Yves here. We have been saying for some time that “Green New Deal” and technology whiz-bang happy talk about an “energy transition” are Band-Aids over a gunshot wound. There is no way out of our greenhouse gas excesses that does not involve pain in the form of lower standards of living and potentially worse health, due to factors like higher temperatures being pathogen and parasite friendly. Radical conservation could forestall some of the worst outcomes, but that means changing how we live and do business sooner rather than later. So instead most pundits and officials have focused on low-pain, “consume better” answers like electronic vehicles (while largely ignoring grid requirements) and cons like carbon capture.
The post below shows that even a somewhat serious energy transition approach, as envisioned by the EU, is deemed too costly….even though the alternative is accelerated damage to the planet.
By Irina Slav, a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. Originally published at OilPrice
- The EU had set aside some 580 billion euro, or almost $630 billion for its net-zero plan over the period 2021 to 2027.
- Voters’ disgruntlement with high energy costs and overall inflation is starting to get the attention of politicians.
- EU leaders are struggling to keep the EU competitive in green energy tech in the face of stiff competition from the U.S. and China.
When the European Union approved its Green Deal, it was done to much fanfare and sparkles. Now, the fanfare and the sparkles are a distant memory as the EU grapples with the actual “how” of the transition equation it wrote for itself. Being quiet on the real costs of the transition push has not helped it, either.
It’s not that the EU is not admitting the transition would be costly. The European Council calls the necessary investment “enormous”. It also says that the EU had set aside some 580 billion euro, or almost $630 billion for its net-zero plan over the period 2021 to 2027. Only it is going to cost a lot more than that—and the EU does not have that kind of money, which is only now coming to light.
This is perhaps the worst possible time for the real costs of the transition coming to light—just as Europeans are beginning to feel the pinch of the additional costs that this transition is imposing on household budgets. And there are European Parliament elections on the horizon.
Last year, the European Commission estimated the cost of the energy transition at over 700 billion euro, or over $758 billion, in additional annual investments between now and 2050. That’s 700 billion euro to be invested in the transition—and replacement of Russian hydrocarbons—every year. It’s a lot of money. And a solid part of it is coming out of European citizens’ pockets. This is a dangerous state of affairs.
In a July 2023 column for Reuters, Pierre Briancon wrote about European governments that “If they don’t come clean to public opinion, and explain how these costs will be shared, they may face crippling populist protests that will compromise their end goals.”
These words have proved to be prophetic, with right-wing parties gathering popularity across Europe months before the European Parliament elections in June. Meanwhile, as the costs of transitioning away from hydrocarbons have continued to mount in the form of both direct inflation and reduced industrial activity, the EU is falling behind on its own targets. Possibly because they were a bit too ambitious.
The plan that the current leaders of the bloc approved was for a reduction in emissions of 55% by 2030 from a 1990 baseline. As things stand now, they will only achieve a 51% reduction by that year and, according to some, this is a problem because every percentage point matters. But even this reduction—which is quite sizeable—is costing a lot. And doubling down on the 55% will likely alienate voters even further.
It seems the EU’s leaders have finally started taking notice, possibly helped by the widespread farmers’ protests, which were essentially a reaction to the Green Deal, which requires the diversion of money previously used to subsidize agriculture to the transition effort. That and the mountains of regulations that are weighing on farmers proved to be too much, and the farmers rebelled.
As a result, the leaders in Brussels and their colleagues from national governments have had to make concessions. And they might just have to make some more because farmers are not the only group disgruntled by all the unpalatable changes that the green transition will bring into people’s lives. This is especially true in light of the discrepancy between what was promised and what was delivered.
Mostly, what was promised was cheap renewable energy. It may be cheap and renewable at some point in the future, but it isn’t now. On the contrary, the overlap between the countries with the largest buildup of wind and solar capacity and the countries with the highest electricity bills is quite remarkable. The other thing that was promised was a thriving business environment, which has yet to materialize.
It is this latter part that seems to have got those in Brussels thinking about something different than emission reduction targets, according to a recent article by Bloomberg. Voters’ disgruntlement with high energy costs and the overall inflation these drive has turned the attention of decision-makers and planners to questions such as boosting the European Union’s competitiveness in the face of stiff competition from the U.S. and China.
Given where China is in terms of transition technology development, which is the position of global leader, and given the billions that the Biden administration has pledged to investors willing to do business in the U.S., the EU is already late to the party. It is even losing business to the U.S. because of those billions, and that’s because at home, it mostly offers a regulatory stranglehold instead of billions in incentives.
