Europe's Green Energy Suicide

If it's cheap and plentiful—even low in carbon-dioxide emissions—much of the continent wants no part of it.

Wall Street Journal June 6 2012 By RAEL JEAN ISAAC

http://online.wsj.com/article/SB10001424052702304203604577398541135...

As austerity bites into European living standards, sparking revolt at the polls, "growth" has become the politician's mantra. But to be competitive, European countries require a secure, plentiful and competitively priced energy supply. Unless Europe radically rethinks its obsession with carbon-dioxide emissions and the anti-fossil fuel energy policies that flow from it, growth is likely to remain elusive.

European Union law mandates that the 27 member countries on average cut their C02 emissions 20% by 2020, compared to 1990 levels. The goal after that is to cut emissions by between 80% and 95% by 2050. In May 2010, a study by the European Commission's energy department estimated the 20% cut would cost 48 billion euros ($66.3 billion) a year. The Commission's draft Energy Roadmap for 2050 is frank: "There is a trade-off between climate change policies and competitiveness."

There is indeed. The consultancy Verso Economics has calculated the opportunity cost of the United Kingdom's subsidy system for renewables to be 10,000 jobs between 2009 and 2010 alone. A report by the Energy Intensive Users Group (which represents energy-intensive British businesses) and the Trades Union Congress cited steel making, ceramics, paper, cement and lime manufacture, aluminum and basic inorganic chemicals as industries facing up to 141% in additional energy costs by 2020 as a result of C02 emissions-reduction schemes. EIUG Director Jeremy Nicholson notes that "the current policies do seem to be angled towards creating a market for overseas competitors."

Emissions-free solar and wind energy, on which the U.K. plans increasingly to rely, are expensive. The government estimates that a planned offshore wind farm project ringing the coast will cost £140 billion, or £5,600 ($8,972) for every household in the country. Conventional energy could provide the same amount of energy at 5% of the cost.

The U.K.'s Department of Energy and Climate Change commissioned a report (led by Prof. John Hills of the London School of Economics) to examine the issue of "fuel poverty," defined as when fuel bills take up more than 10% of household income. It found four million of England's 21.5 million households fall in this category and the number could rise to 9.2 million by 2016, equivalent to 43% of all homes in England. One of the key factors are green taxes and levies expected to add up to £200 ($306) to bills by 2020.

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European Pressphoto Agency

Wind-powered street lights in Spain.

Spain's experience with subsidizing renewables has been painful. A 2009 study at Universidad Rey Juan Carlos found subsidies required 3.45% of all of Spain's household income tax revenues and had led to a loss of 110,500 jobs. An April 2010 internal assessment by the former Zapatero government was equally bleak. It noted that the price of electricity determined the competitiveness of Spanish industry, and the price had risen to 17% above the European average. The chief reason: government subsidies for renewables, which had increased fivefold between 2004 and 2010.

While Spain has sought to lance its solar investment bubble, others are proceeding with poorly conceived schemes. Denmark already has the highest energy prices in Europe. Yet the recently elected Danish government raised its C02 reduction target to 40% by 2020 and has set a goal of completely phasing out fossil fuels by 2050.

Italy's subsidy system sets the price floor for wind energy at three times the market level. A study at Italy's Instituto Bruno Leoni found the capital necessary to create one green job could have created 6.9 jobs if invested in industry.

Even Germany, Europe's healthiest economy, may be in for some rude surprises. Germany's Renewable Energy Feed-in Act of 2000 requires electric utilities to buy renewables from all producers at fixed, exorbitant rates and feed it into the power grid for 20 years. A German utility executive has observed that solar energy in Germany makes as much sense as growing pineapples in Alaska. Despite this, Germany now has half the world's solar photovoltaic capacity.

Fritz Vahrenholt, the departing head of the renewable energy arm of RWE Innogy and a former hero of the German environmental movement, now says: "We're destroying the foundations of our prosperity. In the end what we are doing is putting the German automotive sector at risk, the steel, copper and chemical sectors, silicon, you name it."

France, because of its heavy reliance on nuclear power, has no emissions problem. But new President Francois Hollande has promised to cut nuclear energy by a third. His defeated Socialist rival, Maxine Aubry, had promised to eliminate nuclear altogether.

If the energy source is cheap and plentiful—even low in C02 emissions—much of Europe wants no part of it. Although Europe has huge shale gas resources, Germany has imposed a moratorium on shale-gas exploration, which France already forbids by law.

Evidence mounts daily that man-made global warming is a phony apocalypse, but its effect in depressing living standards is all too real.

Ms. Isaac's most recent book is "Roosters of the Apocalypse: How the Junk Science of Global Warming Almost Bankrupted the Western World" (Heartland Institute, 2012).