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.

By Allysia Finley of The WSJ. Excerpts:

"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." 

"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."

"U.S. gas and coal producers have benefited from rising prices in Europe. Growing exports, however, are pushing up prices that Americans pay for energy because domestic production lags pre-pandemic levels. Natural-gas prices in the U.S. have doubled since the spring, and some coal power plants are scrounging for fuel."