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Continued: Europe turning 'green' with envy for U.S. energy boom

  • Article by: KEITH JOHNSON , Foreign Policy
  • Last update: January 22, 2014 - 11:41 AM

But Germany, as the EU’s largest economy and home to the world’s most ambitious energy transformation, is the epicenter of the European debate.

Germany’s “Energiewende” — the transformation of its energy system from a soon-to-be-retired nuclear fleet to an array of solar panels and wind farms — is a test case for whether “green” policies undergird, or undermine, economic growth. In Germany, the costs of the nascent transition already appear to be tipping the scales.

German residential power rates have risen from 34 U.S. cents a kWh to 39 cents in the last two years. Industrial rates rose from about 17 cents to over 19 cents a kWh in the same period. The tally for consumers and businesses from subsidizing renewable energy is $32 billion a year.

“I don’t know any other economy that can bear this burden,” Gabriel, the German energy minister, said. The German government plans to cap subsidies for green energy, even though that will do little or nothing to lower power bills in the meantime.

Big German industry groups have criticized the way the Energiewende has played out so far, calling for an end to open-ended subsidies for green power producers. But ironically, German industries have not had to pick up the tab for the costs of the transition to green power, most of which is borne by regular customers.

“I don’t believe that the link that is often made between competitiveness and renewable-energy policies is really there,” Brookings’ Boersma said. “I think it’s very convenient for everyone who is not in favor of renewable to make that claim, but the industries that are at a competitive disadvantage are generally exempt and have all sorts of favorable conditions that would rule out making that link.”

Indeed, a recent study by PriceWaterhouseCoopers found that European countries with aggressive climate policies, including Germany, can manage economic growth even while reducing energy use and greenhouse-gas emissions.

The danger, Boersma and others say, is that Europe may end up watering down its energy and climate policies to deal with economic fears that have little to do with subsidies for solar power or ambitious plans for wind farms. That, they say, could send muddled messages to investors, further clouding the investment climate in the energy sector precisely at a time when hundreds of billions of dollars are needed to make the clean-energy transition work.

Of course, if it’s any consolation to European policymakers, Japanese and Chinese businesses are also grappling with rising energy costs. The post-Fukushima nuclear shutdown in Japan has led to a spike in costly, imported energy, which Japanese government officials say could drive business offshore. And China, which for years rode cheap energy and cheap labor to become the world’s workshop, is steadily ramping up its own imports of pricey natural gas, even as rising labor costs on the coast push manufacturing into the Chinese interior and other countries in Southeast Asia.

But as Europe wrestles with just how to reconcile its environmental ambitions and its economic imperatives, the real irony is that the country that lacks any sort of energy policy at all — the United States — has managed to cut greenhouse-gas emissions, drive energy prices down, and jumpstart a manufacturing boom, all thanks to fracking.

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