This is not an easy position to get oneself out of, and the EU’s leadership is running out of time. The thing is, however, that this leadership put itself into that position by focusing on all the wrong things at the same time and ignoring all the important factors that needed to be the focus of attention. Now, the transition push is in danger, and the repercussions will be felt far and wide.
“If we don’t deliver at home, if we sent a message out that the Green Deal caused a social upheaval, it will become an example for other countries not to follow,” SImoe Tagliapietra, a senior researcher at energy think tank Bruegel, told Bloomberg.
29 comments
Comments are closed.
Even so, I suspect the costs and the carbon footprint of continuing to plough billions into the black hole of corruption that is Ukraine, supposedly for as long as it takes, along with associated increases in ‘defence’ spending, will dwarf these energy transition costs. And none of the EU executives seems able to put 2+2 together to make 4. Plus the anti farmer drives appear to be more about driving small farmers out of business in favour of big Ag.
Exactly. Nothing is quite how it seems in Europe. The normal disease of any political regime is corruptio–Europe has entered that state of corruption (which is much more mature in the USA and thus closer to be resolved). It’s funny that in Germany at least the most “anti-green” political party is the Green Party who fell in love with US imperialism and in now content to pump money and death into the most corrupt country in Europe.
Human population reduction is the one and only solution. Why isn’t that obvious? And it is going to happen. One way or another.
We keep trying, timbers. Give us credit.
a la Harvey Milk’s (apocryphal, probably) quip to Dan White in “Milk”?
https://m.youtube.com/watch?v=9VAkRDPA2fk
If that means a reduction in the population of the global 10% who are responsible for the vast majority of global emissions, then yes perhaps. There was a solution “contraction and convergence” to allow the poor to grow out of poverty while the West went back to the 1960s in emissions but that was rejected by the Western elites. Energy equals power and there was no way that they were going to allow a power rebalancing.
Your statement is pure propaganda which hides the facts of who is overwhelmingly responsible for the emissions (both current and historical), and who should therefore be taking the greatest reductions.
‘If that means a reduction in the population of the global 10% who are responsible for the vast majority of global emissions, then yes perhaps. There was a solution “contraction and convergence” to allow the poor to grow out of poverty while the West went back to the 1960s in emissions but that was rejected by the Western elites…’
Perfect. Ethiopians or Vietnamese have no need or interest in being told they are too many to satisfy Western emission concerns. What these countries need is assistance or support in developing under relatively low emission conditions.
But isn’t it so what just happened? Covid killed mainly old Westerners. It was just, what are you exactly complaining about?
True enough. And many countries ex Africa do having falling, even crashing, birth rates.
Still, the eu is fond of regulations, they could ban private jets if they were serious. And, given their excellent rail system, ban short range commercial flights.
Just for comparison, the EU has thrown 143 billion Euros into the Ukraine black hole so far:
https://www.consilium.europa.eu/en/infographics/eu-solidarity-ukraine/
Let’s keep in mind that besides this expense, EU states have been shutting down nuclear energy, sat on their hands when the Nord Stream pipelines were bombed, and continue to impose self-destructive energy sector sanctions.
So I am skeptical that there is any genuine intention to address the problem of climate change in this EU Green Deal. Either there is some tremendous swindle under the hood there, or this is political/electoral ass-covering, or both.
the overlap between the countries with the largest buildup of wind and solar capacity and the countries with the highest electricity bills is quite remarkable.
One should be very careful about equating high electricity prices with excessive production costs for renewable energy.
The way the EU designed the electricity market generates perverse effects as to these factors.
The EU electricity market is based on the marginal pricing of the last, most expensive plant necessary to satisfy demand. The supply by the most cost-effective plants is first taken into account, then costlier alternatives are considered, with the price rising up to what is required for the least efficient plant strictly necessary to fulfil demand work profitably.
