Lobby says EU’s high energy costs will continue under net-zero plans

(Bloomberg) — European Union electricity prices will still be higher than in the US and China even in a best-case scenario assuming net-zero emissions, due to rising demand and unfavourable conditions, the bloc’s business lobby says.

The study, commissioned by BusinessEurope, found that the cost of generating electricity in the EU would still be at least 50% higher than in these countries by 2050 under a “managed scenario” in which climate targets are met without major disruptions. A “frustrating transition” in which key policies are delayed beyond mid-century could see costs up to three times higher than in these main rivals.

“This will put European companies at a serious competitive disadvantage compared to these key competitors, which is why we need urgent action at EU level,” said Markus Beyrer, Director General of BusinessEurope. “Securing energy at competitive prices will be key to preserving Europe’s industrial base.”

The EU is paying much more for its energy because of its reliance on imports – a situation exacerbated by Russia’s invasion of Ukraine and dwindling gas supplies from Moscow. That has raised concerns that Washington and Beijing could weaken Europe when it comes to powering traditional industries like steel or innovative clean-tech sectors like wind power and batteries.

Cutting energy costs is a top priority for Europe’s big industrial bosses. Policymakers have made renewables competitiveness a cornerstone for the next European Commission, but companies say they are drowning in red tape.

One key EU tool is a carbon border tax, which aims to put a price on CO2 emissions embedded in imports from countries that do not have a strong emissions trading system. If it proves ineffective in helping the bloc’s industry, BusinessEurope said lawmakers should reconsider phasing out free carbon allowances for manufacturers.

The lobby group also recommends greater integration of renewable and low-carbon energy sources across the bloc, securing the hydrogen value chain, streamlining the permitting process and supporting decarbonisation through demand-side incentives.

BusinessEurope includes the main business lobbies of each member state plus the UK. The study, published on Thursday, was produced with economic consultancy Compass Lexecon.