By Pilita Clark in London
High gas and electricity prices will continue to plague Europe for at least
20 years, damaging the competitiveness of industries that employ almost 30m
people, the world’s leading energy forecaster has warned.
In findings likely to inflame claims EU climate change policies are
damaging the bloc’s manufacturers, the International Energy Agency said
Europe will lose a third of its global market share of energy-intensive
exports over the next two decades because energy prices will stay
stubbornly higher than those in the US.
A number of EU countries have embraced green energy subsidies, shunned
nuclear power and resisted the shale exploration that has fuelled a
manufacturing renaissance in the US, prompting growing anger among industry
leaders who say this has been a recipe for competitive ruin.
Fatih Birol, the IEA’s chief economist, said environmental policies alone
had not pushed up energy costs but the price gap between the EU and the US
was going to last much longer than some expected.
“This is a new thing and it’s structural. It’s not a one-off,” he told the
Financial Times.
“Europe didn’t realise the seriousness of this competitive issue,” he said,
warning the situation raises concern for the almost 30m people working in
heavy industries such as iron, steel and petrochemicals across the continent.
European gas import prices are currently around three times higher than in
the US while industrial electricity prices are about twice as high,
creating an energy price gap Dr Birol said would last “at least 20 years”.
Although industry leaders blame the region’s ambitious climate change
policies – especially generous renewable energy subsidies – Dr Birol said
he had “great respect” for the EU’s climate actions and it was a mistake to
say they were chiefly responsible for the bloc’s dilemma.
“Too much of the blame for Europe’s high energy prices is being directed at
its ambitions on climate change while the main factor – the high cost of
imported energy – is being all but ignored,” he said in a speech to
London’s Imperial College where he elaborated on the IEA’s analysis of the
problem.
“Even renewable subsidies, which have become a serious burden in some
markets, are still far from being the dominant factor in price formation,”
he said.
It was important to recognise the big role natural gas played in
electricity generation in Europe, which has yet to experience anything like
the US shale boom that has driven down prices.
Still, Europe alone cannot solve the climate problem he said, explaining
that even if the continent stopped emitting greenhouse gases completely in
2030, it would not stop the trend towards dangerous levels of global warming.
Rather than continuing to see energy policy as a struggle between
competitiveness and climate change action, Dr Birol said Europe needed to
to find a way to address both concerns.
This could include a bigger role for nuclear power and shale gas
production, encouraging more energy efficiency, and renegotiating natural
gas import prices, now that two-thirds of import contracts are due to
expire in the next 10 years.
In addition, he said there was a need to address the “perverse outcomes”
driven by poorly designed renewable subsidy programmes, as well as the
collapse of the carbon market that had made coal fired power generation
more attractive.
“Europe needs to pay more attention to the competitiveness agenda while
keeping the climate agenda alive,” he said.
Copyright The Financial Times Limited 2014.
2 Comments