A first-rate public policy disaster is unfolding
How well is Europe’s energy policy working out? Well, the electricity supply target is an EU goal in its “global leadership” policy on climate change. The EU hoped that by providing a political lead, it would induce others to follow. But that hope was in vain, with the rest of the world refusing to play ball.
At the COP 15 summit in Copenhagen in 2009,the EU assumed that other countries would follow its lead. But when the final deal was done, America, China and South Africa — representing the developing world — in effect presented the EU with a fait accompli.
With America refusing to ratify the Kyoto protocol — which commits signing parties to reducing greenhouse gas emissions — the EU proceeded unilaterally with its strategy to turn towards alternative energy sources. Self-congratulation rather than efficacy was to be the basis of public policy.
The result has been a mess. Energy prices in the EU have risen more sharply than elsewhere and there has been an acceleration in the relocation of heavy industry out of Europe. This has reduced the production of greenhouse gases in Europe but at the expense of increasing them elsewhere in the world. The EU has, in effect, outsourced the production of greenhouse gases to other countries, especially China.
EU energy policy has resulted in the mothballing of 50,000 megawatts (MW) of gas-fired plants in Europe as utilities increased the use of renewables. This has reduced the value of Europe’s top-20 energy utilities by €500bn since 2007, generating losses for investors, including pension funds, as well as threatening further investment in the EU energy sector.
In other countries this questionable policy has triggered a fundamental rethink. Having made huge investments in renewable energy, especially solar power, Germany and Spain are reconsidering the approach.