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European competitiveness in the world is a multi-facet phenomenon comprising several sectors in the member states’ political economy’s models. BusinessEurope is concentrating on industrial transformation, energy issues, investments, renewables, etc. For example, recent conference in Denmark was devoted to a new EU-wide industrial strategy with strategic reviews of EU energy and climate policies.
Background
At the end of October, industry leaders and policymakers from numerous EU member states gathered in Denmark for a conference on the “powering European industry” issues. The event discussed necessary strategies and actions to reinvigorate European competitiveness, with a specific focus on energy policies. “Securing energy at competitive prices is central to preserving Europe’s industrial base and ensuring global competitiveness for European companies”, said BusinessEurope Director General Markus J. Beyrer.
For example, he noted that high energy costs “place Europe at a significant disadvantage compared to other major economies”.
“Alongside private financing, targeted public funding will be crucial to de-risk investments; decarbonising national economies requires strong public-private partnerships”, Beyrer added. The event was organised by the Confederation of Danish Industry, the International Energy Agency, Danfoss and BusinessEurope.
Note. Some recommendations on bringing down energy prices in: https://rebooteurope.eu/energy-climate-transition-how-to-strengthen-eu-competitiveness/
BusinessEurope: “reboot Europe” initiative
BusinessEurope is the leading “European advocate” for growth and competitiveness, standing up for companies across the continent and campaigning on the issues that most influence their performance. A recognized social partner, “it speaks for enterprises of all sizes in 36 European countries” with the national business federations participating as active members.
As the organization leaflet notes, “on behalf of its members the federations ensures that the voice of business is heard in European policymaking”; it interacts regularly with the European Parliament, Commission, the Council and other relevant stakeholders. BusinessEurope also represents the continental business internationally, ensuring that Europe remains globally competitive.
BusinessEurope and the European business community have always strongly supported European integration and a strong European Union. Businesses are the backbone of our economy, fuelling innovation, generating employment, and fostering economic growth.
The European Parliament elections are not merely about selecting representatives, but about safeguarding our values, ensuring our voices are heard, and charting a path towards a brighter, more prosperous future. Under the slogan ‘Reboot Europe’, BusinessEurope has launched its campaign calling for policy changes in the next EU political cycle.
Source: https://rebooteurope.eu/about-us/
Energy transition towards 2050
During last two years, BusinessEurope prepared in-depth analysis of the EU energy system’s transition towards 2050 and its impact on EU competitiveness. The analysis assesses the ways the EU member states can achieve their national as well as the EU-wide climate and energy targets in a cost-effective way, while being internationally competitive.
One of the strongest messages in the analysis is that “strategic review of EU energy and climate policies is needed to achieve the outcome”.
Thus, the report finds that a massive scale-up of renewable and low-carbon capacity is needed to reduce the energy price gap between the EU and third countries and to reach climate neutrality. It also projects that energy prices could remain substantially higher in Europe compared to the competitors around the world.
Therefore, additional policy measures will be needed to secure the competitiveness of European industry, supported by an efficient management and regulatory framework coped with a massive scale-up of private and public investments.
Source and reference to: https://rebooteurope.eu/energy-climate-transition-how-to-strengthen-eu-competitiveness/
Urgent energy policy reform: perspective actions by BusinessEurope
Binding together the competitive energy policy and the EU-wide climate transition is based on “right policy decisions”, acknowledged the BusinessEurope leaders. Thus, the European corporate organisations made some conclusions for the EU policymakers to urgently take into consideration the following vital actions during the next Commission’s political cycle:
= Integration of renewables, low-carbon energy sources and infrastructure. Reaching climate neutrality by 2050 requires deep electrification of the member states economies. At the same time, the 2050 energy mix will rely on a combination of different energy carriers such as wind and solar, hydrogen, biomethane, biomass and nuclear sources. European energy policy must therefore focus on ensuring a sufficient supply of all generation sources and infrastructure. In this context, guaranteeing technology neutrality at EU level is becoming vital with the urgent needs for diverse and complementary means of reaching Net-Zero. Supporting the development of renewables and low-carbon resources along with the necessary infrastructure will not only enhance the security of Europe’s energy system but should also help reduce the overall cost of the energy and climate transition. The BusinessEurope concludes that “when renewables are developed in the least-costly locations and the roadblocks to their development are lifted, including on interconnections, this could lower wholesale power prices by almost 40%”.
= Closing investment gap. Europe’s ability to mobilise more private investments for industrial production and essential infrastructure will be central to reaching the EU-wide net-zero target. Thus, measures to improve investment conditions in general and using private funds in particular shall be fundamental and need primary attention. Public funding and private financing will be crucial to de-risk and trigger investments needed for massive increase in energy deployment and infrastructures. However, projects receiving public funding should be aimed at using so-called “market-based dynamics”.
The development of an efficient European energy system should be supported by increased EU funding either through increasing existing funding facilities (CEF-E, Innovation Fund, etc.) or setting up new facilities based on competition and excellence. These facilities may consider time-limited support for operational (OPEX) and capital (CAPEX) expenditures to incentivise private investments in climate-friendly production methods, where market conditions fail to do so, as illustrated in the steel and ammonia case studies. In addition, the Hydrogen Bank could serve as a useful model, utilizing an auction-mechanism as the guiding principle for the swift and cost-effective deployment of EU funds.
