© 2022 IAI ISSN 2532-6570 IAI COMMENTARIES 22 | 64 - DECEMBER 2022 1 Pier Paolo Raimondi is Research Fellow in the Energy, Climate and Resources Programme at the Istituto Afari Internazionali (IAI) and PhD candidate at the Università Cattolica del Sacro Cuore, Milan. Europe is in the midst of a profound and complex energy crisis. This is not limited to the gas sector as a result of Russia’s invasion of Ukraine but involves all energy sources. French nuclear generation, for example, has fallen to a thirty-year low over the past year due to maintenance works and corrosion. 1 Due to extreme heat over summer, unprecedented drought has reduced hydropower generation as well as the possibility to import coal by river. 2 Oil has not been immune to turbulences either. The EU embargo on Russian crude oil fnally began on 5 December 2022, coupled with a price cap at 60 US dollars/barrel generating uncertainty over future supply and 1 “Explainer: Why Nuclear-Powered France Faces Power Outrage Risks”, in Reuters, 9 December 2022, https://www.reuters.com/ business/energy/why-nuclear-powered-france- faces-power-outage-risks-2022-12-09. 2 William Wilkes, Jack Wittels and Irina Vilcu, “Historic Drought Threatens to Cripple European Trade”, in Bloomberg, 10 August 2022, https://www.bloomberg.com/news/ features/2022-08-10/europe-s-low-water-levels- threaten-rhine-river-hit-80b-trade-lifeline. prices. In February 2023, the second step of the embargo, on refned products, will kick in, with diesel potentially becoming the next chapter of the European energy crisis. 3 So far, Europeans have coped quite successfully with these challenging developments. As far as the gas sector is concerned, they have managed to refll their gas storage, reduce Russian energy imports and attract liquifed natural gas (LNG) cargoes as well as encourage demand reduction/ destruction. However, all of this was possible at an extremely high cost (not only for Europeans) 4 and also thanks to fortunate (yet precarious) 3 Tom Wilson, “IEA Warns Surging Diesel Prices Risk Worsening European Energy Crisis”, in Financial Times, 15 November 2022, https:// www.ft.com/content/e6984b1f-8ee0-4fc7-a1ed- f7bc162a01f. 4 Shotaro Tani and Benjamin Parkin, “Europe’s Appetite for LNG Leaves Developing Nations Starved of Gas”, in Financial Times, 23 September 2022, https://www.ft.com/content/752b1285- 3174-4cf1-83c0-b1151888bf4e. Walking out of the Woods: EU Industrial Policy between the Energy Crisis and Decarbonisation by Pier Paolo Raimondi