Europe is still a long way off from achieving its target of a scenario where the industrial sector accounts for 20 percent of community GDP by 2020 (up from the current 15 percent) and reversing the downward trend of recent years. Attaining this target would allow Europe to hold on to its global leadership in strategic sectors, drive economic recovery and enable the creation of high quality jobs.
This loss in the competitiveness of European industry on international markets can be attributed to the difficulties encountered by small and medium enterprises in gaining access to finance and strategic raw materials; low investment in innovation, particularly as regards the digitization of the economy; and higher energy costs which has led some companies to relocate their production facilities to countries like the United States, where energy costs are substantially lower.
The offshoring process underway in Europe is in stark contrast to the re-shoring phenomenon, whereby North American companies that had relocated elsewhere are now returning to the country, increasingly lured back by low energy costs.
However, rising electricity prices in Europe are not due to the cost of generation or that of its networks. On the contrary, this is happening because in many European states electricity bills include costs derived from taxes, levies, duties and charges that go towards funding public social and environmental policies that push them up disproportionately. These items (the "government wedge," to quote David Robinson, Senior Research Fellow at the Oxford Institute for Energy Studies) account for almost 50 percent of the retail energy price in many European Union countries and they explain the difference in end price compared to the United States, where these policies are largely financed with state and federal funds.
The cost of energy and industrial competitiveness form an indivisible binomial. As the European Round Table of Industrialists (ERT) -- a group consisting of the Chairs and CEOs of 50 major European multinationals from the industrial and technological sectors, of which I am a member -- has been recommending, European energy policy must be aligned with the ambitious industrial targets set by the EU.
The International Energy Agency estimates that the investments needed in the European energy sector in the period 2012-2035 will amount to some US$2.6 billion. In order for these investments to be made, the European Commission and the Member States will have to guarantee stable, predictable regulatory frameworks that will be capable of attracting private capital and promoting a Single Market, with a single regulatory body to vouch for compliance with the regulations in all Member States.
Europe needs a common energy policy that is capable of meeting the challenges of competitiveness, environmental sustainability and security of supply. However, as well as the rising end prices for energy, other aspects such as the diversity of tariff frameworks that distort free competition; the price of CO2 that is too low to be a real incentive for technological shift or a catalyst for reducing emissions; and the mass-scale closure of power plants in Europe due to low profitability, with the consequent risk of power cuts and the lack of back-up available considering the intermittency of renewable energy sources, are all obstacles to achieving this three-pronged target.
The European institutions appreciate the scale of these challenges and they have the opportunity to embark on what Commissioner Arias Cañete describes as the most ambitious energy project since the foundation of the Coal and Steel Community.
The creation of the Vice-Presidency for Energy Union and the post of European Commissioner for Climate Action & Energy itself, as well as the publication of the Summer Energy Package (July 2015) by the European Commission, are all signals of progress towards the implementation of the Energy Union strategy, a streamlined approach superseding the 28 national energy policies and a means to reduce energy costs, something that is crucial in driving a European industrial renaissance. In energy, too, we need more Europe.
This post first appeared on HuffPost Spain.