European industrialists to EU: act now to reduce energy costs

Brussels – Massively increase the deployment and integration of all renewable and low-carbon energy sources and the necessary infrastructure; close the investment gap; secure the hydrogen value chain; continue to accelerate and streamline permitting procedures; address the carbon cost differential and ensure effective implementation of CBAM; introduce measures to close the energy competitiveness gap; and promote industrial decarbonization through effective demand-side measures. These are the seven proposals BusinessEurope has formulated and urges EU policymakers to undertake “urgently” in the upcoming policy cycle.

According to the Association of European Industrialists, European energy policy and industrial landscape are at critical junctures. The recent energy crisis “exposed significant vulnerabilities in the European energy supply and led to a sharp increase in energy costs for European businesses.” Against this backdrop, global economic consulting firm Compass Lexecon assessed how Europe can achieve its climate and energy goals in a cost-effective way while being internationally competitive. “One message is clear from the report’s findings: a strategic review of EU energy and climate policies is needed to achieve this outcome,” said BusinessEurope, which came up with the seven action points based on the findings.

“High energy prices continue to seriously hamper the global competitiveness of European companies and industrial production. Securing competitively priced energy will be critical to preserving Europe’s industrial base,” said BusinessEurope Director General Markus J. Beyrer. “The study shows that even in the case of a managed transition with more favorable EU energy policies by 2050, energy costs in Europe will be at least 50 percent higher than in the United States, China, and India. This will put European companies at a serious competitive disadvantage against these major competitors, which is why urgent action is needed at the European level to close this gap so that Europe can achieve climate neutrality by 2050 without deindustrializing,” he pointed out. “First, we need to decisively address the carbon cost differential and the energy competitiveness gap. We also call for massive deployment of all energy sources and necessary infrastructure. This will increase the security of Europe’s energy systems and help reduce the overall cost of the transition. “For example, The report finds that when renewables are developed in the least-costly locations, and the roadblocks to their development are lifted, including on interconnections, this could lower wholesale power prices by almost 40%.”

Hence, BusinessEurope’s seven proposals. The first, deploying and integrating all alternative sources: “European energy policy must therefore focus on ensuring a sufficient supply of all generation
sources and infrastructure. In this context, guaranteeing technology neutrality at the EU level is key, where we recognize the need for diverse and complementary means of reaching Net-Zero,” BusinessEurope writes. The second element is bridging the gap: “Europe’s ability to mobilize more private investments in necessary production capacity and essential infrastructure will be central to reaching the Net-Zero target. Measures that improve framework conditions for investments in general are fundamental and need to be the primary focus.”

The third regards hydrogen: “The study results indicate that by 2030, green hydrogen produced via electrolysis is projected to remain significantly more expensive than both grey and blue hydrogen. Thus, the EU must adopt a dual approach going forward: investment certainty and industrial demand for green hydrogen must be safeguarded, as it remains the vital hydrogen source for achieving a decarbonized economy by 2050. ” The fourth point is to continue to speed up and streamline permitting procedures, and the fifth relates to work to ensure effective implementation of the Carbon Border Adjustment Mechanism: “An in-depth monitoring of the CBAM implementation is crucial to ensure that it will prevent carbon leakage.”

Finally, the sixth action relates to measures to close the energy competitiveness gap – “it will be crucial to introduce additional measures to mitigate
energy costs for industries at risk of carbon and investment leakage” – and the seventh relates to promoting industrial decarbonization through demand-side measures – “Implementing sustainability criteria for public procurement in all Member States would stimulate demand for clean tech and decarbonized products in Europe.”