Economic analysis just published says energy prices have an overstated impact on the competitiveness of Europe’s businesses, countering arguments from industry that big fuel bills put them at a disadvantage to United States business.
Research by French, German and British economists said while low energy prices can be an advantage, they are only a small factor in overall competitiveness.
Reuters Newsagency reports that as a result, Europe’s future depended more on technological innovation, as it would never have the energy resources that have cut fuel bills in the US.
European leaders will discuss the bloc’s contested energy policy and its impact on industry when they meet in March.
“Europe cannot compete in the global economy based on cheap resources. Like Japan in the 1980s, it must compete on innovation and efficiency,” said Professor Michael Grubb, Chair of Energy and Climate Policy at Cambridge University.
Reuters reports he is also a board member at Climate Strategies, which carried out the report with the German Institute for Economic Research, the Institute for Sustainable Development and International Relations in France and Britain’s Grantham Research Institute on Climate Change and the Environment.
The European Commission, the EU executive, in January outlined 2030 energy policy goals as part of continued efforts to lower climate-warming carbon emissions.
It also said it would continue to provide support for the industries, such as the aluminium and cement sectors, that are most exposed to high energy prices.
Reuters reports subsidies to shelter industry in Europe’s biggest economy, Germany, are in focus as the EC has begun to investigate whether they are fair.
The report found that for 92 per cent of Germany’s industry, energy accounts for a very small share of total costs, on average, only 1.6 per cent of revenue.
The EC’s own research has also downplayed the impact of energy costs in Europe, which are between three and four times as much for gas and around twice as much for electricity as in the US.
EU Energy Commissioner Guenther Oettinger, who comes from Germany’s industrial heartland, said, however, that such a difference in price was a threat.
“For many energy-intensive industries, it will be leave or perish if that continues,” he said earlier.
Eurofer, which represents the steel industry in Europe, said EU climate and energy policies were forcing out industry.
“It’s collective industrial suicide,” Eurofer director general Gordon Moffat told Reuters.
