European Decline '22: Gradually, Then Suddenly

Two stories dominate the headlines this week in Britain and Western Europe: Will Boris Johnson survive in Downing Street and power? And will the Russians invade Ukraine? They’re very different stories, but both are interwoven with the longer and ultimately larger story of the growing energy crisis in Europe and the world. It’s a larger story because economic growth, living standards, and even civilization itself depend on the availability of reliable cheap energy. It’s a longer story because the current crisis is the delayed outcome of feckless and irresponsible energy policies (camouflaged by dreams of Green utopianism) that European governments have been increasingly pursuing since the end of the Cold War.

A few days ago, Bloomberg’s energy correspondent, Javier Blas, tweeted out that day’s snapshot of the European energy situation:

Shocked? Alarmed? But wait. Maybe the Irish who pride themselves on their Green and European virtues tell a better tale? Alas, Blas continued:

Ireland is quite shocking: coal is accounting for 20 percent of power production this cold, windless morning; natural gas is doing another 45 percent, and fuel-oil (yes, you read that right) an extra 16 percent. In total fossil fuels are accounting for almost 90 percent of the country’s electricity now.

There were unhappy responses from the Green twitterati to these home truths along the lines of: Why not tell us about the days on which the sun shone and the winds blew and “renewables” generated lots of cheap energy? But they were missing the point. Renewables, natural gas, oil, coal, hydro, all generate cheap energy (nuclear does not). Except for renewables, however, the energy they provide is also reliable. That’s why they have to be on-stream when wind and sun fail and the energy that renewables then don’t generate has to come from other sources. That’s been happening in Europe a lot in the last few months.

Failure is, in fact, an option.

Why? Europe’s central problem is that its collective policy of switching from cheap fossil fuels to unreliable renewables can work only if the latter get large subsidies. These can be financed either honestly from the taxpayer in higher taxes or sneakily from the consumer in higher electricity bills. Either way they add to the cost of living. In addition, as economists used to know, planning such complex interventions to manipulate market signaling invariably goes wrong at some point and produces either a glut or scarcity. At present it’s scarcity. and therefore energy prices are soaring across the continent afflicting both the wise and the foolish virgins.

Almost all European countries are complicit in these failures. As often happens, though, the biggest countries are the most complicit because they are the most influential. They cause the problems from which everyone suffers.

Take Germany. Former German Chancellor Angela Merkel retired from politics in November last year amid glowing tributes as, in the words of the Economist magazine, “the indispensable European.” In reality she is the European most responsible for the wretched state of Europe’s energy market. She was responsible for five massive policy errors in her years in power, including refugee policy and opposition to reforming the Euro, but her two errors that  concerned energy now look the most damaging and the most consequential.

First, her decision to close down Germany’s nuclear power program—which she took “almost alone”—and replace it with energy from renewables has meant that coal-rich Germany uses more “dirty” coal to handle the problem that renewables don’t provide energy on schedule. It has also ensured that German energy prices are now the highest in Europe. According to one German source, household energy costs will rise by 37 percent by the end of 2022.

Auf Wiedersehen and good riddance.

Second, her determined support of the Nord Stream pipelines under the Baltic Sea over the objections of both Washington and Brussels, increased Germany’s and Europe’s over-reliance on Russian energy. And as we see in the current crisis, that enables Putin to use energy pricing and supplies as weapons against Poland and Ukraine—and to create a European political crisis by setting German economic interests (and now even needs) in opposition to NATO’s strategic unity and dividing the alliance.

It’s difficult to decide which of the two decisions has had the worse consequences.

By comparison French President Emmanuel Macron has a much easier problem to solve because his country “went nuclear” under previous presidents. As a result France has a far more reliable domestic source of energy in nuclear-power stations and is far less vulnerable to shortages of supply and price shocks in the international energy market.

But when prices are rising so sharply in those markets, as they are, France is not entirely invulnerable either. Its finance minister, Bruno Le Maire, warned that without official intervention of some kind, energy prices to the French consumer would rise by 37 percent this year which, inconveniently for the French president, is an election year. Macron has therefore imposed an energy price cap of four per cent.

