Energy costs in Germany and Europe: An assessment based on a (total real unit) energy cost accounting framework

Abstract

Affordable energy is one of the objectives of EU's energy policy. This goal has been challenged by many factors inuencing energy prices and costs such as developments in global energy markets, the EU ETS and the promotion of renewables. Analysing energy costs (prices times quantity) instead of prices has the advantage of taking into account quantity adjustments. However, it does not allow for monitoring the burden which energy costs pose on firms. For this purpose, both the European Commission and the Energy Expert Commission of the German Government recommend using real unit energy costs, defined as energy costs as fraction of value added. We develop an input-output based (real unit) energy cost accounting framework and study the trends in Germany and the EU between 1995 and 2011. We find that many of the unveiled developments are not adequately represented in the political debate, especially with regard to indirect costs (via energy embodied in intermediate inputs), which are more diffcult to assess. Indirect energy costs are on the rise, are larger than direct costs in many industries, are increasingly imported and amplify the asymmetric impacts of legal exceptions available to energy-intensive industries.