It's the gas, stupid!

At every energy shock, the same refrain echoes through European capitals: the carbon price is too high. In reality, the carbon price needs to be even more ambitious to restore industrial competitiveness while ensuring our energy security and sovereignty.‍

For several weeks, a coalition of governments and industrial lobbies has led a coordinated offensive against the EU ETS—the European Union’s emissions trading system. The message, already heard during the 2022 Russian gas crisis, is that carbon pricing weighs down European competitiveness. They argue it should be eased, capped, or even suspended.This is both an economic misunderstanding and a strategic error. Europe would pay dearly for falling for it.‍

A faulty diagnosis

‍Carbon pricing is not a determining component of energy prices. These are primarily influenced by raw energy commodity costs and non-carbon taxes. For instance, in 2025, Serbia—outside the ETS and with a fossil-heavy energy mix—recorded some of the highest wholesale electricity prices in Europe. Meanwhile, Germany spent 30 years building a dependency on cheap Russian gas while exiting nuclear power, a move that has cost it hundreds of billions of euros since 2022.‍

High energy prices in Europe are not caused by emissions pricing; they are caused by a structural dependency on imported hydrocarbons. This exposes us to every energy or geopolitical shock and to the whims of our suppliers—be they false allies or true rivals. The cost is both economic and political, as the Trump administration—which supplies 58% of our LNG—regularly reminds us.‍

Emissions pricing is the most effective tool to break this addiction and regain energy security by making investments in decarbonized energy—nuclear, hydro, geothermal, wind, or solar.‍

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A tool for financing industrial competitiveness

‍Since its launch in 2005, the ETS has reduced emissions in covered industrial sectors by 50%. During the same period, the economic value produced by these sectors grew by 71%. More importantly, the system has generated over €250 billion in revenues, mostly returned to Member States. The higher the price, the greater the revenue: in 2025 alone, over €40 billion was generated. This represents a massive funding source for technological innovation and industrial modernization. Unfortunately, Member States have chosen to allocate only 5% of these revenues to such purposes. This is the real problem.‍

Beyond public funding, it serves as a signal to trigger massive corporate investment. It is the only price signal at a continental scale that makes "breakthrough" investments economically rational: electric arc furnaces (like the €1.3 billion project recently funded by ArcelorMittal), industrial heat pumps, green hydrogen, and carbon capture. Without it, no energy transition or industrial modernization decision can be justified. Worse, without it, the investments made by European industrialists over the past 20 years would be heavily penalized.‍

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Resistance is building

‍Against the "rebels," who caused carbon prices to drop by about 20% in a few weeks by creating market uncertainty, resistance is organizing. Hundreds of European industrialists—carmakers, energy producers, steelmakers—as well as a dozen European governments, members of the European Commission, and MEPs, have spoken out in support of the market in recent days. They emphasize the urgent need for stability to continue financing a generational transition.‍

Carbon pricing is not an obstacle to European competitiveness; it is its prerequisite. It makes investments in key sectors and technologies profitable so that Europe remains relevant in the coming decades. It enables massive electrification for both households and industries. And it organizes the withdrawal from hydrocarbon dependency, allowing for the financing of sovereign, carbon-free, and affordable energy.‍

A price still too low‍

What no one dares to say in the current debate is that the price is too low—not too high.At €65-70 per tonne, the European carbon price is insufficient to decarbonize the "hard-to-abate" sectors—steel, cement, heavy chemicals. Studies converge: we would need €100 to €120 per tonne by the end of the decade for breakthrough technologies to be fully viable without massive public subsidies.

Furthermore, the cost of inaction—on long-term competitiveness, public finances, and households—is far greater than the momentary cost of the transition.This is not an ideological stance. It is investment arithmetic.‍

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The hour of choice‍

Europe has already made strategic mistakes that cost it dearly.Slowing down nuclear power starting in the 1990s led to two decades of gas dependency. We are only just beginning to admit it. In the early 2000s, while the bloc had a massive lead in PV technologies, supporting demand rather than supply favored Chinese manufacturers and destroyed the European solar industry. We are struggling to recover. A final example: the ad hoc intervention on allowance supply in 2022, under energy crisis pressure, weakened the price signal at the very moment it could have accelerated the transition.Every time Europe backed down in the face of short-term constraints, it mortgaged its long-term sovereignty and competitiveness.‍

The choice is simple. We can optimize for the short term: Europe gives in to the rebels, softens the carbon market, eases a few quarters of industrial results, prolongs its dependency on imported fossils, surrenders low-carbon technology leadership to China, and finds itself in ten years exactly where it is today. Or, we hold the line, embrace a strong and rising carbon price as a condition for sovereign reindustrialization, and finally build a Europe that is no longer tossed about by every geopolitical shock on the gas markets.A high carbon price is not what threatens European competitiveness. It is what makes it possible.

The problem is the gas, stupid.

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