EU’s green future needs urgent impact with new Clean Industrial Deal
In December 2024, the average monthly price for natural gas in the US was $3.02 per million British thermal units (Btu), while in Europe it was about four times higher.
This article is part of our special report New Clean Industrial Deal will bind EU’s industrial climate transformation to ambitious competitiveness
This article is part of our special report New Clean Industrial Deal will bind EU’s industrial climate transformation to ambitious competitiveness.
As the deadline for unveiling the Clean Industrial Deal approaches, all eyes are on the European Commission to deliver a comprehensive and robust strategy that will accelerate decarbonisation and reduce energy prices in the European Union.
In 2024, EU gas prices averaged nearly five times those in the United States, while industrial electricity prices were about two and a half times bigger. This disparity underlines a critical competitiveness challenge for Europe.
The transition to clean, domestically generated energy is crucial to reducing these costs. Although the EU’s power sector is rapidly decarbonising, fossil fuels still play a significant role in electricity generation, influencing consumer prices.
Renewables are reshaping energy pricing dynamics. Electrification of heating, transport, and other sectors is reducing demand for fossil fuels and shifting costs from fuel expenses to infrastructure investments.
As the transition progresses, EU energy costs are expected to decrease, but the extent and distribution of cost reduction will depend on core policy choices.
A recent Bruegel policy brief suggests short-term efforts should focus on fair cost allocation among consumers, while medium-term strategies should enhance demand flexibility to improve efficiency.
Long-term solutions require coordinated EU-level investments and stronger cross-border energy interconnections to lower costs for all consumers.
Diverse stances
While the need to reduce energy prices can be commonly agreed upon, not all stances towards the Clean Industrial Deal are unified, with the European Conservatives and Reformists (ECR) showing resistance to certain aspects of the EU’s green agenda.
They advocate for revisions to key climate measures, expressing concerns over the impact on economic growth and national sovereignty, describing the bill as the “most tragic mistake in decades”.
ECR has criticised the policies for prioritising decarbonisation without considering their broader impacts, such as deindustrialisation, job losses, and social instability, singling out measures like the ban on internal combustion engines by 2035.
The European People’s Party (EPP) supports the deal, viewing it as a means to balance decarbonisation efforts with economic competitiveness. Climate Commissioner Wopke Hoekstra said the bill will help provide the “best conditions” for the industry to thrive.
The Progressive Alliance of Socialists and Democrats (S&D) also backs the initiative, emphasising the creation of sustainable opportunities through investments in renewable energy and emission reductions.
S&D highlights the importance of a just transition, balancing environmental goals with social and economic considerations. The group acknowledges the challenges posed by the worsening climate change, urging for immediate action.
Renew has also expressed support for the Clean Industrial Deal, aligning with its commitment to environmental sustainability and economic growth.
According to MEP Christophe Grudler, the Green Deal is reliant on strong industrial support and initiatives such as the Net-Zero Industry Act (NZIA) which aim to bolster industrial sovereignty. By supporting innovation and easing permitting processes, Europe can ensure industrial success while achieving climate goals.
However, recent political dynamics have led to internal challenges within the group, potentially affecting their unified stance on such initiatives.
Time to act fast
The von der Leyen II Commission has a unique opportunity to shape Europe’s industrial and energy policies through the Clean Industrial Deal and a new Competitiveness Compass.
Stéphane Séjourné and Teresa Ribera bear the responsibility to design a robust bill that backs a 90 per cent climate target by 2040, says an analysis by Strategic Perspectives, a pan-European think tank.
The initiative, aiming to strengthen the EU’s industrial sovereignty, serves as a counter to China’s cleantech dominance, and addresses vulnerabilities caused by dependence on imported fossil fuels, particularly from the US and Russia.
On a broader scale, the Commission seeks to solidify its role as a multilateral leader, leveraging this initiative and others such as the Global Energy Transition Forum and Clean Trade and Investment Partnerships.
These strategies aim to secure investments, strengthen partnerships, and support the EU’s energy transition, with the ultimate goals of bolstering competitiveness, resilience, and climate leadership.
The analysis concludes that with Donald Trump returning to the White House, the EU has no time to lose. It must immediately take “no-regret actions” in geoeconomics and energy relations.
