Alert on the lack of investment and strategy in Europe for the Energy Transition

The heads of the European Central Bank, the International Energy Agency and the European Investment Bank appealed to governments, industry and the financial world at a special meeting bringing together dozens of decision-makers at the AIE in Paris.

Accelerating the transition to carbon-free energies will be essential for the competitiveness and financial stability of the continent, they argue.

However, investment remains hampered by political uncertainties, the slowness of authorization procedures (notably in renewable energies), while companies suffer from higher energy costs than elsewhere.

The European Union "is spending vast resources on the transition (...) but doing a lot does not mean doing enough", underlined EIB President Werner Hoyer.

We must mobilize the private sector, and therefore “clarity”. “We cannot leave any doubt about our commitment. Talking about softening or even pausing the green transition can only create confusion,” he warned, also referring to “too many projects stuck in the bureaucracy”: “we don’t have time for that!”

“As long as the transition is not achieved, Europe will remain hostage to the whims of foreign powers controlling the supply of fossil fuels,” he said.

According to the IEA, although electricity and gas prices have fallen slightly since last winter, they remain today 2,5 times higher than their historical average. Gas is five times more expensive in Europe than in the United States, electricity three times more than in China.

“This is bad news for European industries, particularly those requiring a lot of energy, which employ nearly 10 million people,” said IEA director Fatih Birol.

"Many" leaders of heavy industries "wonder what to do (...): stay? Leave?"

An industrial plan for Europe

At the same time, the United States, China, India, Japan, South Korea, etc. are deploying vast support programs to expand their production capacities in this “new industrial era of clean energies,” note the three institutions.

Last year, Europe was able to do without its Russian supplier, "more quickly than many imagined", underlines Fatih Birol.

“But now it must learn to develop in this new reality. It needs a new industrial master plan to keep pace with other economies. However, we still do not see how it will realize its ambitions.”

For him, remaining in the "survival mode" of last winter "will not be enough": "strong actions are needed, and quickly, so that the region remains a global industrial power, if it wants to remain so".

First find a positioning -- the IEA identifies a place for Europe in the production of electrolysers for carbon-free hydrogen, low-carbon steel, heat pumps, etc.

This strategy must be stable, adds the head of the OECD agency, recalling the "huge mistake" of the European withdrawal from the photovoltaic industry 25 years ago.

On the other hand, China has become ultra-dominant in solar panels, the refining of critical metals...

The IEA also sees "an acceleration in the United States", thanks to the Inflation Reduction Act, from which "many companies, not just American, would like to benefit".

The meeting on Friday was to focus in particular on the financial and public policy tools that could make it possible to provide the very high funding required.

For ECB President Christine Lagarde, "procrastination is the risk of increasing the final bill": for example, "in a late transition, the most vulnerable banks would face losses on their loan portfolio twice superior" to the median scenario.

According to her, three quarters of companies in the euro zone have made or plan pro-climate investments within five years, "but the cost of financing is a subject".

“More needs to be done to stimulate the green finance market,” says the official, who supports a Capital Markets Union (CMU).