Energy transition: impact and economic stakes for firms

Article published in the Economic Review of June 2018

The fight against climate change is a major challenge for both the European Union as a whole and Belgium individually, implying a radical transformation of modes of energy production and consumption, for their corporate world as well. In fact, moving them onto trajectories set out as part of the European, national and regional strategies for reducing greenhouse gas emissions, using renewable sources of energy and cutting energy consumption requires major changes in the management of their energy inputs, often indispensable for production processes.

To this end, various measures are being taken concerning energy prices, legislation and investment funding. While impact assessments point up their generally favourable effects in terms of growth, jobs or reducing energy bills, it has to be admitted that companies and sectors of economic activity are not all affected by these measures in the same way. Whereas, on average, spending on energy accounts for 2.5 % of variable expenditure by Belgian manufacturing industry firms, for just over 4 % of them, this item alone makes up more than 10 % of variable expenditure on inputs. Industries that are energy-intensive and more exposed internationally are affected particularly when prices for their energy inputs rise more than those paid by their competitors. For instance, Belgian industrialists pay twice as much for their gas, and 2.5 times more for their electricity than prices charged to their American rivals. Compared with their immediate neighbours, price differentials for electricity are also a disadvantage for them owing to exemptions and/or price reductions being granted to German, French and Dutch industrialists, especially if they are power-intensive. As for Belgian industrial consumers that use natural gas as a raw material, higher taxes also put them at a disadvantage in comparison to their competitors in the three neighbouring countries.

Although the ambitious paths that have been mapped out involve costs related to work adapting equipment and processes, they nevertheless open the door to opportunities for growth and development of new business activities and products, and on foreign markets too. It is widely regarded that innovations, even real technological breakthroughs, will be necessary to ensure and speed up the energy transition, and the growth it brings with it. Apart from the existence of a generally innovation-friendly environment, innovation policies specifically targeted at low-carbon goods and services are also being put in place: in 2013, Belgium spent €350 million on R&D in the energy domain, the equivalent of 0.09 % of its GDP compared with 0.15 % for the EU28. Since innovation is a key element of the transition, it is important to keep up the R&D efforts so as to maintain the flow of new technologies.

There is no doubt that the related adjustments to the economic fabric will also have an impact on people working in a good many branches. So, the success of the transition also depends on mobility of workers to branches that are expected to expand, with the key ingredient being a good skills match thanks to targeted transfer assistance measures. This support is necessary to exploit the potential for job creation (conversion) in activities related to the energy transition.

It is up to both the public and private sector to get the best match between public policies and private investment strategies, with the objective of giving companies incentives to invest in the most relevant technology clusters for the energy transition.

These policies should nevertheless not be drawn up without taking the European dimension into account.

Implementing a common European policy for the environment, energy and security of supply leading to a genuine single energy market is an indispensable condition for ensuring that decisions taken on all sides do not become sources of inefficiency and unfair competition.