Europe may be heading into its biggest fossil fuel crisis since the 1970s. Once again, fossil supply shocks beyond our borders are driving up prices, exposing strategic dependencies and hitting households and businesses alike. However, this time we have the solutions to fight the crisis and protect our citizens and industry.
This was made clear by European Commission President Ursula von der Leyen in her recent remarks on the situation in the Middle East. Her message was unmistakable: Europe needs to continue investing in renewables, grids, storage, and electrification and become energy independent. And fast. With public budgets under strain, private investment will be essential.
However, a growing contradiction sits at the heart of Europe’s policy framework. While energy policy is actively calling for private investment in renewables to bolster competitiveness, parts of environmental policy risk quietly pushing it away.
Those private investments will stall if regulation is unclear.
Why do companies invest in renewables?
Across Europe, companies in sectors ranging from manufacturing to consumer goods are signing long-term renewable electricity contracts – power purchase agreements known as corporate PPAs. These are not accounting tricks. They are long-term commitments that help finance new solar and wind projects by purchasing their clean power, directly supporting the move to home-grown energy. Around 60 GW of wind and solar capacity in Europe has been financed as result of these contracts.
Companies sign PPAs for two very practical reasons. First, to secure stable and affordable energy. In a system still exposed to fossil price shocks, long-term energy procurement provides predictable prices and resilience. Second, to reduce the carbon footprint of their operations, and therefore products, by using renewable energy, making them more attractive and competitive in markets where customers, investors, and regulators increasingly demand lower emissions.
These two motivations go hand in hand. Remove one, and investment becomes less attractive – disastrous when private investment is desperately needed in Europe.
This is where the policy disconnect becomes critical.
Don’t penalise early supporters of renewables
Several upcoming environmental EU rules will determine the details of how ‘green’ a product can be considered in Europe. Yet under draft carbon calculations within the Batteries Regulation, companies may not be allowed to include the renewable electricity they purchase for running their factories to demonstrate the reduced carbon footprint of their products.
In plain terms, a car manufacturer could invest in clean power, help bring new renewable capacity onto the grid, whilst benefiting from predictable energy costs, yet still be told that this effort does not count when the carbon footprint of their cars is assessed. This renders potentially millions of euros of investment in clean power, over a decade or more, worthless.
Companies that invested early in renewable electricity, often at higher cost and higher risk, and continue to support renewable energy deployment would see little recognition for their effort. Competitors that delayed action face no disadvantage. That is not environmental rigour. It is a distortion of incentives and undermining competitiveness.
By excluding PPAs in carbon accounting legislation, one arm of EU rules is trying to accelerate private capital into clean energy via PPAs, while the other actively undermines it.
Companies like steel producer Salzgitter, glass and metals producer Ardagh Group, and chemicals producer Borealis, are amongst the top purchasers of renewable energy. By not recognising this, European champions would be penalised for their investments in renewables, and we remove one of the main incentives to invest.
Companies want to be part of the solution. They are calling on policymakers to ensure that environmental methodologies reflect how decarbonisation actually happens (as demonstrated by these three joint letters). They are not asking for weaker standards or shortcuts. They are asking for coherence between climate ambition and economic reality, and for real emissions-reducing investments to be recognised as such.
At a time when Europe needs every euro of private capital to strengthen its energy system, undermining one of the most effective investment channels makes little sense. Industrial decarbonisation does not happen on paper. It happens through long-term investment decisions. When companies choose clean electricity over fossil-based power, they help scale the infrastructure Europe and the world needs for both energy security and climate neutrality.
Energy policy and environmental policy must align
Carbon rules that ignore private sector action and investment risk breaking the link between ambition and action.
That requires one simple thing from policymakers: alignment.
Energy policy and environmental policy must pull in the same direction. If Europe wants companies across the economy to help finance its clean energy future, their investments must be recognised, not discounted.
The decision lies with European leaders. They can allow conflicting signals to slow down one of Europe’s strongest tools for resilience. Or they can send a clear and credible message that rewards action, mobilises capital, and accelerates the transition.
At a moment of crisis, clarity is not optional. It is essential.
This content was authored by SolarPower Europe & the RE-Source Platform.
