Efficiency key to EU staying competitive

European businesses exporting energy-intensive goods will lose out to firms in the US and Asia unless they become more energy efficient

The warning comes from the International Energy Agency (IEA), which says disparities in global energy prices will undermine Europe’s competitiveness in 2035.

The IEA confirms in its World energy outlook 2013 (WEO 2013), that new unconventional sources of oil and gas have already had a significant impact on international energy prices, with European industrial firms paying more than twice that of their US counterparts for electricity and three times as much for natural gas.

Although the cost gap is expected to narrow in the coming decades, it will not disappear, and Europe’s share of the international market in energy-intensive goods is expected to fall by 10% by 2035. At the same time the US, China, the Middle East and India will see growth.

“WEO 2013 highlights the importance of taking advantage of potential efficiency gains to remain competitiveness,” said Maria van der Hoeven, executive director at the IEA. “Efficiency has become a focal point of energy policies, but two-thirds of the economic potential for energy efficiency is set to remain untapped in 2035 – unless market barriers like fossil fuel subsidies can be overcome.”

The IEA report confirms that in 2012 fossil fuel subsidies increased to $544 billion worldwide, while support for renewables totalled $101 billion. The report predicts a rapid expansion in the deployment of renewables in some regions, but says that fossil fuels will still provide 75% of the world’s energy in 2035. Carbon emissions from the energy sector, which accounts for two-thirds of global CO² output, remain on a “dangerous course”, concludes WEO 2103.

“If we stay on the current path, we will not come close to limiting the rise in global temperatures to 2OC,” said van der Hoeven.

The report came as energy giant RWE confirmed it was abandoning plans to build one of the world’s largest offshore arrays in the Bristol Channel. The firm said a combination of “technical difficulties” and “market conditions” meant that the project was no longer financially viable.