"EU to integrate energy market" - IMF calls for cooperation between countries to increase global competitiveness
European Union companies could become more competitive against their American and Chinese rivals if they pay less for energy. This goal can be achieved thanks to cooperation between governments to invest in and integrate the EU's fragmented energy market, the International Monetary Fund said.
Increasing Europe's economic competitiveness is a priority for the 27-nation bloc as it battles in the race for new climate-friendly technologies against China and the United States.
The challenge has become much more severe after the collapse of cheap gas imports from Russia, following Moscow's invasion of Ukraine in 2022, left EU companies paying twice as much as their American rivals for electricity. The competitive disadvantage for Europe was particularly evident in energy-intensive industries such as chemicals, steel and aluminium production.
In a document prepared for talks by EU finance ministers, the International Monetary Fund stressed that integrating the EU energy market would not only lower prices but also improve the bloc's energy security and help reduce carbon dioxide emissions.
Electricity prices vary within the 27 EU countries, leading to market fragmentation. The IMF said the fragmentation could be fixed if countries traded more electricity across borders and increased the capacity of cross-border networks.
According to the Fund, countries that import and export electricity may be reluctant to trade more across borders, as countries that produce electricity at low cost often resist grid integration for fear that domestic prices will rise. On the other hand, countries with high costs may be reluctant to open their markets to cheaper electricity imports, as this could harm domestic producers.
The IMF said that if the 27 EU governments integrated their energy markets, they could save about 40 billion euros a year as a bloc and attract investors.
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