Europe’s Industry Bosses Demand EU Action On Soaring Energy Prices

EUObserver, 28 February 2014

Benjamin Fox

EU leaders must address rising energy prices and climate policies which are crippling the bloc’s manufacturing sector, according to a manifesto signed by more than 100 industry bosses. 4 million manufacturing jobs across Europe have been lost since 2008.

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4 million EU manufacturing jobs have been lost in the past five years (Photo: arbyreed)

One hundred and thirty seven chief executives, including the heads of Tata Steel, Arcelor Mittal, and Rio Tinto, signed up to a paper published by the International Federation of Industrial Energy Consumers (IFIEC) Europe on Thursday (27 February).

“EU economic recovery and reversing trends in employment will not happen without industry,” the paper states.

EU leaders will gather in Brussels on 21 and 22 March for a summit focused on the EU’s industrial competitiveness and how to reinvigorate the bloc’s rapidly eroding manufacturing base.

The EU’s manufacturing sector has been in steady decline for the past 20 years and now accounts for just 15 percent of economic output. Meanwhile, 4 million manufacturing jobs across Europe have been lost since 2008, according to the European Commission’s latest figures.

EU industrial output, up to March 2012.

EU industrial output, up to March 2012.

The continent’s industrial powerhouse, Germany, along with the Nordic countries and most of northern Europe, is still performing relatively strongly. But what is of most concern is that some of the bloc’s crisis-countries, such as Spain, Italy, and Greece, all of which are now remodelling their economies on increasing exports, have all seen steep falls in their manufacturing output since 2000.

The commission estimates that every euro of industrial production generates another 50 cents in other parts of the economy and has called for “an industrial Renaissance” in Europe. It wants industry to account for 20 percent of the bloc’s GDP by 2020.

Firms are particularly keen for leaders to address rising energy costs which are now between two and three times higher in the EU than in the US. Lawmakers should complete the EU’s internal energy market and “speed up the exploration of shale gas in an environmentally acceptable way,” according to the industry paper.

But the EU remains under pressure to reconcile a need to re-energise its industrial base with its environmental commitments.

In January, the commission unveiled plans to revise its greenhouse-gas reduction target to 40 percent in 2030 compared with 20 percent in 2020.

The carbon goal would be the only legally binding one on governments after 2020, replacing all national targets for renewable energy.

But governments appear to be minded towards meeting the demands of industry instead.

Full story

100+ CEOs From Europe’s Manufacturing Industry Call For New EU Energy & Climate Strategy
IFIEC Europe, 27 February 2014

This morning, a Manifesto signed by 137 CEOs representing EU manufacturing industry was published by IFIEC Europe. It calls upon Heads of State to adopt a set of measures to align the EU’s industry, energy & climate policies.

“This initiative, representing more than 1 million direct jobs from various sectors and countries all over Europe is exceptional”, explains Fernand Felzinger, the President of IFIEC Europe. “It can only be explained by the severity of the crisis impacting the EU 28 manufacturing industry”.

The analysis of energy prices and costs in Europe issued by DG Energy on January 22nd confirms it: EU industry does suffer from an important disadvantage in total energy and climate costs in comparison with competing regions of the world. Such high energy price disparities like the one with the US (energy prices 2 to 3 times higher here) lead to significant changes in the economic structure and have far-reaching effects on investments, production and trade.

Can we do something about it? “Yes, because regulatory costs (subsidies for renewables, taxes, grid costs, etc.) are among the main reasons for this widening price gap” answers Peter Claes, Vice-President of Ifiec Europe. And these are surcharges resulting from public policy, not from market movements.

“These ever increasing surcharges create an unprecedented burden for manufacturing industries which cannot pass through these costs to their customers” explains Philippe Darmayan, the CEO of Aperam, a global leader for stainless steel and a large power consumer. There is no other solution than allowing full offsetting of these costs. “But industry is also a solution provider” adds Peter, “for example, via voluntary demand response”.

Unfortunately, the situation for natural gas is more complex since the main solution stays in our external suppliers’ hands. Implementing the internal energy market and diversifying our supplies, including indigenous production is an absolute necessity. “Ignoring the shale gas option would be a big mistake” says Steinar Solheim, IFIEC’s Chairman for Gas. “The Council has to set the course towards cost-competitive and secure energy. This is the number one priority for Europe’s energy-intensive industries” stresses Hubert Mandery, Director General of the European Chemical Industry Council (Cefic).

EU’s emerging climate policy measures really matter for the future of the companies signing the manifesto. Here lies the other root cause for increasing cost disadvantages with major competing regions. “The EU must give industry a clear signal that highly efficient industrial production is welcome and encouraged to grow within the EU, also in future” says Volker Schwich, President of VIK, the German member federation of IFIEC.

“We urgently need concrete measures to enable the manufacturing industry to grow in Europe” concludes IFIEC’s President. Will the upcoming Council of Heads of State come with real solutions? 137 CEOs and many more desperately hope so.

Full Manifesto

Germans Suffer €52 Billion Export Loss Due To Green Energy Policy
Financial Times, 27 February 2014

Jeevan Vasagar

Germany’s exports would have been €15bn higher last year if its industry had not paid a premium for electricity compared with international competitors, according to an analysis published on Thursday. Germany’s manufacturing suffered €52bn in net export losses for the six-year period from 2008 to 2013.

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Despite Germany’s strong export performance in re­cent years, Europe’s biggest economy has been dented by the nation’s costly shift to renewable energy, IHS consultants said in a report.

They found that the energy price differential be­tween Germany and its five leading trade partners cost the nation’s manufacturing sector €52bn in net export losses for the six-year period from 2008 to 2013.

The figure was calculated by linking changes in the net volume of German manufacturing exports to changes in energy costs, using an economic model that accounted for other variables such as exchange rates.

Almost 60 per cent of the total loss (or €30bn) came in energy-intensive industries: paper, chemicals and pharmaceuticals, non-metallic mineral products and basic metals.

Smaller companies were disproportionately affected, the analysis found. Unlike heavy energy users such as BASF and ThyssenKrupp, small companies are not eligible for exemptions from the energy bill surcharges that cover the costs of the move to clean energy.

The report also looked at investment decisions and found that direct investment abroad had accelerated over time at the expense of domestic investment. Energy cost was an important driver of this shift, said IHS.

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