Europe’s security depends on a European energy union

In a world in turmoil, the EU’s security agenda is as expansive as it is urgent. From building economic resilience to achieving rapid rearmament, progress on almost any of its components depends on one thing: energy.

Two recent landmark reports on EU competitiveness — both by former Italian prime ministers, Mario Draghi and Enrico Letta — highlight what should be obvious: high energy prices and insecure supplies directly undercut economic stability and dynamism. While environmental sustainability is crucial to Europe’s long-term well-being — and, indeed, to humanity’s survival — this ambition must be balanced with the imperative of delivering affordable, reliable and robust energy supplies, not least to industrial sectors.

European industry forms the backbone of European competitiveness and has a vital role to play in European rearmament. For example, the German arms manufacturer Rheinmetall recently reached a market value of €23 billion ($24 billion), surpassing Volkswagen (€19 billion). The continued competitiveness of such military equipment firms — and, more broadly, the reindustrialization on which European security depends — will be impossible without a significant increase in energy realism.

The reindustrialization on which European security depends will be impossible without a significant increase in energy realism

Ana Palacio

The European Commission’s Clean Industrial Deal aims to balance the twin imperatives of reindustrialization and decarbonization, including by promoting public and private investment in clean technologies and supporting energy-intensive industries, such as steel and chemicals, in the green transition. But the vision remains incomplete, not least because it neglects Europe’s fuel manufacturing industry.

This “silent” sector, which supplies 97 percent of the energy for transport and 50 percent of the feedstock used by the chemical industry, is more than a relic of a fossil fuel-powered past; it is a cornerstone of the European economy. Entire value chains rely on the stability and affordability it provides, which renewables will not match anytime soon.

And yet, the Clean Industrial Deal includes no strategy for the fuel industry’s development. Nor does it mention European fuel companies’ ongoing decarbonization initiatives, such as Repsol’s Ecoplant project, which will transform urban solid waste into renewable fuels and circular products. The company projects that, beyond creating hundreds of jobs, Ecoplant will reduce carbon dioxide emissions by 3.4 million tonnes over its first decade of operation.

In line with the Clean Industrial Deal’s pledge to “engage in a dialogue with industries to develop sectoral transition pathways,” the European Commission must take immediate steps to develop a transition pathway for fuel manufacturing. A well-designed strategy could unlock billions of euros in investment and advance key EU goals: decarbonizing transport and heavy industry, strengthening European industry’s global competitiveness and bolstering Europe’s strategic autonomy by reducing its dependence on foreign producers.

Other energy-intensive sectors should also be reassessed and integrated into European decarbonization and reindustrialization strategies, rather than sidelined. This will require the EU to take a pragmatic approach and promote all energy sources that can contribute to a stable, affordable supply, including renewables, fossil fuels, nuclear energy and hydrogen power.

The only way EU member states can achieve true energy security (or its corollary, energy affordability) is together

Ana Palacio

Hydrogen power is particularly important for energy-intensive sectors that cannot be fully electrified. The “RePowerEU” plan, introduced in 2022, aims to produce 10 million tonnes of renewable hydrogen (and import the same amount) by 2030. In order to achieve these goals, the EU must leverage its internal strengths. This means building on Germany’s existing production capacity: it produced 2.2 million tonnes of hydrogen in 2022, more than any other EU country. And it means taking advantage of Spain’s position between Europe and North Africa to establish it as a clean hydrogen hub, with connections to Algeria and Morocco.

The establishment of cross-border hydrogen corridors — within the EU and, ultimately, between the EU and other countries — will require EU-level action, buttressed by private sector support. This must include the alignment of relevant regulations — that is, a true energy union.

Contrary to popular belief, the energy union is not part of the EU’s single market. It is subject to a fundamental contradiction: under the Treaty on the Functioning of the EU, “sustainability” falls under the EU’s mandate, but the security of energy supplies remains in the hands of the member states, each of which decides its own energy mix. By now, it should be clear that this is untenable. The only way EU member states can achieve true energy security (or its corollary, energy affordability) is together.

Of course, the EU has a lot on its plate — not least devising a cohesive vision for its global role at a time when the US under Donald Trump’s second presidency is proving erratic and unreliable and great-power politics are shaping international relations. Such a vision should include deepening relations with a wide range of non-Western countries — such as Brazil, India, Morocco and the UAE — that share its interest in preserving some semblance of a rules-based order.

But if the EU is to play such a leadership role — providing the kind of legal certainty that can help to counterbalance the transactional, capricious and intemperate behavior we are seeing from the US — it must be united, confident, resilient and competitive. This demands a pragmatic, industry-aligned strategy for transforming itself from a lucrative market for others to an innovative industrial powerhouse in its own right, while enhancing its strategic autonomy on rapidly shifting geopolitical terrain. To succeed, a robust energy union is essential.

• Ana Palacio, a former foreign minister of Spain and former senior vice president and general counsel of the World Bank Group, is a visiting lecturer at Georgetown University. Copyright: Project Syndicate