Transcript Energy and Industrial Competiveness

Energy and the Industrial
Competitiveness Challenge
MEP Policy Dialogue, European Parliament, 28/01/2014
Costas Kataras
“Reports that say that something hasn't happened are always interesting to
me, because…
… as we know, there are known knowns; there are things we know we know.
We also know there are known unknowns; that is to say we know there are
some things we do not know.
But there are also unknown unknowns- the ones we don't know we don't
know.”
― Donald Rumsfeld (ex Secretary of Defense, USA)
Known Knowns
Things we know we know
Most important long term barriers to Europe’s
international industrial competitiveness?
(Source: Accenture, 2013)
Europe’s Energy Handicap
Share of Global Export Market for Energy–Intensive Goods
(Source: World Energy Outlook 2013)
Employment in Industry, EU-28, 2000/2013
South Europe’s Energy Handicap-Natural Gas (e/mwh)
Greece- Production Costs Skyrocket
• Price,Gas: GR 44,5 vs EU27 23,4 euro/kwh (+
100%)
• Energy Tax : 5,5 e/mwh ( EU: 0,5e/mwh- xx)
• Gazprom: + 30% higher prices for Greece
RESULT ( ie Greek Glass Industry)
• Production Cost Disadvantage due to energy cost:
+ 20% ( same equipment)
(Source: EC)
Tableware glass production
Significant decrease of activities in the EU:
Austria : 290 less jobs
Belgium : one closure, 2 furnaces stopped, one rebuilt in
2013
Bulgaria : announced production line in 2011, delayed so far
Czech Republic: bankruptcy of major company, 50% staff
reduction compared with 2008 level
Finland : major restructuration and job losses. New glass batch
house in 2012
France : 50% staff reduction in major factory 6000 jobs shed
Germany : 2 plant closure, 350 jobs lost
Ireland : closure of major factory, then reopening with very limited
capacity
Northern Ireland : closure of crystal factory
Italy: 150 jobs lost. Decrease of activity in Murano
UK : remaining single crystal glass factory with extremely limited
production
Poland : Bankruptcy of 2 major producers and closures of many
smaller companies. Also 2 companies increasing capacities
Portugal: : Closure 250 jobs lost
Romania : jobs loss
Spain : one furnace on two not rebuilt in 2010
Sweden: Closure- job loss
Investments are made at Europe’s borders
to the detriment of the EU and particularly
Western Europe.
Increase of production capacity and
investments outside of Europe
Egypt : new investments
Iran : new investments
Ukraine : new investments
Saudi Arabia: new investments
Serbia : capacity tripled in 2012
Turkey : 12 million EUR inv.
Tunisia : new investments
Russia: 389 million investments (5 projects)
FYROM
Known Unknowns
Things we know we don't know
Which photo best describes the economic
activity and prosperity in Switzerland?
The 3rd Wave Illusion
The Negative Impacts of de-industrialisation
• Slows economic development / growth
• Creates Trade Balance Deficits,
as services based economies have limited
export potential
UK
# Industrial Production: From 37% of GDP (1950) to 13% (2010)
# Trade Balance Industrial Goods : From +5% of GDP(1970) to -4 (2010)
# Trade Balance Services :+ 3,5% of GDP (2010)
UK vs Germany- Trade Balance
US
# Trade Balance of Services: + 1% of GDP
# Trade Balance of Industrial Goods: - 4% of GDP
Post-Industrial Era Fantasies
Industrial Production- Top 5 Countries in the World (Added Value, per capita)
• Switzerland
• Japan
• Singapore
• Finland
• Sweden
Unknown Unknowns
Things we don't know we don't know
Black Swans are Here to Stay
# Black Swan- The disproportionate role of high-profile, hard-topredict, and rare events that are beyond the realm of normal
expectations in history, science, finance, etc (that thrive in
globalised, networked societies)
# Description- The event is a surprise (“unpredictable”), has a
major effect, the relevant data were available but unaccounted
for in risk estimates
# Example- Economic Crisis 2008- “It’s the Inequality Stupid !!”
# Prediction- Yes, ( ..revenue disparity ratio comparable to one
on the eve of Great Depression between the richest 0,01% and
the poorest 90%, from 180 to 880 in 2005 (891 in 1928), page 81,
book “Nice Capitalism”
"The first candidate nation for the death of the arrogant capitalism is America, due to the extreme
income inequalities compared only with the Great Depression era .."( 2007/08,"Nice Capitalism" )
"The rise in economic inequality in the U.S. is the main cause of the economic crisis.. it would be
supposed I had forecasted" (Paul Krugman,14/10/2008, NEA/APE/NPR )
The Vicious Circle
• Globalization
• The End of Nation State
• De-industrialization (ie Energy / Carbon Leakage)
• Export of Jobs
• Disappearing Middle Class
• Inequality ( 99% vs 1%, 85 people=3,5 billion people)
• Degeneration /Devolution (reverse evolutionary processes in society)
(The Spirit Level: Why More Equal Societies Almost Always Do Better, by Richard G. Wilkinson and Kate
Pickett, 2009)
• New Black Swan
• Re-industrialisation (ie US)
THE LOST CENTURY, 1950-2050
A New Black Swan From Davos 2014 ?
# Echoes of 1914: backlash against globalization, gilded age of
inequality, rising geopolitical tensions, ignoring tail risks
# Many speakers compare 2014 to 1914 when WWI broke out &
no one expected it. A black swan in the form of a war between
China & Japan?
# If perhaps 1914 isn't a good comparison, rather 1848 and 1968
could be: the former a year of revolutions across Europe; the
latter a year of socialist, communist and student protests in the
U.S., U.K., France, Germany, Italy and the USSR.
# Will 2014 be the year when there is a growing backlash against
the prevailing status quo and rising income inequalities?
Let’s…
• Let’s Drop Energy Costs Now: High Costs are a
Major Disruptor of Competitiveness
• Let’s Love Our Industries: They Alone Give
Birth to Sustainable Wealth and Prosperity
• Let’s Think European in Energy: Our
Institutions Should Act and Unify Energy
Practices and Markets
• Let’s Keep a Healthy Balance Between Energy
Cost and Environment Protection Regulations