Updated assessment: Memos to the commissioners responsible for energy and climate

The European Union has rolled out a wave of legislation to reach its relatively ambitious climate targets. However, decarbonisation, especially of buildings and transport, is happening too slowly and will have to be sharply accelerated during the term of the 2024-2029 European Commission. A speeding-up will only work politically, socially and economically if decarbonisation is accompanied by industrialisation and an effective green social contract that addresses the distributional implications of climate policy.

Domestic backtracking or procrastination is not good for the EU. Delivering on its climate targets is a prerequisite for it to credibly push for the needed acceleration of decarbonisation globally. Lowering domestic ambition would also result in high costs for companies that have already invested in ambitious climate action and would erode investor trust.

What changes as a result of Trump? President Trump is expected to dismantle US climate and environmental policies, substituting them with a push for fossil fuels. He has pledged to halve natural gas and electricity prices, largely through increased natural gas production. For the EU, this represents both a threat and an opportunity.

The threat is the further widening of the EU-US energy price gap, further undermining the competitiveness of the EU’s energy-intensive industry. Unlike the US, the EU is not endowed with fossil-fuel resources. To address this fossil energy competitiveness gap, the EU must double down on its energy transition.

The opportunity is that US policy will become far less clean tech-friendly than it was in the Biden era. This presents an opening to attract clean investment that now may not materialise in the US, advancing the EU’s competitive edge.

Both threat and opportunity point in the same direction: accelerating the EU’s green transition and the industrial policy that supports it.

The European Commission’s approach. Commission President Ursula von der Leyen has confirmed that the EU is committed to its European Green Deal goals. She has promised a Clean Industrial Deal to boost clean industrialisation, and to adopt a new energy strategy aimed at reducing energy prices for both households and companies, accelerating the deployment of clean energy sources and phasing-out Russian liquified natural gas imports. The main risk inherent in this strategy is that it will go too far in accommodating EU member state subsidies, weakening competition and overly protecting incumbents.

Assessment and updated recommendations. The main elements of the Commission’s climate strategy remain valid and have added urgency in the era of Trump. Europe’s economic interest is to push ahead with the clean transition. New clean manufacturing processes will make the best of existing industrial value chains, infrastructure and knowledge. Reduced fossil-fuel imports will increase economic security. To reinforce international partnerships, the EU should be ready to increase financial support for decarbonisation projects in developing countries ¹ Simone Tagliapietra and Cecilia Trasi, ‘Making the most of the new EU Clean Trade and Investment Partnerships’, First Glance, 16 October 2024, Bruegel, https://www.bruegel.org/first-glance/making-most-new-eu-clean-trade-and…. .

The challenge is to minimise the costs of this transformation for European consumers and businesses. This requires EU-wide coordination of renewables investment, the creation of a unified EU energy market and a governance structure that ensures that industrial subsidies benefit the EU as a whole while enabling the restructuring or relocation of energy-intensive industry that would otherwise suffer from a permanent competitive disadvantage.