MEP calls for 'balance' between EU environment and industry policy

Energy prices in Europe are harming the competitiveness of industry, argues Eija-Riitta Korhola.

By Eija-Riitta Korhola

17 Mar 2014

Looking ahead to the March EU council summit, I am pleased that the design of an effective EU energy policy is high on the agenda. It is both commonplace and correct to consider our environmental goals when designing such a policy. But, have we gone too far in that direction? Do we need to move more from idealism towards pragmatism as we refine our energy policy?

European industrial electricity prices are more than double than the US and 20 per cent higher than that of China. Our biggest energy users compete in the global marketplace and this means they begin with a massive EU produced disadvantage. Energy intensive industries exposed to global markets must keep their production costs down and many are tempted to leave the EU for cheaper energy prices and zero carbon dioxide emission costs. These industries tend to be employment intensive too, so if they leave the EU the jobs leave with them.

It was former commissioner Günter Verheugen who said in 2007, "It makes no sense to export pollution and import unemployment." Europe still has a strong manufacturing base, but without an effective policy that acknowledges, examines and reverses the trend of rising energy prices, we cannot sustain or retain our energy intensive industries to keep our citizens in employment.

"We must, without further delay, create and complete a functioning internal energy market combined with an economically sustainable and rational environmental policy"

Ever the optimist, I believe it is not too late to stop this self-harm - and what better time than an election year and the year of appointing the new Commission with a new Work Programme? We must, without further delay, create and complete a functioning internal energy market combined with an economically sustainable and rational environmental policy.

These tasks must be completed as a matter of the highest priority to boost our global competitiveness, reduce unemployment and stimulate overall economic growth. They are equally needed to increase our energy independence and sustainability which is a subject at the heart of the current international dialogue with regard to the situation in Ukraine.

Energy dependency can cost more than just money. I meet regularly with senior representatives of EU industries and the rising cost of energy, especially when compared with those of their global competitors, is always high on their worry list. It must be high on our list too. This aspect is linked to energy poverty, industry closures and companies choosing to leave the EU in exodus which we euphemistically call carbon leakage.

Looking ahead, unless the EU policy and law-making institutions can give some clear signals to reverse this trend, industrial investments in the EU will be reduced as our European companies will build their factories in the growing markets outside of Europe where also they can find lower labour costs, less stringent environmental laws, attractive establishment costs and sometimes easier access to the growing markets that call for their products.

I have served as an MEP for almost 15 years and during that time the creation of a truely single electricity market has been high on the agenda. We have had two directives, countless policies and millions of words spoken, but the market is still incomplete with functional weaknesses. Plus, even though the environmental goals have driven this agenda, I do not believe the environmental benefits have been realised either. Just look at the history of the emission trading scheme (ETS). An ETS in a liberalised and functioning energy market is a market mechanism but when that market is distorted and subsidised it becomes a tax on the consumer. And, as Winston Churchill said, "For a nation to try to tax itself into prosperity is like a man standing in a bucket trying to lift himself up by the handle".

So what must we do? Part of creating an effective EU energy and climate policy to address the issue of rising prices is determining how we can design an effective electricity market. Many of the standard remedies have been tried, more tinkering will not provide the solution, nor will it provide the confidence needed to encourage long-term investments. So we need new and innovative market designs that provide solutions to the current problems.

MEPs have already raised this point in our report on 'making the internal energy market work' and have called on the European commission to launch a study analysing cost-efficient new market designs for the European electricity market, due to the urgent need to maintain and boost European competitiveness in the future. Some colleagues and I have also put further pressure on the commission to mobilise on this issue by sending commission president José Manuel Barroso and energy commissioner Günther Oettinger a letter emphasising the importance of conducting this study.

I hope that the March council summit on competitiveness will provide further impetus for Europe to start addressing the alarming state of our industrial competitiveness. We are all aware of the various environmental targets and for the most part I can support them, but to have an effective global voice on these issues, we also need a strong economy. So I strongly support another target too, that is the share of industrial production of European GDP should be raised to 20 per cent by 2020.

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