WSJ: Europe’s Climate Lesson for America: As wind power flags, energy prices are soaring amid fuel shortages.
By The Editorial Board
Energy prices are soaring in Europe, and the effects are rippling across the Atlantic. Blame anti-carbon policies of the kind that the Biden Administration wants to impose in the U.S.
Electricity prices in the U.K. this week jumped to a record £354 ($490) per megawatt hour, a 700% increase from the 2010 to 2020 average. Germany’s electricity benchmark has doubled this year. Last month’s 12.3% increase was the largest since 1974 and contributed to the highest inflation reading since 1993. Other economies are experiencing similar spikes.
Europe’s anti-carbon policies have created a fossil-fuel shortage. Governments have heavily subsidized renewables like wind and solar and shut down coal plants to meet their commitments under the Paris climate accord. But wind power this summer has flagged, so countries are scrambling to import more fossil fuels to power their grids.
European natural-gas spot prices have increased five-fold in the last year. Some energy providers are burning cheaper coal, but its prices have tripled. Rising fossil-fuel consumption has caused demand and prices for carbon permits under the Continent’s cap-and-trade scheme to surge, which has pushed electricity prices even higher.
Russia has exploited the chaos by slowing gas deliveries, ostensibly to increase pressure on Germany to finish the Nord Stream 2 pipeline certification. Vladimir Putin last week took a swipe at the “smart alecs” in the European Commission for “market-based” pricing that increased competition in gas, including from U.S. liquefied natural gas imports.
Mr. Putin can throw his weight around in Europe because the rest of the world also needs his gas. Drought has reduced hydropower in Asia, and manufacturers are using more energy to supply the West with more goods. Due to a gas and coal shortage, China has rationed power to its aluminum smelters and aluminum prices this week hit a 13-year high.
The U.S. is the world’s largest gas producer, but it isn’t immune from turmoil in energy markets. Natural gas spot prices in the U.S. have doubled over the past year in part because producers have increased exports to Europe and Asia. Exports are up more than 40% during the first six months this year over last.
This underscores how fossil fuels are a U.S. economic and strategic asset. The Biden Administration’s plan to curtail oil, gas and coal production by regulation would empower adversaries, especially Russia, Iran and China, which are the world’s three largest gas producers after the U.S.
Americans are already feeling the pain of rising energy prices. Electricity and utility gas prices were up 5.2% and 21.1%, respectively, over the last 12 months in August. Higher energy costs are bleeding into inflation. Some analysts predict that gas prices could double this winter if U.S. production doesn’t increase and global demand remains high.
Europe is showing the folly of trying to purge CO2 from the economy. No matter how heavily subsidized, renewables can’t replace fossil fuels in a modern economy. Households and businesses get stuck with higher energy bills even as CO2 emissions increase. Europe’s problems are a warning to the U.S., if only Democrats would heed it.