In 2007, the European Union adopted a package of legally binding targets known as “20-20-20.” The EU committed to achieve the following objectives by 2020:
- Reduce EU greenhouse gas emissions 20% below 1990 levels.
- Increase the share of EU energy consumption produced from renewable resources to 20%.
- Improve the EU’s energy efficiency by 20%.
Darwall comments on a recent European Commission analysis, which finds that the U.S. is reducing greenhouse gas emissions almost as fast as Europe but much less expensively, placing EU manufacturers at a competitive disadvantage:
In a clear-eyed analysis last week, the European Commission published its proposals for the follow-up period from 2020. The Commission notes that since 2005, the U.S. cut its CO2 emissions by more than 12% (a little less than the EU, which cut emissions by just under 14%), thanks largely to shale gas. EU firms and households, the commission says, are increasingly concerned by rising energy prices and widening cost differentials with the U.S. Between 2008 and 2012, the average electricity price paid by European industrial firms rose by 16.7% while American firms are paying 2.3% less, so prices paid by American firms are 45% lower than EU firms.
As the U.S. powers into an era of cheap, abundant energy, across the Atlantic the European Commission reckons electricity prices will rise 31% before inflation by 2030 from 2011, and will consume an increasing share of European GDP. Widening energy-price disparities may reduce production and investment and shift global trade patterns, the commission concedes. However, it adds, if other countries outside Europe agreed to cap their greenhouse-gas emissions, they would help Europe’s energy-intensive industries—hardly an inducement for them to do so.
Darwall points out an unexpected side-effect of EU subsidies for renewable power. By flooding grids with cheap electricity when the wind is blowing, the subsidies deter investment in fossil generation, without which wind farms have no backup when the wind isn’t blowing. Wind electricity not backed up with gas or some other form of fossil generation is too unreliable to power modern industry.
With a large wind fleet in a high-wind year, the load factor for conventional generators could drop very low indeed, making it almost impossible to recover their fixed costs. The squeeze is being felt by gas-fired power stations. Last month, gas-fired power stations contributed 29% to the U.K.’s net supply of electricity compared to 50% four years earlier. As a result, there is a dearth of investment in such capacity.
Whether red or green, central planning doesn’t work very well — a hard lesson for many politicians to learn.