Wirtschaftswunder, also known as the Miracle on the Rhine, is a term coined by historians to refer to the post-war economic boom that occurred in West Germany fuelled by the Ruhr’s coal. Back then affordable and secure energy was pivotal for the much-needed post-war industrial recovery, as energy needs for industrial growth cannot adequately be met without stable energy supply that comes from big rotating mechanisms, like steam, gas, or even water turbines. This principle of growth is still incompatible with the European turn towards wind and solar energy which are indeed cleaner forms of energy but are nonetheless stochastic, in a sense that they are unpredictable. Stable and cheap energy supplies enabled industrial expansion. Recognizing the importance of such stability, the European Coal and Steel Community (ECSC) was established in 1951 to ensure a rapid post-war recovery by coordinating coal and steel production among member nations. This cooperative framework laid the groundwork for industrial revival and later served as a precursor to the European Union.

Today, however, the shift to renewables, like wind and solar, presents challenges. At the same time nuclear energy, while capable of providing a consistent and reliable energy supply, faces significant drawbacks, including high costs, long development timelines, and public opposition due to safety concerns and the challenges of managing radioactive waste.  These challenges are recognized by the EU itself, which has implemented measures like the REPowerEU plan and the Clean Energy Package to strengthen infrastructure, improve energy storage solutions, and address grid stability issues as part of the broader green transition strategy. Such measures are insufficient to bear the load as even with advancements in energy storage, achieving consistent supply from renewables requires massive installed capacity and infrastructure investment.

Is it really a matter of renewables?

While some trace the problem of effective transition to the recent stagnation of investment in renewables, its root lies in the stochastic nature and volatility of renewable energy sources, which makes energy prices very dynamic. Consequently, as the share of renewables in the European energy mix grows and energy storage technologies keep falling behind, industrial businesses, which have huge electricity demands will keep offshoring their production to countries outside the Union with safer and predictable energy and thus business environments. In most cases these chosen countries energy mixtures are far “dirtier”-not only-with high levels of coal, oil and gas, but also with old power plants with obsolete pollution abatement technologies or none at all. Paradoxically, these shifts don’t just result in higher global emissions, but equally in a deterioration of the European balance of trade. 

Geopolitics meets Europe’s energy sector

The impact of international relations on Europe’s energy sector became starkly evident following European sanctions on Russia and the sabotage of the Nord Stream 2 pipeline. The affordable natural gas that once formed the backbone of Europe’s energy system ceased flowing through pipelines, forcing Europe to turn to the global LNG market. This shift saw European nations paying 3–5 times more for U.S. LNG compared to prices within the U.S. itself, which subsequently affected the electricity prices. Despite this, European countries continued to pursue their pre-war transition plan with little adjustment, overlooking the fact that renewable technology supply chains are overwhelmingly controlled by China. Indeed, China accounts for approximately 80% of global solar manufacturing and dominates the wind supply chain, providing between 70–80% of the core components and refining almost 100% of the critical minerals required to build turbines. 

The Balkans Paradox

An exemplary paradox that European policy has generated is the Greek government’s selling of coal to North Macedonia, a country that doesn’t apply carbon pricing (a policy mechanism that assigns a monetary pecuniary to carbon emissions, either through a direct tax on fossil fuels or by establishing a cap-and-trade system, to incentivize reductions in greenhouse gas emissions and transition to cleaner energy sources). The Greek coal, excavated from Western Macedonia’s mines, is being transported 30 km north and burned in REK Bitola and REK Oslomej coal-fired power plants, just off the European Union’s borders. There cheap electricity is produced and then sold back to Greece, when wind and solar energy production is reducing. Simultaneously, PPC, Greece’s largest power company, owns several operational coal-fired units, including its flagship Ptolemaida5 unit. This unit got commissioned in 2023, costed 1.5 billion Euros, is far more efficient and thus less pollutant than the old power plants in North Macedonia and now faces premature decommissioning in 2028, or even as early as 2026, under green policies.

A historical parallel from an uncertain period

Surprisingly, similar political initiatives can be traced back in European history. Going back to the Ruhr valley and the interwar period, following France’s victory in World War I, Paris reclaimed the iron-rich Lorraine fields from the former German-controlled Alsace-Lorraine province. This, combined with coal from the Ruhr and Saar mines—ceded to France as part of German reparations—was expected to enable the production of low-cost steel, the most sought-for good of the era—the so-called “metal in the heart of the modern world” —comparable to energy in modern times. However, the French strategy failed, partly due to opposition from unexpected voices, such as British economist John Maynard Keynes. Keynes criticized the creation of “economic frontiers,” arguing that separating coal and iron resources would hinder industrial efficiency and waste human labor on unnecessary transportation driven by political motives rather than industrial logic. This critique resonates when analyzing the impractical Greek coal exports to North Macedonia through Keynes’ lens. The EU’s policy to impose a hybrid of a planned economy model in the energy sector appears to contradict its own historical lessons and the principles underpinning the Schuman Plan.

