Industry guides

The European chemical industry is at a critical juncture, facing a structural squeeze between high energy and feedstock costs and the urgent requirements of the transformation towards circularity and climate neutrality. This paper aims to conceptually unpack these competitiveness challenges and to enable a systematic discussion and analysis of circular economy measures and their potential contribution to boosting that competitiveness in a changing global landscape. We find that industrial competitiveness – defined as the capability to sustain long-term profitability – cannot be restored through a race to the bottom on input costs. Europe faces a permanent and structural disadvantage compared to fossil-rich regions like the United States and the Middle East. Historically, Europe has been able to compensate for this disadvantage through energy and resource efficiency enabled by deep integration in Verbund clusters. However, further boosting productivity would require massive new investments which are currently hindered by high investment risks and geoeconomic uncertainty. To unlock the necessary capital, policy must provide market-shaping instruments that create predictable, large-scale demand for green materials. To achieve this demand-side policies are necessary that enable markets to value not only the physical properties of the chemicals produced but also environmental and sustainability attributes associated with their production. In contrast to bulk commodities, the specialty chemicals segment requires a distinct approach; as Europe’s most innovative and competitive asset, it must be supported by strategies that break its deep dependence on fossil-based supply chains.