Quicksand

Europe willingly walked straight into economic oblivion -- can it save itself? Only with new leaders and new policies.

European leaders, specifically those inhabiting the bureaucratic Mecca that is the Berlaymont building in Brussels, have willingly walked themselves into the ideological and political quicksand of net zero commitments and climate catastrophism. They have been banging on for more than a decade about the necessity of ending the use of fossil fuels and replacing them with intermittent renewable energy, arguing that it is the only path to a new industrialization for the developed world. And the policies and legislation of the recent European Commissions, Parliaments, and Councils — and many EU member state governments — all followed the same path by heavily focusing on net zero ambitions and the European Green Deal.

Reality has finally caught up to this political class still inhabiting positions of power in Brussels as Europe languishes in an economic downturn which they have been unable to effectively respond to. Their energy and climate ideologies — neatly captured by the Church of Carbon moniker popularized by

Doomberg

— have retarded their ability to effectively respond to the challenges at hand. Europe’s decisions over the last two decades to commit economic suicide in the name of the saving the climate is coming home to roost.

When consistently confronted with the EU-weakening brutal challenges of devastating high energy prices; deindustrialization in fundamental sectors like automobiles, steel, chemicals, pharmaceuticals, paper, etc.; associated massive job losses; protesting farmers and workers over growing bureaucratic reach and higher costs of living; poor economic performance compared to its peers in America and China over the last two decades; and growing reliance on energy imports, the canned response from Brussels leader’s is always decarbonize faster, deploy more intermittent renewables, set unachievable GHG emissions targets that make us feel good, and make every energy source and associated purchased good in Europe more expensive!

The latest iteration of this response from European leaders is the Competitiveness Compass. This report from the European Commission is meant to lay out the framework for addressing its competitiveness and productivity challenges. It’s another report, in a long line of reports, that calls for additional reports (not joking). Here is how the Compass frames the challenges today (emphasis in the original):

What is at stake for Europe is not just economic growth, but the future of its model. If Europe does not increase its productivity, it risks to be stuck on a low-growth path, with less income for the employed, less welfare for the disadvantaged and less opportunities for all. Europe faces a world of great power rivalry, competition for technological supremacy, and a scramble for control over resources. In this world, Europe’s competitiveness and what Europe stands for are inseparable.

On this they are correct. If the EU cannot right its proverbial ship and appropriately address its challenges, the entire EU project will be at risk.

They know the primary vector of the disease — high energy prices — but every prescription to remedy the disease results in higher costs of energy. Not a single piece of legislation that comes out of Brussels has an end result of lowering the fundamental cost of energy for the consumer. I challenge anyone to identify a piece of legislation out of the EU that has lowered energy costs (and don’t send me anything about subsidies or price caps or anything like it because the taxpayer/consumer still pays for that).

In an already high energy price environment for traditional fuels (e.g., natural gas), the solution put forward is even higher priced clean energy substitutes. Sustainable aviation fuel — higher cost. Sustainable maritime fuels — higher costs. Similar biofuels and biogases — higher costs. Green hydrogen for hard to abate industry which is already buckling under high prices — higher costs. Renewable electricity as a significant share of the electricity grid while shutting down operating nuclear power plants — higher costs. Burdensome corporate sustainability and ESG reporting requirements — higher costs.

There is no consideration of a different path. There cannot be divergence from the orthodoxy of the Church of Carbon with the current leaders in Brussels and many European capitals. The Competitiveness Compass describes three “transformational imperatives” to boost the EU’s competitiveness:

• Closing the innovation gap

• A joint roadmap for decarbonization and competitiveness

• Reducing excessive dependencies and increasing security

And how does the EU expect to make this happen on the energy front? Again, from the Compass report (emphasis added):

Europe has set out an ambitious framework to become a decarbonized economy by 2050. It will stay the course, including through the intermediate 2040 target of 90%…

The EU needs to tackle upfront the issue of high and volatile energy prices for European companies and households. Energy prices are much higher than in competitor regions and vary significantly across the EU…

These issues will be addressed by the Affordable Energy Action Plan, through a range of measures to ensure that households and industrial customers have a wider direct access to low-cost energy. The plan will help leverage the energy cost reduction benefits coming from further market integration, expand the use of guarantees and risk reduction instruments to facilitate conclusion of long-term power purchase agreements, incentivize industrial customers to provide demand flexibility services, and encourage a fair allocation of energy system costs through better designed tariffs.

Through a range of measures…this consists of the usual suspects of market integration (which is becoming a real challenge for Norway and others due to high continental electricity prices driving up its domestic prices), power purchase agreements, contracts for difference, and better designed tariffs. Not one of these addresses the fundamental reasons for high energy prices in Europe.

European political leaders, and the Compass report, lays a large share of the blame for high energy costs at the feet of fossil fuels. Silly me, but the two peer economic competitors Europe is falling behind — the United States and China — are the largest consumers of fossil fuels in the world and somehow their energy prices are much lower than Europe’s.

