Europe's "Less" Is Doing More Than Anyone Gives It Credit For
3 days ago
- Brent crude remains above $104 amid the Strait of Hormuz closure, which has cut about a fifth of global oil and LNG flows, with Saudi output down 1.9 million barrels per day and tanker rates at record highs.
- Despite these energy shocks, the EU has shown resilience, with the Commission trimming 2026 growth forecast to 1.1% and unemployment stable around 6%, attributing this to decades of efficiency gains.
- The EU uses 44% less energy per euro of output than in 1995, with over a third of that improvement since 2019, and has grown its economy over 70% while cutting emissions 40% since 1990.
- Efficiency measures, like heat pumps and cycling infrastructure, reduce measured GDP but also cut energy imports, creating a trade-off between economic accounting and sovereignty.
- Spain outperformed Italy in the same crisis due to higher renewables penetration (55.5% of generation) and lower gas dependency, showing the impact of energy policy choices.
- EU comparisons to the US and China are flawed because Europe internalizes costs like healthcare and environmental compliance, which US and Chinese models externalize, making GDP a misleading scoreboard.
- The bear case, highlighted by Mario Draghi, shows high energy costs for EU firms, but a Commission study reveals EU firms have become more energy-efficient, offsetting some disadvantages.
- Challenges remain, including painful industrial contraction in energy-intensive sectors, reliance on US LNG, slow renewables buildout, and a flexibility gap in power grids during heatwaves.
- Defense spending is increasing, competing for fiscal space, but the EU could reduce LNG demand by 23% by 2030 through efficiency, heat pumps, and electrification.
- Emilia-Romagna's cooperative model demonstrates how local ownership can sustain production and employment, but energy communities face implementation delays and regulatory issues across member states.
- Europe's slow growth is a measure of efficiency, not decline, as it has cut emissions significantly, reduced energy intensity, and weathered the Hormuz closure with only a minor economic impact.