The May 2019 European elections marked the decline of the traditional centre-right and centre-left parties. The beneficiaries were the green parties, with their objective of ever-more forceful climate policies, and right-wing populists, concerned more about employment and income.

This change was also underpinned by a generational shift: young voters are moving from the traditional left-wing parties to the emerging green groups, and older voters are moving from both the centre-left and the centre-right to the populist right. Somewhat simplistically, the green wave was driven by economic surpluses, as in Germany, and the populist wave was driven by economic deficits, as in France. In this overall picture, climate and energy policies are pertinent.

In Germany, enjoying
full employment and large budget surpluses, high energy prices are not seen as
a threat, except for low-income groups. In Germany, the young, well-educated
and well-off middle-class supported the Green Party, leaving the social
democrats far behind. The greens do not worry about jobs or income; they are
concerned about the environment and global climate. In Germany, the Green Party
is positioned to replace the social democrats as the coalition partner for the
ruling conservative CDU/CSU.

So long as Germany’s
economic outlook remains good, the outcome is likely to be more ambitious
climate and environmental policies, and a possible acceleration of the end of the
coal industry. The established practice of electricity price levies to finance
renewable energy combined with price reductions for large firms is likely to
continue, although it represents a major transfer of income from households to
industry. German electricity pricing also represents
a regressive income redistribution. However, if the economy should suffer,
political acceptance of this approach might disappear.

In France, high energy
costs are a problem for a large part of the population. Many of the very young
have switched from the far left to the Greens; the middle-aged, including many
workers, voted largely for the right-wing Rassemblement
National; the elderly have supported President Macron’s LREM. The very
young seem to worry about climate and the environment; those of working age
seem to worry about jobs and income; the elderly seem to worry about savings
and pensions. Age, income and education are the factors favouring Macron over
Le Pen, but she appears as the spokesperson for the younger, less educated,
with modest living standards.

In the run-up to the
elections, President Macron presented himself as the only alternative to the
far right, but in doing so he also presented the far right as the only
alternative to his own policies. In France, suffering from endemic unemployment
and persistent deficits, many voters are worried about jobs and income. The traditional
French left is in ruins, with the Green party gaining, but without a coherent
economic agenda.

In late 2018, a fuel tax increase in a
context of broadening economic and social disparity triggered widespread unrest
in France, perhaps indicating social limits to aggressive energy policy
measures. The official reason for the fuel tax rise was climate protection, but
it was possibly motivated by the need to offset an earlier cut in the wealth
tax. The regulatory authority warned that electricity price increases proposed
would hit low-income households. In France too, energy policy has an element of
regressive income redistribution.

The EU’s Energy Union
project, as presented in the 2018 Clean
Energy for All document promises ‘to give EU
consumers – households and businesses – secure, sustainable, competitive and
affordable energy’. The desired competitive and affordable energy supplies are,
however, nowhere to be seen; EU electricity prices are two to three times those paid by US consumers.

The explicit target of
EU energy policy is to reduce carbon dioxide emissions by promoting and
subsidising renewables, enhancing energy efficiency, and limiting energy demand
growth. Implicitly, this may restrict economic growth. Indeed, since the
financial crisis of 2008–2009, Europe has experienced lower growth than any
other continent, except Antarctica.

High electricity
prices have not helped the European
Union make more progress than the United States on energy intensity, measured
as energy consumption in relation to
economic growth. That is also the case with carbon emissions. In spite of
much higher electricity prices, Germany has performed worse than the United States on both energy consumption and carbon
emissions. Among the major EU countries, the UK had the best record.

From 2009 to 2017, the EU economy grew by 13 per
cent, measured in constant prices, while primary energy consumption fell by 1
per cent. During this period, Germany enjoyed economic growth of 19 per cent,
while energy consumption increased by 6 per cent and carbon emissions rose by 2
per cent. By comparison, the United States had real economic growth of 19 per
cent and an increase in primary energy consumption of 3 per cent, with much
lower energy prices. Japan performed even better, with a real economic growth
also of 13 per cent and a decline in primary energy consumption of 3 per cent. In
relation to economic performance. The strongest reduction in carbon emissions
took place in the United Kingdom, followed by the United States and France. In case of Brexit, the remaining EU-27 will
face challenges to meet collective targets.

