“Climate targets must go hand in hand with economic competitiveness.”

Europe faces a dual challenge: advancing its climate goals without losing industrial competitiveness in an increasingly demanding global environment. Dr Katja Scharpwinkel, Member of the Board of Executive Directors of BASF SE, Industrial Relations Director and Site Director of BASF’s largest Verbund site in Ludwigshafen, Germany, as well as former Vice-President of the European Chemical Industry Council (Cefic), addresses this challenge, and will be the guest speaker at the Expoquimia Gala Dinner on 3 June. From Ludwigshafen, she examines a decisive moment for the future of Europe’s chemical industry, just days ahead of Expoquimia.

How would you describe the current state of the European chemical industry in terms of competitiveness, investment and regulation, against the backdrop of today’s geopolitical challenges?

Global trade, the approach to key technologies and how states interact – the rules of the game are changing fundamentally. And there’s no turning it back. Hesitating is not an option. At BASF, we don’t wait. We take the initiative, drive our transformation, and focus on what is firmly in our control.

In general, the European chemical industry is under enormous pressure. Despite many initiatives, we still lack the big picture that would bring us back to growth. In Europe, we are still too slow and too discordant in implementing the bold solutions needed in the most critical time since decades.

How does that pan out in numbers?

Across key sectors, site closures and job losses have reached a new concerning dimension. In the chemical industry alone, plant shutdowns in Europe have increased sixfold since 2022 – nearly 10% of Europe’s production base is gone. Investments have stalled, and world class companies are selling off their European assets. Already 20,000 direct jobs are lost, and roughly 90,000 indirect jobs are at risk. This is a structural shift, not a cyclical downturn.

What do you actually take away from these numbers?

We must benchmark Europe with the rest of the world. Especially in terms of energy costs, green transformation pathways and regulation. It’s probably a cold hard fact, but the main cause for the erosion of industrial competitiveness lies within Europe itself. And while this might be uncomfortable for some to hear, it also carries an important implication: the solution lies within Europe as well.

If you had to name one area in your sector where Europe is (still) competitive – what would that be?

Our companies face global competition every day. It’s all about innovation, speed and especially cost competitiveness. We must become faster, more pragmatic and more focused. There is a significant disadvantage for products whose costs are mainly driven by raw materials and energy, such as commodities and basic chemicals.

Speaking in very general terms, competitiveness within the chemical industry tends to increase further downstream in the value chain. This is largely because the share and importance of energy and raw‑material costs decrease, while the importance of innovation and the need for customer-specific solutions increase.

Where are investments worth making?

At BASF, we recently started up the world’s first production plant for 3D-printed catalysts in Ludwigshafen. The benefits for our customers: reduced costs, lower emissions and increased efficiency. Another case in point are ultra‑high purity process chemicals that are needed for a robust and resilient semiconductor production in Europe. Cars, smartphones, data centers for artificial intelligence – to name just a few. All these things depend on chemistry. In Ludwigshafen, we are therefore building two new plants: one for sulfuric acid and one for ammonium hydroxide. We will produce both products in electronic grade, meaning extreme purity. This is one of the toughest tasks in chemistry. And this is what BASF excels at. In all of Europe, these will be the only two plants of their kind that can supply this level of quality. This opens up a new growth area for us and that is why we are investing a triple-digit million-euro sum.

At the end of the day, we all need to realize that without a strong chemical industry in Europe, there is no industrial strength. No technological sovereignty. And that is something worth fighting for.

Are there any distinctive features of the Spanish chemical industry that stand out?

The situation in Spain is similar to that of the rest of Europe, but with some nuances. The country has geographical conditions that allow it to envision substantial, stable, and competitive access to green energy, provided the necessary investments are made. The chemical industry in Spain has shown resilience in recent years, but, as I mentioned earlier, the part closest to the beginning of the value chain, the part most closely tied to energy and raw material costs, is at a critical juncture, as the president of Feique, Teresa Rasero, has acknowledged on several occasions. Spain has many strengths, firmly built over the last 60 years, but it must face the same challenge of declining competitiveness as the rest of the continent.

Cefic has repeatedly called for a “Clean Industrial Deal”: a major European industrial pact to complement the Green Deal with concrete measures to ensure affordable energy, regulatory predictability and globally competitive conditions. What specific elements should such a deal include?

Firstly, we need action on politically driven energy expenses such as grid fees and taxes, and a reassessment of how we use domestic resources. Also, carbon costs must reflect global realities: we therefore need reforms for the next ETS phase to fix core issues like a CBAM that is not fit-for-purpose for the chemical industry. It is about adjusting the system wisely to new realities, not about abolishing it. Secondly, way more efforts are needed to reduce regulatory burden for companies and ensure regulation is effective in restoring competitiveness and bring investments back on European soil. Making an anti-competitive regulation simpler is just not going to cut it! And thirdly, we need to increase market-pull for products made in Europe. Today, there is hardly any price premium for European or green products such as low carbon, bio-based and circular products. The business case for a resilient Europe and the green transformation is often not given.

The chemical industry is often described as both part of the problem and part of the solution when it comes to industrial decarbonisation. What is a realistic roadmap for achieving climate neutrality while preserving jobs and industrial activity in Europe?

Chemistry is at the core of nearly everything. It is the lifeblood of industry – and an essential enabler for billions of people: securing nutrition and health, powering mobility, and making everyday life work. To effectively drive the ramp-up of low-emission and circular products, several interconnected actions are necessary. First, the upfront costs associated with these products must be transferred into end markets, ensuring a willingness to pay and encouraging market pull. This can be achieved through incentives or obligations at the consumer level, alongside cost compensation mechanisms for suppliers as they scale up alternative feedstocks. The reality is that virgin or fossil-based materials remain cheaper compared to recycled or non-fossil alternatives, making support measures essential. Additionally, a regulatory framework that supports feedstock transformation is critical. This includes adopting a flexible and pragmatic mass balance approach, which allows for greater adaptability and efficiency in integrating alternative feedstocks into existing production processes. Together, these steps will create the conditions needed to foster growth in low-emission and circular products, driving the industry toward greater sustainability and competitiveness.

Looking ahead to 2030, what should be achieved?

The world moves so fast and is so volatile, we need to think in shorter time frames and keep agile. In Europe, there is a clear need to recalibrate our CO₂ reduction trajectory. This does not mean abandoning our long-term climate targets but rather requires us to carefully assess the economic outlook for the coming years. To ensure that European industry remains globally competitive, it is essential to consider how mechanisms such as the Emissions Trading System (ETS) and the Carbon Border Adjustment Mechanism (CBAM) can be adapted. Our approach must always be guided by the principles of pragmatism, focus, and speed, ensuring that climate objectives are balanced with economic realities. 2026 must be the year of delivery. Investments in transformation can only be made from a position of economic strength. In short: it is as much about 2026 actions as it is about 2030 targets.

Fotos of Katja Scharpwinkel can be found here.

About the Expoquimia Gala Dinner