Chemical Leasing – The Austrian Experience

1. Chemical Leasing – The Austrian Experience Dr. Thomas Jakl Austrian Ministry for the Environment Head of Chemicals Policy Unit Stubenbastei 5, A-1010 Vienna, Austria

2. Introduction“Chemical-Leasing” • Chemical products provide a broad variety of services • The focus of economic interests is mostly on the products rather than on services • Shifting the focus more toward the “service-part” • It is in the interest of all the parties involved to use the substances in question with maximum efficiency

3. Starting point in Austria - 2002 To evaluate the possibilities in Austria for the implementation of service-oriented business models we had to answer the following • six key questions: • Which business models are suitable for Chemical-Leasing? • Which markets exist for Chemical-Leasing in Austria? • Which applications and models are already in use? • How great are the ecological and economic potentials in Austria? • What are the inhibiting and promoting factors? • What can suppliers/users do to develop this market?

4. Results of the Studies • 4,000 Austrian companies would basically qualify for the application of such models • Cutting today's annual use of 153,000 tonnes of chemicals by one third - 53,000 tons per year that would not have to be used nor paid for, not result into emissions nor waste • This reduction would be distributed to the individual environmental media as follows: 10% emissions to air, 15% emissions to water and 75% waste • On average, the users of these new business models can expect cost savings of up to 15%

5. Ecological Optimisation Potentials in Austria ~53 ~ 30 - 40% Input quantity (1.000 t) ~153 ~100 ~10% ~15% exhaust air wastewater 53 ~75% waste

6. Economic Optimisation Potentialsin Austria ~ 24 million € Costs 100% 85-90% Number of potential customers 2,250 20 400 1,230 Application Potentials Cleaning/degreasing 10-15% Heating (heat transfer oils) 25-30% Pickling 30-35% Other Applications (estimation) 5-10% average cost savings per company ~ 6,100 €

7. Publication of the Ministry of Environment, Forestry and Water Management“Chemical Leasing - An Intelligent and Integrated Business Model with a View to Sustainable Development in Materials Management” Jakl,T.,Joas,R.,Nolte,R.,Schott,R., Windsperger,A., published by Verlag Springer, 2003. Approx. 150 pages, soft cover. ISBN 3-211-40445-7 The book can be obtained for € 30 from the Ministry of Environment, Forestry and Water Management (www.lebensministerium.at)

8. Around 100 participants from 16 countries attended the conference Experts from USA, Sweden, UK and the Germany presented their experiences with this business model Cost savings and ecological improvement within all varieties of “Chemical Leasing” presented during the conference A specific focus was placed on legal as well as political aspects in particular with a view to the new EU–Chemicals Policy (“REACH–Regulation”) Conference“Experiences and Perspectives of Service-oriented Strategies in the Chemicals Industry and Related Areas“Vienna, 12/13 November 2003, in co-operation with the OECD • The conference underlined the promising perspective for these emerging new business models • The conference came to the conclusion, that REACH in fact could boost the development of service oriented business models • The conference recommended, that during the negotiating – process emphasis should be laid on the circumstances and responsibilities in order to minimise the obstacles for service oriented business models to emerge

9. "Chemical Leasing" is put into practice”Support by the Austrian Federal Ministry of Agriculture, Forestry, Environment and Water Management for pilot projects

10. BMLFUW BiPRO SAFECHEM Car industry supplier(first client) (Company of the DOW group) Pilot I”Implementation of Chemical-Leasing in the field of metal degreasing by establishing an Austrian “Center of Excellence” Pero AG, D Producer of high performance cleaning machines Envisaged financial + administrative support Local Austrian Company(to be founded) Chemicals ConceptsBusiness models

11. Pilot II„Chemical service business models within the reprocessing of heat transfer oils“ Description: • Use of isododecan (catalyst) and compressor oil • Isododecan contaminates compressor oil during the process Procedure now – present state: • user is owner of isododecan + compressor oil • application facility is at the user • used mixture ⇛ disposal company (1.000 t/y) • user pays for isododecan, compressor oil and for disposal (costs for isododecan about 435.000 €/y)

12. 250 Application Supplier 50 700 Cement Industry 1000 Pilot II„Chemical service business models within the reprocessing of heat transfer oils“ Target and Benefit: • Closed loop: supplier will build and run the destillation plant • Savings of organic chemicals about 250 tons/y at the company – potential in other applications in Austria ~ 3.000 tons/y • Waste reduction at the company 250 tons/y – potential in other applications in Austria ~ 5.000 tons/y New Proce- dure 750

13. Pilot III„Chemical-Leasing in the field of paint stripping“ Present Situation: User: • User of paints (Coating enterprise), Alfit AG/Austria, manufacturer of hinge-, slide- and drawer systems for the furniture industry • Presently solvents are bought and disposed after use Supplier: • The paint stripping enterprise, Fa. Tiefenbacher GmbH • Solvent mixtures for different demands, specific maintenance of the baths and reprocessing of the solvents • Reprocessing of the used solvents only possible with know-how of the composition

14. Pilot III„Chemical-Leasing in the field of paint stripping“ Key questions: • Kind of contract • Legal protection • Legal questions in the field of waste treatment Accomplished Targets: • Realisation of a legally established „Chemical-Leasing“ • About 100 tons of solvent mixture should run in a closed loop ⇛ 50 % reduction of solvent

15. Pilot IV“Chemical-Leasing with Borealis AG” Content: • Development of methods to work out possible starting points for „Chemical Leasing“ in the Borealis enterprise • Elaboration of a specific model for a specific case • Development of methods • Development of specific questions concerning the use of chemicals and the obtained waste • Involving of possible leasing partners at an early state

16. Conclusions and outlook I • The prospect of success for this new business model is evident • Many different kinds of "Chemical-Leasing" models are already in practice • Service-oriented business models fit for the fast developing chemical industry: constantly changing processes + new chemicals • Chances to find new partners, new clients and open new markets • A more effective use of technology and chemicals is the key factor • Promotion of recycling rather than disposal -minimization of pollution caused by waste disposal

17. Conclusions and outlook II • A well based legal framework (legal nature of the chemical within the cycle of the leasing model) is necessary • Clarification of responsibilities : ownership and strict liability for release or disposal; Profit sharing! • Possible obstacles: loss of knowledge and loss of control over the processes; scepticism about the providers’ competence in managing customer’s processes

18. Outlook III-The UNIDO-Project • For Austria’s chemical policy the implementation of Chemical Leasing projects is a top priority • Austria is proud to provide support for the UNIDO – initiative in twofold nature: experiences gained so far as well as financial resources • The results of the UNIDO Projects will receive broad international attention (SAICM Prep Com 3 in Vienna 09/05)