EU commissioner laments US climate rollback, retains focus on competitiveness

Europe is grappling with a widening competitiveness gap with markets like the US, where President Donald Trump kicked off his second term in the White House with a flurry of pledges to roll back climate action and green energy policies.

At the same time, geopolitical shocks will only deepen, lawmakers and executives said during a panel discussion at the World Economic Forum in Davos, Switzerland, Jan. 23.

"If you have looked at the news in the past two weeks, you might think climate action was somewhat optional. Well, clearly it isn't," said Wopke Hoekstra, EU commissioner for climate, net-zero and clean growth, reflecting on Trump's promises to withdraw the US from the Paris Agreement on climate change and increase oil and gas extraction.

"We find it unfortunate that our American friends have left the Paris Agreement," Hoekstra said. Yet, "there is no alternative than to continue working with the Americans, also on climate."

Growth strategy

There are also lessons Europe should learn from the business environment in the US, whose economy has stormed ahead of Europe's in the past decade.

As the European Commission gets into its second term under President Ursula Von der Leyen, the EU's strategic focus has shifted to industrial competitiveness.

"We need to bridge climate action and competitiveness," Hoekstra said. "We need to make sure that decarbonization is not just a strategy for climate but also a growth strategy."

When it comes to innovations in technology or artificial intelligence, Europe is not doing enough compared to the US, the commissioner added.

Part of that is the ease at which capital is flowing in the US, which is "in a completely different realm," Hoekstra said.

Pan-European synergies

According to Catherine MacGregor, CEO of French utility Engie SA, a decarbonized but affordable energy supply should top the agenda when designing the future of Europe's industrial strategy.

To reap the synergies of clean power potential across various European markets, from Iberian solar to Nordic hydro and French nuclear, Europe should push forward on market integration, MacGregor argued.

"We have to think one European market," the CEO said on the panel. That could include cross-border power purchase agreements, where MacGregor sees "some red tape to be removed."

To prevent Europe from overbuilding its renewables fleet, more emphasis needs to be put on electricity storage, the executive added.

"Everything we add to the grid is going to increase the cost of the system. By putting storage in the right place, we will minimize the cost of the grid," MacGregor said.

Innovation in new solutions such as green hydrogen deployment has been slowed by lukewarm support, Iberdrola SA CEO Ignacio Galán said in Davos.

"The momentum of hydrogen has really diminished. We were expecting a lot of support ... but that hasn't arrived yet," Galán said.

While considering itself a global leader on clean technology, Europe is ignoring progress elsewhere in the world, the executive said.

"We are behind those who traditionally we've been criticizing," Galán said, noting that China's economy is now more electrified than Europe's.

AI opportunity

Looking forward, European lawmakers need to build up expertise in the potential of artificial intelligence for industrial competitiveness, Hoekstra said, noting that many policymakers "are not ready."

AI is "definitely going to be part of the solution," according to MacGregor.

"Energy is a lot about data," MacGregor said. "Data and AI helps us tremendously on optimizing this energy system that we are all building."

The executive said AI can be used to optimize forecasting capabilities that predict weather, power consumption and grid capacity, for example.

"The time to develop these forecasts has been cut by 10x and that is thanks to AI," MacGregor said.

More turmoil on the horizon

While Europe is implementing the lessons learned in the energy crisis of 2022, where a dependence on Russian gas resulted in an energy shortfall and price spikes, geopolitical risks are far from banished, Hoekstra said.

Indeed, the security of energy infrastructure is no longer guaranteed. In December 2024, the EstLink2 power cable in the Baltic Sea was the subject of suspected sabotage and will remain out of action until August.

The incident followed damage to the Balticconnector gas pipeline and the severing of data cables in the Baltic Sea.

Earlier this month, defense alliance NATO committed to increasing military surveillance of critical infrastructure in the Baltic region.

Both physical and cybersecurity threats are increasing, delegates at Davos heard.

"If the last five years were rocky, fasten your seatbelts," Hoekstra said. "In the next five to 10 years, we will see way more turmoil in geopolitics."