The July revision of the EU ETS Directive will determine whether the EU can reconcile it with industrial competitiveness. In short, whether it can achieve decarbonization without deindustrialization.

EU’s global competitiveness gap is growing

Europe now operates in a very different environment than when its climate policy was originally designed. According to forecasts from the Organisation for Economic Cooperation and Development (OECD) and the International Monetary Fund (IMF), EU economies are expected to remain among the slowest-growing in the G20 in the coming years, while the gap between Europe and major competitors such as the United States and China continues to widen.[1]

European industry faces structurally higher energy costs. This is not a short-term fluctuation but a trend. The International Energy Agency’s (IEA) Electricity 2026 report underlines the scale of the challenge. EU electricity prices for energy-intensive industries remained elevated in 2025, averaging more than twice American levels and almost 50 percent above those in China. Wholesale electricity prices followed the same pattern: the EU recorded the highest levels among the markets analyzed by the IEA, matching the twofold gap with the United States, while standing significantly above levels in India, Australia and Japan. The report also points to the role of EU ETS prices in maintaining upward pressure on electricity costs.[2]