The Strait of Hormuz crisis has highlighted the fragility of European supply, in a world where European industry wants to be globally competitive despite the continent's lack of resources compared to other markets, such as the United States and China. Geopolitics, competitiveness, and sustainability find an intersection point in energy, where Europe must choose a path, with directions such as the one defined at the Cercle d'Economia Annual Meeting in a conversation between the president of Repsol, Antonio Brufau, and the president of Naturgy, Francisco Reynés.
"Europe has based its energy strategy outside of its industrial strategy, and this is an absolute barbarity," Brufau stated in a dialogue led by the vice-president of the Cercle d'Economia, Carmina Ganyet. "Everything has focused on sustainability and, instead of protecting industry, industry has gone to China," Brufau added. Thus, a paradox arises: while Europe has reduced its emissions to represent 6% of the global total, China is the world's largest emitter, with 30% of the total, and here, "Europeans are necessary collaborators." As Brufau highlighted, EU regulation has led companies to move to China, where coal still fuels industry.
"There is no strategic autonomy if there is no guaranteed supply," added Brufau, who warned that Europe's irrelevance in terms of emissions could end up translating into economic irrelevance. At this point, Reynés agreed, pointing out another paradox surrounding the energy sector: "We may find that Europe will decarbonize, but the world will increase emissions, because the world will continue to manufacture and will have to bring it here." In this sense, as they highlighted, the goal of sustainability must also be balanced with that of competitiveness and security of supply, as all three are, moreover, interconnected.
Diversification, connection, and regulation
In view of these contradictions, Europe must move towards energy autonomy, with a strategy that involves the diversification of energy sources and reducing regulation, as they have argued. And diversification, in turn, involves interconnection between European markets, since "interconnection allows flexibility." However, as Reynés recalled, Spain and France are only connected by one gas pipeline, while the connection through Catalonia has been pending for years.
"Nobody takes advantage of the diversification of supply sources, and there is no exchange because there is no European energy policy," Reynés maintained. Diversification is precisely what places Spain in a "better position" compared to other European countries in the face of the Hormuz crisis, with strategic facilities such as the gas pipeline with Algeria, and with more reserves than other European countries.
Despite this diagnosis, both see positive signs in European management: as Brufau pointed out, the EU aims to regain industrial muscle and raise the weight of manufacturing from 14% to 20% of the European economy. On this path, "Europe has to understand that it must allow companies to compete on equal terms with those from the rest of the world."
"We have to understand that energy policy and industrial policy are part of a whole. Otherwise, in ten years Europe will still have the same weight of industry," continued Brufau, who invited Europe to look at the United States regarding the management of fossil fuels: "A great risk for Europe to look at China and not at the United States."
Decisions with criteria, and consequences
Both have conveyed this need to approach energy from an industrial perspective to nuclear: despite the planned calendar for the closure of nuclear power plants in Catalonia, they have called for no definitive decision to be made without first making an assessment of the available sources, after the pace of commissioning of new infrastructures has not been as expected.
And it is that, for decision-making, it is essential "to make them with good judgment, and explain the consequences," according to Reynés, something he has also conveyed to European instances. "Europe can make the decisions it deems appropriate, but it has to explain them and not deceive. No one is required to be right, but to make decisions with good judgment, and explain it," even when a decision leads to a loss of competitiveness and a reduction in industrial weight: "What cannot be done is to make decisions without thinking about the consequences."
Thus, decisions with good judgment, diversification, and regulation that does not hinder competitiveness are key on the path towards European energy sovereignty for Brufau and Reynés. It is a piece of the big question the Cercle is asking in this edition: Europe's strategic autonomy, myth or reality?, which focuses on crucial fields for Europe to outline the roadmap to leave the myth behind and go for reality.