We’ve become so inured to the Brussels story that the USA is the Great Polluter (although it’s now #2 to China in absolute terms), and to the idea that the EU is the good guy on CO2 emissions, that it comes as a shock to challenge it. Isn’t it the EU which goes to Cancun and Copenhagen and Rio and pleads for firmer climate action, while the bad guys like the USA, China and India drag their feet? Isn’t it the EU which has passed vast and wasteful laws closing down coal-fired power stations, setting up cumbersome Emissions Trading Schemes, and mandating renewables? Isn’t it a prominent EU member-state — the UK — which has gone a step further, and passed a law requiring emissions reductions of 80% by 2050?
(An aside: there’s something seriously wrong when a parliament elected for five years presumes to load binding responsibilities onto children not yet born — but I suppose that’s no worse than leaving them a legacy of grinding debt).
But somehow the facts have a nasty way of overturning our preconceptions — and of forcing actions which we failed to anticipate.
On June 29th, the Sun reported that coal has overtaken gas in UK electricity production, and that coal consumption is back to levels not seen since 2006, with coal imports up 20% at 18 million tons.
And it’s not just the UK. According to Bloomberg, Europe is burning coal at the fastest pace since 2006. Despite the unnecessary added cost of carbon permits, coal is still cheaper than gas. And it’s available and reliable. Bloomberg, 4 July 2012
Meantime US CO2 emissions have been falling since 2005 — without any emissions trading scheme, Kyoto limits or a global emissions treaty.
What’s going on here to produce these counter-intuitive results? First and foremost, the shale gas revolution. The USA is awash with cheap natural gas. They’re replacing coal capacity with gas, which leads to substantially lower emissions.
US Electricity prices have halved. And US gas is very cheap indeed. The price of gas in Germany is five times higher than in the US, and in Japan seven times higher. (As I asked last week in the Strasbourg plenary, how is Europe supposed to compete in a globalised world on these terms?). The result? Gas is now better value than coal for electricity generation in the US. So US demand for coal has dropped, leading to lower prices. And lower coal prices make coal competitive in Europe. I’m delighted to see that the realities of the market-place carry so much more weight that the laws and policies of the madmen in Brussels.
In this context, how are renewables shaping up? Badly, in a word. Spiegel reports that solar photovoltaic subsidies in Germany will cost German energy consumers over €300 billion. Spiegel Online, 5 July 2012 Professor Fritz Vahrenholt, formerly CEO of RWE Renewables, in Strasbourg last week, told us how they were unable to turn a profit with their major investment in wind in Germany.
A new economic impact study on California’s Global Warming Solutions Act finds that the average California family will end up paying an additional $2,500 annually by 2020. In addition, the state is expected to lose an additional 262,000 jobs, 5.6 percent of the gross state product, and a whopping $7.4 billion through decreased annual state and local tax revenues as a result. IVN News, 4 July 2012
The logic of the market is inexorable. Coal and gas (and nuclear) are real. Renewables are simply pretentious green posturing by politicians who ought to know better. If we want to keep the lights on, we’d better learn to love coal again. And we should be pursuing shale gas relentlessly.
Acknowledgement: Much of the material in this blog came from Benny Peiser’s excellent CCNet briefings. Thanks Benny.