No. 1259 - Energy costs and competitiveness in Europe

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by Ivan Faiella and Alessandro MistrettaFebruary 2020

The paper examines the trend in energy costs in EU countries by assessing their effects on competitiveness. To this end, it proposes a Unit Energy Cost (UEC) indicator for the manufacturing sector, it analyses its performance in different countries and sectors between 1995 and 2015 by appraising its main drivers (price changes, taxation, energy intensity and structural changes in the economy), and it examines its effects on competitiveness.

The UEC has increased over the period, reflecting above all the price of electricity, which was driven by the financing costs of renewable energy. The rise in the UEC appears to have subtracted almost 2.5 percentage points from export growth. Among euro-area countries, the positive effect of the single currency on export growth was attenuated by the high incidence of energy costs.

Forthcoming in: Environmental & Resource Economics

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