Thus, the production of hydro-power is first considered (cheapest); then wind&solar and nuclear (more expensive, but still cheap); then gas; then oil; then coal (typically the most expensive source of electricity). Take the case of France (figures for 2023):
11.9% Hydropower
64.8% Nuclear
10.3% Wind
4.4% Solar
6.1% Gas
2.1% Biomass, waste burning
0.4% Oil
0.2% Coal
0.1% Other
The price of running a coal thermal plant is what determines the electricity price — despite the fact that almost all electricity can be produced at vastly inferior costs. The difference is a permanent windfall for those companies that sell electricity (but actually do not produce any) on the much vaunted liberalized EU energy market. In France, it is not a windfall for EDF, which operates the nuclear power plants, because the French law obliges it to sell a large part of its production to those brokerage firms at prices below production cost ! EDF has therefore been accumulating losses and piling up debt just to maintain artificially the pretense of an energy market with many participants.
Countries where the share of renewables such as solar and wind is much higher have another problem: such renewables are cheap, but because of their intermittence, they require more frequent supply from thermal power plants operating with coal or gas. And each time such plants are necessary to compensate variations between supply and demand, the prices of electricity go way up — even if their contribution is small.
Yes, the transition is inherently fraught with considerable costs, but those insane neo-liberal market constructions make things much worse.
And in addition, Europe believes forcing a military build-up at prohibitive costs constitutes the highest priority…
“One should be very careful about equating high electricity prices with excessive production costs for renewable energy. The way the EU designed the electricity market generates perverse effects as to these factors.”
An excellent explaining comment, all through. Look to the Chinese electricity market, and there are none of the perverse effects found in the EU market; rather the reverse.
The Chinese burn coal and they couldn’t care less about your concerns for the environment lol
Political units at this time in history (at least in the West) prefer war to peace because war offers a way to destroy civil liberties and to transfer power and wealth to the corrupt elites that now govern the EU. I find it interesting that Europeans have turned their back on rationality itself which was supposed to free them from religion.
It is not just Europe but most electricity balancing areas in the US use “marginal pricing”.
The California Independent System Operator CAISO uses the idiocy of marginal pricing to hold up the profits of PG&E and SCE.
The author ignores China because it doesn’t fit her market outlook. China will be 100% renewable before many countries in the west because that is part of its plan. Wind and solar provide enough energy for ALL residential usage at very low production costs. The 422GW of wind and solar in the NW deserts will help in replacing coal usage and in meeting increasing electricity usage. High speed rail, many buses, and 40% of new cars all run on electricity. The coal plants built for industry will be replaced by renewables over the next twenty years.
Where do you get your data? There’s no such data about China and renewables, it’s just a lie.
.
“The country added 47.4 Gigawatts (GW) of new coal power in 2023, more than double the amount added by the rest of the world combined. It raises concerns that gains in clean power, including by China, are being undermined by the persistent use of coal, the worst energy form for climate change and air pollution.”
Sure but what do you do when you need 10 watt, and solar and wind only produces 8.
That’s why its the marginal producer that sets the price, to spur more money into electricity production. The problem is of course the unreliability of renewables, so as a greater proportion of it is in the system, it both outcompetes stable providers (large thermal plants, wheter coal or nuclear powered) and giving rise to larger variance in output thus requiring more money being spent on fixing that.
The problem is the unreliability of renewables, not the market.
Renewables are unreliable in very predictable ways.
Markets are currently set up to maximize profit from that intermittency.
They could be set up to optimize smoothing of supply and minimizing cost, but that would require central planning rather than private capital allocation for maximum profit, a paradigm shift.
“Renewables are unreliable in very predictable ways. Markets are currently set up to maximize profit from that intermittency. They could be set up to optimize smoothing of supply and minimizing cost, but that would require central planning rather than private capital allocation for maximum profit, a paradigm shift.”
— Jsn
[ Surely and importantly so. Thank you. ]
1) “Mostly, what was promised was cheap renewable energy. It may be cheap and renewable at some point in the future, but it isn’t now. On the contrary, the overlap between the countries with the largest buildup of wind and solar capacity and the countries with the highest electricity bills is quite remarkable.”
— Irina Slav
2) “One should be very careful about equating high electricity prices with excessive production costs for renewable energy. The way the EU designed the electricity market generates perverse effects as to these factors.”
— Vao
[ Thank you so much, Vao. ]
Not to be THAT pessimist, but the built-in warming we will see as a result of already emitted GHGs will result in a global temperature warming well above the threshold needed to stabilize our emissions. Warming the Arctic and particularly the permafrost over the next few decades will ensure a steady stream of methane emissions that we cannot control.
