“While the European Union has reduced its coal capacity by about 40%, China has increased it by more than 40%,” Motuzova notes. This is not a temporary divergence, but a long-term difference in trajectory.

Emissions: relative success versus global reality

This observation carries broader implications. It suggests that emissions reductions are not driven solely by technological progress, but also by structural changes in the economy. “Less production means fewer emissions, but also less economic activity,” the analysis states.

The global comparison is stark. Since 2005, the EU has reduced emissions by more than 1.2bn tonnes of carbon dioxide. Over the same period, China’s emissions have increased by almost 6.9bn tonnes and India’s by 1.9bn tonnes. “Global emissions trends are largely determined by economies that are expanding their energy capacity,” Motuzova says.

The conclusion is straightforward. Europe is decarbonizing, but global emissions remain high because the largest emitters are following a different path.

Today, the EU accounts for roughly 6% of global emissions, compared with around 30% for China, 11% for the US and 8% for India. While the EU has reduced emissions by about one third since 2005, part of that decline reflects structural changes in industry, not only technological progress.

As Motuzova argues, this is a broader economic shift: “Less production means fewer emissions, but also less economic activity.”

In other words, Europe’s reductions are being offset by growth elsewhere.

Competitiveness under pressue

This asymmetry is reflected directly in competitiveness. Diverging energy strategies translate into different costs, levels of supply stability and investment decisions.

Europe is moving towards a low-carbon model, while other economies combine new energy sources with traditional ones. “If these conditions differ significantly, the result is an imbalance that the market naturally reflects,” Motuzova notes.

Electricity as a structural cost

The most visible expression of this imbalance is the price of electricity. In 2024, average prices in the EU stood at around €179 per MWh ($193), compared with $75 in the US and $76 in China.

“This is not a marginal issue, but a systemic problem,” Motuzova says. “Electricity is a key input for industry, digitalization and decarbonization. If it is significantly more expensive, it directly undermines competitiveness.”

The gap is even clearer in the underlying cost structure. Energy and supply costs in the EU reached €114.8 per MWh ($124), compared with $38.5 in the US and $45.8 in China. For energy-intensive industries, this difference is decisive.

“The price of electricity determines whether it makes sense to keep production in Europe or relocate it elsewhere,” Motuzova says, noting that network charges and taxes further increase the final price.

The role of the carbon market

Branislav Strycek, CEO of Slovenske elektrarne, Slovakia’s largest electricity producer, offers a practical perspective on the pricing mechanism.

“Europe has deliberately made energy more expensive because it has decided to save the world. And yet it produces only 6% of global emissions,” he told Statement.

A key factor, he argues, is the EU Emissions Trading System (ETS). “Allowances are currently around €70 per tonne, and roughly 40% of the electricity price reflects carbon costs. If Europe decided not to pursue this policy, prices would fall immediately. They could be somewhere between €50 and €60 per MWh,” he says.

The pricing mechanism itself also plays a role. “Electricity prices are set by the most expensive power plant in the system,” Strycek explains. This marginal pricing model means that even cheaper sources take on the price of the most expensive generation, typically gas or coal, which also carry carbon costs.

The paradox of high prices

The result is a paradox. Even countries with largely emission-free electricity generation face high prices.

“Even though we in Slovakia do not pay carbon costs in our power plants, we take the price from the market,” Strycek says. Lower production costs do not automatically translate into lower prices for consumers, but into higher margins for producers.

Market integration further complicates the picture. In central Europe, electricity markets are highly interconnected, meaning prices are transmitted across borders depending on supply conditions and grid capacity.

Spain is often cited as an exception, with lower prices driven by a higher share of renewables and weaker interconnections. “It depends on how easily electricity flows between markets. Central Europe is much more interconnected than Spain,” Strycek notes.

A structural dilemma

The system reflects a transitional phase. Europe is reducing its reliance on fossil fuels, but cannot yet fully replace them. “We still need them, but at the same time we are making them more expensive,” Strycek says. This tension between necessity and regulation is ultimately reflected in prices.

The Kompas500 analysis reaches a sobering conclusion. Europe is making progress on decarbonization, but it is doing so in a global environment where other major economies are pursuing different strategies.

“If the global playing field is not levelled, different approaches will translate into different economic outcomes,” Motuzova concludes.

Europe therefore faces a dilemma: how to balance climate ambition with industrial competitiveness.