Industrial competitiveness in the context of the EU climate and energy policy

framework- Chatham house rules -

23 June 2014

Albert PRECUPEuropean CommissionDG ENTR

Topic

Proposed: Improving the management of energy and a change in the structure of energy consumption in the SME sector

Industrial competitiveness in the context of EU climate and energy policy framework

Topic Local/regional/national aspects of sustainable energy

and climate policies Framework conditions for sustainable energy investment Sufficient and secure supply on the energy market

(guaranteeing affordable energy provision) Energy prices and access to energy The EU has a shared competence with the Member

States in the area of energy, and also adopts policy measures in other areas (climate change, the Single Market etc.)

Climate and energy policy context

-20 % Greenhouse

Gas Emissions

-20 % Greenhouse

Gas Emissions

-40 % Greenhouse

Gas Emissions

-40 % Greenhouse

Gas Emissions

20% Renewable

Energy

20% Renewable

Energy

20 % Energy

Efficiency

20 % Energy

Efficiency

27 % Renewable

Energy

27 % Renewable

Energy

ReviewMid-2014Review

Mid-2014

2020

2030New Key

Indicators for competitive, secure and sustainable

energy

New Key Indicators for competitive, secure and sustainable

energy

New Governance system

Main elements of the package

Communication on "A policy framework for climate and energy in the period from 2020 to 2030": ambitious EU GHG emissions reduction and RES targets by 2030 + key role of energy efficiency. Need to avoid policy overlaps and to ensure cost-efficiency in policy intervention.

Communication "For a European Industrial Renaissance": central role of industry in sustaining economic recovery and boosting competitiveness and jobs creation. Objective of an EU-wide share of manufacturing in GDP of 20% by 2020 reaffirmed.

Communication and SWD on energy prices and costs in Europe: importance of effects and interactions of all different policy and regulatory choices at the EU as well as Member States' level

Policy context of the package

22 January 2014 Commission's comprehensive package of proposals in the fields of energy, climate and industrial policy

Strong message: intertwined nature of all these policy areas and need to define mutually-reinforcing actions.

Reindustrialisation, decarbonisation of the economy and secure energy equally important EU objectives

Competitiveness (energy, industrial and economic) common denominator in policy definition and implementation

Forthcoming discussions at the June European Council high political momentum + need to deploy an effective, comprehensive and long-term strategy for Europe.

2030 climate and energy framework

GHG emission reduction target of 40% by 2030 (43% for the ETS sector; and 30% for the non-ETS sector)

RES target of at least 27% will be necessary to ensure full cost-efficiency

how best to deliver the optimal energy savings in 2030 to be addressed during the EED review (June 2014)

New Governance system

Systematic monitoring with key indicators (e.g. energy price differentials, diversification of energy imports, intra-EU coupling of energy markets, Competition, innovation)

Main Challenges

Industrial Policy Communication

Main challanges:

Weak internal demand

Non-conducive business environment

Low innovation and investment

High energy prices !

Access to basic inputs is difficult (raw materials, qualified

labour and capital)

Industrial Policy Communication

Key priorities:

mainstreaming of industrial competitiveness in other policy areas

maximising the potential of the internal market

support of innovation, skills, and entrepreneurship

access to critical inputs

integration of EU firms in global value chains

Final Objective: mobilizing actors across the economy to deliver industrial change

Report on energy prices and costs

Significant disparities in price levels and trends across MS as well as between industry sectors

Highly differentiated energy policies adopted at national level and distortive impacts associated with regulated energy prices

Significant and increasing differentials registered compared to external competitors

Europe needs to contain energy costs to remain competitive

Report on energy prices and costsStrong concerns for implications in terms of Europe's competitiveness, in particular of international competitiveness of energy-intensive industries

Deterioration of energy competitiveness (cost of providing energy services in one economy relative to others)

Negative effects on industrial competitiveness (ability of industry to compete internationally)

Knock-on effects for the rest of the economy impact overall economic competitiveness (productivity of an entire economy relative to others)

Political agreement on the carbon leakage in the 2030 FW

Continued monitoring of the components and drivers of energy prices and costs is essential

Large differences in regional energy prices are unquestionable

Sources: IEA 2013

Weighted average industrial energy prices (including tax) by economy

Report on energy prices and costs

Recommendations:

to complete the internal energy market

to increase energy efficiency

diversify energy supplies and supply routes

more convergence in network practices across the EU

the impact on energy prices understood and minimized by MS in implementing European energy policies

Necessary framework conditions

Ambitious policy objectives imply thorough assessment of efforts required economy-wise and, in particular, by businesses in terms of investments and innovation.

Effective and sustainable ”energy transition” only ensured by an approach aimed at guaranteeing:

• affordable energy for all users

• appropriate financing

• competitiveness and exploitation of new business opportunities

Level playing field to be ensured + safeguard measures as appropriate (i.e. carbon leakage, state aid)

Meeting objectives only possible via enhanced coordination between the EU and Member States

At European level June 2014: European Council Energy Efficiency Directive: 2014 Review Emissions Trading System proposal: co-decision procedure Development/implementation of new governance structure Competitiveness and energy security indicators

At international level 2014: Ban Ki-moon Climate Summit of World leaders 2015: Paris climate conference

Next steps