“It’s Not Enough to Dream of Sustainability – We Need Realistic Framework Conditions”
Public Events
We create chemistry for a sustainable future – this is one of the commitments of BASF SE as it moves towards the energy transition. As an integral part of the chemical industry, the world’s biggest chemical enterprise in terms of turnover is also one of the most energy-intensive companies in the world. As part of the lecture series “First-Hand Information on Economic Policy” on 9 December 2021, Dr. Martin Brudermüller, CEO of BASF SE, and ZEW President Professor Achim Wambach discussed the sustainability strategy of BASF.
Brudermüller opened his lecture by stating that, in addition to its financial objectives – growth, profitability, earnings and dividends, – BASF also included two non-monetary goals in its corporate strategy in 2018. Firstly, to achieve a higher sales rate for so-called ‘accelerator solutions’, which play an essential role in the company’s sustainable development. Secondly, BASF aims to continue on its growth path while reducing emissions by 30 per cent until 2030, explained the BASF CEO.
At European level, the EU Green Deal provides a roadmap for greater sustainability: The EU is committed to achieving climate neutrality by 2050. For this to succeed, all economic sectors in Europe must take an active part. “The European Green Deal is the project of the century and the most comprehensive sustainability programme in history. But how should we approach it?,” asked Brudermüller. The challenges for the chemical industry are massive: achieving climate neutrality, harnessing energy from renewable sources like wind turbines and solar panels, mastering the challenges of digitalisation, and changing chemical products and production processes so that they produce little-to-no emissions. “At the same time, however, BASF must remain profitable. This makes decarbonisation of the chemical industry a multidimensional challenge,” said the BASF CEO.
BASF strategies to reduce emissions
In the chemical sector, a good way to reduce emissions is to adapt the energy use of steam crackers, which are part of a fundamental process in the industry and mark the starting point of numerous value chains. “BASF has introduced two programmes to manage its carbon footprint: an R&D programme and an investment programme,” Brudermüller told an audience of around 310 viewers attending the event via live stream. While the R&D programme was launched to further develop e-crackers and methane pyrolysis, the investment programme aims to explore new ways of producing renewable energy. In addition, the company also wants to engage more closely with its customers by providing transparent information in the future, for example regarding the emissions produced by BASF products and on how to reduce the carbon footprint, explained Brüdermüller.
Energy demand in Germany will grow significantly in the coming years. Against this background, CO2 emissions can only be reduced if this rise in demand is met using primarily renewable energies. This rise is the result of an increasing electrification, for example in the area of e-mobility. Energy provision and the electricity price play a crucial role in this regard. “The problem is that Germany currently has one of the highest electricity prices in the world. This is not because of the costs incurred in generating electricity, but because the price increases threefold due to the electricity tax, the EEG surcharge and the grid fees. Especially the EEG surcharge has done its duty,” concludes Brudermüller. While the EEG surcharge has proven to be a useful instrument for promoting renewable energies, it is becoming an obstacle to innovation and increasingly inhibits transformation processes. Reform is therefore needed to reduce electricity costs. However, this is a political question that cannot be addressed by companies alone, said the CEO of BASF.
Sustainability targets: Policymakers and the industrial sector should work together
“As a next step, the industrial sector and policymakers should work together more closely. The sector has technologies that can contribute to a more sustainable future. Policymakers, on the other hand, should provide a framework that creates incentives instead of sanctions and that promotes these technologies,” said Brudermüller, adding: “Only if this succeeds will we have the chance in Europe to change things together so that companies can maintain their profitability and competitiveness.”
After the presentation, ZEW President Wambach and the BASF CEO discussed different issues regarding sustainability. Achim Wambach wanted to know what role the CO2 price plays for the chemical industry. According to Brudermüller, CO2 prices are justified. For the chemical industry, however, it is important that these prices are predictable in the long term and realistic in their implementation. “Otherwise this will lead to distortions of competition through the relocation of investments. Policymakers and the industrial sector must establish a clear roadmap for the coming 20 years. Then, the transformation will also be economically viable,” explained Brudermüller.
Other topics discussed at the event included the carbon border tax – which aims to support the European economy on its path to climate neutrality, – green hydrogen, upcoming BASF innovations and EU funding programmes for batteries. At the end of the event, the ZEW President asked whether the world’s biggest chemical enterprise in terms of turnover is on the right path towards sustainability. “We in Europe need new ways of working together. It is not enough to dream of sustainability – we need realistic framework conditions and targeted measures. Policymakers should not only impose sanctions, but also create incentives for European companies. Otherwise we run the risk of losing ground to countries like China or the USA,” concludes Brudermüller.