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Benny Peiser: EU’s Green Energy Debacle Shows The Futility Of Unilateral Climate Policies

Benny Peiser, Financial Post

As the Ontario government announces new unilateral climate policies, Canadian policymakers would be well advised to heed the lessons of Europe’s self-defeating green energy debacle.

The European Union has long been committed to unilateral efforts to tackle climate change. For the last 20 years, Europe has felt a duty to set an example through radical climate policy-making at home. Political leaders were convinced that the development of a low-carbon economy based on renewables would give Europe a competitive advantage.

European governments have advanced the most expensive forms of energy generation at the expense of the least expensive kinds. No other major emitter has followed the EU’s aggressive climate policy and targets. As a result, electricity prices in Europe are now more than double those in North America and Europe’s remaining and struggling manufacturers are rapidly losing ground to international competition. European companies and investors are pouring money into the U.S., where energy prices have fallen to less than half those in the EU, thanks to the shale gas revolution.

Although EU policy has managed to reduce CO2 emissions domestically, this was only achieved by shifting energy-intensive industries to overseas locations without stringent emission limits, where energy and labour is cheap and which are now growing much faster than the EU.

Most products consumed in the EU today are imported from countries without binding CO2 targets. While the EU’s domestic CO2 emissions have fallen, if you factor in CO2 emissions embedded in goods imported into EU, the figure remains substantially higher.

Of all the unintended consequences of EU climate policy perhaps the most bizarre is the detrimental effect of wind and solar schemes on the price of electricity generated by natural gas. Many gas power plants can no longer operate enough hours. They incur big costs as they have to be switched on and off to back-up renewables.

This week, Germany’s energy industry association warned that more than half of all power plants in planning are about to fold: Even the most efficient gas-fired power plants can no longer be operated profitably.

Every 10 new units worth of wind power installation has to be backed up with some eight units worth of fossil fuel generation. This is because fossil fuel plants have to power up suddenly to meet the deficiencies of intermittent renewables. In short, renewables do not provide an escape route from fossil fuel use without which they are unsustainable.

Gas-fired power generation has become uneconomic in the EU, even for some of the most efficient and least carbon-intensive plants. At the end of 2013, 14 per cent of the EU’s installed gas-fired plants stood still, had closed or were at risk of closure. If all gas plants currently under review were to close, this would amount to 28 per cent of current capacity by 2016. Almost 20 per cent of gas power plants in Germany have already become unprofitable and face shutdown as renewables flood the electricity grid with preferential energy.

To avoid blackouts, the government has to subsidize uneconomic gas and coal power plants. Already half of the 28 EU countries have in place or are planning to subsidize fossil fuel power plants to keep the lights on.

Germany’s renewable energy levy, which subsidizes green energy production, rose from 14 billion euros to 20 billion euros in just one year as a result of the fierce expansion of wind and solar power projects. Since the introduction of the levy in 2000, the electricity bill of the typical German consumer has doubled.

As wealthy homeowners and business owners install wind turbines on their land and solar panels on their homes and commercial buildings, low-income families all over Europe have had to foot the skyrocketing electric bills. Many can no longer afford to pay, so the utilities are cutting off their power. The German Association of Energy Consumers estimates that up to 800,000 Germans have had their power cut off because they were unable to pay the country’s rising electricity bills.

The EU’s unilateral climate policy is absurd. First consumers are forced to pay ever increasing subsidies for wind and solar energy; secondly they are asked to subsidize nuclear energy too; thirdly, they are forced to pay for increasingly uneconomic coal and gas plants to back up power needed by intermittent wind and solar energy; fourthly, consumers are additionally hit by multi-billion subsidies that become necessary to upgrade the national grids; fifthly, the cost of power is made even more expensive by adding a unilateral Emissions Trading Scheme. Finally, because Europe has created such a foolish scheme that is crippling its heavy industries, consumers are forced to pay even more billions in subsidizing almost the entire manufacturing sector.

In the last few years, major economies such as Canada, Australia and Japan have begun to realize the futility of going it alone and have retreated from unilateral policies and targets. Now even the EU has decided to walk away and has adopted a conditional climate pledge. It has burdened European taxpayers and businesses with astronomical costs while shifting its heavy industry and CO2 emissions to other parts of the world. Europe’s climate policy failure demonstrates beyond doubt that its unilateralism has been a complete fiasco. The lessons of this self-defeating debacle are clear: Don’t make the same mistakes or you will face the same fiasco.

Benny Peiser is the director of the London-based Global Warming Policy Forum. The text is based on written evidence he gave to the Committee on Environment and Public Works of the U.S. Senate.

Financial Post, 14 April 2015