EUROPE'S GREEN EXPERIMENT

A C O S T LY FA I L U R E I N
UNILATERAL CLIMATE POLICY
John Constable

The Global Warming Policy Foundation

Report 52
Europe's Green Experiment: A Costly Failure in Unilateral Climate Policy
John Constable
Report 52, The Global Warming Policy Foundation

© Copyright 2022, The Global Warming Policy Foundation

EUROPE'S GREEN EXPERIMENT
A C O S T LY FA I L U R E I N
UNILATERAL CLIMATE POLICY

‘For they have sowen the winde, and they shall reape the whirlewinde:
it hath no stalke: the budde shall yeeld no meale:
if so be it yeeld, strangers shall swallow it up.‘
Hosea, Chapter 8: verse 7

‘I will show you fear in a handful of dust.‘

T. S. Eliot, The Waste Land.

iii
iv
Contents
Summary  iv
1. Introduction  1
2. The Emissions Trading Scheme  4
3. Growth in renewable energy  9
4. Conventional electricity generation  15
5. Renewable heat and cooling  19
6. Renewable transport fuel  21
7. Total renewable energy progress  22
8. Costs and benefits  23
9. Energy efficiency  25
10. Energy prices in the EU  28
11. Energy production, consumption and productivity  31
12. Emissions in the EU  34
13. Green jobs and other jobs  37
14. Has the EU learned from its experiment?  45
15. The energy transition illusion and the future of European prosperity  54
16. Conclusion  72
About the author  73
Notes  74
Review process  78
About the Global Warming Policy Foundation  78

v
Summary
Since 1990, the European Union has pursued a rapid decarbonisation strategy, at first based largely
on emissions trading but increasingly reliant on thermodynamically incompetent renewable en-
ergy. The results have been to increase energy costs, suppress energy demand, and prevent recov-
ery after exogenous shocks such as the financial crisis of 2008 and the global pandemic of 2020.
Energy consumption, particularly electricity consumption, has been falling steadily in the EU since
about 2005, and it is reasonable to infer that these societies are regressing towards thermodynam-
ic equilibrium, with the effects temporarily buffered by fossil-fuel manufactured goods from Asia.
A selection of key findings follows.

The European Union Emissions Trading Scheme

• Phase 3 of the European Union Emissions Trading Scheme (EU ETS) ran from 2013–2021 has
added €78 billion to consumer costs in the bloc, with the annual cost now amounting to about
€17 billion.
• In 2020, EU member states paid €1.2 billion of ETS revenue to electro-intensive industries to
compensate them for cost increases caused by the ETS itself in 2019. This amounts to about 12%
of total ETS costs in that year and is clear evidence that the ETS has a detrimental effect on com-
petitiveness. Germany paid €546 million, some 17% of its ETS revenue.

Renewables subsidies and renewables growth

• Income support subsidies (excluding tax expenditures) to the renewable sector in the EU27 in
the period 2008–21 amount to approximately €770 billion.
• The annual cost of renewable subsidies to consumers in the EU27 currently amounts to €69 bil-
lion, with no end in sight.
• Renewables capacity has grown from about 100 GW in 1990, nearly all hydro, to over 500 GW in
2020, about 17% of the world total, with the vast majority of the increase being subsidised wind
and solar.

Electricity, gas and transport fuel prices

In the period 2008 to 2018:
• Electricity prices to households in the EU have been 80% above those in the G20.
• Electricity prices to industries in the EU have been about 30% above those in the G20.
• Gas prices to households in the EU have been approximately double those in the G20.
• Gas prices to industries in the EU have been between 20% and 30% above those in the G20.
• Diesel prices in the EU have been approximately 10% to 40% above those in the G20.
• Petrol prices in the EU have been approximately 30% to 50% above those in the G20.
• The EU’s underlying wholesale prices for electricity and gas were similar to those in the G20, and
for both petrol and diesel the EU’s wholesale prices were below those in the G20, both indicating
that the EU’s higher energy prices are due to policy.