It’s “naked unashamed populism” according to the Telegraph’s Ben Marlow who goes on to point out that Macron doesn’t want rising fuel prices to invite riots from the gilets jaunes in an election year—the election is due in April.

More to the point, it's a bad economic decision since it will encourage excessive use of energy, build up popular support for the price cap, and make it difficult to abolish it, even after the election, because that would mean accepting responsibility for a large rise in electricity prices. As long as it lasts, however, its huge costs will be borne by the state-supported nuclear supplier, EDF, its investors, the taxpayers, and ultimately by France’s nuclear industry which needs more capital investment to update the very ageing power stations that give France its energy advantage over other European countries. But Macron can afford it, and since he might win an election by doing it, he didn’t hesitate.

Suicide, she wrote.

Boris Johnson can only envy him. He is facing the political crisis of a lifetime amidst an economic crisis of rising energy prices and shrinking energy supplies. That  is the cumulative result of successive governments which pursued the dream of total decarbonization while failing to invest in an energy security guaranteed by many sources of supply, in particular domestic sources of reply as in France. Theresa May inherited the policy of Net-Zero decarbonization but she then made it worse—more expensive and requiring greater sacrifices from the voters.

Boris himself is similarly culpable because, having originally supported the fracking of natural gas—which is plentiful in Britain and the surrounding seas, the greenest fossil fuel, and possesses numerous other advantages—he junked the commitment to license its development in 2019 to win Green votes. He needs his government to reverse that decision if the lights are to stay on and the gas heaters to warm Britons through the winter. If not, he'll be out in the cold himself, perhaps as soon as next week when the Gray Report is slated to be released.

The larger lesson was delivered by Lord Frost, the cabinet minister who negotiated a mainly favorable Brexit deal for Boris, via an interview with the London Times this week: Boris needs to immediately clear out “all the neo-socialists, green fanatics and pro-woke crowd” in Downing Street if he wants to save his premiership. Lesson? Personnel is policy.

And if Boris doesn't keep in Number Ten, the same lesson will need to be read to his successor. Europe's energy policies are a recipe for destroying governments. So far the governments don't seem to have realized that.

Renewables: Is There Anything They Can't Do?

From the Wall Street Journal:

Natural gas and electricity markets were already surging in Europe when a fresh catalyst emerged: The wind in the stormy North Sea stopped blowing. The sudden slowdown in wind-driven electricity production off the coast of the U.K. in recent weeks whipsawed through regional energy markets. Gas and coal-fired electricity plants were called in to make up the shortfall from wind. Natural-gas prices, already boosted by the pandemic recovery and a lack of fuel in storage caverns and tanks, hit all-time highs. Thermal coal, long shunned for its carbon emissions, has emerged from a long price slump as utilities are forced to turn on backup power sources.

The episode underscored the precarious state the region’s energy markets face heading into the long European winter. The electricity price shock was most acute in the U.K., which has leaned on wind farms to eradicate net carbon emissions by 2050. Prices for carbon credits, which electricity producers need to burn fossil fuels, are at records, too... At their peak, U.K. electricity prices had more than doubled in September and were almost seven times as high as at the same point in 2020. Power markets also jumped in France, the Netherlands and Germany.

So the transition to so-called renewable energy has really been raking European energy markets over the coals. Literally, in fact, as coal-fired power plants are having to increase production to meet energy demands. And it's making Russia into a one nation OPEC, the only country in the region with an excess of natural gas which will happily export it.... for some significant diplomatic concessions.

Quite the bind the E.U. finds itself in. Perhaps they might consider changing course, accepting that shutting down their natural gas and nuclear power plants, not to mention banning fracking, is a mistake?

Doesn't sound like it! Reuters --

Record high power prices in European Union countries show the bloc must wean itself off fossil fuels and speed up the transition to green energy, the EU's top climate change official said on Tuesday.

That official -- first vice-president of the European Commission Frans Timmermans, who has appeared in these pages before, always singing the same one-note tune -- argues that, in fact, it is because they haven't transitioned quickly enough that things are so bad! "Had we had the Green Deal five years earlier, we would not be in this position because then we would have less dependence on fossil fuels and on natural gas," he said.

Never mind that the transition itself helped create the shortage by causing a shortage of the fuels that, for the foreseeable future, the continent continues to run on. That, and the fact that the wind doesn't always blow and the sun sometimes fails to shine.

