The European Union is projected to face the highest energy prices globally until at least 2050, according to a recent study by BusinessEurope. This scenario arises from increased energy demand and inherent disadvantages within the EU’s energy framework. Even under the most optimistic net-zero scenario, the EU’s energy production costs are expected to be at least 50% higher than those in the US and China. In a scenario where climate policies encounter delays, costs could triple compared to key competitors, placing European industries at a severe competitive disadvantage.

The root causes of this cost disparity include the EU’s reliance on energy imports and geopolitical disruptions, notably the reduced gas supplies following Russia’s invasion of Ukraine. Such dynamics have exacerbated the cost challenges, prompting concerns over Europe’s ability to sustain its industrial base against global competitors like the US and China, who may capitalise on their lower energy costs to boost traditional and clean tech sectors, such as steel and wind energy.

Markus Beyrer, Director General of BusinessEurope, has called for urgent action at the EU level to address these energy cost issues. He highlighted the need for competitive energy prices to maintain Europe’s industrial competitiveness. Key recommendations from BusinessEurope include revisiting the phase-out of free carbon emission allowances for manufacturers, better integration of renewable and low-carbon energy sources, ensuring the hydrogen value chain, streamlining licensing procedures, and promoting decarbonisation through incentives.

The high energy costs remain a top concern for major European industrial leaders. Policymakers have recognised the importance of competitiveness in renewable energy as a cornerstone for the next European Commission. However, businesses continue to struggle with bureaucratic hurdles that hinder swift progress in energy transition.