Radical change in the way we power our lives and industry is underway. The latest edition of the International Energy Agency’s World Energy Outlook report from October 2023 shows clean technologies playing a significantly greater role in the global energy system by 2030 than they do today.
Based on existing policy pledges by governments around the world, the agency foresees almost 10 times as many electric cars on the road; solar PV generating more electricity than the US power system does today; and renewables’ share in the global electricity mix nearing 50%, compared to the current 30% It also expects heat pumps and other electric heating systems to be outselling fossil fuel boilers and three times as much investment going into new offshore wind projects than into new coal and gas-fired power plants.
Already the positive impact of early acceleration of clean energy and technologies can be felt in the economies of countries such as China. And while progress towards clean energy is unstoppable, it is important to note the IEA also highlights these advancements are not enough to keep global warming below the 1.5C set down in the Paris Agreement.
The task ahead is significant, but accelerating the energy transition is a real opportunity to increase the competitive advantage of business, create jobs and give life to new industries. Yet, on the other hand, political rhetoric and politicization in Europe, especially as the EU and several European countries go to the polls, is downplaying the wins of a move away from fossil fuels by the region and risks delaying the transition.
Unlike the US, Europe is close to fully dependent on fossil fuels imported from unstable regions and countries, making it more vulnerable to geopolitical shocks. The war in Ukraine, and subsequent energy crisis, was a wake-up call. In response – seeing that electrification and renewable energy are the best ways to reduce energy dependence, and also that nations with more renewables have been able to reduce the high price of electricity – EU countries decided to accelerate the energy transition.
European businesses are, however, already feeling China’s ability to offer renewable products and cars at much lower prices, and also the way the US’s Inflation Reduction Act is attracting European companies’ investments into America. For the EU to bring those benefits home rather than see them land in China and the US, a concerted focus on developing a long-term industrial strategy needs to surface.
For some time, European businesses have been calling on the EU to flesh out a more powerful industrial strategy to help them compete with the US and China. Despite the promising framing of the European Green Deal at the centre of European politics, the EU has not been able to come forward with a single investment and industrialization package, that would show its full commitment to the energy transition and to making European businesses and products competitive with the rest of the world.
Recently the Antwerp Declaration set out demands for a more business-friendly EU industrial policy that can secure investment and keep up with tech development and production in the US and China. Led by more than 600 businesses from across sectors, the action plan centers the need for competitiveness at a key moment in the acceleration towards a new global net zero model of industrialization.
It is surely time to rethink what we mean by competitiveness by putting ‘competitive sustainability’ at the heart of EU industrial policy. Recognizing how clean tech industries are growing and being supported in China and US, the EU has an opportunity to revamp its impressive regulatory capacity – long-used, for example, to deliver effective carbon pricing in Europe – and combine it with effective incentives that match its international competitors. Just as the US’s incentive-drive Inflation Reduction Act is being viewed by many as maturing into a need for regulatory frameworks around powerplants and disclosure, a basket of both carrots and sticks will be the best chance for Europe to maintain its positioning in the race to green electrification.
Ursula von der Leyen has put herself forward for a second term at the helm of the Commission, presenting herself as the candidate of business and supporting the Antwerp Declaration. It is important she, supported by colleagues across Europe, makes it clear that competitive sustainability is key to how Brussels and European capitals can “keep supporting European industry throughout this transition” and central to how they will make Europe more competitive.
Whatever the results of the European elections in June, the Commission, and politicians across Europe, must work hand-in-hand with business and industry to make the energy transition a reality. This will be good for business, good for the economy and good for the planet.
