Assessing EU's direct and indirect energy dependencies

Europe is highly dependent on fossil fuels, and 97% of the EU’s oil consumption is imported as well as 90% of its fossil gas consumption. How can Europe address this issue, especially at a time of geopolitical tensions that have a significant impact on energy and the economy?

Assessing EU’s direct and indirect energy dependencies is a topic of STOA workshop for which Théo Wittersheim, Research engineer at the Shift Project, and Ugnė Keliauskaitė, Research analyst in energy and climate at Bruegel, share their views.

The French think tank the Shift Project has developed a new methodology to assess energy dependencies that distinguishes itself from previous studies that often remained limited to monetary flows, direct imports, or domestic production (mostly electricity), which accounts for only around 20% of the EU’s final direct and indirect energy consumption. This new tool considers the hidden energy dependency, called “energy exposure”:

What is hidden energy dependency?

Théo Wittersheim from The Shift Project explains: “Our methodology is based on two core principles: analysing our dependencies from the perspective of physical flows (for instance, barrels of oil, tonnes of steel, etc.) and monitoring these flows across entire value chains. In this way, we do not stop at the final product crossing a border or reaching a consumer; instead, we map every step in the value chain—from extraction, transformation and transport to manufacturing, trade and final use.” – Read the full interview with Théo Wittersheim

This approach allows a better understanding of the true level of the European Union’s dependencies and the associated risks, particularly those of a geopolitical nature.

”Our metric, energy exposure, is similar to a carbon footprint, but it differs from it in two major ways”. Théo Wittersheim adds: “First, it looks at value chains from an energy perspective, not a carbon perspective. Second, energy exposure is calculated using a novel hybrid energy model which not only relies on input–output tables, but also on energy balance tables and trade data. This makes it possible to create a macro-level map of global energy production and consumption, showing energy suppliers, critical sectors, and which strategic uses are most exposed.”

This tool calculates the European Union’s “energy exposure”, which is estimated at around 14,500 TWh for 2022 (the most recent year available in data). When broken down into three components, this total comprises: domestically produced energy (23%, of which 24% is fossil fuels), directly imported energy (54%, of which 98% is fossil fuels), and energy embedded in imported goods and services (23%, of which 81% is fossil fuels).

“In a context where Euroeffects andighly dependent on mature oil and gas producers, identifying where our exposure truly lies helps us to better target vulnerabilities, anticipate second-order effects, and avoid policies that merely shift risk rather than reduce it. Some sectors may not consume large quantities of oil or gas themselves but may nevertheless be heavily reliant on other sectors that are, in turn, heavily dependent on them,” according to Théo Wittersheim.

A major challenge is to highlight the value chain and assess the potential domino effect. Taking oil as an example, it is used in industrial applications such as the chemical sector (for plastics, first and foremost), as well as outside industry, with its primary use being to power vehicles. In the first case, large-scale substitution is not easy to achieve: the circular economy will have an important role to play, as will reducing demand. In the latter case, the risk is that an oil shortage could disrupt transport systems that bring food and goods to cities and materials to industrial areas, which cannot function without them.

Assessing the energy dependencies linked to the different needs of a population, an economy or a country is essential to determine which ones must be secured first against future fossil fuel-related risks, and at what cost, Wittersheim explains.

For the Shift Project, one of the most surprising findings on energy exposure is that the European Union has direct leverage over most of its dependencies, as approximately 80% of its energy exposure is tied to its infrastructure (buildings, industries, and vehicles), allowing to plan and prioritise decarbonisation in accordance with its own interests. Foreign industries, mainly located in Asia, account for the remaining 20% of the EU’s energy exposure.

In addition, an emerging trend observed by the Shift Project is the slow decrease in the energy content of the imported goods and services from China, which contradicts the observation that the monetary value of imports from China keeps growing. This may be due to increased efficiency of its industry and its focus on high-end products.

However, measuring energy exposure at EU level alone is not sufficient to fully understand dependencies. “Energy dependency is unequal among the Member States, and if some European countries remain highly dependent on oil or gas imports, this will compromise the decarbonization of other countries and of the European Union as a whole. The European market will remain exposed to significant energy risks, which could lead to imported inflation or supply chain disruptions for all member countries.” On this basis, Wittersheim suggests extending the exercise and replicating it at national level.

What would be the best strategy, or the key areas for improvement, for Europe to reduce its vulnerability to energy crises, as experienced with Russia and Iran?

