Energy prices have overstated impact on EU industry - report

Thu Feb 6, 2014 12:17pm EST

Related Topics

* Like Japan, Europe must rely on innovation, energy thrift

* EU leaders to discuss energy costs in March

* Academics reject industry claims on energy costs

By Barbara Lewis

BRUSSELS, Feb 6 (Reuters) - Energy prices have an overstated impact on the competitiveness of Europe's businesses, economic analysis published on Thursday said, countering arguments from industry that big fuel bills put them at a disadvantage to U.S. peers.

Research by French, German and British economists said while low energy prices can be an advantage, they are only a small factor in overall competitiveness. As a result, Europe's future depended more on technological innovation as it would never have the energy resources that have cut fuel bills in the United States.

European leaders will discuss the bloc's contested energy policy and its impact on industry when they meet in March.

"Europe cannot compete in the global economy based on cheap resources. Like Japan in the 1980s, it must compete on innovation and efficiency," Michael Grubb, Chair of Energy and Climate Policy at Cambridge University, said.

He is also a board member at Climate Strategies, which carried out the report with the German Institute for Economic Research, the Institute for Sustainable Development and International Relations in France and Britain's Grantham Research Institute on Climate Change and the Environment.

The European Commission, the EU executive, in January outlined 2030 energy policy goals as part of continued efforts to lower climate-warming carbon emissions.

It also said it would continue to provide support for the industries, such as the aluminium and cement sectors, that are most exposed to high energy prices.

However, subsidies to shelter industry in Europe's biggest economy, Germany, are in focus as the European Commission has begun to investigate whether they are fair.

Thursday's report found that for 92 percent of Germany's industry, energy accounts for a very small share of total costs - on average, only 1.6 percent of revenue.

The Commission's own research has also downplayed the impact of energy costs in Europe, which are between three and four times as much for gas and around twice as much for electricity as in the United States.

EU Energy Commissioner Guenther Oettinger, who comes from Germany's industrial heartland, said, however, that such a difference in price was a threat.

"For many of them (energy-intensive industries), it will be leave or perish if that continues," he said earlier this week.

Eurofer, which represents the steel industry in Europe, said EU climate and energy policies were forcing out industry.

"It's collective industrial suicide," Eurofer director general Gordon Moffat told Reuters. (Additional reporting by Maytaal Angel in London, editing by David Evans)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.