By Océane BALBINOT-VIALE, Sustainable Investment Research Analyst, Crédit Mutuel Asset Management Crédit Mutuel Asset Management is an asset management company of Groupe La Française, the holding company of the asset management business line of Credit Mutuel Alliance Fédérale.
Caught between an ambitious clean energy transition and the hard realities of industrial competitiveness and geopolitical turmoil, Europe has to step up its strategy. The European Union’s Clean Industrial Deal (CID)1 , rather than just a climate policy, highlights that affordable energy is a key determinant of both energy sovereignty and industrial competitiveness. By making affordable energy a priority, the CID marks a shift towards a more interventionist stance. However, its reliance on contracts such as Power Purchase Agreements (PPAs) or Contracts for Difference (CFDs) and power grid interconnections raises questions about Europe’s ability to shield itself from volatile markets and external dependencies.
While the CID points out affordable energy as a means of securing industrial viability, it also implicitly acknowledges Europe’s structural energy cost disadvantage relative to the United States or China. High energy prices have long been a burden on European industry competitivity, where energy-intensive processes make production costs highly sensitive to energy price fluctuations2 . While PPAs and CFDs provide price visibility, they do not solve the question of whether Europe can generate domestically sufficient clean energy at globally competitive prices and reduce its exposure to external energy shocks.
The strategic dimension of the CID’s energy policies becomes more evident when considering Europe’s dependence on critical raw materials (CRMs) for its clean energy transition as these are overwhelmingly sourced from outside the EU3 . While the CID seeks to address this issue through the set-up of a central purchasing and stockpiling agency, the European Critical Raw Material Centre, it will not suffice to tackle Europe’s dependence on a handful of suppliers, namely China , and may leave Europe vulnerable to supply chain disruptions and to non-EU countries with geopolitical leverage.
The role of nuclear energy within the CID framework presents notable challenges for Europe’s pursuit of energy sovereignty. High capital costs, long lead times and political considerations continue to raise questions about its viability as a short-term solution for energy affordability. Again, Europe’s dependence on external suppliers for key components of the nuclear fuel cycle5 highlights persistent vulnerabilities in achieving full self-sufficiency. However, the CID’s commitment to “technological neutrality” opens the door for nuclear to play a more prominent role in the clean energy transition. With strong support from key member states such as France, nuclear energy has the potential to complement renewables, by providing a stable, low-carbon power source and could become a crucial pillar of Europe’s long-term energy security strategy.
The success of the CID to strengthen Europe’s electricity grid and integrate energy markets across member states will ultimately depend on overcoming key challenges. A more interconnected energy system does not automatically translate into lower costs6 , particularly if domestic renewable capacity fails to grow at the pace required to meet industrial demand. Moreover, while enhanced grid flexibility can help manage supply fluctuations7 , it does not eliminate Europe’s fundamental reliance on energy imports. That being said, by reducing regulatory barriers to interconnection and investing in cross-border infrastructure, the CID lays the foundation for a more resilient energy system.
Similarly, the CID’s attempt to insulate Europe from the volatility of gas markets through collective purchasing is also an interesting aspect of its approach to energy sovereignty. Indeed, the CID’s strategy carries inherent risks: relying on an EU-wide Gas Market Task Force to negotiate more favorable terms would require that Europe maintains sufficient bargaining power in an increasingly competitive energy landscape. Moreover, without a simultaneous push to scale up renewable alternatives, these collective purchasing measures could reinforce Europe’s dependence on natural gas rather than reduce it.
The CID’s approach to affordable energy provides much-needed relief for industries while laying the groundwork for a cleaner and more resilient future. Addressing structural vulnerabilities, through stronger commitments to domestic energy production, more proactive industrial policy and a strategic approach to securing critical supply chains, will be essential to achieving the full potential of the CID. Yet, the momentum created by the CID offers an opportunity for Europe to redefine its energy landscape, turning challenges into catalysts for innovation and long-term security, and to emerge as a global leader in clean, independent energy.
This commentary is provided for information purposes only. The opinions expressed by the author are based on current market conditions and are subject to change without notice. The information contained in this publication is based on sources considered reliable, but Groupe La Française does not guarantee their accuracy, completeness, validity or relevance. Published by La Française Finance Services, registered office at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, n° 18673 X, a subsidiary of La Française. Crédit Mutuel Asset Management: 128 boulevard Raspail, 75006 Paris is a management company approved by the Autorité des marchés financiers under number GP 97,138. Société Anonyme with a capital of €3871680, RCS Paris n° 388,555,021, Crédit Mutuel Asset Management is a subsidiary of Groupe La Française, the asset management holding company of Crédit Mutuel Alliance Fédérale.
1Clean Industrial Deal - European Commission
2Competitiveness of European Energy - Intensive Industries
3Meeting the costs of resilience: The EU's Critical Raw Materials Strategy must go the extra kilometer
4Ibid
5Analysis of Nuclear Fuel Availability at EU Level from a Security of Supply Perspective
6Sweden open to power cable project if Germany reforms, minister say
7Renewable Revolution: A Review of Strategic Flexibility in Future Power Systems