical industry as a whole,” said Brudermuller. “And as leaders, we have the responsibility to make bold decisions and set the right path to a more sustainable future for all of us,” he added.
BASF’s Verbund, or strategy of integration from upstream to downstream, also involving energy and infrastructure, gives it an advantage in decarbonisation, according to the CEO.
“I think having climate change in front of us and [the challenge of decarbonisation], it is also good to look into yourself and say, Where is your DNA? Where are your strengths? And the Verbund, the integrated production of BASF, is the trademark of BASF and where our strength is,” said Brudermuller.
“And when it comes to decarbonisation, this Verbund also has the unique opportunity to achieve progress very quickly and maybe [provide] a competitive advantage,” he added.
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NOTE ~~ The first part of this Article was posted in FrackCheckWV on September 28, namely: Challenges to Scale Up the Decarbonization Technology by Joseph Chang, ICIS, September 22, 2021
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