Energy consumption
• Up to 2005, final energy consumption in the EU followed a rising trend, but has been falling
since, and is now at levels not seen since the early 1990s. Such a deep and sustained decline in
energy consumption is unprecedented in the modern era.
vi
• Electricity consumption, a strong indicator of a societal complexity and development, followed
a rising trend up to 2008, but has been falling since and is now at levels last seen in the early
2000s. This is also unprecedented.
• In the United Kingdom, electricity consumption has fallen back to levels not seen since 1970.
• Energy efficiency cannot in principle result in the observed reduction in energy and electricity
use, and the likeliest cause is price rationing and demand destruction.

Conventional generation capacity and system load factor

• In the period 1990–2020, total EU electricity generation capacity has nearly doubled due to
growth in renewables, while thermal capacity, which remains essential to system stability, has
declined sharply due to regulation and lack of investment signals.
• Electricity industry productivity has fallen because the enlarged generation fleet serves a small-
er demand. In 1990 the EU’s generation fleet load factor was approximately 56%, but by 2020
this has fallen to 37%.

Emissions abatement costs

• Carbon dioxide abatement costs in the EU are on average several times greater than even high-
end estimates of the social cost of carbon ($100/tCO2e), indicating that the economic harm of
the EU’s mitigation policies is greater than is the climate change it aims to prevent.

Green industrial growth

• Employment in the European wind and solar industries has contracted sharply since 2008, with
the Spanish industry falling from over 200,000 jobs in 2008 to under 50,000 in 2021, and the Ger-
man industry halving from over 60,000 to under 30,000 full-time equivalent jobs. Despite a small
absolute increase in employment, the EU’s share of global renewables industry employment has
fallen from 20% in 2012 to 13% in 2021, and the bloc has substantial presence only in those ar-
eas of low-carbon technology, such as biomass, where there is little international competition.
• Subsidised deployment in Europe has failed to give European industries a secure position in the
world markets for renewable energy equipment. The field is now dominated by China.

The European Green Deal

• In spite of the overwhelmingly negative results from Europe’s green experiment 1990 to 2021,
the EU Commission appears to have learned nothing; it has announced still more ambitious tar-
gets for low-carbon energy, and has even promised to reduce energy consumption still further,
in spite of the obvious dangers.
• Distressed policy correction is inevitable but entails significant reductions in European stan-
dards of living. Deferring this correction and persisting with renewable energy will increase the
depth of economic sacrifice required to put European society back on a thermodynamically
sound energetic footing.

