On 26 February 2025 the European Commission published its Affordable Energy Action Plan as a central part of the Clean Industrial Deal. The plan sets out short-term measures to lower energy costs for households, businesses and industry, alongside structural reforms intended to make the system more resilient to future price shocks. The Commission estimates savings of EUR 45 billion in 2025, rising to up to EUR 130 billion a year by 2030 and EUR 260 billion a year by 2040. It says energy efficiency alone could deliver savings of up to EUR 162 billion a year by 2030.
The plan's most important feature is that it addresses all three components of an energy bill: supply costs, network charges, and taxes and levies. That matters because the debate about high European prices has often focused narrowly on the wholesale market. Our view is that the Commission has diagnosed the problem correctly and chosen sensible levers, but that most of those levers sit in national hands. Taxes, levies and network tariffs are set by member states and their regulators. The savings estimates will only materialise if national governments act on them, and the record on that front is mixed.
Why Europe's prices are a competitiveness problem
European industrial electricity and gas prices remain well above those in the United States and China. After the 2022 crisis, wholesale prices fell substantially but did not return to pre-crisis levels, and they remain exposed to gas prices because gas plants still set the marginal price in many hours. For energy-intensive industries such as chemicals, steel, aluminium and fertilisers, that gap is the difference between investing in Europe and investing elsewhere. The Clean Industrial Deal is the Commission's attempt to make decarbonisation and competitiveness reinforce each other, and the energy price plan is its foundation.
The three parts of the bill
On supply costs, the plan's long-term answer is more renewables, grid investment and energy efficiency, so that gas sets the price less often. It also aims to strengthen long-term contracting, building on the 2024 electricity market reform, so that consumers can benefit from the lower costs of renewables and nuclear. The Commission has promoted power purchase agreements and contracts for difference for this reason. For gas, it wants better supervision of gas markets and greater preparedness for price crises.
Network charges are a growing share of bills and will rise further as grids expand to connect renewables and serve electrified demand. The plan calls for more efficient network tariffs that incentivise flexibility and electrification while maintaining incentives for grid investment. That is the right direction. Tariffs that reward consumers for shifting use to times when the grid has spare capacity can reduce the total amount of network that has to be built.
Taxes and levies vary widely across member states and in many cases tax electricity more heavily than fossil fuels used for heating or industry. That is counterproductive when the policy objective is electrification. The Commission has long argued that member states should lower taxes on electricity, and the plan repeats that call. It is one of the quickest ways to lower bills, but it reduces revenue, which is why many governments have been reluctant.
What we think works
The emphasis on network tariffs and taxation is welcome, because those are areas where policy rather than markets determines the outcome. Shifting levies from electricity to fossil fuels, or to general taxation, would make electrified heating and transport more competitive immediately. Designing network tariffs to reward flexibility would reduce long-term network costs and help integrate solar, which is already pushing midday prices down in many markets.
The focus on energy efficiency is also sound. Efficiency is often treated as a secondary policy, but every unit of energy not consumed avoids supply, network and tax costs at once. The Commission's estimate that efficiency could save up to EUR 162 billion a year by 2030 is ambitious, but the direction is right.
Where we are sceptical
The first concern is that the headline savings are estimates that assume full implementation. Many of the measures depend on member states lowering taxes, reforming tariffs and accelerating permitting. The Commission can recommend, guide and approve state aid, but it cannot set national electricity taxes. Some governments face fiscal constraints that make tax cuts difficult, and network regulators move slowly.
The second concern is gas. The plan's ability to reduce gas prices directly is limited. Europe now buys a much larger share of its gas as LNG, which links its prices to global markets. A well-supplied global LNG market later this decade would help, but that is outside Brussels' control. Improving gas market supervision is useful, but it does not change the fundamental price.
The third concern is that the short-term measures may come at the expense of investment signals. If governments respond to price pressures by capping prices or levies in ways that undermine the revenue of generators or grid operators, they will raise the cost of capital for the very investments that are supposed to lower prices in the long run.
The plan also promises an update to the EU energy security framework, covering threats such as cyberattacks and extreme weather. Those risks are real, and preparedness is cheaper than crisis management.
What should happen next
The most useful thing the Commission can do is publish country-by-country progress on the three parts of the bill, showing where electricity taxes, levies and network tariffs stand relative to the plan's recommendations. Peer pressure and transparency have been more effective in EU energy policy than exhortation. Member states should prioritise moving levies off electricity and reforming tariffs to reward flexibility, because those deliver the largest effects soonest.
Our assessment
The Affordable Energy Action Plan is a well-targeted document that addresses the real drivers of high European energy bills. Its weakness is not analysis but authority. The biggest savings depend on national decisions about taxation and tariffs that Brussels cannot make. If member states act, the plan could narrow the gap with Europe's competitors and speed electrification. If they do not, the savings estimates will remain on paper, and European industry will continue to face prices that make new investment hard to justify.