Europe’s green energy rush slashed emissions—and crippled the economy

European politicians pitched the continent's green transition to voters as a win-win: Citizens would benefit from green jobs and cheap, abundant solar and wind energy alongside a sharp reduction in carbon emissions.

- Tom Fairless & Max Colchester

Europe has succeeded in slashing carbon emissions more than any other region—by 30% from 2005 levels.

(BLOOMBERG)

Nearly two decades on, the promise has largely proved costly for consumers and damaging for the economy.

Europe has succeeded in slashing carbon emissions more than any other region—by 30% from 2005 levels, compared with a 17% drop for the U.S. But along the way, the rush to renewables has helped drive up electricity prices in much of the continent.

Germany now has the highest domestic electricity prices in the developed world, while the U.K. has the highest industrial electricity rates, according to a basket of 28 major economies analyzed by the International Energy Agency. Italy isn’t far behind. Average electricity prices for heavy industries in the European Union remain roughly twice those in the U.S. and 50% above China. Energy prices have also grown more volatile as the share of renewables increased.

It is crippling industry and hobbling Europe’s ability to attract key economic drivers like artificial intelligence, which requires cheap and abundant electricity. The shift is also adding to a cost-of-living shock for consumers that is fueling support for anti establishment parties , which portray the green transition as an elite project that harms workers, most consumers and regions.

Energy analysts say it makes strategic sense for a continent that lacks the abundant oil and gas riches enjoyed by the U.S. and some other regions to diversify its energy sources. In some cases like Spain, blessed with lots of sunshine, or Nordic countries, with abundant hydro power to provide energy when its wind farms fall silent, the transition looks promising . France’s reliance on nuclear energy is helping it keep costs down.

But in much of the region the transition is at risk of backfiring, adding to economic stagnation.