Red tape is driving investment out of Europe – and threatening the energy transition

Europe is full of potential. It has the infrastructure, resources and skills needed to grow its economy and reduce its carbon emissions.

We know this because we’ve been part of the European business community for 135 years. In fact, in the past decade alone, we’ve invested more than €20 billion here. Our 12,000 employees in Europe keep the wheels moving and provide energy and chemical products that help power the economy and make modern life possible.

But potential means nothing if you don’t live up to it. And right now, the EU needs change, urgently.

Europe’s industrial competitiveness faces a crisis. It seriously lags China, India and the United States, and the gap is widening because of high energy and labor costs, low productivity and ever-increasing layers of laws and complex regulations.

If industries aren’t attracted to invest here, Europe risks continuing to lose its industrial base. This “deindustrialization” means jobs go away and economic security declines as the EU becomes even more dependent on imports.

This impacts the EU’s climate goals, too. After all, innovative companies look for the most attractive places to invest in low-carbon opportunities. They want to put their money where a full range of solutions is better supported.

ExxonMobil is ready to work on low-carbon projects that could help retain existing industrial infrastructure and support Europe’s climate goals. We’re pursuing more than $20 billion in lower-emission investments globally between 2022 and 2027, but the current EU policy framework simply deters us from bringing many technologies and solutions to EU markets.

What needs to change?

The EU needs to reduce its regulatory burden.

The EU needs to reduce its regulatory burden. This can be done quickly with almost immediate impact. According to the European Roundtable for Industry ERT), 91% of CEOs across the EU believe that improving regulation is the quickest and best way to restore competitiveness.

Former Italian Prime Minister Mario Draghi’s recent report on the future of European competitiveness calls for simpler rules and less reporting. He supports implementing the European Commission’s previously announced proposal to cut 25% of reporting requirements, as well as testing existing and proposed regulations to ensure they don’t make the EU even less competitive.

Draghi also wants the Commission to “postpone initiatives” that could pose problems to competitiveness or innovation.

His report points to the EU’s sustainability reporting (Corporate Sustainability Reporting Directive) and due diligence (Corporate Sustainability Due Diligence Directive (CS3D)) frameworks as “a major source of regulatory burden” that will involve “major compliance costs for companies.”

I agree. Instead of piling more burden and complexity on businesses, the Commission should now pause, reset and rethink how it can make doing business in Europe more attractive.

I’m optimistic because I believe the EU wants to do the right thing and will soon realize it’s going about it in the wrong way.

The EU needs to broaden the solution set to help drive a thoughtful energy transition.

When the independent European Court of Auditors scrutinized the EU’s Hydrogen Strategy, they called for a “reality check” of the strategy’s overly ambitious targets for the production and import of renewable hydrogen. Yes, we need renewable hydrogen, but we also need all forms of low-carbon hydrogen – including from natural gas and nuclear – to be part of the solution set.

Likewise, it’s widely accepted that carbon capture and storage (CCS) is essential to reaching net-zero. As a company taking a leading role in implementing CCS projects around the world, we’re pleased the EU agrees this technology is critical to reaching society’s carbon emission goals. However, instead of mandating CCS injection, the EU should move to a market-based system that makes the technology more competitive and spurs much-needed investments. Generally speaking, the “carrot” incentivizes investment; the “stick” just makes companies like ExxonMobil find another place to invest.

Chemical (advanced) recycling is another technology that should be encouraged. It’s unacceptable that incineration is increasing in Europe, especially when chemical recycling technology works and can be expanded here with the right policy support. Our proven technology enables us to transform hard-to-recycle plastics into raw materials for making valuable new products. We’re already doing this in the United States, having processed more than 27,000 tons of plastic waste that would almost certainly have otherwise ended up in landfills.

However, Draghi’s report on competitiveness states there’s currently no viable business case for plastic recycling in Europe because the costs of doing so are too high compared to the lower costs of incineration and creating virgin plastic. To make it economically viable and incentivize investment, a practicable “mass balance” system is needed to qualify recycled content and generate the highest demand for plastic waste as a valuable feedstock for making new products.

Only the most hardline in their view would disagree that society needs a mix of recycling technologies to address the plastic waste challenge.

Now is the time to act.

Europe has the drive, capacity and desire to lead. But that won’t happen unless policymakers correct their course.

We need political leaders to demonstrate the will to make real changes, quickly. The chemical sector has been challenged. According to the trade association CEFIC, the sector is operating at only 75% capacity, and producing 10 percent less than it was in 2021. Meanwhile, the refining sector has seen a dozen refineries shuttered in the past five years, according to Concawe. And, yes, the EU might continue to reduce carbon emissions as highlighted in the European Commission’s State of the Energy Union Report, but decarbonizing by deindustrializing is not the answer. Europeans will pay a high price through product shortages, higher costs, lost jobs and increased reliance on imports.

If they don’t act, the EU will fall further behind the rest of the world. But if they seize this potential and keep the EU open for business, it could revitalize its industrial sector and its competitiveness, while leading the world toward a lower-emissions future.

Potential alone isn’t enough. We need action to make it real.