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Europe’s Green Energy Policy ‘Bordering On Disaster’

Walter Russell Mead, Via Meadia

Europe may see itself as the globe’s green paragon, but its energy policies are a mess bordering on a disaster.

Pushing through wind and solar energy while snubbing its own shale resources has driven electricity prices up and threatened an already sluggish recovery. The FT reports:

“It’s fine being very, very green, but not if you’re interested in manufacturing,” [said Jim Ratcliffe, chief executive of the chemical giant Ineos]. “The UK is already disadvantaged on the wholesale cost of energy, and then it puts taxes on it. Anybody who’s an energy user is just going to disappear.”

The best way to look at most green policies is as a luxury. That is, it usually requires people to do things they wouldn’t do otherwise, and it constrains growth. That’s an easier sell in boom times, as we saw in the years leading up to the 2008 financial crisis. But today the world’s “greener” countries are finding it harder to keep pedaling up the green hill:

“There’s been a tangible shift in Europe,” says Roger Reynolds, a utilities specialist at Exane BNP Paribas in London. “The balance has now moved away from reducing emissions at any cost to the question of affordability.”

Europe hoped to act as a global leader by setting its ambitious 2020 climate goals, but its position as a first mover in green policy has only managed to put European industry at a competitive disadvantage relative to the rest of the world. Green energy is more expensive than brown energy and must be propped up by government subsidies to gain significant market share. The costs of these subsidies get passed on to consumers, meaning households and businesses must pay out the nose for electricity. If you’re a decent-sized widget manufacturer in Germany, options in the developing world and shale-rich America start to look more appealing.

As Germans debate how their energy policy will affect their country’s economic strength, as well as its impact on the working poor, there are two things the rest of us should think about: first, all of Germany’s expense and trouble over its green policies will have essentially zero impact on global climate. Growth in countries like China and India—in part accelerated because energy-intensive processes will quickly shift from Germany to less regulated economies—will more than offset any savings that Germany produces. Second, the chances that Germany’s “example” will reform or change the politics around energy and climate in the developing world are minimal. Those choices will be made based on domestic politics and the balance of forces locally.

This is politics as ritual. It is about expressing identity and attitude rather than changing the world. It’s a great feeling, for those who can afford it.

Via Meadia, 16 October 2013