According to Ugnė Keliauskaitė from the think tank Bruegel, fossil fuel dependence in Europe means remaining vulnerable to external pressure and reliant on gas suppliers. Théo Wittersheim from the Shift Project adds that diversifying suppliers of oil and gas does not necessarily mean securing supply, as we rely mostly on mature producers, which creates a twofold pressure: geopolitical and geological.

Ugnė Keliauskaitė from the think tank Bruegel argues that: “To avoid repeating these vulnerabilities, Europe must prioritise the transition to a system based on domestic generation. In the EU’s case, this means electrification powered by renewable energy.”
Read the full interview with Ugnė Keliauskaitė

Keliauskaitė also notes that “the EU has made real progress on the supply side: the share of renewables in electricity generation rose from 37% in 2021 to 48% in 2025. What is needed is targeted measures that incentivise electrification. There is a range of solutions that can be implemented, mostly through financial instruments, and the impacts are expected to be positive for countries that implement these measures.”

One example mentioned by Keliauskaitė is that “Spain has reduced the share of time that gas sets prices from 75% in 2019 to just 15% by 2026 and faced structurally lower electricity prices during the Iran shock than Italy, where gas sets prices 90% of the time. Cheap, stable electricity is a competitive advantage for industry.”

Wittersheim also agrees on the importance of electrification: “In the case of France, electrification—of buildings, transport and industry—is one of the most essential levers for reducing dependence on fossil fuels, alongside efficiency and sufficiency measures. This is expected to be important for most, if not all, EU Member States.”

Decarbonisation and the deployment of renewable energy appear to offer a solution to Europe’s energy dependencies. However, could they lead the European Union towards a new form of dependency?

According to Ugnė Keliauskaitė, fossil fuel consumption inevitably entails dependence on non-EU countries, whereas building a renewable-based system enables domestic energy production and, therefore, greater independence: “With fossil fuels, the dependency is permanent and operational. That is the leverage Russia exploited in 2022 and what the Iran conflict is now threatening again. With clean technology, the dependency is largely in the construction phase. Once a solar panel is installed, the fuel is free and entirely domestic. Nobody can sanction European sunlight. That is a structurally different and more manageable vulnerability. In the clean technology supply chain, there is still an opportunity to establish a strong domestic manufacturing base across several sectors. It is possible to run a system dominated by renewables, as several European countries, such as Denmark—with more than 90% of its electricity generation from wind and solar—show,” says Keliauskaitė.

On feasibility in terms of infrastructure, she qualifies her position by outlining several prerequisites. First, grid infrastructure and cross-border interconnections must keep pace with generation capacity. Second, demand-side flexibility must become a systemic feature: smart EV chargers, heat pumps and battery storage can shift consumption to match supply, reducing the peaks and troughs that make renewable-dominated systems hard to operate. Third, storage and back-up generation become much more important. Finally, a renewable-dominated system implies a new industrial geography: a system built on cheap renewable electricity rewards proximity to generation. Energy-intensive industries should increasingly locate where renewable energy is abundant and inexpensive.

Wittersheim also agrees that electrification should not be questioned: reducing our dependence on oil and gas is by far the main priority, given that we have only three months of strategic stock and that none of the alternatives will lead to a comparable level of dependence. However, he offers a nuanced view of electrification, noting that it does not automatically deliver independence. The amount of electricity that can be generated in Europe by 2050 will not be unlimited, and new material dependencies could emerge. Greater circularity and sufficiency could help reduce these.

The Shift Project has examined copper in one of its latest studies. According to Wittersheim, decarbonisation requires increasing quantities of copper, whether for electricity generation or for the electrification of end uses. He extends the point beyond copper: “This is expected to be true for many critical materials, with different stakes for each of them, depending on the technologies they are required for. A more systematic view is required to understand the role of each material. The challenge is not simply a shift from fossil to material dependency, but the need to anticipate and manage a new set of physical constraints across both energy and material systems.”

Finally, new energy dependencies may emerge despite the decarbonisation of Europe, for instance through new trade agreements, unless a wider perspective is systematised. Trade agreements with countries heavily dependent on fossil fuels should be designed and negotiated with climate considerations in mind; likewise, fossil fuel imports should be aligned with decarbonisation targets. Wittersheim further notes that trade agreements that lead to an increase in Europe’s exports should be consistent with the resulting energy consumption, to ensure that they do not create new energy dependencies.