Regulatory Reform

The EU’s Energy Conundrum

By: Riley Workman

The push to control carbon emissions and increase renewable energy alternatives in the United States has sparked a swarm of controversy over the effectiveness and economic impact such measures might have. If left unchecked, these restrictions can have severe economic consequences for the U.S. and remove the competitive edge that we maintain as a powerful energy producer.

Many of these concerns are expounded upon in a report recently released by the Manhattan Institute’s Center for Energy Policy and the Environment, which examines the effect that carbon taxes, cap-and-trade schemes, and renewable energy subsidies have had on the European Union.

The results have been grim.

Average electricity prices for Europeans ($0.26 per kWh) are more than double what they are for Americans ($0.12 per kWh).  What’s more shocking is that despite the lack of these stringent environmental regulations, the U.S. has actually reduced its carbon emissions since 2005 by a greater margin than the EU with reductions of 10.9 percent and 9.9 percent, respectively.

European companies are taking action in response to these higher energy prices.  Last year the German-based BASF calculated that they could save almost $700 million a year in energy costs alone if their plants were in the United States.  BASF has nearly doubled their annual investments in U.S.-based plants from $500 million in 2010 to $1 billion in 2013 and is expected to maintain this level of investment through 2017.  Other European manufacturers and companies are beginning to follow suite.

These high energy prices are also negatively affecting European families.  In 2013, 300,000 German households had their energy turned off for failure to pay their power bill.  The cause of this energy crisis might just be the 55% increase in residential energy cost across the EU since 2005.

While there is certainly a need for reasonable environmental regulations, many lessons can be learned from the mistakes that the EU has made when it comes to energy and environmental policy.  California is a good case-study of European-style environmental regulations gone badly.  Due to the state’s plethora of carbon controls and renewable energy mandates, customers of Southern California Edison pay roughly $316.06 for 1,250 kWh each month.  The rest of the country, on the other hand, pays an average of $120.86 for the same amount of electricity.

The American Legislative Exchange Council has long supported pro-growth policies that seek to avoid increases in overly burdensome or redundant environmental controls and mandates and has written about states looking to Europe for lessons of what not to do. Going forward, it’s imperative for policymakers to understand the importance of ready access to affordable and reliable energy and to realize that certain environmental policies could lead to significant unintended consequences as the EU’s energy crisis so clearly demonstrates.

In Depth: Regulatory Reform

In his first inaugural address, Thomas Jefferson said that “the sum of good government” was one “which shall restrain men from injuring one another” and “shall leave them otherwise free to regulate their own pursuits of industry.” Sadly, governments – both federal and state – have ignored this axiom and…

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