Newspaper article International Herald Tribune

Europe Faces a Crisis in Energy Costs

Newspaper article International Herald Tribune

Europe Faces a Crisis in Energy Costs

Article excerpt

Europe relies heavily on imported coal and natural gas, while green power sources require subsidies that are passed on to industry and consumers.

The signs are everywhere. Britain has been unable to reach a deal for its first nuclear power station since the 1990s. Spain, once a clean-energy enthusiast, has sharply reduced its support for wind and solar power.

Even the European Union's flagship environmental achievement of recent years, its Emissions Trading System for carbon dioxide, is beset by existential doubts. On Tuesday, the European Parliament batted away an effort to bolster anemic carbon prices on the E.T.S.

Prices for permits to emit greenhouse gases, which have fallen as low as EUR 3 a ton, are just a small fraction of what they were a few years ago, meaning that they are no longer doing their intended job of inducing utilities and manufacturers to invest in new technology and switch to cleaner fuels.

Evidently, members of the European Parliament were more concerned about further increases of energy costs, which some European companies already say are putting them at a competitive disadvantage.

Europe is lurching through an energy crisis that in many respects parallels its seemingly unending economic crisis. Across Europe, consumer groups, governments and manufacturers are asking how their future energy needs can be met affordably and responsibly.

It is a question that is far more acute than in the United States, where the shale gas revolution has done wonders to ease energy angst. "Europeans are getting increasingly concerned about energy," said Corin Taylor, an analyst at the Institute of Directors, a British business group. "Manufacturers are looking at U.S. energy prices with envy, and if they can, they are making investments in North America."

European countries have yet to demonstrate that they can or in some cases even want to exploit their own potential shale gas troves. At the same time, most of Europe's indigenous sources of oil and natural gas are in decline, making increased dependence on imports almost inevitable.

In some ways, Europe is a victim of its own success. It has made remarkable progress in switching to a future beyond oil and natural gas. For instance, last year, a hefty 23 percent of European power demand was met by electricity generated by renewable sources like wind and solar, compared with 13 percent in 2002. This shift was "driven primarily by generous support policies for renewables," said Susanne Hounsell, an analyst at the energy research firm IHS CERA in Paris.

But achievements like that have also brought problems. Most green electricity sources cannot compete with coal and natural gas on their own and require subsidies that are passed on to industry and consumers. The more power they generate, the higher those costs. …

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