1. Industrial Renaissance 2 nd Slovenia 5.0 Strategy Conference 11 December 2015 René van Sloten

2. Page 1 551 Chemicals sales (€ billion) EU 528 NAFTA Rest of Europe 98 1,111 China 413 Rest of Asia 142 Japan South Korea 121 72 India 44 Rest of the world 151 Latin America Asian chemicals production outpaces other regions Source: Cefic Chemdata International World chemicals sales in 2014 are valued at € 3.232 billion. The European Union accounts for 17% of the total

3. Page 2 EU chemicals sales increased by 80% in 20 years, while its world market share nearly halves Source: Cefic Chemdata International

4. The world landscape of the chemicals industry is changing rapidly! “13th Five-Year Plan” From “following the lead” to “taking the lead” and from a big country of petroleum and chemical industry to a “great power” From “following the lead” to “taking the lead” and from a big country of petroleum and chemical industry to a “great power” Leading on technology innovation and trade Leading on technology innovation and trade Prevailing in international markets Prevailing in international markets Page 3

5. Page 4 Trends in overall growth expected to continue Source: Cefic Chemdata International and Cefic analysis 20142030 Growth in post-recession Europe remains low, mainly due to mature markets and an ageing population

6. What does this mean for Europe and its chemical industry? Page 5. In 2011, Europe had the highest plant closure rate in the world (72% of closures). Source: Roland Berger

7. Overall, Europe’s chemical industry decline is the result of a number of structural drivers Page 6Source: Roland Berger

8. Page 7 Can we remain Competitive? Large integrated domestic market with strong customer industry clusters High international orientation and global networks to external customer industries Skilled and motivated workers and scientists Constant adaptation to globalised markets Strong innovation efforts will generate new growth clusters: Efficient Energy use, health and new materials which could solve upcoming societal mega challenges  High energy and feedstock costs  High Regulatory Compliance Costs (eg REACH)  Lack of a “Common Industrial Policy” or a “Common Energy Policy”  Non-energy raw material availability and cost issues (eg. biobased feedstock, rare earths, minerals)  Mature market, ageing population, risk aversion of societies

9. Page 8 Advantaged energy and feedstock prices are a clear enabler of competitiveness

10. Page 9 Energy intensity slashed in half during 23 year period The use of combined heat and power units, a shift to higher value-added, lower energy- intensive products, have all contributed to our energy efficiency gains +71% -24% Page 9

11. Page 10 Energy costs: a competitive disadvantage The ETS principle: Sectors at risk of carbon leakage should receive 100% allocation of allowances up to benchmark levels of carbon efficiency. If undertakings meet the benchmarks, and cannot avoid carbon costs by becoming more efficient, those costs are “undue”. If these undertakings cannot grow without incurring carbon costs, those costs are “undue”. The proposals would require even those undertakings that can meet the revised benchmarks to either reduce production or purchase allowances.

12. Page 11 Recommendations The reformed ETS should provide incentives for undertakings to become “best performers”. It should not impose cost penalties on “best performers”. The reforms should look to the actuality and be founded on facts. The current proposals introduce an arbitrary threshold of eligibility for full protection: arbitrary changes to the benchmarks: and arbitrary limitations on dynamic allocation. They will result in undue costs for energy intensive industries, and a further disincentive to investment and growth at benchmark levels. We look to the Council and the Parliament to amend these proposals to provide –A carbon leakage list and benchmarks based on real data rather than assumptions –Dynamic, production-based allocation with a sufficient reserve for growth.

13. Cumulative cost assessment on chemical industry shows high regulatory burden Page 12

14. Page 13 Cost evolution over time is steadily rising Mostly driven by chemicals and industrial emissions legislation, and to a lower extent by energy legislations at the end of the period

15. Page 14 Cefic position on Better Regulation (1/3) I.Cefic welcomes the Commission’s Better Regulation Package (19.5.2015), in particular: emphasis on the evaluation of existing legislation (rather than new legislation) need for evidence-based regulation systematic consideration of competitiveness impacts in all impact assessments proposal to introduce independent quality checks on major amendments adopted by the European Parliament and the Council during the legislative process and underlines that : better regulation is not deregulation good legislation is clear, consistent and predictable – it effectively delivers on policy objectives at the lowest cost

16. Page 15 Cefic position on Better Regulation (2/3) II.It identifies the current challenges specific to the chemical sector: High burden : EU chemicals policy = ‘Top 10’ most burdensome areas of EU law Complexity of legal framework, causing high potential for inconsistencies and overlaps Implementing measures of EU existing legislation lead to substantially disproportionate results (e.g. REACH Authorisation, ED, ETS) Isolated Member State initiatives (cf. national nano registers, national restrictions) Cumulative cost of legislation

17. Page 16 Cefic position on Better Regulation (3/3) III.Cefic addresses 3 main demands to the European Commission: 1.make burden reduction results more tangible -COM REFIT programme lacks concrete objectives to measure progress 2.systematically assess the impact on innovation of new policy initiatives 3.extend Better Regulation policy beyond traditional law-making -COM is focussed on improving the EU law-making process, but relevant EU rules are increasingly adopted outside the legislative procedure (cf. EU implementing acts, guidance, action programmes)

18. 9 billion people will live on earth by 2050! How can we guarantee food and water supply for everyone? What are possible bene- fits and contributions of plant science? Health & Nutrition Sustainability challenges are business opportunities 67% of the world population will live in cities by 2025! What does future architecture look like? Which materials are needed to make energy consumption more efficient? Construction & Housing 50% more primary energy needed in 2030! What is the ideal energy mix of the future? How big is the stake of renewable energy? Energy & Resources 1.2 billion cars will drive on earth by 2020! How can we reduce emissions and fuel consumption ? What will future cars be made off ? Mobility & Communication Page 17

19. What to do – « Age of application » can contribute to European growth and further improved sustainability Page 18

20. Page 19 Finding a new balance – opportunities in the context of the Circular Economy Source: Roland Berger

21. Page 20 And how do we define circular economy? For us the circular economy is part of a strategy aimed at making Europe more resource efficient, by both avoiding unnecessary material and energy losses throughout the life- cycle of products and maximizing value by keeping resources circulating in loops many more times than today. Today, the chemical industry delivers already many contributions to the circular economy, because they make business sense: Enabling technology and products Process design in manufacturing “The European chemical industry is supports the transition towards a circular economy.”

22. Policies enhancing the competitiveness of the EU chemical industry Co-ordinated energy policy delivering affordable energy Responsible climate policy Innovation policy Regulatory stability and consistency Open markets Access to raw materials Addressing skills and people mobility First class logistics Page 21