Climate targets vs Industrial policy - can we do both?

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EU EU has committed itself to promote the role of industry and its competitiveness. Which target or targets for energy and climate policy should be set - only one for CO2 emissions or do we also need a renewables target? Do we need targets for competitiveness and security of supply? These and other questions were on the table at a seminar in the European Parliament organised by the Swedish Society for Business and Politics (SPN).

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Jonas Berggren, head of Swedish Enterprise Brussels office, opens the SPN-seminar on "Climate target(s) vs industrial policy - can we do both?".

The global energy landscape is changing rapidly. Energy prices are increasing and the gap between Europe and other regions are increasing. Shale gas has revolutionised the American energy market, with prices now 50 percent lower in the US than in Europe. Germany is phasing out its nuclear power by 2022. 90 percent of all carbon emissions now come from outside the EU.

The European Commission is about to propose a new framework for EU’s climate energy and policy. At the same time as new binding targets are discussed. Which target or targets should be set?

Maria Sunér Fleming, Director for Climate and Energy Policy at the Confederation of Swedish Enterprise, wanted to combine high ambitions for decarbonisation with a highly competitive energy policy for the future.

– Both the climate challenge and securing competitiveness and growth are urgent matters. There is an energy revolution going on and Europe is losing ground. The costs of energy in Europe are becoming higher than in other regions and according to the IEA, the gap is widening. Cost efficient, affordable and reliable energy is rapidly becoming more important for the competitiveness of European industry. The situation is worrying as the trend today is that investments are moving out of Europe. By letting the concept of carbon leakage cover also the gradually lower re-investment levels and decisions to start new plants in other parts of the world, we would measure an ongoing decrease of competitiveness for the EU as an industrial region, she said.

For Maria Sunér Fleming it was key to keep and develop Europe’s comparative advantages.

– Investment decisions for global companies are based on several factors, such as closeness to markets and suppliers, infrastructure and access to qualified labour, but especially for energy-intensive companies, the price of energy is becoming an increasingly important factor. This must be addressed when the future energy and climate policy is now being formulated. We need competitive costs for energy, cost efficiency, stability of grids and diversification as well as lowered emissions and an effective use of resources. The way forward includes the use of one target, one on CO2, but focus and concrete targets are also needed for competitiveness and security of supply, said Sunér Fleming.

Britta Thomsen, MEP from the S&D Group and shadow rapporteur of the European Parliament’s response to the Energy Roadmap for 2030, agreed that Europe’s main challenges today are energy prices on that rise, the shale gas revolution in the US but also the lack of own energy sources, which were all having an impact on the competitiveness of European industry. Despite this, she saw a need for more binding and tighter targets.

– Without binding climate targets there will never be any commitment and hence, no progress. Such targets could also serve to create a stable framework, which would be conducive for investment decisions. The new 2030 framework for climate and energy policies should include three separate targets. Energy efficiency should be improved by 40 percent, energy from renewable energy sources should make up for 35 percent of the total and CO2 emissions should be reduced by 95 percent by until 2050, said Britta Thomsen.

Tom Howes, deputy head of unit in DG Energy of the European Commission said that more attention has to be given to competitiveness aspects, especially now after the crisis, but questioned how the rising energy costs could be tackled.

– Since many elements of the energy price were external and difficult to alter, ultimately we have to ask ourselves which kind of industrial structure we want to have, he said.

He also elaborated on the upcoming communication from the European Commission, to be presented in January 2014, and on the need for new targets.

– The initiative will frame energy and climate policies for the period up to 2030. It will provide a long-term perspective for investments, a more sustainable, secure and competitive EU energy system and ensure that the EU stays on track to meet the climate and energy objectives. What we need is a more European approach than before. The Single Market has gained in importance since 2007. We also need to give more attention to competitiveness. It is too early to reveal if the commission will propose one, two or three new targets, but as far as the theme of this seminar is concerned - if we can do both climate targets and industrial policy - the answer is yes, we have to, Howes concluded.

The seminar was held in the European Parliament. It gathered around 60 participants from the European institutions, business organisations, individual companies and other stakeholders. It was moderated by Jonas Berggren, head of the Brussels Office of the Confederation of Swedish Enterprise.

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