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05 May 2014

Energy at the core of the confrontation between Europe and United States


Completely overshadowed by the fight against climate change, competitiveness is back on the European agenda: The European Commission talks now about an imperative industrial renaissance in the EU. The competitiveness gap of Europe, usually referred to its relation to China, India or Brazil, but is also concerns today the increasing gap between EU and the US (A country with the same economic maturity!). However, as Competitiveness can be assessed in many ways, reflections now focus on a key point: energy…

A combination of factors actually explains why thoughts are now focused on the energy sector. In the first place, the US energy revolution of shale gas (but also shale oil, surprisingly forgotten in political speeches), provides the American industry with a gas three times cheaper than in Europe. Then, electricity prices are on average two times higher in the EU than in the US, which is mostly due to the increasing economic weight, for consumers and public finances, of subsidies to renewables energies.. Finally and most importantly, as the Chief Economist of the IEA recently pointed out, the EU completely neglects the impact of its huge imported energy bill (over 500 € billion).. The United States becomes a major energy exporter while Europe massively imports fossil fuels…

A worrying situation

European industry is facing a major disadvantage in terms of energy costs, concerning not only the energy-intensive industries (as chemicals, metallurgy, aluminum…) but also the entire supply chain supporting them. The IEA recalled that if nothing was to be done, the EU could lose in the next 20 years, for sectors mainly covered by electro intensives industries, a third of its share in export markets… This is why Sigmar Gabriel, the German Minister of Energy, recently raised the spectrum of a “dramatic de-industrialization” in Germany, where 50% of the GNP relies on exports. Even if the French green Institute for Sustainable Development and International Relations (IDDRI) tried to minimize the real impact of the US energy revolution, the facts speak for themselves: European energy transitions are taking the wrong path, and dragging down the European economy.

Do not miss the industrial renaissance

Climate commitments are absolutely necessary, but must be reconciled with an economic reality reducing the EU financial leeway, and calling for a greater coherence to take the right choices. Europe is experiencing a serious industrial decline, deeply worrying for the future of its people. In the energy sector, there is room for improvements to foster the European industrial renaissance, provided that policies won’t be designed arbitrarily. European policies now have to translate in practical terms the industrial renaissance expressly encouraged by the European Commission, starting by the last guidelines published by the EC on January 2014.
The implementation of a consistent low carbon strategy could be achieved by the development of competitive RES technologies, without subsidies, and according to the rational evolution of energy consumption and non-electric renewable energies. An action on the structure of energy demand should have the ambition to reduce massively the European dependency on fossil fuel energies. Similarly, the efforts in energy efficiency must be strengthened, focusing in the first place on the reduction of fossil fuels consumption, starting with oil. An open mind towards the exploitation of shale gas resources in Europe is essential, such as renegotiating the long-term supply contracts of gas (2/3 of the current contracts will expire in 10 years). Finally the recognition of nuclear energy as an endogenous, low carbon energy source, and the reflection on new extraction methods for shale gas, are two serious paths to explore, to strengthen the European economic, industrial and social future.
Depending on the way the European Union will manage its energy policies, Europe will also engage its industrial and global future. It is time for Europe to get out of the lie carried out by Rifkin‘s “third industrial revolution”; a thesis, overwhelmingly rejected in the US, and shutting down day by day the Industrial Europe. The industrial renaissance of Europe will be a major challenge for the next European elections and for the roadmap that Member States will assign to the next European Commission, which must remain an executor of the member state’s wills.

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The Union of the French Electricity Industry is the trade association of the French electricity sector. We bring together companies from the whole value chain of the electricity industry.

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