EXECUTIVE SUMMARY
On September 9, 2024 Mario Draghi, the former Italian Prime Minister and former President of the European Central Bank, delivered a report to the European Commission offering his recommendations as to how the countries of the European Union could “reignite sustainable growth”. The report started with a statement of alarm – that “a wide gap in GDP has opened between the EU and the US”, and that unless Europe addresses its lagging productivity growth, it may fall into an irreversible economic decline.
To avoid this fate, Draghi recommends that the European Commission take action in three areas. First, Europe must refocus its collective efforts on closing the “innovation gap” with the United States and China, especially in advanced technologies. Second, Europe must develop and implement a joint plan for “decarbonization and competitiveness”, including directing five per cent of European income (i.e. 700 billion Euros per year, equivalent to $1,050 billion Canadian dollars) to fund a public “green investment program” and other investments. Third, it must “increase security and reduce dependency”, notably by forging “preferential trade agreements and direct investment with resource-rich nations, building up stockpiles in selected critical areas, creating industrial partnerships to secure the supply chain of key technologies …and increasing defence industrial capacity”.
Writing on behalf of the Climate Intelligence Foundation (CLINTEL), Samuel Furfari offered a critique of Draghi’s proposals with respect to energy policy. He especially challenged Draghi thesis that decarbonization offers a major economic opportunity for Europe. After 45 years of financing by the European Commission and member countries, renewable energy sources are still being subsidized either directly or through consumer bills. In fact, European countries have provided massive subsidies (exceeding 30 million Euros annually in Germany alone) to renewable energies. The high energy prices there are undermining the competitiveness of European industries and causing deindustrialization in more and more sectors.
Perhaps Draghi’s strangest contention is that the EU’s potential for innovation in so-called clean energy technologies is a competitive advantage. The notion that the EU can outpace China in the renewable energy equipment race through government subsidies is unrealistic.
Despite its claim to offer ideas for increased energy security, the Draghi report largely ignores oil and natural gas. In 2022, the EU imported 96% of its crude oil, 83% of its natural gas and 54% of its coal, amounting to a total of 57% of its energy consumption. Much of the supply comes from Russia or Middle Eastern sources that are at risk of supply interruptions. Reducing oil and gas import dependence may be a wise long-term strategy for improving energy security, but as these energy sources will be needed for decades at least, a prudent approach to security would include increasing domestic supplies and diversifying, not ending, the sources of imports.
In endorsing decarbonization as the way to increased energy security, Draghi ignores a key geopolitical consideration. If it switched entirely from hydrocarbons to renewable energy sources, the EU would merely shift dependence from multiple oil and gas suppliers to a single source – China. How this would enhance European energy security is a mystery.
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