Europe Is Losing Its Factories

Into Europe: The European Union survived Russia's energy weapon, but it hasn't been without damage to its economy. Is Europe now facing deindustrialisation?

00:00 Introduction
00:57 Chapter 1: How Europe Survived Russia's Energy Weapon
04:42 Chapter 2: Impact on the European Economy
05:53 Chapter 3: Europe's Deindustrialisation
7:54 Chapter 4: Europe's Economic Dilemma

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[ivanbrezina]

You can print money, but you can not print electricity. Subsidizing price of electricity for some industries will increase the price for others.

[Croz]

One of the problems is a lot of heavy industry is not only energy hungry, but requires an extremely reliable source. An aluminium smelter can't just turn itself off for a few hours a day to save energy, it costs a lot of time and money to shut down and a lot of time and money to start back up again. That generally means coal, gas, hydro or nuclear are the only feasible options, not unless you install a massive battery that can cope with any variation in renewable output.

[lockon]

So basically Europe stopped buying cheap Russian gas to buy more expensive US LNG AND Russian LNG via third parties like India and China, but this is somehow a win for Europe? This is a huge L any way you look at it. You're paying more for gas, you're STILL buying Russian gas and your industry is leaving the EU to China and the US....

[glennnielsen]

What worries me is that Europe invests in "panic" so that we get an suboptimal portfolio of energy technologies.

[ABanRocks]

Europe didn't really beat Russia if their economy is going down. Germany just went into recession.

[Luke-zkrf]

This just proves one of the easiest ways to improve productivity in an economy is to reduce energy costs, it benefits all businesses & consumers. Of course reducing costs is a generational challenge.
But the UK needs to be working to reduce our energy unit cost, a combination of nuclear & renewables is the only true way forward

[OddRagnarDengLerstl]

Who would dare to invest in Europe now? Energy is not solved. Infrastructure is not being protected, e.g. Nordstream. Foreign properties are frozen. Trust is lost.

[MeEntertainmentJo_]

Europe needs to find a 4th gen reactor design it agrees upon and build out a nuclear industry. That Germany it still trying to put up photovoltaic absolutely confuses me: Germany has terrible solar potential. The only viable zero-carbon sources for Europe (with Spain as an exception) are wind and nuclear. And given that nuclear needs so much water, they need to be building them to feed seawater instead of freshwater. That takes time to build and can be done economically at scale but they needed to start years ago.

And that comes back to it's political system: the EU is ran by boomers who aren't able to change their minds and still believe the myth of the danger that nuclear poses. Meaning its still going to be headed down the path of really terrible energy policy choices and de-industrialization to follow.

[querch]

I think the EU should focus on setting ups its new energy system first and foremost before it tries to re-industrialise. If that means procuring solar panels, inverters and wind turbines from outside then so be it.
Any subsidies to industries, in the meantime, should focus on maintaining existing assets because if they close down and fall into disrepair, restoring production capacity will end up even more expensive.

[quantummotion]

The EU is screwed longer term. First, all of the EU economies are in budget deficit, so all the carbon taxes used for EV incentives will STAY regardless of transition because the governments will need the money...they will simply be another form of taxes. The extra subsidies for LNG means no money for future bailouts for Southern Europe. The constant push towards renewable, refusal to go nuclear, and expensive LNG means energy security will ALWAYS be a hot issue as renewables will not cover the gap. For years, many in the EU criticized the US for not taking the climate seriously. Now that that the US is going full steam with renewables, it suddenly is a problem, and Germany is burning more coal than ever before. The EU simply needs to stop playing games with its markets. Renewable energy makes no sense for Northern Europe, it should go nuclear. The EU cannot compete with the US in spending money for an all EV transition, so it should go the way of hybrid cars to stay in the game of battery production but not be caught in a lithium/cobalt crunch and get rid of the EV subsidies. Also get rid of the carbon tax. Focus on making electricity CHEAP. If you make electricity CHEAP, people will switch to it. Its not enough just to make gas more expensive. Finally, people need to realize that you will NEVER get rid of oil and gas, because you need those to make all the plastics and petrochemicals. The environmental policies that the EU has taken on will kill off the industrial capacity of the EU, as fuel and material inputs will be expensive, alternatives will as expensive if not more, and businesses will find it easier to do business somewhere else as BASF is learning right now.

[iechuanlee]

The EU shoots themselves on both feet by sanctioning Russia and allies to the US. Result increase in fuel price from US & no fuel from Russia. This is making the EU firm not competitive & the consequences are moved abroad.