I’ve never been wildly enthusiastic about any of the transition plans because they really just involve self-flagellation. A serious approach would view the current situation as catastrophic, and start talking about radical, incredibly painful adjustments. Frankly, I doubt democracy can survive in that environment because I very much doubt that our political and business leaders would ever willingly change a system such that they sacrifice more than the wage-earners. So, I’ll be forced to give up pretty much everything I own or desire to own, while the wealthy carve out enclaves of privilege and social systems designed to keep them safe and secure.
So I have a bit of sympathy for the right-wing populists. They may be fighting for an unsustainable system, but they at least seem aware that it’s probably better than what the average person will face in the future.
Same here, I am at the point where I sometimes think “who cares, let the world end and burn, at least once in their lives the bastards will end up sharing the fate of the poorer people”. Then I remember my kids, of course.
How else are they going to start minting trillionaires? Even more people have to have a reduced standard of living.
“There is no way out of our greenhouse gas excesses that does not involve pain in the form of lower standards of living and potentially worse health”
Although I agree that worse health may happen (we already have experienced that) in our current trajectory. The lower standards of living is not inevitable part of transition (again we have already experienced lower standards of living alternatively known as high cost of living ) the reason I say it is not inevitable is because of the – never has been “free-market” canard – that is thoroughly parasitized by the FIRE Sector.
Specifically the one where overproduction and crapification of real products that actually contribute to a standard of living – from cars to you-name-it are designed for obsolescence and deliberately timed to fail so that production or service can achieve turn over at rates or expanding money gains to meet the FIRE sectors carefully procured “investment” plans that – in effect – produce a plantation economy… where a few commit the majority to peonage and most to wage structures that do not keep up with the cost of living. This is because the legislative branch of local through federal has been captured by the FIRE sector (a loose amalgam of predatory and parasitical actors whom prey or feed upon the real product sector)
Ranting – but, when you have western folks crying about how much overproduction is hurting the maintenance of higher product costs – complaining in effect that the cost of living is too low!! or gaming the system to crap a real service by claiming poverty when charging ransom prices by channeled profits away from the service to the fire sector (hospitals, assisted living, private equity plays, bond servitude, pay or die pricing) – those ransom prices and asset inflations that raise the cost of living do nothing – nothing but impede and reduce standards of living without contributing an iota to clean, sustainable energy use – they work against it
Interesting – so the reason for the crapification of consumer products should be blamed on the FIRE sector.
.
I remember that we used to have very good dishwashers. You could throw totally dirty dishes and pans and it would do the job magnificently. Then the *government* mandated “green” dishwashers, i.e., dishwashers who don’t wash dishes. Oh blame on FIRE.
.
I bet you think FIRE wants to change all our beautiful gas stoves for the crappy electric stoves. Right? And also FIRE wants to mandate horrendous, burdensome, ridiculous electric vehicles. Right? Just following your train of thought. Meanwhile, MOAR government is certainly the solution to all our problems.
It occurs to me that this might be a great opportunity for the EU. They have long wanted to introduce a EU taxation scheme where the citizens of the EU pay takes to it directly and not just in paying the taxes of their own countries. With the vast amounts of money needed for this scam, errr, scheme, it would be a great opportunity to bring in EU taxation to raise the money for it. But what I think what will happen is that the EU will raise bonds to pay for it instead and backed by that new taxation. That way, the bond-holders also get to dip their beaks in this honey pot.
Dropping 49% from 1990 emission levels in basically a decade still pretty impressive.
A snippet from Yves’ intro: “..and cons like carbon capture”
Carbon capture schemes are, at best, a very temporary band-aid (non)fix
https://www.bloomberg.com/news/articles/2024-04-09/russia-china-twin-threat-sees-eu-us-face-vast-increase-in-defense-spending?srnd=homepage-americas/
G-7 Faces a $10 Trillion Reckoning as the World Races to Re-Arm
The US and its allies are just starting to come to terms with the vast increase in defense spending required to counterbalance the militaries of Russia and China.
”…Analysis from Bloomberg Economics shows how the increasing burden of preparing for war will create a new fiscal paradigm for most NATO members.
Even just meeting the alliance’s 2% of annual GDP minimum for military outlays would stall much of the EU’s post-pandemic debt consolidation. Getting to 4% would push the bloc’s weaker sovereigns to make painful choices between even deeper levels of borrowing, significant cuts in other parts of the budget, or else tax increases…”
“…How a remilitarized world can reconcile such commitments with finite tax revenues and ever-greater welfare and health needs is set to become a searing political question in the years ahead…”
No discussion of emissions from war-mongering…