Navigating Industrial Energy Vulnerability Effects on Export Competitiveness –Evidence of Small Open Economies

The low-carbon transition and the energy crisis pose new challenges for sustainable economic growth in the European Union. The high import dependency and the still insufficient share of renewable energy sources threaten the competitiveness of the European economy, especially in small open economies. The article aims to introduce the term “industrial energy vulnerability” to investigate impact of volatile energy prices and fossil fuel import dependence on export competitiveness. Industrial energy vulnerability undermines cost-efficiency and global competitiveness in various export sectors, especially in small and open economies. Therefore, the dependent variable in the study is exports as a percentage of GDP, while the independent variables are electricity price for non-household consumers and import dependence on solid fossil fuels. The panel data analysis with TSLS was conducted for six European countries -Croatia, Czechia, Hungary, Poland, Slovakia and Slovenia -in the period 2010-2021. The results show that higher electricity prices and higher import dependence reduce export in the observed period. The results are crucial as they confirm the importance of a stable and independent energy sector as a facilitator of competitive domestic production.