Costly Lessons from Europe on Renewable Energy Support

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H. Sterling Burnett

Managing Editor, Environment & Climate News at The Heartland Institute

H. Sterling Burnett, Ph.D. is managing editor of Environment & Climate News and a research fellow for environment and energy policy at The Heartland Institute. Burnett worked at the National Center for Policy Analysis for 18 years, most recently as a senior fellow in charge of NCPA’s environmental policy program. He has held various positions in professional and public policy organizations, including serving as a member of the Environment and Natural Resources Task Force in the Texas Comptroller’s e-Texas commission.

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Wind Farm in Desert

A new study by the Manhattan Institute shows the aggressive policies adopted by the European Union to fight climate change have resulted in dramatic increases in electricity costs for residential and industrial consumers. For instance, between 2005, when the E.U. adopted its emissions trading scheme, and 2014, residential electricity rates in the E.U. increased by an average of 63 percent. In addition, E.U. countries intervening the most in their energy markets – Germany, Spain, and the U.K. – have seen their electricity costs increase the fastest.

Higher energy costs are undermining European companies’ international competitiveness. In 2013, the Center for European Policy Studies found European steelmakers were paying twice as much for electricity and four times as much for natural gas as U.S. steel producers. A 2014 International Energy Agency (IEA) report warned continued energy imports, along with expensive climate policies, will likely hurt European industry for the next two decades or more, predicting the E.U.’s share of “the global export market for energy-intensive goods, especially for chemicals, is expected to fall (by around 10% across all energy-intensive goods, i.e., cement, chemicals, pulp and paper, iron and steel).” By contrast, IEA expects the United States and emerging economies to be able to increase their shares of the global export markets for these goods.

With these facts in mind, in January 2014, Germany’s energy minister, Sigmar Gabriel, declared that his country had reached  “the limit” with renewable-energy subsidies and that Germany had to reduce its electricity prices or risk “ deindustrialization.”

The study also found Europe’s sacrifices failed to affect global carbon dioxide emissions. Since 2005, while the E.U. reduced its carbon dioxide emissions by 600 million tons per year, the combined emissions of four developing countries – Brazil, China, India, and Indonesia – increased by 4.7 billion tons per year, nearly eight times the reduction achieved in the European Union.