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Europe puts its energy transition on life support [1]

['Https', 'Www.Semafor.Com Author Tim-Mcdonnell']

Date: 2025-05

The Clean Industrial Deal is in some ways a long-overdue answer to the US Inflation Reduction Act. The key policy innovation of the IRA was to incentivize low-carbon investment, rather than regulate emissions — carrots, not sticks.

For Europe, which suffers from divisions between member states and a supranational authority and has more bureaucracy, that approach was always more challenging. But competition is mounting with the US and China for companies producing renewable-energy hardware and EVs, as well as lower-carbon approaches to steel, cement, and other heavy industries. And if the US, under Trump, pulls back on public support for the energy transition, there could be an opening for Europe to reposition itself as an attractive investment destination.

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Rather than scrapping the push to renewables, the Clean Industrial Deal “identifies that Europe’s main energy problem is its fossil fuel import dependency,” Tagliapietra said. With little headroom to increase domestic oil and gas production, and the reduction of cheap Russian pipeline gas deliveries since Moscow’s 2022 invasion of Ukraine, Europe has become increasingly reliant on higher-cost liquefied natural gas imports from the US.

“Europe needs to reduce its import needs as quickly as possible, and divert its energy system to domestically-manufactured renewables, which would make the energy system not only greener, but also safer and more competitive,” Tagliapietra said.

The new plan focuses on measures to speed up the permitting process for new renewables, and on pushing EU member countries to cut electricity taxes. That approach could save energy consumers €2.5 trillion over the next 15 years, EU Commissioner for Energy and Housing Dan Jørgensen said this week.

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The high-level goal to “mobilize” €100 billion in clean tech investments is mostly “smoke and mirrors,” economist Nils Redeker wrote on BlueSky, because it lacks a clear basis in the EU budget. But other new steps could be more impactful, including requirements for government agencies to buy more domestically-produced low-carbon tech, and a streamlined process for ramping up protective tariffs against heavily-subsidized imports from China. The European Investment Bank will also offer new financing deals to support corporate renewable energy contracts.

The new plan also says that officials will further relax restrictions on how much individual countries are allowed to subsidize “strategic” low-carbon technologies. Since 2019, European countries have provided about €353 billion in subsidies to various corners of their economies, but only 12% of that funding has gone toward strategic sectors like battery manufacturing, clean hydrogen, and semiconductors, Redeker found in a recent study.

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[1] Url: https://www.semafor.com/article/02/27/2025/europe-puts-its-energy-transition-on-life-support

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