Industries and big investors first!

Energy prices are soaring, bills are too… again. 

The President of the European Commission summed up the stakes before the European Parliament: we must urgently produce the energy we need, tax clean energy much less and invest in massive electrification.

The following day, at the Paris Nuclear Energy Summit, she proposed using European bank guarantees to finance the deployment of small reactors in pursuit of these three objectives. A few weeks earlier, she had also announced the creation of a future bank for the decarbonisation of industry, funded by ETS revenues… which she had also promised would help finance part of the future European budget…

Let’s not forget that revenue from emissions trading schemes (ETS) is a significant source of income for public budgets. Whilst industries that rely on fossil fuels in their production processes (chemicals, steel, plastics, etc.) have been clamouring for free allowances[i], the governments that claim to support them are unwilling to forego the revenue generated by this ‘tax’.  Therefore, it will be difficult to maintain the balance in the reform promised by the European Commission. To give an idea of the scale involved, in France this tax is expected to generate 2 billion in revenue by 2026, and almost 5 billion in Poland.

In the same speech, the President also pointed out that prices reflect not only production costs, but also distribution costs – and therefore the costs of the networks. However, many interconnections between countries are lacking, and congestion on the electricity grid is holding back the installation of new data centres and the development of the economy.  In December, the European Commission, in its ‘European Grids Package’, proposed allocating 25% of ‘congestion revenues’ to fund energy interconnections. These measures also aim to facilitate the establishment of new production capacity by reducing the time taken to obtain permits, particularly in relation to environmental regulations. By applying a new first-come, first-served principle for grid access, rather than the existing first-ready, first-served principle, it is likely that the digital giants will be better equipped to connect than smaller projects….

In a nutshell: quick, quick, quick – but the big ones, the really big ones, come first; the small ones can wait.

With this set of decisions, the Commission highlights:

• The inability to consider the idea of a “small-scale Europe” and to see European added value only in “very large-scale” cross-border investments, 
• A preference for ‘very large’ data centres when it comes to access to an electricity supply that could become scarce, 
• Prioritising the rescue of European industry first and foremost, and thus diverting all public resources to prop up the production of ‘carbon-intensive’ goods and, in effect, reducing the funding available for the transition across all sectors 
• The failure to see that Europe’s resilience depends above all on its social cohesion and on ensuring a decent standard of living for all…

This series of decisions, though, poses a threat to Europe, its economy and its job market.

It is society as a whole that must move away from fossil fuels. If we set up a bank to support the decarbonisation of industry, where is the ‘Decarbonisation Fund’ for the rest of society? What will be done for small and medium-sized enterprises, which account for the vast majority of jobs and form the backbone of Europe’s economy? 

Many European countries are objecting to this industrial focus; it is deeply unfair and geographically unequal. It would make more sense to fund decarbonisation based on the economy’s overall dependence on fossil fuels. Setting investment priorities for energy infrastructure based on the needs of a given region would be more cost-effective and would result in a far better allocation of resources.

[i] the right to pollute without incurring additional costs in order to compete with countries where energy is much cheaper