Energy prices are rising sharply, but no official metric tracks their economic impact. Europe faces a growing energy bill, while renewables and electrification offer potential solutions.
Energy costs rise sharply
Energy prices are expected to increase by 25 percent this year, but no official measure exists to track how this affects economies that import energy. This lack of a clear indicator makes it difficult to assess the full economic impact of rising energy costs on importing countries.Global growth projections revised
The International Monetary Fund (IMF) predicts 2.3 percent growth for the United States and 0.9 percent for the eurozone, down from earlier estimates. It attributes the slowdown to weaker economic momentum, higher energy costs, and reduced consumer confidence. The United Kingdom and Japan are projected to grow at 1 percent and 0.6 percent respectively.Energy geography shapes future growth
According to the IMF, the future of economic growth will largely depend on energy availability. Countries that export energy benefit from better trade terms, while those that import face greater economic strain unless they invest in technology to offset the costs.Energy prices outpace economic growth
The World Bank forecasts a 24 percent rise in energy prices in 2026, the highest since the invasion of Ukraine in 2022. This increase is far outpacing the expected 3 percent real global growth and 4.7 percent inflation, effectively shifting economic value from industrialized economies to energy-producing ones.Energy efficiency becomes a key metric
The Statistical Review of World Energy by the Energy Institute shows that global energy supply increased by 1.7 percent in 2025, while global economic growth was 3.3 percent. This means that each unit of economic growth required an additional 0.5 percent in energy, highlighting the need for more efficient energy use.Energy costs as a share of GDP
Research from the University of Texas shows that energy expenditures as a share of GDP have fluctuated significantly over time, peaking during major economic downturns. Understanding this share is crucial for predicting economic cycles, but no official, updated statistic currently tracks it.Energy prices and economic resilience
The OECD found that energy costs have risen during every recession in the region since 1970, except during the pandemic. However, no official quarterly data exists to track this trend, and existing records stop in 2010. This gap in data limits the ability to anticipate and respond to economic shocks.Europe’s energy vulnerability
Europe is particularly exposed to energy price shocks due to its heavy reliance on imported fossil fuels. In 2024, fossil fuels accounted for 58 percent of the EU’s primary energy needs, compared to 24 percent in China and 37 percent in India. This dependence has not decreased despite shifts in energy sources.Renewables offset some energy costs
Despite rising energy prices, the growth of renewable energy has helped reduce reliance on fossil fuels. In 2025, solar and wind power surpassed coal in the global electricity mix for the first time, with solar alone adding 647 gigawatts of capacity. This shift has helped stabilize energy production and reduce the need for imported fuels.Europe’s progress in renewables
In 2025, wind and solar power supplied 30 percent of the EU’s electricity, outpacing all fossil fuel sources for the first time. Coal’s share has dropped to a historical low of 9.2 percent, while renewables now account for nearly half of the electricity mix.Energy costs remain high in other sectors
Despite progress in the electricity sector, energy costs remain high in other areas. The EU’s transport sector relies heavily on imported fossil fuels, and only 22 percent of its energy use is electrified. This means that much of the economy remains vulnerable to energy price shocks.Three key priorities for Europe
Europe must accelerate the deployment of renewables, unlock the electrification of transport, heating, and industry, and publish a clear indicator of energy expenditures as a share of GDP. These steps are essential to reduce economic vulnerability and achieve greater energy independence.Energy transition as an economic policy
The energy transition is not just a climate issue but also a matter of economic sovereignty. As long as Europe remains dependent on imported energy, its economic growth will remain tied to geopolitical factors. Measuring this dependence is the first step toward reducing it.
