Europe’s Green Experiment

There are two glaring deficiencies in the implementation process for New York’s Climate Leadership and Community Protection Act (Climate Act): lack of detail about the costs to implement the transition to net zero and disregarding the experiences of other jurisdictions.  This post summarizes the current situation of the European plan to meet the same target as New York.  The Global Warming Policy Foundation just released a report entitled Europe’s Green Experiment – A Costly Failure in Unilateral Climate Policy.  I believe the Climate Action Council should explain how New York’s plan could possibly avoid the issues identified in this report in their Final Scoping Plan.

Everyone wants to do right by the environment to the extent that efforts will make a positive impact at an affordable level.  I have written extensively on implementation of New York’s Climate Act because I believe the ambitions for a zero-emissions economy embodied in the Climate Act outstrip available renewable technology such that it will do more harm than good.  The opinions expressed in this post are based on my extensive meteorological education and background and do not reflect the position of any of my previous employers or any other company I have been associated with, these comments are mine alone.

Climate Act Background

The Climate Act establishes a “Net Zero” target (85% reduction and 15% offset of emissions) by 2050. The Climate Action Council is responsible for preparing the Scoping Plan that will “achieve the State’s bold clean energy and climate agenda”.  They were assisted by Advisory Panels who developed and presented strategies to the meet the goals to the Council.  Those strategies were used to develop the integration analysis prepared by the New York State Energy Research and Development Authority (NYSERDA) and its consultants that quantified the impact of the strategies.  That material was used to write Draft Scoping Plan that was released for public comment at the end of 2021. The Climate Action Council will revise the Draft Scoping Plan based on comments and other expert input in 2022 with the goal to finalize the Scoping Plan by the end of the year.

In section 16 of the Climate Act § 75-0103 there is a mandate to consider efforts at other jurisdictions: “The council shall identify existing climate change mitigation and adaptation efforts at the federal, state, and local levels and may make recommendations regarding how such policies may improve the state’s efforts.”  There has been very little discussion of efforts at other jurisdictions.  The few times other jurisdictions were discussed it was mostly related to calls for greater aspirational goals.  The remainder of this article describes why I believe the European experience should be considered by the Climate Action Council.

Europe’s Green Experiment

John Constable wrote the new report describing the economic impact of European green policies. The European Climate Law:

…..raises the EU’s 2030 emissions reduction target to at least 55% from 40% and makes climate neutrality by 2050 legally binding.  The Climate Law is part of the European Green Deal, the EU’s roadmap towards climate neutrality. To reach its climate goal, the European Union has come up with an ambitious package of legislation known as “Fit for 55 in 2030. It comprises 13 interlinked revised laws and six proposed laws on climate and energy.

Constable writes:

These policies were built on a long-standing interest in renewable energy flows, stretching back into the 1930s but first prominent in response to the oil shocks of the 1970s. After 1990, this interest crystallised as demanding targets for levels of renewable energy in final energy consumption, starting in earnest in 2009, and the Emissions Trading Scheme, which began in 2005. These policy instruments were supported by a concerted and extensive program of public communications and supplementary environmental regulation, such as the Large Combustion Plant Directive of 2001, and its successor the Industrial Emissions Directive of 2016, both intended to address industrial release of harmful substances.

This general environmental effort has been tremendous, but the results are still poorly understood by the public upon whom the experiment has been performed. A host of pertinent questions hang in the air unanswered:

Have the EU member states reduced their emissions?

Have they reduced them in a cost-effective manner?

Are the policies setting an economically compelling example to other countries?

Has a self-supporting and internationally competitive green economy emerged in Europe?

Is Europe a leading developer of low carbon technologies?

How much has the green experiment cost?

Have there been any unintended consequences?

Can it continue?

What has been learned?

The report contains 14 sections that are all relevant to New York’s plans:

• The Emissions Trading Scheme
• Growth in renewable energy
• Conventional electricity generation
• Renewable heat and cooling
• Renewable transport fuel
• Total renewable energy progress
• Costs and benefits
• Energy efficiency
• Energy prices in the EU
• Energy production, consumption and productivity
• Emissions in the EU
• Green jobs and other jobs
• Has the EU learned from its experiment?
• The energy transition illusion and the future of European prosperity

I recommend that anyone interested in potential issues with New York’s plans read the report.  I am only going to summarize a few of the findings listed in the summary.

