Europe's energy crisis and US protectionism: Reindustrialization in jeopardy? - The Fabrique's Notes

Following on from the Working Paper 'Industrial jobs threatened by the energy crisis, border carbon adjustment mechanism and Inflation Reduction Act: an estimate' published in April 2023 in collaboration with Oliver Wyman, this Note provides additional analysis and refines the results of the estimate of the volume of industrial jobs threatened by three factors: persistently high energy prices, the forthcoming introduction of the border carbon adjustment mechanism (BCAM - and the associated abolition of free CO₂ emission allowances) and the introduction of attractive business incentives in the USA under the Inflation Reduction Act (IRA). These estimates are based on simple assumptions: doubling of electricity and gas prices from their 2019 levels, and immediate introduction of the BCAM with a price per ton of CO₂ of Euros 100. A series of interviews with representatives of the main industrial sectors concerned completes the work, and sheds light on numerous feedbacks from the field. This Note shows that the sustained rise in energy prices is by far the biggest threat to our industry. Compared to a reference year (2019), a doubling of electricity and gas prices puts up to 116,000 industrial jobs at risk in France. This is four times greater than the parallel impact of the disappearance of free allowances following the introduction of the BCAM (almost 28,000 additional jobs threatened). For its part, the IRA makes these two threats even more tangible for a few high-carbon sectors, but is not likely to add any further risk. This initial result is largely confirmed by our interviews with industrial sectors. This work also enables us to identify the respective scale of the risks currently weighing on the various French industrial sectors, which everyone agrees play an indispensable role in restoring economic sovereignty, and which are undoubtedly greatly weakened. More specifically, this study reveals that metallurgy is currently the most affected industry in France. A doubling of electricity and gas prices, coupled with the immediate introduction of the BCAM, would threaten almost 27% of jobs in this sector (i.e. 18,000 jobs). Of all the industrial sectors studied, this would be by far the most acute exposure to the risks studied, followed by the paper and cardboard industry (20% of jobs threatened) and the chemical industry (15% of jobs in the sector threatened)