##s, and europe regulates. ” speech ep130224 clean. docx 2. • this might be unfair, but there is certainly a widespread impression that this is, at least partly, true. and indeed, data do not look great. o data on public and private investment, as well as gdp per capita, shows that despite our many plans, the ea has trailed the us. o looking at a more granular level, we seem to be stuck between the us ( with its digital champions and cheap energy ) and china ( with its significant cost advantages on the very green technologies we wanted to foster : solar panels, evs, and even windmills. ) ; all this with no obvious positioning between the two. o on the energy front, us natural gas is at 10€ / mwh. before the war in ukraine, we were at around 20€ / mwh. the new normal for us is now between 30 - 50€ / mwh … to which we must add an additional 20 - 30€ / mwh for carbon capture and / or blue hydrogen. that is 5 to 8 times higher than in the us. so, yes, one might ask : is there a future for eu energy intensive firms? • clearly, the challenges presently facing the eu are truly transformative. they require extensive reallocation of resources across sectors, the rapid adoption of new technologies, and disruptive innovations. all three involve ample funding and significant risk taking. • if history is any guide, though, europe ’ s economy is bad at reallocations ( the old sclerosis story ) and slower than its competitors at embracing new technologies. we are by now used to the fact that the digital giants of this world are all american ( or chinese ). if anything, the fact that tesla was born in the us came as a shock. but then again, elon musk has a way of doing things that is not quite european. • what i am saying here is that, to some extent, what you see in europe may be the result of our deep preferences. by that i mean a greater risk aversion than our competitors. and maybe also a stronger preference for leisure? as european elections loom, i detect a fear of greening, a fear of war, a fear of china, and a fear of demographics fuelled by the aging - migration nexus. • is europe doomed then? i don ’ t believe so, but the path to our

collective wealth should be manageable. o but we should still do our homework on the “ who will pay? ” part of the question. this requires a granular and realistic understanding of the costs per sector, but also of other political and technical constraints. think about gas boilers in germany... as i am about to close, i must mention the elephant in the room : geopolitics. everyone understands that global warming is … well, global ; and that the eu emits only a small fraction of greenhouse gas. so, the question of who will pay is as much about the different groups in our societies, as it is about other countries around the world, especially the us and china. in the old world of rules - based international relations, a reasonable hope would have been that international policy coordination could provide a satisfactory solution. however, the recent cops have dashed my hopes. i will not risk my reputation anticipating what the outcome of the strategic interactions between the 3 big players might be. i will only share a few worries and unanswered questions. • first, i am worried about the faith one seems to be putting in the carbon border adjustment mechanism and in industrial policies of all breeds. as i already mentioned, energy prices in europe put us at a serious disadvantage compared to the us, which have access to cheap energy, do not intend to tax carbon, and have opted to subsidize clean energy. while we could expect a cheaper euro to correct for part of europe ’ s competitiveness gap with the us, a weak currency is not a permanent solution. • second, although europe probably never was the most innovative economy, it was good at incremental technological progress, but much less at the disruptive type, which is becoming more important. besides, looking beyond quantum, superior quality is often associated with our continent : the quality of the products we make, but more broadly, the better quality of life and greater social equity we achieve given a lower gdp per capita than the us. i would nevertheless caution against the sense of complacency that might come out of this line of thinking. permanently trailing our competitors will ultimately undermine our welfare. that will not be acceptable to the people. • third, in the great power game now underway, europe ’ s traditional foreign policy doctrine comes under stress. while eu countries operate well in the safe environment of rules - based international relations cemented by international organizations and strong transatlantic ties, it seems to be less effective in establishing