vii
List of figures
1. Emissions in sectors covered by the EU ETS, 2005–20.  4
2. EU ETS emissions cap reduction, 2005–30.  5
3. EU ETS costs (general and aviation) 2013–21, by member country.  7
4. Clearing prices for auctions of general allowances, January 2013 to 30 June 2021.  8
5. EU ETS allowances, surplus of allowances and auction prices, 2005–20.  8
6. Total subsidies by energy carrier in the EU27 excluding tax expenditures, 2008–2018.  9
7. Subsidies to biomass, solar, and onshore and offshore wind in the EU27.  10
8. Total tax expenditures by energy carrier in the EU27, 2008–18.  10
9. Subsidies to renewables in the major economies, 2008–18.  11
10. All renewable electricity generation capacity: EU28 1990–2020.  11
11. Wind power capacity: selected EU states 1990–2020.  12
12. Solar power capacity: selected EU states 1990–2020.  12
13. Renewable electricity generation capacity in selected countries, 2012–21.  13
14. Renewable electricity generation in the EU28, by country: 2004–20.  13
15. Electricity generation in the EU28 by fuel type, 1990–2020  13
16. Total electricity generation capacity in the EU28, 1990–2020 by member state.  15
17. EU28 electricity generation fleet load factor 1990–2020.  16
18. Nuclear electricity generation capacity in the EU28, 1990–2020.  17
19. Combustion fuel electricity generation capacity in the EU28, 1990–2020.  17
20. Renewable energy for heating and cooling in the EU27, 2011–2020.  20
21. Renewable energy used for heating and cooling.  20
22. Renewable transport fuel in the EU27, 2011–20.  21
23. Renewable use in transport in Europe, 2005 and 2020.  22
24. Historical trends and sources on renewable energy shares.  23
25. EU abatement costs and the social cost of carbon.  24
26. Subsidies for energy efficiency in the EU27, 2008–18, by support type.  26
27. Electricity prices in the EU and the G20, 2008–19.  28
28. Natural gas prices in the EU and the G20, 2008–19.  29
29. Transport fuel costs in the EU and the G20, 2008–19.  29
30. EU27 primary energy, 1990–2020.  31
31. EU27 final energy consumption 1990–2020.  31
32. EU27 energy flows.  33
33. Energy productivity of wealth in the EU27, and selected countries, 2000–2020.  34
34. Historical trends and projections of net greenhouse gas emissions, 1990–2050.  35
35. Carbon intensity of industrial energy consumption in the EU28 1990–2019.  36
36. Carbon intensity of energy consumption for transport in the EU28, 1990–2019.  37
37. Photovoltaic module production by region 1990–2020.  38
38. Global annual photovoltaic module production by region 2010–20.  38
39. Employment in the European solar industry.  39
40. Global employment in renewables, by sector.  39
41. Employment in renewables by country and sector.  40
42. Renewable energy sector employment in selected countries, 2012–20.  40
43. Employment in renewables, Germany, the rest of the EU, and China, 2012–20.  41
44. Renewable energy capacity, Germany and the Rest of the World, 2012–21.  41
45. EU trade balance 2011–21.  42
viii
46. EU imports from and exports to China, 2011–21.  42
47. EU trade balance with China, 2011–21.  42
48. Extra-EU trade balance 2016, 2020, and 2021, by commodity type.  43
49. Extra-EU trade balance by EU member dtate, 2021.  44
50. EU27 extra-EU exports and imports by member state.  44
51. The core of the Trans-European Transport Network.  46
52. Energy targets for the EU27.  50
53. World total primary energy: 1800–2015.  58
54. World total primary energy supply: 1971–2019.  59
55. Total primary energy in the People’s Republic of China 1990–19.  60
56. Electrical energy generation fuel mix in China, 1990–2016.  60
57. EU28 total primary energy, 1990–2019.  61
58. Electricity fuel mix in the United Kingdom 2009–21.  62
59. UK electricity supplied 1920–2020.  62
60. UK energy flows 1995 (mtoe).  64
61. US primary energy: 1949–2020.  65

List of tables
1. Indirect carbon cost compensation paid out by EU member states in 2020.  6
2. Estimated abatement costs per tonne of carbon dioxide in the United Kingdom.  25
3. Proved fossil fuel reserves in Europe.  69
4. European coal as at 2012.  70
5. Wet natural gas production in Europe, and resource estimates  71

