Tuesday, December 06, 2016

With Trump’s victory, Europe may need to become more open minded about energy and climate policy

Published on Newsweek

With the election of Donald Trump, Europe’s climate and energy policies may face drastic upheaval. It doesn’t look like top policy makers have noticed, given that EU Climate and Energy Commissioner Miguel Arias Cañete reacted to Trump’s victory by tweeting that “the world can count on the EU to continue to lead on climate”. 

Really? If Trump does withdraw from the Paris Agreement on climate change, or even from the 1992 UN Framework Convention on Climate Change or, if he simply ignores international climate commitments, it’s not very likely that Europe’s industry would just sit by and watch how Europe’s competitiveness is coming under strain. 

At Open Europe we’ve made clear how any advantages from EU climate change rules are closely dependent on what the rest of the world does. For example, the EU’s so-called “20-20-20 Targets” are about making sure 20% of EU energy provision is coming from renewables. But since forcibly adopting renewables pushes up business costs, unless the whole world walks in lockstep, the EU’s overall competitiveness will comparatively decline. Despite the fact that the United States may only be responsible for about 15 percent of CO2 emissions, its economic competitiveness is still the central anchor point for the world economy. An Open Europe study from 2014 estimated the cost of adopting the EU’s climate change targets at an extra £220,000 for a British SME.

Is there anything wrong with renewables? Not at all. If only Europe managed to get all its energy from that particular energy source, it would no longer be dependent on Saudi Arabia or Russia. Renewables are in itself a much more decentralized kind of energy generation than traditional forms of energy provision, so an energy market dominated by renewables is likely to be much freer and more competitive than the current state-controlled energy markets currently operating in Europe.

At least, that’s the case if we’re speaking about economically viable renewables, which they aren’t yet. Despite progress on bringing down the average price per megawatt generated through renewables, many traditional competitors still have the upper hand, partly due to subsidies, which drive up the cost of electricity indirectly, but also because fossil fuel prices are at historic lows. Another problem with renewables is that they aren’t all that environmentally friendly to begin with. Hazardous materials are needed to produce solar panels while the environmental downsides of wind turbines have also been documented.

Of course renewables are making rapid progress, and so is battery and storage technology, which can help renewables deal with the fact that electricity transmission networks aren’t sufficiently adapted to cope with their specific pattern.

At the same time though, fossil fuels are making important headway as well. In India, an Anglo-Indian company developed a revolutionary technique to capture carbon emissions from coal-fired power stations – a technique that has been shown to work on a commercially viable basis. The clean coal debate was restarted this year, after both candidates in the U.S. presidential race came out in support of it.

Since coal remains the world’s single biggest source of electricity, developing ways of reducing its environmental impact should be at the top of the agenda. Despite what naysayers think, fossil fuels aren’t going to disappear anytime soon. In fact, coal-fired electricity generation is projected to rise from 8.6 trillion kWh in 2012 to 9.7 trillion kWh in 2020 and 10.6 trillion kWh in 2040 as developing and developed nations alike are ploughing billions into building new plants. G20 nations have spent $76 billion for coal projects between 2007 and 2015 and are currently investing $24 billion more in fossil fuels.

This brings us to the one important lesson that should be drawn from energy policies: it’s not wise to declare that only one particular kind of energy production can be environmentally friendly and economically viable. As long as the principle that “the polluter pays” is respected, coal, renewable, nuclear and other technologies should be allowed to compete with each other. 

With Trump’s victory, it’s likely that renewables in the US will be subject more than ever to market forces. It’s unlikely Europe won’t somehow will be forced to follow suit. Therefore, Europe needs to become open minded about the issue and accept that just as technology could make renewables economically viable, it could make fossil fuels environmentally friendly.  

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