Other EU instruments such as Important Projects of Common European Interest (IPCEIs) should be further developed to stimulate additional research, support first industrial development and intensify the EU-wide investments in decarbonised energy technologies and infrastructures. However, IPCEIs are often considered too burdensome and lengthy; hence, to accelerate the transition and deployment of strategic ecosystems through IPCEIs, a 4-month ceiling for the review period should be enforced. A simplified procedure should also be put in place for SMEs’ involvement in IPCEIs. When State aid measures are implemented to supplement EU funding, they should be targeted, time-limited and carefully monitored to mitigate distortions of competition and preserve a level playing field in the single market.
More on IPCIs in: https://www.integrin.dk/2024/10/31/new-european-competitiveness-deal-a-declaration-is-on-the-way/
= Secure the hydrogen value chain. The BusinessEurope’s report reveals that hydrogen can play key role in the path to net-zero emissions, especially to decarbonise certain European industrial sectors. The share of hydrogen in final energy consumption could grow up to 15 to 25% by 2050 depending on the scenario, with demand being met through both domestic production and imports. The report indicates that by 2030, green hydrogen produced via electrolysis would remain significantly more expensive than both grey and blue hydrogen. Thus, the EU must adopt a dual approach going forward: a) investment certainty, and b) safeguarding industrial demand for green hydrogen as a vital hydrogen source for achieving a decarbonised economy by 2050.
In the short to medium term, public support will be necessary to ensure that investments around green hydrogen can accelerate, and that the member states can start producing decarbonised products that are competitive both internationally and compared to fossil fuel-based production methods. In the long term, scale and learning effects, higher CO2 pricing and the build-up of EU’s renewable energy production are expected to enhance the competitiveness of green hydrogen and achieve a faster deployment.
= Cost-competitive energy intensive industries. The carbon border adjustment mechanism, CBAM is an indicator the GHG emissions (in carbon dioxide equivalent, ‘CO2e’) will apply to imports of certain goods and selected precursors whose production is carbon intensive (with most significant risk of carbon leakage), i.e. in cement, iron and steel, aluminium, fertilizers, electricity and hydrogen.
More on CBAM in: https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:52021PC0564
An in-depth monitoring of the CBAM implementation is crucial to ensure that it will prevent carbon leakage. In addition, there is an urgent need to accelerate the work on CBAM’s critical parameters, in particular through altering/facilitating existing approaches to:
– the WTO-compatible exports support scheme, which is crucial to maintain the competitiveness of European products in third markets; one such measure could be maintaining full free allocation for that part of the production which is destined for export;
– the prevention of the risk of circumvention and resource shuffling;
– preserving the framework for indirect cost compensation under the EU ETS including for CBAM sectors beyond 2030, considering that a CBAM on indirect emissions would not reflect the indirect carbon costs passed on to European consumers through electricity prices;
– the impacts of CBAM on downstream production in the EU, in light of input materials becoming more expensive. By December 2024, the Commission is mandated to assess carbon leakage risks linked to exports as part of its annual ETS report. It is crucial that it dedicates sufficient resources, time and expertise, along with consulting with relevant stakeholders at this stage to assess these risks, rather than waiting until 2028 when the assessment is due to be undertaken under CBAM.
= Closing energy competitiveness gap. Addressing the carbon cost differential alone will not be sufficient to prevent the risk of relocation and investment leakage if the gap in total energy system costs remains excessively high, as the report’s projections show. Hence, it will be crucial to introduce additional measures to mitigate energy costs for industries at risk of carbon and investment leakage. The following measures should be considered at EU level to close the energy competitiveness gap between EU-based industrial consumers and major competitors from outside the EU, while also supporting the transition to a net-zero economy:
– broaden the scope of industries considered at risk of investment and carbon leakage as well as factors considered to contribute to such leakage, to encompass factors such as CO2 pricing, energy and infrastructure costs, along with international competition;
– urging the member states to fully implement the schemes for indirect cost compensation under the EU ETS while transitioning towards renewable and low-carbon energy sources;
– develop recommendations on reducing the exposure of industrial consumers to rising costs for energy infrastructures, for instance through exemptions from network charges in the respect of fair cost allocation and avoiding distortions of competition in the internal market. This will become increasingly important in the years to come, as investments in energy infrastructure are expected to increase;
– support an efficient implementation of the Electricity Market Design agreement to enhance companies’ ability to sign long-term contracts, which can provide them with significant hedging opportunities, reducing the impact of gas price fluctuations on consumer prices and contributing to the overall stability of the system.
= Suggestions for industrial decarbonisation. The EU member states have to orient corporate communities towards profitable advances in “cases” concerning emissions and compliance with sustainability criteria. However, without additional measures to stimulate demand for decarbonised goods, the competitiveness gap with third countries making it more attractive to move production elsewhere, threatening the green-business’ opportunities. But production and demand for decarbonised goods in the EU has to increase at the same time.
One of the key levers in that respect is public procurement, which represents around 15% of EU GDP; besides, implementing sustainability criteria for the EU-wide public procurement would stimulate demand for clean tech and decarbonised products in Europe.
Therefore, additional efforts to create markets for the decarbonised products are needed; they should specifically include: a) introducing sustainability criteria in EU public procurement legislations, alongside existing sectoral EU legislation, like the Net-Zero Industry Act; b) advancing product-specific sustainability requirements such as those to be developed under the Ecodesign for Sustainable Products Regulation; and c) implementing “environmental scoring systems” to incentive the purchase products which include environmental impact assessment throughout the whole product’s life cycle.
All references and citations from the BusinessEurope News in: https://rebooteurope.eu/energy-climate-transition-how-to-strengthen-eu-competitiveness/