European renewable energy: Seeds of central planning

The “ends justify the means” ideology surrounding the climate debate is certainly a dangerous game to play when government enters the equation

Are we in for a big freeze, relying on renewable energy?
Geoffrey McLatchey
On 2 April 2013 11:51

As European environmental concerns take precedence over economic necessity, it seems impossible that the two can be reconciled. In an effort to curb climate change, the U.K. and Germany are set to dismantle their fossil fuel and nuclear power industries respectively in order to prop up expensive and inefficient green energy programmes, thus setting an alarming precedent for the role of government when backed by “green” motives.

Last week, British company Centrica announced a deal with Cheniere Energy Partners that will have Britain importing a substantial amount of natural gas from the US starting in 2018. Recent gas shortages in the U.K. combined with the cheaper price of U.S. shale gas sparked the deal, which serves to highlight Britain’s dependency on natural gas imports as an important energy source. The kicker? By 2022 Britain’s Climate Change Act mandates carbon emissions be reduced by at least 34 percent of 2008 levels.

In Germany a similar storyline is unfolding as Energiewende (Germany’s renewable energy initiative) aims to phase out the German nuclear power industry. This resolution comes in the wake of Chancellor Merkel’s politically-motivated closure of all of Germany’s 17 nuclear power plants by 2022.

Both the U.K’s Climate Change Act and Germany’s Energiewende set energy goals for the year 2050 with 80 percent being the magic number – the Climate Change Act seeks to reduce carbon emissions 80 percent by 2050 while Energiewende will have Germany running on 80 percent renewable energy by that time.

With fossil fuels comprising about three-quarters of British energy supply and nuclear almost one-quarter of Germany’s, the obvious question raised by the two countries’ renewable energy initiatives remains: How can these goals be achieved without shutting down a large portion of the fossil fuel and nuclear dependent economies of each nation? So far, the question is answering itself.

In Britain the Climate Change Act has forced the closure of several coal-fired power stations and has increased subsidies for wind power. Inevitably, this has led to higher energy prices and increased taxes. Douglas Carswell MP recently announced that his failure to oppose the Act was his “biggest regret as an MP”. Carswell noted the regressive nature of the Act by asserting, “The Climate Change Act is giving us a low carbon economy the way that pre-industrial Britain had a low carbon economy.” In other words, to cut carbon emissions by such extreme measures, a majority of the UK’s fossil-fuel dependent economy will be put on hold.

Similarly, Germans are paying 11 percent more in energy costs this year in order for nuclear-replacing solar and wind energy to be made cost effective. The mandated closure of nuclear energy plants marks an unabashed move to support an uncompetitive industry at the absolute cost of a competitive one.

In the long run, what toll this will have on Europe’s largest economy is yet to be seen, but an export-driven country dependent on keeping industry competitive will indubitably require large sums of taxpayer money in order to keep its new energy initiative afloat – as we have already witnessed in increased German energy prices.

British and German governments’ ability to choose winners and losers in the energy realm represents a misconstrued version of creative destruction. The logic being that by implementing green energy, the “outdated” coal and nuclear options will become obsolete. Of course, creative destruction is only applicable when innovation creates a superior product to its predecessor. Government-mandated destruction, being neither creative nor innovative, leaves Britain and Germany with an expensive and inefficient energy industry and hands the bill to the taxpayer.

Looking beyond the inevitable cost repercussions for consumers from green energy policies, governments’ willingness to radically do away with free market principles in the energy realm in order to satisfy environmental concerns is one which should breed concern. Whether a proponent of renewable energy or not, the “ends justify the means” ideology surrounding the climate debate is certainly a dangerous game to play when government enters the equation.

Geoffrey McLatchey is a Research Associate at the Competitive Enterprise Institute

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