Developing a proper growth strategy in the EU would not necessarily protect Europe fully from the US protectionist temptations, but it could be a more fruitful strategy, down the line, than merely engaging in retaliatory action, even if it is carefully targeted.

'The energy transition could be a key area for such EU growth strategy. This may sound surprising given the current gloom on climate change mitigation,' Moëc writes in his weekly Macrocast. 'But we think it is worth re-stating that decarbonising is in the economic interest of Europe when one considers the massive income transfers to the rest of the world from the net imports of fossil fuels – notably to the US – and the long-term cost to investment of the volatility which they entail. Further progress on electrification would reduce Europe’s fossil fuel bill. This would come with a daunting investment effort, but rather than seeing it purely as a cost, we should balance it against the tangible economic benefits.'

Moëc names four reason for why green growth could be key for the EU region’s growth:

• The EU can still significantly contribute to climate change mitigation despite its current low share in global emissions (6%) by using access to its market to incentivise exporters to the EU to move to a cleaner growth model themselves (this is the basis for the border carbon tax).
• Moving further down the decarbonation path is squarely in Europe’s economic interest. […] Even before the 2022 energy shock, EU countries have been routinely paying to the rest of the world the equivalent of 2% to 3% of their GDP for their net imports of coal, gas, and oil. “These funds could be better used by the EU to invest in infrastructure, innovation, education, and other areas, which are essential for developed economies to keep their competitive edge in global markets,” as Mario Draghi puts it in his recent report.
• Price gyrations inherent to fossil fuels entail a cost to potential growth in the EU. To make this more intuitive: the immediate impact of the rise in gas prices in 2022 was a short-term decline in consumers’ purchasing power – partly mitigated by additional government spending generating more debt issuance – but also triggered a “wait and see” attitude on investment from businesses, especially the most energy-intensive ones, which will leave scars on Europe’s productive capacity for the future.
• Volatility in fossil fuel prices could ultimately rise, rather than fall, with the US becoming an ever-larger producer. Indeed, the US tolerance to disruptions in supply from the Persian Gulf has naturally risen as a consequence of this growing energy autonomy. Irrespective of ideological choices, this could contribute to a shift in Washington DC on how escalation risks in the Middle East should be assessed. Benign neglect cannot be fully warranted, because the price of oil is set on the global stage, and US consumers would still be immediately affected – and consumers are also voters who are more numerous than domestic producers – but it still changes the terms of the calculus. Separately, the EU’s growing dependence on the US for its gas supply as replacement to Russian sources is a vulnerability in the looming battle on international trade.