WSJ: Europe's Stark Renewables Lesson

"We can avoid what could well be a human calamity," German Chancellor Angela Merkel said in 2007 after EU leaders decided to cut greenhouse gas emissions by 20% and to generate 20% of the EU's energy from renewable sources by 2020. While these policies might have no discernible effect on the climate, they are a calamity for the EU. Like Frankenstein, the EU has created a renewable-energy monster it does not know how to tame.

In a clear-eyed analysis last week, the European Commission published its proposals for the follow-up period from 2020. The Commission notes that since 2005, the U.S. cut its CO2 emissions by more than 12% (a little less than the EU, which cut emissions by just under 14%), thanks largely to shale gas. EU firms and households, the commission says, are increasingly concerned by rising energy prices and widening cost differentials with the U.S. Between 2008 and 2012, the average electricity price paid by European industrial firms rose by 16.7% while American firms are paying 2.3% less, so prices paid by American firms are 45% lower than EU firms.  

As the U.S. powers into an era of cheap, abundant energy, across the Atlantic the European Commission reckons electricity prices will rise 31% before inflation by 2030 from 2011, and will consume an increasing share of European GDP. Widening energy-price disparities may reduce production and investment and shift global trade patterns, the commission concedes. However, it adds, if other countries outside Europe agreed to cap their greenhouse-gas emissions, they would help Europe's energy-intensive industries—hardly an inducement for them to do so.  MORE