Europe's abdication from climate leadership would stunt growth in the region and hand a huge economic advantage to China and the United States as they carve out their share of a multi-billion low-carbon market, a German think tank said today (14 November).
The report's release coincides with UN climate talks running until the end of next week.
They are hosted by Poland, one of the EU member states to have embraced the counter-argument that the European Union should be only a part of, not the leader of global climate efforts and that acting alone will damage competitiveness.
Germanwatch, a think tank used by German government ministries to carry out research, says such a shift would only harm Europe's ailing industrial sector and it is no longer true to say the European Union is an isolated environmental leader.
Already China's solar equipment exports are worth almost as much as its exports of shoes, making it a major threat to EU technology. In 2011, China's solar exports totalled $35.8 billion (€26.6 billion) compared with $39 billion (€29 billion) for shoes, UN data showed.
In all, the low-carbon energy products market will be worth an estimated $500 billion (€372 billion) per year by 2050, the report says, citing independent research and economists.
Apart from China, the world's other top greenhouse gas emitter the United States has also begun climate action.
While Germany has blocked EU legislation to improve car fuel efficiency, the United States, known for its gas guzzlers, has adopted standards to double the efficiency of new cars compared with those on the road.
German Chancellor Angela Merkel said she was saving jobs by sheltering luxury carmakers, such as BMW, which has funded her party, from tougher regulations.
Germanwatch says ultimately her actions will cost, not save jobs as the rest of the world innovates to capture the economic and air quality benefits of cutting fuel bills and emissions.
"It's never a good long-term policy to build a protection wall around industry. In the end protection doesn't eliminate but increases the need for transformation," Christoph Bals, one of the report's authors said.
"Industry has legitimate concerns, but they can't blame all their problems on climate regulation."
China's competitiveness is helped by cheaper labour.
EU industry is concerned the United States has a huge advantage from cheap energy generated from shale gas, while green energy charges are inflating EU energy prices.
European gas prices are roughly three times higher than those in the United States and EU electricity prices are around 2.5 times higher, the European Commission has said.
Germanwatch says costs not prices are the problem and they can be tackled through energy efficient buildings, for instance, which would create jobs in construction.
It also wants a deeper 2030 EU greenhouse gas goal (50-55% lower than 1990 levels) than the around 40% cut the European Commission is considering.
A Commission analysis found a 40% cut would add around 0.5% to annual gross domestic product, in part because fossil fuel import bills would shrink.