Despite ambitious aims,
high energy prices and high expenditure on renewable energy, Germany has
underperformed on energy and carbon efficiency compared to the United States.
Apparently, in Germany, high energy prices have not been a sufficient
condition for energy efficiency; in the United States, they have not been a necessary condition. Prices may not always be the most efficient
tool in energy policy.

The EU’s emphasis is increasingly on climate and governance, monitoring member
states’ progress on their mandated integrated national
energy and climate plans. The
overriding objective is to reduce greenhouse gas emissions by 85–90 per cent by
2050 from 1990 levels. The EU is on track to meet the so-called “20-20-20” targets set
in 2007 for 2020: a 20 per centreduction
ingreenhouse gas
emissions from 1990 levels, 20 per cent of EU energy from renewables, and a 20 per cent
improvement in energy efficiency. Economic stagnation is helping the EU meet these
targets, but it is notable that the EU has no targets
for employment or income.

The social cost of
these policies receives little attention. From 2009 to 2017, the world economy
grew at an average annual rate of 3.4 per cent, with an cumulative growth of 35
per cent; the figure for the European Union was 1.6 per cent, with cumulative growth
of 14 per cent. Some member countries, such as Greece, France and Italy, by
2017 had high unemployment – around ten per cent of the labour force – whereas
for others, such as Germany and the United Kingdom, the figure was around four
per cent, similar to the United States. High energy costs add to the strains
that the euro has inflicted on southern Europe.

The EU plans to mandate
integrated 10-year national energy and climate plans (NECPs)
starting from the period from 2021
to 2030. The purpose is to ensure that member states have policies consistent
with the Paris Agreement, as well as energy union objectives.  Monitoring implies a centralised control of
energy policies, transferring energy policy and energy taxation competence from
the national capitals to Brussels.This would require a revision of
the treaties currently in force. Any transfer of competence to Brussels on such
matters is likely to damage important national interests.

Energy poverty is a
major challenge across the EU. Energy costs do not hit household consumers in
an equitable way. With rising income, energy consumption tends to increase, but
the proportion of a household budget spent on energy tends to decline. For high-income
households, with comfortable budgets and a high savings rate, consumption of
electricity and motor fuel is little affected by prices. Their economic
situation permits them to weather price increases by reducing savings or by
buying more efficient equipment that cuts energy costs.

By contrast, the
purchasing power of low-income households with tight budgets and little or no
savings are more severely affected by energy prices. For these groups, energy
consumption has the highest price elasticity, as energy prices take a
comparatively high share of household budgets. The distribution of energy
expenditure is more even than that of incomes. With rising income, energy costs
take a diminishing share of household budgets. Consequently, policies for
expensive energy have anti-social effects, regardless of any benign
environmental justification.

High unemployment has
restrained EU energy demand, but depressing economic activity and leaving
people out of work is an expensive way of curtailing energy consumption. Millions
of unemployed EU citizens represent a potential increase of energy demand. Millions
of young people in the EU, especially in southern Europe, cannot afford their
own homes. With their own living quarters, they would have used more energy for
lighting, heating and cooking. The failure of the EU to meet these challenges
is likely to produce more populist opposition.

In our political vocabulary, policies that enhance economic and social inequalities qualify as right-wing, and policies that reduce inequalities are seen as left-wing. From that perspective, EU climate and energy policies appear to be right-wing in nature, and opposition to them as left-wing. Against this backdrop, Marine Le Pen’s popularity among French workers should not be a surprise. Her voters are more sensitive to energy price rises than are those of President Macron. Like low-income voters everywhere, Le Pen’s supporters see climate-driven costs as assaults on their purchasing power and living standards. In this light, climate can be seen as a new polarising factor, reshaping the old conflict between capital and labour.

This is a trailer of an article, “EU Energy Union – A critical view”, to be published in the autumn of 2019 by The Journal of Energy and Development.

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June 10, 2019 at 11:29AM