Allysia Finley: Climate policy meets cold reality in Europe

The rush to renewables causes severe energy price spikes and shortages. Biden’s policies would do the same in the U.S.

European leaders at the United Nations last week applauded themselves as they doubled down on their pledges to slash CO2 emissions. And Prime Minister Boris Johnson said the U.K. “will lead by example, keeping the environment on the global agenda and serving as a launch pad for a global green industrial revolution.” Such vows of carbon chastity are, to say the least, ironic as Europe grapples with a severe energy shortage and surging prices wrought by its green industrial revolution.

In the past decade the U.K. and Europe have shut down hundreds of coal plants, and Britain has only two remaining. Spain shut down half of its coal plants last summer. European countries have spent trillions of dollars subsidizing renewables, which last year for the first time exceeded fossil fuels as a share of electricity production.

But renewables don’t provide reliable power around the clock, and wind power this summer has waned across Europe and in the U.K., forcing them to turn to gas and coal for backup power. Yet demand for these fossil fuels is also surging across Asia and South America, where drought has crimped hydropower. Manufacturers there are also consuming more energy to supply Western countries with goods.

Japan has become especially dependent on liquefied natural gas imports since it shut down most of its nuclear power plants after Fukushima in 2011. Even China has been forced to ration electricity to energy-hungry aluminum smelters because of a coal power shortfall. This has sent global aluminum prices soaring.

Increased global demand has caused the price of coal to triple and the price of natural gas to increase fivefold over the past year. Europe’s cap-and-trade scheme has pushed prices even higher. Under the program, manufacturers and power suppliers must buy carbon credits on an open trading market to offset their emissions. The price of credits has spiked this year as demand for them from coal plants and other manufacturers has increased while government regulators have tightened supply.

Russia is exploiting Europe’s energy difficulties by reducing gas deliveries, perhaps to pressure Germany to complete certification of its Nord Stream 2 pipeline, which bypasses Ukraine. Russia’s Gazprom has booked only a third of the available transportation capacity through its Yamal pipeline for October and no additional deliveries via its Ukraine pipeline. Europe has become ever more dependent on Russia—the world’s second largest gas producer, after the U.S.—for energy because the U.K. and Germany have banned hydraulic fracturing, letting their rich gas shale resources go to waste. Meantime, the Netherlands is shutting down Europe’s biggest gas field.

In short, all of Europe’s green chickens are coming home to roost. Several U.K. retail electricity providers have collapsed in recent weeks because of the surging price of gas. Energy experts warn that some German power suppliers are in danger of going insolvent. Germany’s electricity prices, which were already the highest in Europe because of heavy reliance on renewables, have more than doubled since February.

Skyrocketing power prices have caused U.K steel makers to suspend production. A former energy adviser to the U.K. government warned last week that the country’s energy shortage this winter could prompt a “three-day working week”—a reference to the coal and rail worker strike in 1974 that caused the government to ration energy for commercial users….

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September 28, 2021 at 02:04AM

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