By: Cédric Duprez, Gert Bijnens, John Hutchinson
The recent energy price shock ate into the profit margins of most firms, across all sectors. Belgian data reveal that many regained profitability when prices fell back, but energy-intensive firms didn't recover in the same way. This is unfortunate, not least for Europe's ability to meet its climate objectives, as low profits make it harder for firms to finance green investments. Energy-intensive firms are also preparing for the imminent increase in carbon emission costs following the full implementation of the European Union (EU) Emissions Trading System (ETS). For the most carbon-intensive firms, this financial pressure limits their ability to self-finance. Government support is a potential alternative. The European Commission has also proposed targeted assistance to energy-intensive sectors for the transition.