Don’t blame carbon costs for European industry’s woes, yet

Energy costs amounted to 8.1% of value added across all EU manufacturing activity in 2025, down from a peak of 8.9% in 2022. But energy-intensive manufacturing sectors, such as cement, chemicals, and iron and steel production, faced energy costs of up to 16%, 21%, 55% of value added in 2025, respectively.

What you will learn:

• European energy-intensive industries face structurally higher energy prices than competitors in the US and China. The resulting energy-cost challenges must be addressed, especially in the face of a volatile global geoeconomic environment, but proposals to scrap carbon pricing would do little to help industry and would risk undermining energy security and emissions reduction.
• Scrapping carbon prices would do little to alleviate industry input costs and would remove a crucial incentive for efficient emissions reduction across Europe. Total headline carbon costs across European manufacturing are moderate, representing between 0.2% and 3.5% of value added depending on the country, and 1.1% on average across EU countries.
• To help EU industry, policymakers should focus on addressing Europe’s energy-cost challenges. This includes supporting industrial transitions to more energy- and carbon-efficient processes and reducing the cost of electricity to facilitate electrification, including by shifting some energy duties away from electricity.