ix
x
1. Introduction
The European Union prides itself on being the global leader in at-
tempts to mitigate climate change through policies aimed at reduc-
ing the emissions of greenhouse gases. The ambition to take on this
role emerged during the later 1990s, coinciding, significantly, with
the reunification of Germany. It rapidly became prominent and, by
the early part of the new millennium, climate change mitigation had
already achieved dominance in the economic policy of the EU and its
member states. This trend has continued, and today it is no exaggera-
tion to say that climate mitigation exercises a controlling interest in
every aspect of the EU’s strategy and tactics. The depth to which the
abstract goal of emissions reduction and the particular methods, no-
tably renewable energy, are entrenched can be gauged from the fact
that four years after voting to leave the EU, and two years after actu-
ally leaving, the United Kingdom is still following the path outlined by
the Commission.
It is doubtful whether the supervenience of climate policy in EU
thinking will survive the current geopolitical crisis. This is not because
Europe’s unilateralism has been caught out by the recent resurgence
of national conflict – geopolitical strife has never been far away, and
indeed has been growing – but rather that the war in Ukraine has
brought the failures of the EU’s climate policies into sharper focus,
and sooner than might have been expected. But this does not mean
that the harm of the policies is itself of recent origin. On the contrary,
the environmental policies have been damaging to the EU’s interests
and advantageous to those of its rivals from the very beginning. As
this study will demonstrate, the enthusiastic adoption of the green
agenda in the 1990s and early 2000s has effectively produced grad-
ual industrial and economic disarmament. That makes the error all
the more extraordinary, but it also indicates that the EU must now
deal, not just with short-run damage of recent origin, but also with
the harms accumulated over two decades and its resultant enfeeble-
ment relative to Europe’s competitors. Arresting the decline will be
difficult; recovering the situation entirely may be impossible.
What was the EU Commission thinking of when they blundered
into these disastrous errors? In general, the EU’s climate policies are
an attempt, through policy, to internalise the externalities of energy
consumption, thus creating an incentive to reduce greenhouse gas
emissions and pollutants. It was hoped that this would encourage the
rest of the world to do likewise, while also – and this was not entirely
consistent – giving the EU’s member states, and Germany in particu-
lar, a commanding and unassailable lead in the emerging markets of
the new green economy. Europe had lost its global dominance in the
world of coal and oil and gas; it would recover it through wind and
solar and the suppression of fossil fuels in an historic energy transi-
tion, which after 2011 came to be known by its German title, the en-
ergiewende.
These policies were built on a long-standing interest in renewa-
ble energy flows, stretching back into the 1930s but first prominent in
response to the oil shocks of the 1970s. After 1990, this interest crys-
1
tallised as demanding targets for levels of renewable energy in final
energy consumption, starting in earnest in 2009, and the Emissions
Trading Scheme, which began in 2005. These policy instruments were
supported by a concerted and extensive program of public commu-
nications and supplementary environmental regulation, such as the
Large Combustion Plant Directive of 2001, and its successor the In-
dustrial Emissions Directive of 2016, both intended to address indus-
trial release of harmful substances.
This general environmental effort has been tremendous, but the
results are still poorly understood by the public upon whom the ex-
periment has been performed. A host of pertinent questions hang in
the air unanswered:
• Have the EU member states reduced their emissions?
• Have they reduced them in a cost-effective manner?
• Are the policies setting an economically compelling example to
other countries?
• Has a self-supporting and internationally competitive green econ-
omy emerged in Europe?
• Is Europe a leading developer of low carbon technologies?
• How much has the green experiment cost?
• Have there been any unintended consequences?
• Can it continue?
• What has been learned?
An onlooker, from the United States perhaps, might note that
governmental enthusiasm for the green policies continues, and if an-
ything has grown over the thirty years since 1990. They might assume,
quite reasonably, that the EU would only forge ahead in this way if the
policies were working. But this assumption would be mistaken. Gov-
ernments persist in their folly not only because they are too close to
their own failures to bring them into focus, but sometimes because
persistence is the most effective means by which failure can be con-
cealed. There are none so blind as those that will not see.
However, for those that wish to confront the matter without prej-
udice, there is no shortage of data, and the questions sketched above
can be addressed with sufficient accuracy to permit conclusive an-
swers. This study attempts – on the basis of information published by
the renewables industry, by the EU’s own data resource, Eurostat, and
by the Commission itself – to distil an intelligible description of the
main policy instruments, their costs, and their consequences. Its con-
clusions can be briefly stated as follows. The climate policies adopted
by the European Union have:
• degraded the productivity of the energy sector, particularly the
electricity sector;
• increased the cost of energy, particularly electricity, through the
coerced adoption of thermodynamically incompetent renewables;
• created a strong price-rationing effect that has suppressed energy
demand, particularly electricity, within the EU’s member states;
2
 • made the European region more dependent on goods and ser-
vices – including renewable energy generation equipment – from
without the EU, principally fossil-fuelled Asia and China;
• produced the longest sustained fall in energy consumption in the
modern period, perhaps the longest since the late Middle Ages;
the onset of societal instability cannot be ruled out.
Distressed policy correction is inevitable, but the timing is uncertain.
The harmful outcomes sketched above have, to some degree,
been offset by the adoption of more efficient end-user energy con-
version devices, improvements that would in other circumstances
have delivered positive substantial increases in societal complexity
and welfare, but in the EU have only prevented a precipitate decline.
One might say that, alongside the illusion of intrinsic prosperity cre-
ated by the import of goods from Asia, energy-efficiency measures
have anaesthetised the public to the economic damage of the last
thirty years.
Of course, it is undeniable that in terms of its principal goal the
EU’s policy has been successful. Emissions of greenhouse gases have
been reduced significantly in nearly all sectors. However, the abate-
ment cost exceeds even higher estimates of the social cost of carbon,
indicating that the environmental policies are causing more harm to
European welfare than is the climate change that they aim to prevent.
The cure is worse than the disease.
Even if the EU and its member states were to acknowledge their
error today, it is unclear whether they could recover gracefully and
without considerable societal distress. The malinvestment in renew-
able energy is on a very large scale; writing it off and rebuilding the
energy sector on thermodynamically sound lines will require sacri-
fices in household income for extended periods. However, there is as
yet no sign that the Commission is conscious of the structural harm
that it has inflicted on member states, and, in the New Green Deal put
forward in 2021, it is now proposing to proceed still further along the
same policy track.
A change in course is inevitable and will be forced on member
states sooner or later, but the deeply embedded harm of nearly thirty
years of error means even a prudent policy correction towards fun-
damentally cheaper energy will require substantial reductions in Eu-
ropean living standards. Failing to undertake this correction as soon
as possible will result in still deeper damage and even more costly
remedial action. Explaining this to the European people will form the
greatest political challenge of the next fifty years.

