Europe turns to energy-intensive imports amid high electricity prices

Washington D.C. Correspondent
Source: International Energy Agency: Electricity 2024 • Electricity equivalent of imports calculated by determining how much electricity would be used to produce that material in the EU, based on EU electricity intensities. The countries shown in the figure are not members of the EU. Aluminum refers to primary aluminum, rather than recycled aluminum. UAE = United Arab Emirates. UK = United Kingdom. U.S. = United States.

High electricity prices are hurting domestic manufacturing in European Union countries and prompting the bloc to import more energy-intensive goods from abroad, including from countries heavily reliant on fossil fuels, according to a new International Energy Agency (IEA) report.

This trend is one of many consequences of Russia’s 2022 invasion of Ukraine, which fueled an energy crisis in Europe, driving up electricity prices and making it more expensive to produce energy-intensive products like steel, aluminum and concrete within the bloc.

By importing goods made abroad, the EU indirectly contributes to the use of electricity, and any ensuing carbon dioxide emissions, in those countries. Renewable energy is responsible for about 40% of the EU’s electricity mix; in contrast, several of the countries producing aluminum and steel going to the bloc still rely largely on fossil fuels.

The IEA estimated the indirect electricity use for each type of good imported into the EU in the above chart by calculating how much electricity would have been used to produce that product within the bloc.

In 2022, imports of energy-intensive goods increased about 8% over the previous year. While energy-intensive imports declined in 2023, they remained about 4% higher than pre-invasion levels, the IEA concluded.

Aluminum, used to build cars, clean energy systems and more, drove the trend as the EU imported large volumes of the metal from non-EU countries like Norway, Russia and Iceland, followed by India and United Arab Emirates. Norway and Iceland get most of their electricity from hydropower and geothermal, while Russia, India and UAE rely heavily on fossil fuels.

Russia’s share of these indirect electricity imports has dropped from 18% in 2019 to just 9% last year, driven by the impact of sanctions, IEA estimates, though aluminum remains unaffected.

IEA expects the EU’s use of a border carbon tax to serve as a check on the flow of energy-intensive goods as it is phased in over the next nine years.