KEY INSIGHTS
- A structural weakness, not bad luck: The EU imported 57 per cent of the energy it consumed in 2024, practically the same share as two decades earlier, so it has transformed its power system without changing its strategic position.
- The dividend is already visible: The International Monetary Fund estimates that efficiency gains and renewables have cut the cost of this shock for European households by around 12 per cent, and by up to 17 per cent in its most severe scenario.
- An energy island behind the Pyrenees: Spain’s interconnection with the rest of the EU stands at around three per cent of its installed capacity, against an EU target of 15 per cent by 2030.
- A power without a budget: The proposed 2028-2034 EU budget of close to €2 trillion amounts to just 1.26 per cent of gross national income, which makes new own resources a question of sovereignty rather than accounting.
- Protect people, tax the windfall: A third of across-the-board electricity subsidies would end up with the richest fifth of households, so support must be targeted and paid for, in part, by those profiting from the war.
Twice in barely four years, Europe has been hit in the same place. In 2022 Russia turned gas into a weapon; since 28 February, the war with Iran and the de facto closure of the Strait of Hormuz have struck us from another direction, through another fuel and another chokepoint. The geography may change, but our vulnerability stays the same.
The bill arrived quickly. Two months into the conflict, the European Commission estimated that member states had spent more than €27 billion extra on fossil fuel imports without receiving a single additional unit of energy in return: we were simply paying more for the same. Seven months on, traffic through Hormuz has yet to return to normal, and wholesale gas costs more than twice what it did a year ago.
None of this is bad luck; it is a structural weakness. In 2024 the EU imported 57 per cent of the energy it consumed, practically the same share as two decades earlier, which means we have transformed our power system without changing our strategic position. And a continent that has to check the price of Brent before deciding how far it can go in foreign policy is not fully sovereign.
For too long we have defended the Green Deal almost exclusively as climate policy, as a matter of accepting costs today to avoid greater damage in 2050. That argument remains correct, but it has allowed its opponents to cast decarbonisation as a luxury for quiet times, something to be shelved the moment a crisis hits. That is exactly what much of the European right has done over the past two years, dismantling green legislation in the name of “simplification” and at times relying on the votes of the far right to do so.
The Iran war should settle that debate. Europe does not need less transition as the world becomes more dangerous; it needs to turn the green transition into power.
Energy Is Power Too
Fossil fuels have one decisive geopolitical feature: they have to be bought again and again, whereas infrastructure, once built, stays. Every megawatt generated in Europe from wind, sun, water, or nuclear, every heat pump and every electrified factory reduces our exposure to events we do not control. A wind turbine may well contain Chinese components, and Europe must diversify those supply chains too, but an offshore wind farm in the North Sea keeps generating even when a strait is closed on the other side of the world.
The dividend is already visible. The International Monetary Fund (IMF) estimates that efficiency gains and the growing share of renewables over the past five years have cut the cost of this shock for European households by around 12 per cent, and by up to 17 per cent in its most severe scenario. The European Central Bank (ECB), for its part, finds that higher gas prices have passed through to electricity less strongly than in 2022, precisely because a larger share of our electricity now comes from renewables. This is climate policy turned into security policy.
It is also industrial policy. If European companies pay two to three times more for electricity than their American competitors, as the Draghi report warned, then clean energy produced at home is one of the few competitive advantages Europe can build within its own borders.
That advantage, however, only exists at continental scale, and this is where Europe runs into its own limits. Spain is the clearest example. The Iberian peninsula has some of the best renewable resources on the continent and yet remains practically an energy island, with interconnection capacity to the rest of the EU of around three per cent of its installed capacity, against an EU target of 15 per cent by 2030. While Europe pays a geopolitical premium on the fuels it imports, part of the south’s clean electricity is stuck behind the Pyrenees, and the Bay of Biscay subsea link, which will almost double exchange capacity with France, will not be ready before 2028.
European energy autonomy will not be built out of 27 greener national systems but out of a genuine European energy system. A Union with sun in the south, wind in the north, hydropower in Scandinavia, and nuclear in several member states needs a grid able to carry electricity to wherever it is consumed. Interconnectors, storage, shared reserves, and the capacity to manufacture strategic technologies are European public goods, and when a European public good depends on 27 national budgets, it ends up underfunded and unevenly spread.
That is the uncomfortable core of the problem: Europe wants to act as a power without yet having the fiscal instruments of one. The Commission’s proposal for the 2028-2034 budget, close to €2 trillion, amounts to 1.26 per cent of EU gross national income, which is little for everything we are asking of it, from defence to enlargement to repaying NextGenerationEU. New own resources are therefore not an accounting debate but a question of sovereignty.
The Social Contract of Green Power
There is one final condition, without which none of this will hold. The transition will lose support if millions of citizens experience it only as a sum of bans, obligations, and costs, so green power has to be felt in everyday life: in an energy bill that reacts less when a strait closes thousands of kilometres away, in industry that stays in Tarragona, Dunkirk, or Duisburg, in jobs along the new industrial value chains, and in support concentrated on the households for whom changing their car, renovating their home, or replacing their heating is simply out of reach.
It also means protecting people properly while structural change takes hold. In 2022 and 2023 European governments spent roughly 2.5 per cent of GDP on household support, around 70 per cent of it untargeted or price-distorting, and the same mistake is now being repeated: according to the IMF, a third of across-the-board electricity subsidies would end up with the richest 20 per cent of households, against just 11 per cent for the poorest 20 per cent. Support has to reach those who need it, and it should be paid for, at least in part, by those who are profiting from the war.
The finance ministers of Spain, Germany, Italy, Portugal, and Austria have asked Brussels to bring back the 2022 solidarity contribution on the windfall profits of energy companies. Brussels has not moved, and member states are starting to go it alone: Portugal has proposed its own levy on oil extraction and refining, Poland’s windfall tax on fuel companies became law on 1 October, and the Czech government has approved one for refineries. A European contribution, temporary and strictly tied to the windfall generated by the shock, would be fairer and would also protect the single market.
The climate policy that survives this decade will be industrial, social, and geopolitical at once, or it will not survive.
Europe began its integration by pooling coal and steel, the raw materials that decided who could wage war and who could rebuild peace. Seventy-five years later, the material foundations of power are different: abundant clean electricity, the grids that carry it, storage, critical raw materials, the industrial capacity to produce all of it, and the budget to mobilise it at continental scale. The next phase of the European project is about pooling that power.
The green transition is no longer only about the climate we will leave our children in 2050; it is also about who will be able to put pressure on us in 2030, and whether Europe will still be able to decide for itself when the next crisis comes. That is what moving from green transition to green power means.
Source: www.socialeurope.eu
