Europe’s Energy Woes

From The Economist

ENERGY and green policies should be ideal for common European action. Pollutants know no borders. The cost of renewables such as wind turbines and solar panels can be cut, and their drawbacks mitigated, if they are linked across Europe. When the wind stops blowing in Germany the sun shines in Spain; if both sources die down, French nuclear plants or Swiss hydroelectric stations can take up the slack. A proper European-level emissions-trading scheme should minimise the cost of reducing greenhouse gases. And a successful low-carbon transition should reduce dependence on imported fossil fuels.

Yet the reality is messier. The EU struggles with a hotch-potch of national policies, conflicting and expensive subsidies, Balkanised energy markets and ever-growing reliance on fuel imports. After years of crisis, Europeans are more concerned with the cost of climate-change policies than with their benefits. European industries pay three to four times more for gas, and over twice as much for electricity, as American ones (which benefit from cheap shale gas). One reason Europe has so far met its emissions targets is its long economic slump. Yet recession and deindustrialisation are hardly a climate-change policy.

So the EU’s new planned emissions targets, announced this week, were contentious. When wages are being squeezed to regain export competitiveness, it is hard to sell the idea of higher energy prices, particularly when the rest of the world is doing too little to cut greenhouse gases. The current policy is known as 20-20-20: by 2020 its members should reduce greenhouse-gas emissions by 20% (relative to levels in 1990), with 20% of the mix produced from renewable sources and a 20% improvement in energy efficiency. After an unusually acrimonious internal debate, the European Commission called this week for the ambition to be raised to a 40% reduction in emissions by 2030. It wants a “binding” EU-wide target of at least 27% for the share of renewables, though there would be no new national targets for renewable energy. The commission also refrained from proposing new legislation to regulate the development of shale gas.

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