Financial Post, April 14

Ontario will follow the EU at its peril — power rates will soar while industries depart

As the Ontario government announces new unilateral climate policies, Canadian policymakers would be well advised to heed the lessons of Europe’s self-defeating green energy debacle.

The European Union has long been committed to unilateral efforts to tackle climate change. For the last 20 years, Europe has felt a duty to set an example through radical climate policy-making at home. Political leaders were convinced that the development of a low-carbon economy based on renewables would give Europe a competitive advantage.

European governments have advanced the most expensive forms of energy generation at the expense of the least expensive kinds. No other major emitter has followed the EU’s aggressive climate policy and targets. As a result, electricity prices in Europe are now more than double those in North America and Europe’s remaining and struggling manufacturers are rapidly losing ground to international competition. European companies and investors are pouring money into the U.S., where energy prices have fallen to less than half those in the EU, thanks to the shale gas revolution.

Although EU policy has managed to reduce CO2 emissions domestically, this was only achieved by shifting energy-intensive industries to overseas locations without stringent emission limits, where energy and labour is cheap and which are now growing much faster than the EU.

Most products consumed in the EU today are imported from countries without binding CO2 targets. While the EU’s domestic CO2 emissions have fallen, if you factor in CO2 emissions embedded in goods imported into EU, the figure remains substantially higher.

Of all the unintended consequences of EU climate policy perhaps the most bizarre is the detrimental effect of wind and solar schemes on the price of electricity generated by natural gas. Many gas power plants can no longer operate enough hours. They incur big costs as they have to be switched on and off to back-up renewables.

Most products consumed in the EU today are imported from countries without binding CO2 targets

This week, Germany’s energy industry association warned that more than half of all power plants in planning are about to fold: Even the most efficient gas-fired power plants can no longer be operated profitably.

Every 10 new units worth of wind power installation has to be backed up with some eight units worth of fossil fuel generation. This is because fossil fuel plants have to power up suddenly to meet the deficiencies of intermittent renewables. In short, renewables do not provide an escape route from fossil fuel use without which they are unsustainable.

Read more here: http://business.financialpost.com/fp-comment/eus-green-energy-debacle-shows-the-futility-of-climate-change-policies