Europe’s Energy Choice

This tension is at the center of the debates now playing out across Europe, from local municipalities to the highest decision-making levels in Brussels. While some Europeans associate today’s energy-price inflation with the war in Ukraine, others think it stems from broader efforts to combat climate change. For example, the vast majority of Italians blame the energy crunch on geopolitical tensions, whereas a significant share of Germans and Poles blame climate-change policies. Much will depend on which side wins this battle for hearts and minds.

Europe’s choice will hold important implications for whether we can limit global warming to 1.5° Celsius above pre-industrial levels. If European politicians can convince their electorates to go along with the right longer-term strategic decisions, they could both manage the energy crunch over the next few winters and leverage renewable energy and energy-efficiency improvements on an unprecedented scale.

That would position the EU decisively as one of the leading major economies in the green transition—making it competitive with China and demonstrating that wealth and welfare are not synonymous with burning fossil fuel. Conversely, if Europe panics and locks in fossil-fuel price subsidies and new investments in long-term gas infrastructure, it will have squandered a historic opportunity.

Even as we move toward a medium term in which renewables can provide stable and affordable energy, other obstacles will arise. We will need ample affordable energy, both to power everything that can be electrified and to provide zero-carbon fuels for industries, products and activities that cannot. We therefore must build the new green-energy infrastructure as quickly and cheaply as possible.

But ‘fast and cheap’ does not always align with security or dependency concerns. The new concept of ‘friend-shoring’ implies that Europe will want to source all essential parts of its energy infrastructure from allies and friendly partners as a means of ensuring reliable supplies. But while achieving near self-sufficiency through domestic green infrastructure production and friend-shoring is ultimately possible, it is not the cheapest or the fastest option in the short term.

Europe will need to engage more widely with neighbors and global partners to scale up green industries and reduce the marginal costs of green technologies. European electorates will demand fast, cheap, clean and secure energy, but satisfying them is unattainable in the short term. Once again, we are back to hard political choices. Creative political solutions can help, but politicians will have to decide on a strategy and then convince the public to come along with them. Europeans should expect nothing less of their leaders.

Bo Lidegaard is co-founder, partner and head of research at Kaya Advisory.This article is published courtesy of the Australian Strategic Policy Institute (ASPI).