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Snow on top of a hedge outside a residential apartment block and a high voltage electricity transmission tower in Berlin, Nov. 21.
Photo:
Krisztian Bocsi/Bloomberg News
Europe is struggling to keep its lights and the heat on this winter, and fuel supply is only half of the energy crisis. The other half, now coming into view, is the ruinous fiscal cost associated with the failure of green-energy flights of fancy. European taxpayers will pay this bill for years to come.
Governments across Europe have announced €674 billion ($696 billion) in handouts and subsidies to alleviate the burden of skyrocketing energy prices between September 2021 and October 2022, according to Bruegel, the Brussels-based think tank. The money includes €264 billion in Germany alone and the equivalent of €97 billion in the United Kingdom. This is on top of what households and businesses are paying in higher energy bills even after the subsidies.
Some policies will help. Almost every European country has reduced excise taxes on fuel. This is a rare instance of the energy crisis forcing a beneficial rethink of green fixations—in this case, Europe’s tendency to treat energy levies as a green “sin tax.” But for the most part the money is subsidizing households and businesses directly or indirectly. One common tactic is to impose a retail price cap, with taxpayers plugging the gap between the costs that utilities must pay for energy and what they’re allowed to charge consumers.
A special dishonorable mention goes to countries such as France and Germany whose energy policies have dragged the government directly into the utility business. Paris has turned majority-state-owned utility EDF into a subsidy slush fund, using state control to limit retail prices today while apparently hoping taxpayers won’t notice plunging dividends or a big equity injection tomorrow. Berlin may nationalize
Uniper
and is offering tens of billions of euros in subsidized credit to other utilities.
This tabulation assumes “temporary” subsidies will expire on schedule, such as Britain’s energy price cap that’s due to end in April. If you think politicians will do that willingly, we have a hydropower dam in the Sahara to sell you.
This tally doesn’t include costs associated with the race to build new energy infrastructure, especially to import natural gas from sources other than Russia. Governments seem to be in denial about how to encourage private investment to shoulder more of this load.
Politicians still claim their medium-term plan is to ramp up renewables such as wind and solar. But those subsidies will skew incentives against investing in gas terminals or pipelines and the like. Taxpayers may end up footing bills that private investors would have been willing to pay if politicians hadn’t promised to put fossil fuels out of business within 10-15 years. Governments also are rushing to impose windfall taxes on the profits from the fossil-fuel investments they say they want to encourage.
Add it all to the tab. It’s impossible to say how much money Europe has wasted on its failed green-energy transition over the past few decades. Estimates for Germany alone start in the hundreds of billions of dollars. Taxpayers shouldn’t be surprised if their total bill to bail out that failed energy transition tops $1 trillion in coming years. When it comes to green energy, the motto is “pay, and pay again.”
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