Regulated industries are facing increasing pressure to craft practical strategies to decrease emissions of greenhouse gases. Through a series of “sector spotlights,” ClimateIntel.com assesses the challenges and opportunities a carbon-limited economy will bring to specific sectors. This spotlight explores four reasons why the chemical industry should position itself as an active player in the climate change debate.

(1) Regulated Emissions and Products: The chemical industry and its downstream customers are the primary source of direct emissions for hydrofluorocarbons (HFCs) and perfluorocarbons (PFCs). HFCs and PFCs are thousands of times more potent than CO₂ on a ton-by-ton basis, meaning that even small quantities of emissions may result in significant compliance costs. The chemical industry is also the primary source of NOx emissions from industrial sources, and manufactures synthetic fertilizers which account for more than one fifth of the NOx emissions associated with agricultural soil management. These greenhouse gases are directly regulated by prevailing regulatory proposals.

(2) Rising Energy and Feedstock Prices: Chemical manufacturing is very energy-intensive, accounting for 22 percent of all energy-related emissions from the US manufacturing sector in 2002 (more than any other manufacturing sub sector including petroleum refining). Chemical manufacturers also use fossil-fuels as feedstocks for many chemical and plastic products. Regulatory systems that increase prices for energy and carbon-based inputs will hit the chemical industry particularly hard.

(3) Competing Regulatory Mandates: US chemical manufacturers are already facing mandates relating to Chemical Facility Security as well as new Registration, Evaluation, and Authorization (”REACH”) requirements for chemicals exported to the European Union. The industry needs to ensure that new climate-change mandates are manageable for an industry already facing major regulatory upheavals.

(4) New Market Opportunities: While the U.S. chemical industry may face increased costs in a regulated environment, it is also well positioned to develop the next generation of fuels, feedstocks, and materials needed to move the US and its global trading partners away from the current carbon-intensive economy. The rapidly developing field of nanotechnology is a particularly promising source of future climate change sequestration and mitigation technologies. Industry leaders need to be engaged now to ensure that new climate change policies promote innovation in the chemical industry rather than just smothering existing markets.

With or without the involvement of industry leaders, policymakers are negotiating climate change policies at both the domestic and international level that will directly affect the future landscape for the US chemical industry. By engaging in the debate as it evolves, chemical industry leaders have the chance to help craft a solution that leverages the industry’s strengths, rather than preying on its vulnerabilities.

For further information about this topic, please contact Akin Gump.