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EU Must Contain Energy Costs Or Risk ‘Deindustrialization’

Stefan Nicola and Tino Andresen, Bloomberg

Europe must get a grip on energy prices to protect growth and stop its industry from fleeing abroad, according to two top policy makers.

The region needs to reduce the cost gap with the U.S., where a shale-gas revolution has slashed prices, European Union Energy Commissioner Guenther Oettinger told a conference in Berlin via a video link from Brussels.

German companies and consumers are shouldering costs of as much as 24 billion euros ($32 billion) a year for clean-energy aid, the country’s Economy and Energy Minister Sigmar Gabriel told the same event. Europe’s biggest economy has reached “the limit” with renewables subsidies and must contain power prices or risk “deindustrialization,” he said.

Germany has been one of the most ardent advocates of ambitious carbon-reduction policies that have helped drive up Europe’s power prices at more than three times the rate of inflation. Chancellor Angela Merkel has made reforming renewable-energy subsidies to reduce the cost of the country’s switch from nuclear power the top priority of her third-term government, which took office last month.

Elsewhere in the region, Spain, Italy, Portugal and the Czech Republic have slashed aid for solar power. U.K. Prime Minister David Cameron is looking for ways to reduce utility costs after the opposition Labour party promised to freeze bills if it wins the general election in 2015.

Europe has “experienced an above-average development of power and gas prices,” just as the U.S. benefited from declining costs, said Oettinger, who will tomorrow help outline the EU’s new climate target.

Energy prices for German households are “at a problematic level,” Leonhard Birnbaum, management board member of EON SE, the country’s biggest utility, said today at the same conference.

Merkel could reduce prices by cutting back fees and taxes that make up more than half of the electricity bill, Oettinger said. Germans pay more for power than residents of any EU nation except Denmark.

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