For at least two years, now, UKIP has been raising the problems of EU energy policy, which have driven up prices in Europe, just at the time when the USA is benefitting from cheap shale gas. Shale gas has driven an industrial renaissance in America, and resulted in businesses and jobs “on-shoring” – returning from cheap labour markets in the East and resuming domestic production. But such is the dominance of green ideology (funded partly by you and me through the European Commission) that it seemed difficult to get traction for a rational approach.
But at last the message is getting through. EU Industry Commissioner Antonio Tajani said three months ago that “Europe faces an industrial massacre” as a result of energy policy, and I’ve been quoting that line relentlessly ever since. We are (as I constantly say) driving business and jobs and investment out of the EU altogether, and often to jurisdictions with lower environmental standards. It’s called “carbon leakage”, but it means that we lose jobs and increase emissions with the same policy.
Now, a group of fourteen CEOs of major energy-intensive businesses in Europe have written to Commission President José Manuel Barroso, making the very same point. They draw attention to the problems of competitiveness. Led by Jean-Pierre Clamadieu, CEO of Solvay, they urge the need to include all energy sources in the mix, including shale gas, which can help to reduce costs as well as reducing import dependence and increasing energy security (natural gas is important not only for energy, but also as a feed-stock for the chemicals industry). They call for strong political leadership to solve the energy price crisis in Europe .
In a separate but related move, the Chief Executive of INEOS, Jim Ratcliffe, has also written with a striking prediction. He says that on current policies, the European chemicals industry will be “extinct” in ten years. This is apocalyptic stuff – but perhaps no more so that Tajani’s “industrial massacre”. Here is Jim Ratcliffe’s letter.
INEOS of course is one of the UK’s largest players in the chemicals business, and was in the news recently over the future of its Grangemouth plant in Scotland. The plant was put at risk by the price and availability of natural gas, and ironically seems only to have been saved by the prospect of imports of shale gas from the USA. This story underlines the urgent case for shale gas in the UK (as does the unrest in Ukraine and possible risk to supplies of Russian gas).
Ratcliffe draws a parallel with the demise of the textile industry (in that case, the issue was UK labour costs compared with the “cheap-finger markets” of Asia). He says that a million direct jobs and five million indirect jobs depend on the chemicals industry. These may be lost. He contrasts the $71 billion investment in petrochemical projects in the USA with a series of plant closures in Europe (where the price of gas is three times as high as in America). And I have to quote this paragraph verbatim: “I can see green taxes, I can see no shale gas, I can see closure of nuclear, I can see manufacturing being driven away. I can see the competition authorities in Brussels blissfully unaware of the tsunami of imported product heading this way and standing blindly in the way of sensible restructuring”.
In fact the INEOS letter is the source of the point I made in a previous post: that INEOS profits in Europe have halved in the past three years, while profits in the USA have tripled. So where would we expect them to invest?
While I am alarmed by the dangers which the British and European economies now face, I must admit to a certain satisfaction at seeing the big guns of British & European industry endorsing the case I have been making for years. As with the €uro débâcle, “We told you so”.
But I have a question for Commissioner Tajani: You have understood the problem. Now, where’s the solution? And to conclude with the bad news: this Commission is demob happy. It will go later this year, and a new one will be appointed. No action can be expected in 2014. And the new Commission will have to learn these lessons all over again.