Navigating the chemicals transition pathway

On January 27, 2023, the European Commission published its long-anticipated Transition Pathway for the Chemical Industry. This forward-facing document is aimed at facilitating the cooperation and support of chemicals industry actors in achieving the green and digital (twin) transition of the EU economy in the coming decades. The pathway consists of eight building blocks incorporating nearly 200 industry action items. These eight components and their most industry-relevant action items are summarized and analyzed here.



  • The EU industrial strategy, enumerating measures necessary to transition the European economy to be more sustainable and modern, was unveiled on March 10, 2020. The World Health organization declared the COVID-19 pandemic the very next day.
  • The EU Commission deemed it necessary to update the industrial strategy in light of the wild shift in circumstances brought about by the pandemic. This 2021 update authorized the creation of industry-specific transition pathway documents facilitating industrial support for the green and digital transition of the European economy.
  • The resulting chemical industry transition pathway document is the byproduct of collaboration between the Commission, member states, chemical industry actors, social partners, NGOs, and academia. In consulting so many interest groups the transition pathway seeks to balance the sustained movement towards a greener, more digital chemicals sector with the maintained competitiveness of the sector itself.

The eight building blocks of the transition pathway

  • The transition pathway incorporates eight building blocks, key topics that address major aspects of the overall commitment to the twin transition. These eight components are:

1) Sustainable competitiveness

  • The first building block acknowledges the need to maintain the EU chemical industry’s competitive edge in the global economy. As the second largest chemical-producing bloc in the world, with sales nearing EUR 500 billion in 2020, the 27-member bloc (EU-27) has great incentive to preserve its market share in the chemicals sector.
  • This maintenance of EU’s major player status in the chemicals industry must be achieved without compromising the elevated standards for chemical safety for which the bloc is known. In fact, the document asserts, European competitiveness, and chemical sustainability should be bolstered simultaneously.
  • The promotion of safe and sustainable by design (SSbD) products is at the forefront of this building block. Stakeholders suggest that this promotion be catalyzed by an injection of funding from Horizon Europe, the LIFE program, as well as public-private investment initiatives. This funding is intended to advance the wider adoption of such SSbD product practices despite their initially higher cost to produce. The transition pathway tags this commitment as one to be pursued in the short term.
  • Another notable action item here is the insistence that chemicals hazardous enough to be banned in the EU should not be produced for export to other regions. The document explicitly acknowledges that this will likely involve the amendment of existing legislation and views this objective again as one to be dealt with in the short term. (For an in-depth discussion of this topic regarding the export of hazardous waste, please read previous AgencyIQ analysis here.)
  • Noted here are the unique challenges that small and medium-sized enterprises (SMEs) face in digitalizing their business practices as envisioned by the twin transition. To this end, the Commission and member states are expected to invest EUR 1.5 billion over the following seven years through a network of European Digital Innovation Hubs (EDIH). These are envisioned to be advisory entities combining technical business support with financial grants to ease the learning curve of digitalization specifically for SMEs throughout all industrial sectors, including chemicals.

2) Investments and funding

  • The chemicals industry requires particularly large financial investments provided over long time horizons to yield “first-of-their-kind” chemical products that deliver sustainability in tandem with the high performance necessary to keep the bloc’s industry competitive. The transition pathway estimates this cost between EUR 218 billion and EUR 238 billion, with trillions more necessary to then disseminate these newly developed novel products throughout European society.
  • The document notes that a large portion of this funding will need to be public given the hesitance of the private sector to invest such hefty sums to engineer chemical products with long developmental time horizons. The European Innovation Council (EIC) can provide some of this money, making EUR 10.1 billion available for the invention of new technologies from 2021-2027. The Emissions trading system (ETS) Innovation Fund will similarly provide EUR 38 billion from 2020 to 2030 for low-carbon technologies, another potential financier for industry actors developing less carbon-intensive chemical processes.

3) Support to research and innovation, techniques, and technological solutions

  • This section highlights the importance of aiding in the conceptualization, researching, and subsequent sharing of technology and techniques that support the twin transition. The document underscores this importance by asserting that 38% of projected emissions stemming from equipment utilized in energy-intensive industries between 2030 and 2055 can be prevented. The only condition being that the expected technologies become commonplace and available for retrofitting this equipment by the end of the decade.
  • This building block calls for considerable good-faith collaboration between stakeholders in the chemicals industry. Sharing expertise in the conceptualizing and implementing of SSbD frameworks is repeatedly mentioned as a medium-term objective. Heightening cooperation between research, academia, and industry is given as another example of necessary collaboration in the short term.
  • Another significant action item calls for the drafting of an industrial technology roadmap in the short term. This is a document whose creation by the Commission, member states, industry representatives, and research institutions facilitates the aligning of all these stakeholders on common positions regarding technological innovation within the chemicals sector.