Anyway, you heard it from Frans first -- renewable energy causes problems that can only be solved by... more renewable energy. Is there anything it can't do?

Saving Economic Recovery from the Greens

As the end of the Second World War approached, the Allied nations began serious preparations for peacetime policy and reform. That was felt to be an overriding duty owed to their armed forces fighting and dying in the field; it was fueled by a strong sense of guilt that they had failed in this duty after the Great War; and the content of that reform was largely shaped by two general ideas in wartime circulation.

The first was that future governments must harness science for the benefit of society; the second was that state planning was manifestly superior to the unplanned chaos of free market competition. The cant phrase was that as we had planned to win the war, so we must now plan to win the peace. Together these two ideas would shepherd us towards a better world. Films, plays, and novels as well as White Papers were published along these lines.

Critics would patiently make a case against these ideas. My first boss on the Daily Telegraph, whenever a colleague proposed to tackle some social problem “like a military operation,” would ask sardonically: “Have you ever served in the Army?” But it’s hard for even clever people to make a dent in an amorphous ideological atmosphere.

As a result the first idea triumphed in the United States, where science married government following the Manhattan Project, gave birth to a military-academic-industrial complex, and has lived a luxurious but not always honest life dancing to her mate’s priorities ever since. The second idea of state planning won out in Britain, in the Allied Control Commission running Germany for the first few years of peace, in several other Western European states, and of course in an “Eastern Europe” under Soviet control.

The results of both we’ll see below.

They’re important because the same kind of debate is now being held in Europe and North America over what policies we should be pursuing in the relatively near future as we emerge from the Covid-19 pandemic, and the lockdowns imposed to defeat it, to find economies ravaged by several months of inactivity and losses. Estimates of the severity of those losses vary greatly from a fall in GDP of 6.5 percent to one of 35 percent.

And when we recall it took about six years for many European countries to return to the levels of prosperity they enjoyed before the 2008 financial crash (made worse in Europe by the grumbling Euro crisis that may be about to re-emerge in Italy), we must acknowledge the seriousness of the challenges we’ll face and the difficulty of choosing between alternative choices. .

Debates over which recovery policies to pursue fall into two categories. There is the more or less eternal clash between those favor a free market policy of liberating enterprise, cutting regulations, and stabilizing the currency in order to attract investment and increase economic growth and those who believe in state planning, public investment, high levels of regulation, and inflationary finance to do the same.

Intellectually speaking, that conflict was decided by the early fifties in Europe. As the distinguished Hungarian economist, P.T. Bauer used to argue, the workforces in countries on both sides in the war were already skilled, educated, and in possession of attitudes and aptitudes conducive to economic success. They already had or were human capital.

How would they perform under different policy regimes? The answer was provided by the sluggish postwar economic performance of statist Britain under Clement Attlee’s Labour compared to the rapid recovery of both Germany and Italy under Christian Democrats whose finance ministers pursued orthodox policies of deregulation and anti-inflationary finance. Italy returned to prewar levels of prosperity by 1949, Germany a little later. Both enjoyed “miracle” economies by the mid-fifties; the Brits had to wait for Margaret Thatcher in 1979.

So we know the policies needed to provide a speedy return to prosperity.

But those working on post-pandemic recovery policies have adopted a second aim which greatly complicates any plans to do that. The European Commission, most European governments, notably those led by Angela Merkel and Emmanuel Macron, the United Nations, the Democratic opposition party in the U.S., the Pope, the Davos crowd of morally correct CEOs, and bien-pensant liberal opinion generally supports a  “Green New Deal” of recovery on the back of a massive reduction of carbon emissions which is rather like eating without food or swimming without water.

If my description sounds somewhat over-critical, here is the EU’s own account of what the "European Green Deal" (click on the link) means: “a modern, resource-efficient, and competitive economy where:

I will treat that last item as a meaningless piety until the EU manages to come up with a financial and currency deal that rescues the economies and unemployed youth of southern Europe left behind by the depredations of the Euro. First things first. On the other hand, I will charitably assume that the first item will not be achieved by “exporting” the EU’s carbon emissions to other parts of the world, mainly Asia, by investing in factories that operate under looser climate rules. As is done now.