[joaquimbarbosa]

For Europe to stay competitive it needs to lower burocracy and decrease energy prices, those 2 things are crucial. Lowering energy prices could be done by using more energy efficient sources, using less gas, increase storage, and increasing baseload, mainly nuclear. Then it needs to really think outside of looking good. Because every single plans like the chips act or Net 0 industry act, besides from inferior versions of US subsidy plans, they also waste a lot. For exemple, many useless investment into hydrogen (like hydrogen pipelines and transportion network), subsidizing chips but having no clear intention on wich chips to subsidize, not creating demand for the high end chips they want, subsidizing solar pannels while still importing wafers and other components from China, same for batteries. We need to get our sh1t together, and start thinking about the whole suply chain, from consumption, to materials, not just the product

[jcliu]

The greatest geopolitical revolution in the 21st century was the rise of fracked shale oil/gas in the United States, which for the first time in 50 years made the world’s largest economy not just self-sufficient in energy but the world’s largest exporter. (The 70s-imposed export ban on U.S. oil/gas wasn’t even lifted till mid-2010s!) This one fact underlines all the reversals of American foreign policy: Under Obama, pivoting away from the Middle East became obvious, b/c all those Arab petrostates went from embarrassing but invaluable protectorates to direct competitors! Under Trump and Biden, shale made old-fashioned isolationism and protectionism a live option again.

Smarter EU leaders saw the competitive risk of America regaining the resource trump card over the rest of the rich world. But, whereas e.g. Japan always protected itself via diversity of supply (because it’s always been an island devoid of fuel sources), the Merkel/Macron pretense of “Europe from Lisbon to Vladivostok” was all about “domesticating” Russia’s Siberian gas as an input as reliable and freely available to VW and BASF as Texas fracked gas is to GM and Dow.

They banked on Putin being a corrupt gangster capitalist hedonist above all else—the rentier boss of rentier bosses. The disaster was finding out he’s actually…an idealist? And so Europe is back to where it was in the 1956 Suez Crisis: Stuck on a small, very crowded, very resource-poor peninsula; shorn of the colonies (formal and informal) that used to compensate for natural deficits at home; and totally at the mercy of America’s ability to shut off the taps, whether of LNG or finance flows.

China, facing similar constraints around traditional fossil fuels, had the foresight to become a dominant first-mover in renewable energy using state-led industrial policy. The EU—more in thrall to the “Washington Consensus” of free trade and marketization than the U.S. ever was—thought they could get there via regulations and carbon pricing.

Best example of where sclerosis tempered by virtue-signaling gets you: DieselGate. At the same time Tesla was ramping up and China was consolidating the battery supply chain, Deutschland AG’s solution to lower emissions was systematically destroying Europe’s urban air quality with “clean diesel”—a decade-long, continent-wide epidemic of magical thinking (and criminal conspiracy) that fell apart entirely within years of VW trying to break into the US market.

[skyrask]

Biggest issue with heavy industry is not how much energy as whole costs but type of energy it uses. Most of the energy used in heavy industry is thermal because it is cheapest, most plentiful and easiest to regulate energy around. When it comes to switching to renewable energy it needs to be remembered that one kw/h of thermal energy is 3 times cheaper than one kw/h of electricity. This is because to produce one kw/h of electricity you need 3 kw/h of thermal energy to heat up the steam to propel turbines to turn generators. This is the reason steel, concrete, plastic and other materials that require primarily thermal energy in production dominate material output of heavy industries.

[javiervll]

I think that the four main economies of the European Union 🇪🇺 (Germany 🇩🇪, France 🇫🇷, Italy 🇮🇹 and Spain 🇪🇸) should take advantage of their strengths and unite more, including in the technological and military field (France has nuclear weapons and is a permanent member of the UN Security Council 🇺🇳). If they don't, it will be very difficult for Europe to compete with countries like the United States 🇺🇸, China 🇨🇳, India 🇮🇳, Russia 🇷🇺, United Kingdom 🇬🇧, Japan 🇯🇵 or Brazil 🇧🇷

[zionarra]

Can Europe stay competitive? Certain industries like luxury goods and tourism? Almost assuredly yes. Heavy industry and consumer goods? Likely not. Cheap Russian natural gas was a key driver in the German economy. The LNG that's replacing it is from marginal suppliers that costs much more. Moreover increasing US protectionism (e.g. Inflation Reduction Act) means that European products will struggle to be competitive in the largest consumer market (it's funny how everyone thought US would go back to free trade after Trump, but Biden's been doubling and tripling down on practically every Trump era policy). Combined with Europe's demographic decline - Europe has likely peaked economically and it's all downhill from here. But don't take my word, I'm just another idiot on the internet.

[thomasdevine]

As an American, I would have more respect for the Europeans if they developed their own shale fields. Instead, they burn lignite (brown coal), the worst polluting energy source around.

[lukedornon]

I seem to remember somebody telling the Europeans a few years BEFORE this war that they were too dependent on Russian energy and the response was laughter....

[swanneeji]

Russia never used energy supply as a weapon. It did not cut off the gas. The EU cut its import of Russian gas and then the pipelines we’re blown up.

[nbgoodiscore]

I believe there are a few gaps in your explanation. It was good overall, but what you didn't touch was the effects of producing 40% of it's solar panels on energy demand, coupled with the temporary use of coal in Europe. Mind you, the sun shines in the south of Europe during most of the year, and that is being used to their advantage. The EU has an international electricity grid that also connects renewable energy sources between different countries in the union. There is also a boost in recycling solar panels to decrease dependence on imports for it's manufacturing.