One of the largest plastics manufacturers in the world wants to be climate-neutral by 2035 – and is entering into massive cooperation agreements in the USA. In an interview with ntv.de, Covestro boss Markus Steilemann explains why Germany as a production location is on the decline and what he believes needs to change to prevent deindustrialization.
ntv.de: Covestro wants to be climate-neutral by 2035. Are you still holding onto it?
Markus Steilemann: Yes, definitely.
What does the path to climate-neutral production at Covestro look like?
Markus Steilemann has been CEO of Covestro AG since 2018. He has been President of the Association of the Chemical Industry in Germany since 2022.
(Photo: picture alliance / SvenSimon)
First and foremost through the use of more green electricity. We do not want to achieve climate neutrality by buying certificates.
Europe and Germany are not aiming for climate neutrality until 2045. Why do you want to achieve it ten years earlier?
Because we believe that we use far too many resources to make modern life possible. Out of an entrepreneurial instinct for self-preservation, one quickly comes to the conclusion that economy and ecology must be connected with one another quickly and in a sensible manner.
But you could take more time with the transformation.
We see ourselves as pioneers. We are looking for the best possible economic path between fossil fuels with CO2 emissions on the one hand and the increasing pricing of CO2 emissions and the increasing competitiveness of renewable energies on the other.
How far are you on the way to climate neutrality?
In 2022, we got 12 percent of the electrical energy we need worldwide from green sources. This year we are aiming for 18 percent.
Now there are only twelve years until 2035. Is that enough?
I am very confident. Let’s say we hit 18 percent by the end of the year. Then we still have 12 years to convert the remaining 80 percent. That’s about seven percent per year – that’s how far we’ve come. This does not include the fact that the changeover will go faster and faster. Especially in the field of renewable energies.
However, their production will probably increase.
We will also grow in production, yes. And yet I am confident, because at the same time the speed of the expansion of renewable energies is increasing.
They just signed a massive renewable energy offtake deal in Texas. What role have the subsidies for the expansion of green energy in the USA played in this?
For us they played no direct role. But certainly an indirect role, namely for our partner Ørsted, a leading US renewable energy company based in Denmark. The Inflation Reduction Act subsidizes the expansion of renewable energies.
What role does Germany play as a location on the way to climate neutrality?
The successful model in Texas follows a cooperation with Ørsted in Germany, which we started in 2019. At that time we signed the largest purchase agreement in Germany at the time. This will also lead to a further expansion of renewable energies by 2025, because the wind farm required for this has yet to be built. This shows that we can be leaders in Europe.
That was four years ago. Has the Inflation Reduction Act made the US a more attractive location in the meantime?
The Inflation Reduction Act is a double-edged sword. On the one hand, it promotes an investment-friendly environment. On the other hand, it has discriminatory elements such as the so-called “Buy American” aspect, which actually runs counter to necessary and sensible globalization.
So how should Europe respond to the Inflation Reduction Act?
Europe should help companies with operating costs and subsidize less investment. Because this subsidization is associated with relatively hard and narrow leeway. And that is exactly the problem in Europe and Germany: over-regulation, even punishment.
If things continue like this, will your company still be producing in Germany after 2035?
We believe in Germany as a location. But whether we can produce in Germany depends on many aspects. On the one hand, the energy turnaround is the central factor: We have to think about large amounts of affordable electrical energy very early on.
And other aspects?
Just as the automotive industry has switched from the internal combustion engine to the electric motor, the chemical industry must invest in its own processes so that more electricity is used as an energy supplier than oil and gas. The framework conditions for this change must be created.
So are Europe and Germany in danger of losing their competitive advantage?
The engine of growth in Europe has started to stutter massively. In Germany we are in a recession. We have to reckon with the fact that Germany will slip to last place among the leading industrial nations in terms of growth this year and will be at the bottom of growth in Europe. These are facts and figures that play a major role in whether and to what extent investments are actually made here at the location.
But for you as an entrepreneur it must be very pleasant right now when two of the largest economic areas are literally throwing around subsidies for the green technologies of the future, right?
I have a clear opinion on subsidies. They must always be a last resort and always temporary. An industry cannot be permanently subsidized in a healthy and competitive way.
What do you think of the industrial electricity price?
I am very much in favor of the industrial electricity price.
Why?
The industrial electricity price is nothing more than a bridge. On the one hand, we do not yet have enough electrified chemical and energy-intensive industrial processes. On the other hand, we have neither a sufficient expansion of renewable energies nor competitive electricity prices. Until this gap is closed, there will be a long dry spell with little electrical energy at very high prices for the chemical industry. And this gap, in which we have not been competitive for a long time, must be bridged. That’s what an industrial electricity price is for.
Couldn’t companies bridge this period themselves?
We need the investment security that such a fixed electricity price entails, so that Germany will continue to have an industrial base with strong investments after 2030. Because otherwise the companies will go through the risk assessment catalog and possibly make their final investment decisions outside of Germany.
Covestro too?
We are committed to Germany as a location. At the same time, Germany has become less attractive for new investments. The reasons for this are not fought. Tax policy, energy policy and the reduction in bureaucracy are going in the wrong direction. So it’s more about preserving the substance in Germany than about a new wave of investment.
Intel settles in Magdeburg, Tesla in Brandenburg. These are future investments worth billions, for which Germany was chosen as the location. Wouldn’t you also see that as a wave of investment?
The federal government has massively resorted to the subsidy pot. That helps individual companies, but it’s not good industrial policy. We need less bureaucracy, fewer restrictions and regulations.
These are massive investments. Intel alone is expected to create 10,000 jobs with the new factories in Magdeburg. The federal government is doing something right, isn’t it?
It seems to work in some cases. For example, the federal government has massively changed the approval process for the construction of LNG terminals, and in some cases even undermined it. Politicians have obviously recognized that something needs to be done in the areas of bureaucracy, approval procedures, planning procedures and subsidies. That shows: it works.
Interestingly, however, she does not manage to transfer this to an industrial policy level, but always does it in the individual company context. That is extremely inefficient, because in Berlin you can’t constantly take care of individual investments that are large but still small in the overall economic context.
Clara Suchy spoke to Markus Steilemann