Take the Antwerp BASF site as an example.  BASF Antwerp is the largest chemical production site in Belgium and the second largest of the BASF group worldwide.  The site, which it shares with a number of partners (e.g. Zandvliet Power, Air Liquid), is responsible for 4% of total Belgian electricity consumption and 9% of total natural gas consumption.  That is energy-intensive indeed.  It is because chemistry is inherently energy intensive, in the way that many chemical processes are driven by temperature and pressure, both of which require energy.  Also, a number of chemical processes use energy as a raw material.  Thus, natural gas is used as a raw material to make ammonia.  Similarly, chlorine is made using electrolysis, consuming vast amounts of electricity.  

 

BASF has made energy efficiency a priority since the 70s when the oil crisis hit. The key achievement of its efforts in this regard is what it calls the ‘verbund’ model. Basically this comes down to the way a chemical plant’s various processes are linked to each other to optimise the use of energy and resources. Thus, all chemical processes that produce steam are linked to chemical processes that use steam. Furthermore, where it is possible excess steam (instead of electricity) is used to drive pumps and various mechanisms. Also, the fuel gas that is released in chemical processes is captured and fired to produce steam, which in turn drives other chemical processes, and so on the cycle goes. The result is that the BASF plant is almost entirely self-sufficient for its steam needs. Only about 3% of the time on year basis does the plant need to take recourse to fossil fuels (natural gas) to produce steam. That extra steam, when needed, is produced by a highly efficient cogeneration plant built onsite by RWE and Electrabel. That same 450 MW plant generates electricity for the BASF site. Six wind turbines onsite do their bit too and the rest is supplied direct by the national transmission network. The result is that the BASF site in Antwerp is a highly energy-intensive (given the nature of its processes) but also incredibly efficient system, that in some areas is nearing the limits of nature’s laws.   That also means that this integrated system is vulnerable to supply problems. Should the supply of electricity or natural gas suddenly collapse then the whole system comes grinding to a halt.  Getting it going again afterwards is no easy ask and consumes a huge amount of energy. This is why the BASF site has direct connections to both the Belgian and the Dutch gas networks and a fully redundant set of links to Elia’s transmission network.  

 

BASF Antwerp has also managed to decouple its environmental impact from its production volume. While production has consistently increased (until the current economic crisis), the plant’s emissions and water pollution have consistently declined. And that means a great deal to Belgium’s overall environmental  picture, given the volumes of emissions at stake here.  Ineos is another chemical company with a major plant in Antwerp. It too tells a similar story of interrelated processes, cogeneration and extreme energy efficiency. Also in the steel sector, the Arcelor Mittal plant in Ghent is esteemed for its energy efficiency.

 

That the above companies are not isolated cases is proven by the results of the Flemish Energy Benchmarking Covenant. In context of the Kyoto protocol the Flemish government set up a system in 2002 whereby energy-intensive industrial sites are invited to participate in a benchmarking programme. The essentials of the deal are that those sites that proved to be in the ‘world-top’ (a statistical definition but comes down to being in the top 10% of the world ranking) in their energy efficiency and CO2 emissions control would be given an allocation of emissions rights without cost. By 2007, 182 industrial sites—representing more than 80% of industrial energy use in Flanders—had joined the programme. As it turned, in 2002 the Flemish group was already better than the world top. But the group improved in subsequent years too, maintaining their world class position. Between 2003 and 2007 the group managed to reduce its energy consumption (under constant production) by more than 5%. Also in absolute terms the energy consumption declined somewhat, while production increased by 5%. CO2 emissions rose slightly (0.4%) against 2003. The point is, if Belgium manages to meet the Kyoto targets by 2012, then that will be due mainly to the efforts of the industrial sector. However, there is one area where industry is not yet meeting its targets: NOX emissions. As outlined in an earlier chapter, this is one of the key air pollution problems in this country and needs urgent attention. It is a priority for industry, but also for the transport sector.

 

Looking beyond 2012 a new set of challenges is emerging for industry. For one, the emissions targets are getting tighter. By 2020, total CO2 emissions for industrial sites that fall under the new European emission trading scheme (ETS – covering the period 2012-202) will have to decline by 21% against the base year of 2005. That is a significant cut, especially since many industrial companies are claiming that some of their processes are at the thermodynamic limit of energy efficiency. Be that as it may, the chemical industry’s biggest gripe was not with the target itself but with the way it was to be implemented. The industry argued that the proposed auctioning of emission rights would translate into a production tax of approximately 500 million euro by 2020. The problem is that an auctioning system does not make a distinction between efficient and inefficient processes. If a particular site has made major investments in the past and as a result is currently sitting at the limits of its efficiency potential, then the carbon credits it needs to buy will be a straightforward production tax.  That could make those companies uncompetitive against competitors abroad that do not fall under the European system. As long as the European ETS system is not integrated in a global post-Kyoto system, then there is the risk that European industry will become uncompetitive from a cost perspective, in turn leading to what is called ‘carbon leakage’ (the emissions will happen, but not in Europe). Hence, the chemical industry lobbied for a system similar to the Flemish benchmarking covenant—and got it. Thus, if a company can prove that it is exposed to international competition and that it meets certain benchmarks in energy efficiency, then it will be allocated a portion of its emissions rights free.   

 

Obviously not everybody is happy with this adaption of the ETS system. The environmental lobby argues that the whole point of introducing the ETS system is to impose a price on carbon, and thereby stimulate a transition to low-carbon products and processes.  Indeed, many—including the pro-business Economist—continue to argue that a straightforward carbon tax would have been a much simpler approach than the cap-and-trade system currently deployed under Kyoto and the EU climate package. The main criticism against Kyoto also focuses on this point, that the carbon market never got going properly—there were too many free emission rights floating about.  

 

Some in the chemical industry complain that they are hit twice by the ETS system, in their own emission rights and in the emission costs embedded in the energy price (initially paid for by the energy producers). But that is the whole point, one could argue, to add costs at every step in a high-carbon industrial chain. Chlorine needs to be expensive. The chemical industry is able to turn that argument around too, however, by asking us to look at the entire value chain of a chemical product, including those phases where the product actually saves CO2 emissions. BASF did this exercise for its entire product portfolio and came up with a remarkable conclusion: for every ton of CO2 the BASF group emits it is saving three ton elsewhere in the value chain.  Key examples here are the fuel additives that allow engines to run cleaner and more efficiently, or the composite materials used as insulation material in buildings and as steel replacement in ships.  

 

The final word has not been said on this matter. The energy-intensive industries must be given credit where it is due: they have made tremendous achievements in energy efficiency and emissions control.  If some of their principles (i.e. waste nothing) could be deployed in the way we manage our buildings and transportation, then achieving the country’s 2020 targets should be a piece of cake.  The key challenge for industry, however, is that they are reaching the limits of further energy efficiency and emission control in a number of processes. Given the fact that emission targets will only get more stringent beyond 2020, and that industry’s energy consumption and emissions levels are, in absolute terms, still enormous, then something more fundamental will need to change. In the longer term industry will need to work not just more efficiently, but differently—different processes, different products.