The section on the European Union Emissions Trading Scheme is relevant because the Climate Action Council has setup a subgroup to consider a carbon pricing scheme for New York.  The report notes that:

The Phase 3 of the European Union Emissions Trading Scheme (EU ETS) ran from 2013–2021 has added €78 billion to consumer costs in the bloc, with the annual cost now amounting to about €17 billion.  In 2020, EU member states paid €1.2 billion of ETS revenue to electro-intensive industries to compensate them for cost increases caused by the ETS itself in 2019. This amounts to about 12% of total ETS costs in that year and is clear evidence that the ETS has a detrimental effect on competitiveness. Germany paid €546 million, some 17% of its ETS revenue.

I see no reason to expect that similar costs to consumers will also occur if New York sets up a similar scheme.

The summary description of electricity, gas and transport fuel prices should be a cautionary tale.  It is impossible to compare the Draft Scoping Plan cost projections with the results observed because there is insufficient detail in the Draft Scoping Plan.  The report compares European Union (EU) energy costs to the world’s largest economies in the G20.  It found that in the period 2008 to 2018:

Electricity prices to households in the EU have been 80% above those in the G20.  Electricity prices to industries in the EU have been about 30% above those in the G20.  Gas prices to households in the EU have been approximately double those in the G20.  Gas prices to industries in the EU have been between 20% and 30% above those in the G20.  Diesel prices in the EU have been approximately 10% to 40% above those in the G20.  Petrol prices in the EU have been approximately 30% to 50% above those in the G20.  The EU’s underlying wholesale prices for electricity and gas were similar to those in the G20, and for both petrol and diesel the EU’s wholesale prices were below those in the G20, both indicating that the EU’s higher energy prices are due to policy.

I believe that the results shown for conventional generation capacity and system load factor will be replicated in New York.  The summary states:

In the period 1990–2020, total EU electricity generation capacity has nearly doubled due to growth in renewables, while thermal capacity, which remains essential to system stability, has declined sharply due to regulation and lack of investment signals.  Electricity industry productivity has fallen because the enlarged generation fleet serves a smaller demand. In 1990 the EU’s generation fleet load factor was approximately 56%, but by 2020 this has fallen to 37%.

In a recent post on the carbon pricing subgroup I noted that New York’s investments in emissions abatement costs have been very high so far.  The report notes:

Carbon dioxide abatement costs in the EU are on average several times greater than even high-end estimates of the social cost of carbon ($100/tCO2e), indicating that the economic harm of the EU’s mitigation policies is greater than is the climate change it aims to prevent.

One of the big claims in the Draft Scoping Plan is that the transition plan will provide jobs.  However, the results in Europe suggest that may not work out as proposed.  The summary of green industrial growth explains that:

Employment in the European wind and solar industries has contracted sharply since 2008, with the Spanish industry falling from over 200,000 jobs in 2008 to under 50,000 in 2021, and the German industry halving from over 60,000 to under 30,000 full-time equivalent jobs. Despite a small absolute increase in employment, the EU’s share of global renewables industry employment has fallen from 20% in 2012 to 13% in 2021, and the bloc has substantial presence only in those areas of low-carbon technology, such as biomass, where there is little international competition.  Subsidised deployment in Europe has failed to give European industries a secure position in the world markets for renewable energy equipment. The field is now dominated by China.

Conclusion

Constable concludes: “In spite of the overwhelmingly negative results from Europe’s green experiment 1990 to 2021, the EU Commission appears to have learned nothing; it has announced still more ambitious targets for low-carbon energy, and has even promised to reduce energy consumption still further, in spite of the obvious dangers.”  He suggests that “policy correction is inevitable but entails significant reductions in European standards of living”.  I agree with him that this will be the case in New York. 

The Climate Action Council should explain to the residents of New York why their plan will not result in the problems that have been observed in Europe.  If they cannot do that then this ideological experiment should be put on hold until they can prove otherwise.