European industry entered 2026 with the same problem that has been limiting its competitiveness for three years. It is neither labour costs nor a lack of technology, but a persistent energy cost advantage held by the United States and China. For energy-intensive industries, this means pressure on margins, investments, and production locations.
Just a few years ago, the European industrial debate focused mainly on labour costs, automation, and access to capital. Today, energy has become the key competitive factor. It is energy that most determines the profitability of production in steel, chemicals, cement, fertilisers, paper, and parts of advanced processing.
The problem is not solely high energy prices as such. Far more important is that Europe structurally pays more for energy than its main competitors. According to the head of the Eurogroup, energy prices in the Union remain two to three times higher than in the United States and China, creating a permanent cost gap for industry operating in Europe.
This changes investment logic. Under a lasting price difference, technological advantage is not always enough to justify keeping production in Europe. Companies are starting to make decisions not only based on labour and logistics costs, but above all on the cost per megawatt-hour over a ten- or fifteen-year horizon.
Europe adjusts its industrial policy
Brussels is increasingly admitting that the current transformation model needs correction. The Clean Industrial Deal launched in 2025 is an attempt to respond to a problem that has been growing faster than the pace of regulatory adjustments in recent years. The European Commission explicitly states that European industry needs cheaper energy, simpler regulations, and protection against unfair global competition.
This is a significant shift. Until recently, the dominant approach treated decarbonisation primarily as an environmental goal. Now the Commission increasingly presents it as an industrial policy tool. This shift is not semantic. It means that the energy transition is to be assessed not only through emission reductions, but also through its impact on production competitiveness, employment, and economic security.
The new logic is pragmatic. Industry cannot decarbonise at a pace that leads to a permanent loss of competitiveness and the relocation of production outside the Union. Such a model only statistically reduces emissions in Europe, while in reality shifting them to other regions of the world.
Germany shows a new direction for heavy industry
This is most visible in Germany, which remains the industrial core of Europe. Berlin has allocated up to €5 billion to support the decarbonisation of heavy industry through so-called carbon contracts for difference (CCfDs), designed to compensate for the costs of switching to lower-emission technologies in sectors such as steel, cement, and chemicals.
This is an important signal because it shows a shift in priority. Germany no longer treats climate policy solely as an emission reduction project. Increasingly, it is designed as a tool to keep industry in the country.
The mechanism is simple. The state subsidises the difference between conventional production costs and low-emission production costs. The goal is not only to reduce emissions. It is also to limit the risk of industry relocating production outside Europe.
This is the element that becomes key today. Industrial policy is no longer just about whether production will be green. It is about whether it will remain in Europe at all.
Cheaper energy becomes a form of industrial policy
The European Commission and the EU’s largest economies are increasingly accepting that energy-intensive industry requires active cost support. In practice, this means moving away from a model where industry had to absorb the costs of transformation itself.
Brussels is preparing to increase the pool of free emission allowances for industry between 2026 and 2030, which could reduce company costs by around €4 billion. At the same time, member states are developing national support mechanisms for energy-intensive sectors.
This is, in effect, a new form of European industrial policy. Its core is no longer just subsidising investments, but also partially shielding operational costs. This is a fundamental change because for decades European competition policy was reluctant to provide permanent support for industry’s current costs.
Today, that caution is giving way to realism. If energy remains permanently more expensive than in the US and Asia, then without compensatory mechanisms, part of European industry becomes structurally unprofitable.
Poland gains an opportunity, but on condition of investment
For Poland, this is a strategically important moment. On one hand, the country still benefits from cost advantages in production, logistics, and employment relative to Western Europe. On the other hand, Polish industry is exceptionally sensitive to energy costs due to the share of energy-intensive industry and a historically high share of coal in the energy mix.
This creates a double risk. Poland no longer competes only with Germany or the Czech Republic, but also indirectly with American industry supported by cheaper energy, cheaper gas, and aggressive industrial policy. At the same time, it cannot count on a long-term cost advantage if it does not lower the cost of energy for industry.
Therefore, not only new generation capacity will be crucial, but also grids, energy storage, power purchase agreements (PPAs), demand flexibility, and the pace of electrification of industrial processes. For Poland, the energy transition is no longer primarily a climate project. It becomes a condition for maintaining industrial competitiveness.
The biggest risk is not the transition, but its cost
In public debate, it is often assumed that the energy transition itself is the biggest threat to industry. That is an oversimplification. For industry, the bigger problem is not the direction of change itself, but the cost and pace of its implementation.
European industry can accept decarbonisation if it leads to stable and predictable energy costs. The problem begins when the transition raises costs faster than industry can compensate them through productivity growth.
This is why the current policy correction at EU level matters. Europe is not abandoning decarbonisation. Europe is trying to adapt it to the realities of industrial competition.
This is a fundamental difference. In the coming years, competitive advantage will no longer be determined solely by the pace of the green transition, but by which economies can combine three elements at once: cheap energy, security of supply, and the ability to maintain industrial production.
For Europe, this is no longer a climate policy issue. It is a matter of the ability to maintain an industrial base.
