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30/09/2016

EU seeks to tackle industrial decline, high energy costs

Trade & Society

EU seeks to tackle industrial decline, high energy costs

Tajani Sept 2013.jpg

EU nations will be left far behind the US unless they address high energy costs that are worsening the continent's industrial decline, the European Commission said on Wednesday (25 September).

To tackle the issue the Commission, the EU executive, is preparing a policy document later this year followed by an EU summit in February 2014 focused on industry.

Enterprise and industry Commissioner Antonio Tajani said part of the answer is an industrial compact "to address high energy prices, difficult access to credit, a drop in investments, lack of skills and red tape".

He drew a comparison with the fiscal compact signed in March 2012 by 25 EU leaders with a view to forcing euro zone countries to keep their budgets in surplus or balanced.

Economic output generated by EU industry has fallen to 15.1% of GDP from 15.5% last year, short of the 20% informal goal the European Union should aim for by 2020, the Commission said in its 2013 report on industrial competitiveness.

“The Commission has taken several initiatives to address high energy prices, difficult access to credit, drop in investments, lacking skills, and red tape. And we will come forward later this autumn with an industrial initiative to go further and boost action in this field," Tajani said, announcing fresh proposals "in the next few weeks".

In a new industrial policy strategy unveiled a year ago, Tajani declared the aim to raise industrial activity to 20% of EU gross domestic product by 2020, compared to 16% today, taking it back up to pre-crisis levels. The strategy set out six priorities for short-term action: advanced manufacturing technologies, key enabling technologies, bio-based products, construction and raw materials, clean vehicles, and smart grids.

>> Read our Special Report: Europe's Industry : Halting the Decline

Doubts remain, however, about the EU’s ability to deliver on the objective.

Cheap energy

As EU industrial output declined, the US meanwhile has been re-industrialising with the help of a cheap-energy boom following the exploitation of shale gas.

Some industry, especially the chemical sector for which gas is a feedstock as well as an energy source, has been relocating to the United States to take advantage of it.

The Commission has said natural gas prices in the European Union are roughly four times higher than in the United States. The gap could narrow, especially if the United States exports more, but that is complicated in terms of domestic politics.

EU leaders held a summit to focus on energy earlier this year when they acknowledged it would be hard for the European Union to match the US shale gas revolution because of different geology, land ownership and environmental concerns.

EU leaders have instead emphasised resource efficiency, although the bloc as a whole has failed to meet energy-savings goals.

It is also trying to enforce new targets on fuel efficiency for cars, a move that could reduce consumer energy bills.

But Europe's leading economy, Germany, says much of its wealth and jobs is based on its premium manufacturers, such as Daimler and BMW, whose fuel consumption and carbon emissions are at the higher end of the EU vehicle fleet.

And it has been blocking implementation plans for a 2020 vehicle efficiency goal.

Environmentalists say enforcing the 2020 target that would cap fuel consumption and limit carbon emissions to 95 grams per kilometre is essential to competitive advantage.

The Commission report also says industrial development should be clean and high-tech.

To try to increase the tiny role played by electric and fuel cell vehicles, the Commission is planning a new green vehicles initiative with an anticipated budget of €700 million from the beginning of 2014.

French President Francois Hollande earlier this month laid out a 10-year roadmap to revive French industry by promoting new technologies to drive job creation.

Background

A Commission communication published in October 2012 promised a "new industrial revolution" in Europe, urging immediate action to re-launch manufacturing on the continent.

>> Read: Commission seeks 'new industrial revolution'

The strategy's headline goal is to raise industrial activity to 20% of EU gross domestic product by 2020, compared to 16% today, taking it back up to pre-crisis levels.

The focus is on strengthening industrial competitiveness to support economic recovery and to enable the transition to a low-carbon and resource-efficient economy.

The strategy set out six priority areas for short-term action: advanced manufacturing technologies, key enabling technologies, bio-based products, construction and raw materials, clean vehicles, and smart grids.

Timeline

  • Autumn 2013: Commission to table industrial initiative
  • Feb. 2014: EU summit to discuss industrial initiative and high energy prices

Further Reading