That leaves item two. If my charitable assumption is correct, economic growth can only be de-coupled from resource use—to the extent that the economy grows while the carbon-based forms of energy that currently power it are massively cut—by new forms of energy as yet undiscovered or by scientific advances that allow us to use carbon-based energy while eliminating their emissions.

And here the Green New Deal faces a serious problem: Science isn't Magic. It's a powerful engine of progress but it doesn't always deliver exactly what you want when you want it. For instance, most of the new alternative forms of energy currently in use—the so-called “renewables”—are either unreliable (i.e., winds don’t blow on schedule, not all days are sunny) or expensive to produce, commercially risky, and in need of subsidies.

Similarly, technologies that would allow us to “capture” carbon emissions and disperse them harmlessly have yet to be developed. That means not that they will never be developed, but that they might remain bright ideas for a long time and be prohibitively expensive compared to existing energy sources when they eventually come online.

And those caveats apply to other new technology “fixes” on which the Green New Deal implicitly relies. They explain too why the deal is so heavy on vague uplift and social justice rhetoric in its “roadmap to actions” section: “supporting industry to innovate,” for instance, and” “turning the political commitment [to making Europe climate-neutral by 2050] into a legal obligation.” Its rhetoric can’t be matched by its proposed actions.

What becomes crystal clear is that, barring some huge technological miracles, the only way that Europe can grow without net emissions of greenhouse gases by 2050 is by diverting the whole of any economic growth away from increasing the living standards of its peoples into transforming its economy along puritan green lines. Even then it will find it hard, probably impossible, to avoid actually depressing such living standards by a considerable amount.

In short, Greenery can’t rely on science to deliver the goods for it.

That, of course, is exactly how the Soviet Union destroyed itself. It diverted the proceeds of production (and of massive borrowing from abroad) from consumer living standards to investment in military technology, thus becoming as someone said: “Upper Volta with nuclear weapons.”

EU leaders can’t admit any of this, and they may well feel that—in response to pressure from their own Green parties (with whom some are in coalition)—they have gone much too far in promising this transformation. President Macron’s fierce threats to place sanctions on countries that don’t join the Paris Green accords would suggest so. It’s a classic attempt to get other countries to assume the burdens that would otherwise cripple France in competition with them.

Nations have sometimes made commitments they have no intention of fulfilling for a quiet life diplomatically. But repeated commitments create a general political atmosphere in which retreating from them looks like cowardice, bad faith, and even cynical duplicity. The existence and growing political clout of extreme Green parties and NGOs make that doubly difficult. Those movements have no qualms about adopting policies that will bring about a severe drop in the standard of living of countries, including their own, that they feel are looting the world’s resources. In fact it’s their policy is to bring about such a change—and in particular to use the transition from the recessions caused by the pandemic not to restore the living standards of 2019 but to foster a humbler, poorer, greener Western world.

In the last week, sensing a danger that the EU would begin to soften its flagship Green cause in order to revive European economies, environmental pressure groups have begun to make the case that restoring prosperity comes second to moving to the new green economy—and, more honestly and ruthlessly, to propose that some industries either shouldn’t return at all or at the very least should return in a shrunken form.

Their candidates for this reduction in size and importance are: the airline industry, the shipping industry, and (more surprisingly) the farmers who are in the firing line because the Greens argue that the Common Agricultural Policy (CAP) damages the environment, privileges large agri-business, and takes a massive 38 percent of the EU’s budget which could be used on greener causes.

All three industries have clout, strong lobbying representation in Brussels, and strong positions to defend. The airlines have the advantage that when the pandemic has faced from memory, people will want to vacation and visit their second homes abroad. The shipping industry likewise, and it has already sounded the alarm. France’s farmers, which have successfully defended the CAP against earlier attacks from, for instance, Tony Blair and Margaret Thatcher, have always enjoyed the support of French governments. They're unlikely to lose that now.

But these industries—and the customers they serve—will need to organize for a real fight. They may have the larger public on their side, a popular cause in economic recovery, and an intellectual case in how recovery was achieved after 1945. But their enemies are well-entrenched in the media, the bureaucracy, the law, and politics. And they have the great unseen benefit of a political atmosphere in which saving the earth is the unassailable political virtue—and the European Union its loudest champion.

