Green legislation will alter chemical landscape
-- Purchasing, 11/17/2005
Editor’s Note: For more information on 'green' legislation affecting chemicals, see "Regs could raise prices" the December 8 issue of PURCHASING Magazine.
Recent changes in laws and regulations governing air quality, toxic chemicals and renewable fuels could have far-reaching effects on the demand and pricing for a host of chemical commodities.
Take solvents. Beginning with the 1990 amendments to the Clean Air Act, the Environmental Protection Agency (EPA) began regulating and limiting industrial emissions of "hazardous air pollutants" (HAPs) and ozone-forming "volatile organic compounds" (VOCs). The restrictions had their biggest impact on the use of hydrocarbon solvents. According to the Rauch Paint Guide, an annual review of business conditions in the industry, hydrocarbons dropped from 52% of all the organic solvents used in paints and coatings in 1992 to 40% in 2004, largely due to the HAP and VOC regulations. High-solids, waterborne and oxygenated-solvent coating formulations have grown as hydrocarbon use has declined. Meanwhile, EPA devised rules in the mid-1990s specifically targeting ozone-forming VOC emissions in architectural and industrial maintenance (AIM) coatings. And California implemented an even stricter set of AIM ozone-control rules in 2000. The California regulations were the model for AIM emission limits adopted by New York, New Jersey, Pennsylvania and several other Northeastern states at the beginning of 2005. Industry groups say that the latest AIM rules will cause a further reduction in organic solvents in house paints, and an acceleration of the shift toward waterborne acrylic latex formulations, at least in California and the Northeast. Ethanol for gasoline blending will be another winner in the environmental regulatory stakes. Since the 1990 amendments to the Clean Air Act, urban areas with high levels of toxic tailpipe emissions have been required to sell gasoline blended with at least 2% ethanol, which makes the fuel cleaner burning. Ethanol can also boost octane ratings, and has gained market share at the expense of another octane enhancer, methyl tert-butyl ether (MTBE). That additive has been phased out in many states because it is suspected of harmful health effects and has been found to contaminate drinking water. Another plus for ethanol: it is a renewable resource that is obtained from corn by fermentation, while MTBE is derived from increasingly expensive petroleum. Ethanol will get a further lift from a comprehensive energy bill signed into law on August 8, 2005 by President George W. Bush. Among other provisions, the new law aims to reduce U.S. reliance on foreign oil by encouraging greater use of renewable fuels such as ethanol and biodiesel. To do this, the measure mandates a minimum renewable fuels usage of 4 billion gallons in 2006, increasing to 7.5 billion gallons in 2012. According to John Urbanchuk, an analyst with the market research firm LECG, LLC, the renewable fuels provision in the new law will spur some $6 billion in investments to build 4.3 billion gallons of new ethanol capacity.
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