How Affordable Energy Boosts Competitiveness and Green Transition Success
With the Affordable Energy Action Plan, the EU aims to cut costs, drive decarbonisation, and ensure no one is left behind – REVOLVE unpacks how.
Making Europe more competitive has been the talk of the town in Brussels since Mario Draghi, former Italian prime minister and the president of the European Central Bank, published his report in September 2024, focused on competitiveness. The EU has since shuffled its economic agenda, putting competitiveness at its heart. In doing so, this would make sure that European businesses thrive in a world where climate change, AI and geopolitical challenges constantly expand and evolve.
To address challenges like high energy costs, fierce global competition, and the need for a more resilient and sustainable industrial sector, the European Union published the Clean Industrial Deal. The Deal aims to boost production stages, focusing on the energy-intensive industries and the clean-tech sector. The former would tackle high costs, unfair global competition, and complex regulations, whilst the latter would be put forward as a necessary step for industrial transformation, circularity, and decarbonisation.
At the core of the Clean Industrial Deal and the EU’s competitiveness, is affordable energy. Simply put, to fulfil the Clean Industrial Deal, Europe needs affordable energy. The European Commission (EC) adopted the Affordable Energy Action Plan to lower energy bills for industries, businesses and households, while promoting the transition to a low-carbon economy.
At the core of the Clean Industrial Deal and the EU’s competitiveness, is affordable energy.
REVOLVE explores the implications of this action plan through key lenses, including the Emissions Trading System 2 (ETS2), energy poverty, affordable housing, and how EU-funded projects can help accelerate the plan’s goals.
The importance of the ETS2
The Affordable Energy Action Plan represents a broader effort to transform Europe’s energy landscape. The plan sets out to lower energy costs for consumers, complete the Energy Union, attract clean energy investment, and strengthen resilience against energy crises.
However, the plan is not without its shortcomings, Eleanor Scott of Carbon Market Watch says to REVOLVE. “Crucially, it makes no mention of ETS2, despite the system’s far-reaching implications for energy affordability and climate justice. Additionally, the plan continues to endorse investment in new gas infrastructure – an approach that many experts view as risky and short-sighted, particularly given the volatility of fossil fuel markets and the EU’s long-term decarbonisation goals”, she adds.
The European Union’s ETS2 introduces a carbon pricing mechanism that targets fossil fuel use in buildings, road transport, and small industries. Its core objective is to reduce greenhouse gas emissions by making polluting fuels more expensive, hence making cleaner fuels the better business decision. This is what economic incentives are all about.
However, a growing concern is that ETS2 may disproportionately impact lower-income households, who already spend a higher percentage of their income on energy, Scott points out. “Without proper safeguards, this could deepen existing inequalities and exacerbate energy poverty”, she adds.
To address these risks, the EU has established the Social Climate Fund, a €86.7 billion instrument designed to support vulnerable groups. Yet, there is widespread acknowledgment that this fund alone may not be sufficient.
“Energy poverty remains a pressing issue across Europe, affecting over 40 million citizens who are unable to adequately heat their homes”, Scott says. As the June 2025 deadline approaches, EU Member States are required to submit comprehensive Social Climate Plans. These must clearly identify populations at risk of energy and transport poverty and propose effective strategies to mitigate the impact of rising energy costs.
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