EU Green Deal Competitiveness

European industrial electricity prices averaged roughly EUR 0.18/kWh in 2023, about double the US rate and well above China's. The EU Green Deal's ambitious climate targets are accelerating a competitiveness crisis: European industry is simultaneously paying for decarbonization, subsidizing renewable deployment, and competing against manufacturers in countries with cheap energy and no carbon price.

The evidence. European chemical companies (BASF, Covestro) have announced investment shifts to the US and China, citing energy costs. European steel production faces carbon costs of EUR 50-100/ton under the ETS while competing against Chinese steel with no carbon price. Analyses commissioned in Brussels suggest CBAM offsets only part of the competitiveness gap for covered sectors, leaving the rest unaddressed.

The US factor. The IRA's manufacturing incentives (tax credits for domestic production of batteries, solar, EVs) create a subsidy gap that compounds the energy cost gap. European companies can receive larger incentives for building factories in the US than in Europe. This "subsidy race" forces the EU to choose between matching US subsidies (expensive) or losing industrial investment (strategically damaging).

Can the EU maintain ambitious climate policy without deindustrializing?

Only with deliberate industrial strategy. The EU's Net Zero Industry Act (2023) attempts to match US incentives with streamlined permitting and manufacturing targets. But the fundamental disadvantage persists: European energy costs are structurally higher than US (shale gas) or Chinese (coal, hydro) costs. The Green Deal's success depends on whether clean energy cost reductions can close this gap before industrial relocation becomes irreversible.

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