The “nightmare of the Rhine”

Today, it’s Germany, the EU’s industrial powerhouse, who is bearing the brunt of these policies. Starting in 2021, Germany succumbed to one of the lowest real GDP growths in the EU, while full year GDP Growth is expected to reach -0.20 percent by the end of 2024 according to Trading Economics global macro models and analysts’ expectations, indicating a recession. This is upon the backdrop of iconic companies such as Siemens, Volkswagen, and BASF who are now shifting operations to regions with cheaper energy and labor. This rapid deindustrialization of Germany’s economy is a direct outcome of European energy policy, even if partly.

Markus Krebber, CEO of Germany’s multinational energy company RWE, recently warned about the precarious state of the German energy grid. During a November dark doldrum—a period of minimal wind and solar generation—energy prices spiked tenfold, to around 800 euros per MWh. A similar event in January, when demand is on average 10 GW higher than November, could trigger blackouts, highlighting the need for diversified energy sources. The move to natural gas as an intermediary energy source left Germany vulnerable after the Ukraine conflict disrupted supplies of cheap Russian gas. This dependency revealed the geopolitical risks of transitioning away from coal, a historically native energy source for Europe, without fully developing renewable alternatives.

The societal effects of deindustrialization

This vicious cycle is depriving European nations of a skilled workforce, including engineers and scientists, vital for sustaining industrial innovation. As industries relocate to countries with lower labor costs and less stringent regulations, many experienced professionals—including engineers, technicians, and skilled tradespeople—find themselves displaced or compelled to seek opportunities elsewhere. This migration not only reduces the pool of talent available in Europe but also creates a gap in essential skills that are vital for maintaining competitive industries. Simultaneously, it fosters societal changes, leading to an increase in what anthropologist David Graeber, in his 2018 book Bullshit Jobs, described as unnecessary, unfulfilling employment that offers little societal value. As industries relocate to regions with lower costs and fewer regulatory constraints, Europe risks becoming a hub for administrative redundancy, stifling creativity and progress. This situation undermines Europe’s position in global innovation, leaving it at risk of falling behind in technological advancements. Graeber’s critique underscores the broader inefficiencies of misdirected labor, making the European energy crisis and industrial stagnation symptoms of a deeper systemic failure. That threatens especially the German industry related social model, which is based on close relations between unions and employers and has proven to be a success for many years, resulting to the production of technologically advanced goods with a high global demand. 

Future Prospects and Recommendations

Climate crisis is a global problem and should be faced as such. A sudden and “violent” green transformation in Europe could backfire, harming economies and indirectly increasing global emissions as industries relocate to less-regulated jurisdictions. Lessons can be drawn from the U.S. Inflation Reduction Act, which fosters green industrial growth while maintaining competitiveness.

Furthermore, Europe should develop its energy policies under a geopolitical lens, prioritizing security, resilience, and strategic influence, making the Union a fertile ground for industry. As the world stands on the brink of the Fourth Industrial Revolution, propelled by advances in artificial intelligence, it must ensure the availability of affordable and reliable electricity to power the backbone of this transformation—large, energy-intensive data centers. The outsourcing of such critical infrastructure risks not only economic competitiveness but also national security, as AI tools become increasingly embedded in the operations of corporations, financial institutions, and public services. Failing to retain this industry could exacerbate vulnerabilities to cyber threats and compromise Europe’s technological sovereignty.

While the Green Deal envisions breakthroughs like green hydrogen-meaning hydrogen produced by electrolysis of water, using excess renewables production-as a mean of energy storage and utilization of existing gas-fired power plants and networks, these technologies remain nascent and that is where most of public funding should be oriented towards. If Europe’s industrial base shrinks irreversibly before these innovations mature, the benefits of a net-zero future may come at too great a cost to even achieve its desired goal. 

To mitigate industrial decline resulting from the green transition, the EU has implemented measures such as the Carbon Border Adjustment Mechanism (CBAM), which imposes a carbon tax on imported goods, including those from Chinese producers and European offshored companies, to discourage offshoring. While these measures may be considered a step in the right direction, they are arguably not enough to address the deeper systemic issues at play.

Conclusion

The European Union’s unwavering commitment to a net-zero future, estimated by BloombergNEF to require over €32 trillion by 2050, risks alienating its citizens due to the opaque decision-making processes. Meanwhile, the new 2024-2029 European Commission seems to have been formed using predominantly political criteria, leaving small space for optimism that good initiatives and voices from the industrial and academic world are not going to get lost in the labyrinthine bureaucracy of Brussels and consulting companies’ drawers and expire before being implemented. Outsourcing emissions to less-regulated regions undermines both environmental and economic goals. Achieving true sustainability requires balancing ambition with pragmatism to ensure that industry and ecology can thrive together by addressing further societal issues like overconsumption and efficiency, as the cheapest and more sustainable energy is the one not consumed.