Admittedly, Europe correctly realizes that its fossil fuel import reliance, which sits at 98% for oil and petroleum products, 95% for natural gas, and about 50% for coal demand, is the true problem. But instead of searching for more domestic fossil fuel sources, European leaders push for more green energy sources whose supply chains are all dominated by China. In a renewable energy competitiveness and productivity war with China, Europe will lose every time as it cannot match China on price, innovation, and supply chain dominance. Its hard to capture a global market when you are so far behind the market leaders and your investment and political environment is terrible.

The only path forward for Europe is to abandoned the current political class in Brussels (and many EU member state capitals) for more pragmatic leadership. There is a growing number of “center-right” and “far-right” governments that are vocal about their hatred of the Green New Deal. All eyes will be on the German election outcomes in February. A potential center-right/far-right government would be monumental (

eugyppius

has recently covered the chaotic German election process very well). Following in Germany’s footsteps, France is likely to shift to a “center/far-right” government in due course. The end of climate catastrophism as a serious political and geopolitical policy framework will be severely weakened if this happens. Ideally, it would be a fatal blow that consigns it to ridicule and disbelief by our progeny.

As more EU member states shift to the right politically with Germany, France, and Romania potentially falling like dominoes and join Hungary, Austria, Slovakia, Croatia, Italy, and others, the grip of power in Brussels becomes weaker and weaker. If Brussels bureaucrats and European Commission President Von der Leyen disregard these new member state government requests to scuttle the Green New Deal — which many of the right wing/nationalist leaders are already calling for — it could lead to dangerous cracks in what is left of the EU’s cohesion. It would also neuter the European Commission and grind to a halt any chances at getting Europe back on the right path economically.

If the European Commission is forced to bend to the will of the new right wing majority in Europe that dispenses with the climate catastrophism ideology, then perhaps a pragmatic and sensible energy policy can return to Europe. In that miraculous event, here are some policies Europe can consider to solve the challenges laid out in the start of this essay.

First, redirect all public support schemes and subsidies away from intermittent renewables and expensive sustainable fuels towards nuclear power development. In 2023, the EU spent €354 billion on total energy subsidies, €145 billion of which covered national crisis measures and another €61 billion for renewable energy. This would equate to a significant investment in the future energy supply and would help the EU in its drive to become a world leader in AI and digitization in the coming decade.

Nuclear plants will run for 80 years or more and provide the much wanted low carbon electricity at a capacity factor of about 95% — three times that of wind and five or more times that of solar power. And the more nuclear power deployed, the lower the demand for imported fossil fuels. Its a win-win! Yes, it will take time to deploy nuclear power plants, but it is a far better use of the hundreds of billions of dollars the EU is currently wasting on net zero fantasies.

Second, further reduce import dependency by opening up domestic exploration and production for fossil fuels. I know this will be challenging in Europe, but it must be done. Start with pushing for more production in the North Sea and reopen the Groningen field in the Netherlands. Create an enticing exploration environment that will bring in large companies to search for the “liquid gold” under Europe’s feet. Explore the Mediterranean Sea around Crete and Cyprus with greater intensity. Undertake a true search for shale oil and natural gas throughout Europe. Whatever it takes to produce more at home. Right now Europe relies on imports to meet 98% of its oil needs, over 95% of its natural gas demand, and nearly 50% of its coal requirements. Do everything possible to reduce reliance on imports.

Third, reduce taxes on energy for consumers, including an end to the Carbon Broder Adjustment Mechanism and onerous sustainability disclosure and compliance requirements for companies. Ease the burden on household consumers and make Europe a more enticing investment environment.

Fourth, do away with unobtainable renewable energy targets. It is detrimental to set targets that have no chance of being met all the while imposing fines and punishment on the very industry Europe will rely on to meet those targets. In addition, stop putting in place trade barriers that make it difficult for cheaper imports of energy supplies to come to the European market.

Fifth, discard essentially all of the Green Deal legislation that was passed during the last Commission. Get rid of the Renewable Energy Directive, the Corporate Sustainability Due Diligence Directive, the Methane Emissions Reduction Regulation, green hydrogen regulation, the FuelEU Maritime regs and associated requirements for sustainable aviation fuels, and on and on. All of these regulations are to prescriptive, unimplementable, lack sufficient support mechanisms and flexibility to successfully establish a new market for the sustainable fuels, and add cost in a high-priced environment. They are dumb and myopic.

Last, take actual action. Stop waiting for the same analysis and reports to be produced by a variety of European “experts”. Execute pragmatic solutions before its too late. The longer Brussels remains mired in its net zero quicksand, the more difficult it will be to save Europe from itself. The continent is at the precipice of disaster — this is not hyperbole.

Do better Europe, the world needs you to be strong and successful. Extricate yourself from the net zero quicksand, get serious, and pull yourself up by the bootstraps. Or else.