4) Regulation and public governance (legislation)

  • This building block addresses legislative barriers to implementing the twin transition. It lists three specific challenges. The first cites the lack of predictability for legislative proposal timelines. The second is the lack of consistency between EU and national law, sometimes called vertical incoherence. The third notes the lack of legislative harmonization across sectors of the economy, called horizontal incoherence.
  • Following positive stakeholder feedback about the legislative transparency made possible by the EU Chemicals Legislation Finder ( EUCLEF) portal, the European Union commits to provide continuous updates in the medium to long-term through this tool. EUCLEF is an online search platform managed by the European Chemicals Agency (ECHA) allowing enterprises to access information on how certain chemicals are regulated under EU legal frameworks beyond ECHA’s remit (e.g., cosmetics, detergents, toy safety, air emissions).
  • An action item here suggests lifting transparency practices from the food-safety sector and employing them within the chemicals regulatory environment. No doubt this would involve collaboration between ECHA and the European Food Safety Authority (EFSA).
  • A comprehensive timeline of high-profile pieces of legislation which directly affect the chemicals sector is presented on pages 56 and 57 of the document. The graphic is not intended to be exhaustive nor are its chronological estimates meant to be concrete, though it reasonably addresses stakeholder request for a cumulative roadmap of EU chemical legislative ambitions.

5) Access to energy and feedstocks

  • This building block publicizes the challenge of securing adequate energy inputs as the chemicals industry is expected to quadruple its energy requirements by 2050. This consideration comes at a time when the industry is heavily reliant on Russian gas – both as a raw fuel and as a feedstock to create refined fuels (i.e., crude oil to gasoline, soybean oil to biodiesel) – to meet present energy demands. The implications of EU commitments to drastically reduce carbon emissions and sanctions on the import of Russian gas converge to incentivize the chemicals industry to transition to renewable sources of energy.
  • This document puts forth three potential alternative feedstocks: biomass, waste, and carbon dioxide (CO2). Biomass feedstocks may incorporate sugars or vegetable oils as raw inputs to refine energy. The key challenge with biomass, the document notes, would be reliable availability of these raw inputs as Europe continues to experience consequences from biodiversity loss and climate change. The use of waste as a feedstock is particularly circular, potentially breaking down plastics, iron, and aluminum waste to create chemical outputs capable of being used as fuel. There is some uncertainty as to how scalable these processes for breaking down waste might be. Finally, carbon from CO2 may be able to replace fossil fuel feedstocks. Technologies capturing carbon from the air straight from the source of industrial emissions have shown promise. These carbon capture processes are still incredibly costly at present and, especially in the case of transforming CO2 via electrolysis, require quite a bit of energy to undertake in the first place.

6) Infrastructure

  • Building off the considerations of the previous building block, this component of the transition pathway concerns the infrastructure necessary to facilitate access to energy and feedstock. It notes the present lack of this infrastructure particularly in inland industrial sites, as well as in central and eastern Europe as troubling. The slow approval procedures at the member-state level are also obvious barriers to securing necessary infrastructure.
  • One action item of interest involves the repurposing of gas pipelines and the creation of all new pipelines to transport hydrogen. This is set to be accomplished in the medium-term. The chemicals industry is expected to champion the adoption of clean hydrogen.
  • Another medium-term priority is the interconnection of cross-border electricity grids. This will allow for the flow and sharing of energy between member states. In a similar vein, there are action items here to promote a truly Pan-European railway system that could transport energy and feedstocks.

7) Skills

  • The reskilling and upskilling of the European workforce is a key consideration to accomplish the twin transition. Workers must be educated on how to use newly digitalized processes and the greening of the economy will surely lead to novel professions for which there is little formal education yet available.
  • The digital education action plan, European Strategy for universities and the EU Pact for Skills, are all put forth as potential mechanisms for providing the workforce with the requisite skills. The first initiative specifically addresses the adaptation of education systems to an increasingly digital economy, while the second lists actions that would aid the twin transition by making higher education more resilient and responsive to changes in the labor market. The EU Pact for Skills is a non-binding initiative inviting companies and other stakeholders to investigate and address emerging needs for skills collaboratively.

8) Social dimension

  • There will undoubtably be social consequences in undertaking the twin transition. Considerations for fairness and inclusivity can lead to a more benign or even positive social impact.
  • There is an acknowledgement of the uneven effect the transition will have on different geographic and economic regions. Job opportunities are expected to leave some localities and subsectors and appear in others.
  • Gender is a social issue of great importance in this context. This building block includes action items to gather data on specialized risks for women working in the chemicals industry. Another is aimed at encouraging the participation of women in chemistry and chemical engineering programs at the university and high school education levels.

What could be next

  • Stakeholders have indicated their preference for certain legislative additions. These ideas were not included in the body of the transition pathway as it only encompasses actions to be taken on existing legislation. Some of the most notable requests are as follows:
  • There is a request for a sectoral roadmap outlining how the chemicals industry can contribute to EU climate goals. This request is in line with article 10 of the European Climate Law (EU/2021/1119)
  • Binding goals, enshrined within an explicit EU law, are requested regarding increases in reuse, recycling, and circularity of materials. This scope of this legislation should go beyond just packaging materials.
  • There is desire from stakeholders for the EU to aid in the development of OECD testing schemes and methods for the safety evaluation of polymers. This is in relation to the anticipated REACH revision that is expected to incorporate polymers for the first time.
  • Interested parties feel that sectoral legislation, especially those regarding chemicals, waste, or products, should align on key definitions. “Recycling” is given as an example of a concept which all relevant legislation should define and consider nearly identically.
  • Stakeholders insist on the development of a warning system for delinquent SMEs. This mechanism would notify SMEs of impending sanctions for non-compliance with EU regulation, allowing them to rectify their behavior.

To contact the author of this analysis, please email Rayan Bhargava.
To contact the editor of this analysis, please email Scott Stephens.

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