Higher energy prices might be a blessing for Europe

Posted by Eberhard Rhein on 25/11/13

European industry is afraid of losing its international competitiveness because of a rising gap between European and American gas and power prices. EU prices for gas, it is claimed, amount to just one third of US shale gas prices. This enormous price differential is bound to undermine the competitiveness of European energy-intensive industries. They will either have to switch to US production sites or close their production.

Such an impact should be rather welcome. Energy-intensive production has never been Europe’s strength, and it will be even less so in the future.

There is no point for Europe producing basic chemicals, steel, copper or aluminium, glass, pulp and paper or, if so, from recycled material that will substantially reduce the energy input. Even cement production will not be a major industry in the future considering the little new construction that will take place in a continent with stagnating population.

Higher energy prices in Europe should therefore offer an incentive for Europe to review its long-term economic future. Where should it create new jobs?

The answer should be non-ambiguous: In services and high-tech, low energy-intensive sectors. Switzerland and Germany should be exemplary. Innovative products and services must be the competitive response to energy-and labour-intensive products from USA or China.

Europe must continue to push for renewable energy and energy efficiency. These should be the Europe’s answers, not shale gas or carbon capture and storage, for which Europe is not well fitted because of its high population density.

Instead of complaining of excessive energy costs about which it cannot do anything Europe should use them as an opportunity for further increasing its energy efficiency and defining an industrial strategy focusing on innovation in high-tech sectors like nano-materials, aviation, electrical vehicles, trains, subways, 3D products, pharmaceuticals, carbon material etc.

Anyhow, the EU industrial sector currently accounts to no more than 16 per cent, which the European Commission aims at raising to 20 per cent until 2020 as part of its re-industrialisation strategy. The share of energy-intensive products is thus next to negligible and definitely no risk for the employment situation.

Eberhard Rhein, Brussels, 20/11/2013

 

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