European chemical industry: Solvay CEO calls for European "Inflation Reduction Act

The Inflation Reduction Act (IRA), which was already passed in the USA in the summer, is now further intensifying the competitive pressure on European chemical companies, because the $430 billion program is not just about reducing inflation, but above all about promoting climate-friendly technologies and thus making American industry fit for the future. Combined with favorable energy prices, this will make the USA an even more attractive investment location for European companies. Ilham Kadri, CEO of the European chemical company Solvay, says: "For years, industry has benefited from cheap gas from Russia. This dependence has now turned into a competitive disadvantage. If Europe fails to find an adequate response to the IRA, there is a risk that the industry will shift much of its investment to the U.S., where energy costs are much lower and the government is relying on aggressive incentive policies." In the long term, this could jeopardize Europe as a business location, as the chemical industry is the most energy-intensive and also the fourth-largest sector of the economy. However, in the first half of 2022, for the first time, the EU imported more chemicals than it exported, both in terms of volume and value, resulting in a trade deficit of €5.6 billion.

This means that new import dependencies will be created. "Therefore, instead of positioning itself against the new U.S. law, the EU should develop its own investment incentive policy, a kind of European Inflation Reduction Act, so to speak," Kadri finds. "Of course, the industry should not rely only on subsidies. However, we are facing a triple change today: energy, digitalization, as well as the associated societal changes. To master all the resulting challenges and strengthen Europe as a business location, we need a combination of business investment and public subsidies." The Solvay Group is investing €2 billion to drive the energy transition within the company and achieve complete CO2 neutrality in all business areas by 2050. The group also has sites in the U.S., but still plans to make significant investments in Europe. Ilham Kadri is generally positive about the future of the European chemical industry. "The current situation is without question worrying. However, the end of dependence on Russian gas is an excellent opportunity to drive the energy turnaround even more forcefully and switch to renewable energies. In principle, Europe has very good prerequisites for this. What is missing, however, are targeted investments at the European level and an efficient infrastructure, which must be created now."