Until it dispels that myth, industry will have an uphill fight—and the EU a mass of of embarrassments.

Is There Anything Global Warming Can't Do?

Global warming -- is there anything it can't do? Item No. 1:

England is in danger of experiencing droughts within 20 years unless action is taken to combat the impact of the climate crisis on water availability, the public spending watchdog says. The National Audit Office (NAO), in a report published on Wednesday, says some parts of England, especially the south-east, are at risk of running out of water owing to decreased rainfall and a need to cut the amount taken from natural waterways.

Water companies will have to reduce the quantity of water they take out of rivers, lakes and the ground by more than 1bn litres a day, creating huge shortfalls in the coming decades, the NAO warned. Parliament’s auditor predicted that 4bn litres of additional water supply would be needed each day by 2050 to counter the growing risk of drought from the climate emergency. The total supply is forecast to drop by 7% by 2045 because of the climate crisis and the need to scale back the amount of water taken out of England’s waterways and soils.

The one thing the British Isles will never run short of is water, since it falls from the sky every day in buckets, but hey...

Have you ever noticed that all such "predictions" as this one only run in one direction: utter calamity. Never mind that doomsayers have been at this since time immemorial, and that in the modern era some form of Malthusianism has interbred with the environmentalist watermelons (green on the outside, red on the inside) to produced the current media-fueled obsession with imminent doom if... we don't immediately enact their policy preferences. That those preferences include channeling vast amounts of public monies to the very folks making the predictions is entirely coincidental.

Funny how they never predicted the global rise in life expectancy, the improvements in farming that allows the planet to support 7.5 billion people, and surging living standards that all have occurred during our lifetimes. Why, it's almost like this is the best time ever to be alive.

Item No. 2:

After failing to grow wheat in Canada’s subarctic Yukon territory 15 years ago, farmer Steve Mackenzie-Grieve gave it another shot in 2017. Thanks to longer summers, he has reaped three straight harvests. This spring he plans to sow canola on his family’s 450-acre farm near Whitehorse, a city not much further from the North Pole than the heart of Canada’s crop belt Saskatchewan.

“If you asked me five years ago if I would be growing wheat, I’d have laughed,” said Mackenzie-Grieve, 62, who harvested some 100 acres last year.

Canada’s average temperature over land has warmed by 1.7 degrees C (3 degrees Fahrenheit) since 1948, with the north warming by 2.3 degrees C, the government said in 2019. More promising for Canada, one of the world’s top grain exporters, is that its frost-free season expanded by more than 20 days on average from 1948-2016, according to a 2018 paper by Environment Canada scientists.

So... good news, right?

Large-scale farming with quality harvests remains an elusive challenge in the far north, due to short summers and lack of infrastructure to store and transport commodities. But a warming climate makes crops possible in far-flung, isolated places. Newfoundland and Labrador, with a tiny fraction of Canada’s arable land, plan to add farm area the size of Toronto, the nation’s largest city...

“Climate change will have a very negative climatic, social and economic impact on the province but there still may be some small offset gains by producing food,” said Newfoundland and Labrador Fisheries and Land Resources Minister Gerry Byrne in an interview.

For environmentalists, there's a speculative cloud surrounding every silver lining. But no matter what trivial good, like feeding people, may come from "climate change" be not afraid -- the European Union is on the case, in the best way it knows how: with more bureaucracy and a spanking-new Action Plan!

Today, the European Commission and the High Representative set out the priorities and way ahead on Human rights and Democracy, adopting a Joint Communication and the EU Action Plan on Human Rights and Democracy for 2020-2024. Further, they put forward a joint proposal to the Council to act by qualified majority voting on issues falling under the Action Plan, reflecting the strategic importance of the Action Plan. It aims at fostering faster and more efficient decision-making on human rights and democracy.

Changing geopolitics, transition to the digital age, environmental degradation and climate change pose important challenges, but they are also opportunities to foster positive transformation towards more democratic and inclusive societies. Today's proposal sets out steps for the EU and its Member States to embrace new realities and act together in line with the EU's founding values.

Well, that ought to do it.