Natural gas from shale has the U.S. chemical industry seeing “green,” but in Europe another kind of green could signal the complete shutdown of the continent’s chemical industry.
Green taxes, skyrocketing energy costs and high feedstock prices have meant that chemical plants have been shutting down left and right with no plans to replace them. Chemical companies have appealed the European Union to move to protect the industry.
“I recall the extinction of the European textile industry happening before my eyes as a young graduate at Courtaulds in the 1980s. Chemicals could go the same way. It could well be another European dinosaur,” chemical industry CEO Jim Ratcliffe wrote to the EU Commission President José Manuel Barroso.
“I can see green taxes, I can see no shale gas, I can see closure of nuclear, I can see manufacturing being driven away,” Ratcliffe added. “I can see the competition authorities in Brussels blissfully unaware of the tsunami of imported product heading this way and standing blindly in the way of sensible restructuring.”
The advent of hydraulic fracturing, or fracking, of shale formations in the U.S. has led to a manufacturing boom, as booming natural gas production has brought down energy prices to about a third of European prices. Cheap U.S. energy has meant that the chemical industry has announced $71 billion worth of expansions, while European chemical plants are being shuttered.
Shale gas in the United States has transformed both its competitiveness and its confidence. There are $71 billion worth of announced petrochemical expansions on the back of shale gas flowing into chemicals. This is predicted to grow to over $100 billion.
“Energy, in the form of gas, in Europe is three times higher than the USA today, whilst electricity is 50% higher,” wrote Ratcliffe, who heads the chemical giant INEOS. “There are no cheap feedstocks in Europe. USA and Middle East feedstocks costs are in another league.”
“In the UK we have seen 22 chemical plant closures since 2009 and no new builds,” Ratliffe noted. Indeed, there isn’t much hope that Europe will be able to have their own energy boom due to environmental goals.
The EU has been loathe to allow shale gas drilling in Europe and France has imposed a ban on fracking in the country. The current crisis the Ukraine which threatens Europe’s gas supply has led to increased calls for fracking shale gas, but those calls may have fallen on deaf ears.
EU lawmakers have tried to take some steps to making fracking easier on the continent by allowing member states to forgo some environment reviews for new gas wells, but those are on a country by country basis and many in Europe fear groundwater contamination from fracking.
But there has yet to be any evidence linking fracking to groundwater contamination. Even the U.S. Environmental Protection Agency and the Energy Department have declared fracking to be environmentally safe.
“I still have not seen any evidence of fracking per se contaminating groundwater,” said U.S. Energy Secretary Ernest Moniz last year.
But EU lawmakers and much of the public are still skeptical of fracking. Burdensome environmental regulations also hamper energy development on the continent as well. Regulations add to the cost of extracting natural resources, like gas, making it less attractive to European energy companies.
“Energy and climate policy must be affordable. Undermining Europe’s competitiveness leads straight to de-industrialization,” said Hubert Mandery, director general of the European Chemical Industry Council.
“With a proper framework, the chemical industry can continue making a major contribution towards a more carbon-efficient EU economy. The EU should abandon costly unilateral measures, which have proven unsuccessful in the past, and instead work for a global climate deal,” he added.
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