3
 2. The Emissions Trading Scheme
The EU Emissions Trading Scheme (ETS) began in 2005. It is no-
tionally the bloc’s principal emissions reduction mechanism and
its most powerful attempt to internalise the externalities of en-
ergy consumption. In practice, as we shall see, it has been over-
taken and marginalised by renewable energy policies, although
the ETS remains extremely and increasingly expensive.
The ETS is a cap-and-trade mechanism, covering electricity
generation, heat, and energy-intensive industry. The cap guaran-
tees the emissions reduction, while trading of allowances is in-
tended to ensure that reductions can be achieved in the lowest-
cost sectors first.
The EU proudly reports that emissions in the sectors covered
have fallen by 43% since its introduction and that the scheme is
a key contributor to the fact that EU emissions in 2020 are some
31% below 1990 levels, exceeding targets (Figure 1).1

Figure 1: Emissions in 2.5

sectors covered by the
EU ETS, 2005–20. 2.0
Source: Redrawn from European
Environment Agency.55 Note: The
category ‘Estimate to reflect current 1.5
scope’ is the EEA’s estimate of those
GtCO2e

emissions not covered by the ETS

before 2013, but now included in 1.0
the scope of the ETS.

Aviation 0.5
Estimate to reflect current scope
All industrial installations
0
Combustion of fuels 2005 2010 2015 2020

However, a causal relation between the ETS and the evident

emissions reductions is rather harder to establish than might be
imagined. As the authors of one study observe:
Changes in emissions depend on both changes in activity levels
and the emission intensity of production, influenced by EU and in-
ternational policies and a wide range of other factors. This makes it
challenging to ascertain the extent to which emission reductions
are directly attributable to the EU ETS.2
While this point may seem subtle – the ETS guarantees the
emissions reduction but does not necessarily cause it – the guar-
antee is real and is created through a cap imposed by legislation,
with that cap being reduced by a specified percentage on an an-
nual basis, as summarised in Figure 2. It should be recognised,
however, that this decline in emissions is not uniform across
all sectors. For example, aviation within the EU exhibits a clear,
though undramatic, upward trend over Phase 3 of the ETS, rising
4
Figure 2: EU ETS emissions Emissions cap reductions (percentage points per year)
cap reduction, 2005–30. Phase 1 Phase 2 Phase 3 Phase 4
Source: Adapted from COM(2021) -1.74 -2.2
962 final.56 Commission note: -4.2
‘The cap for phase 4 reflects the 2.5
post-BREXIT publication of the EU
ETS total volume of allowances
in the Commission Decision (EU) 2.0

GtCO2e
2020/1722.’
Emissions 1.5

1.0

0.5

0
2005 2010 2015 2020 2025 2030

from 53.5 mtCO2e in 2013 to 68.2 mtCO2e in 2019, only falling in

2020, to 24.9 mtCO2e, as a result of travel restrictions imposed as
part of the public health measures addressing the global pan-
demic.3 As we shall see, the interaction of climate policies and ex-
ternal shocks acting to reduce economic activity and thus emis-
sions is a recurrent theme in this story.
Aviation is admittedly an exception and its emissions in-
crease should be compared with the 43% reduction at stationary
industrial installations (that is, the power sector and industry) cit-
ed by the Commission for 2005–20. This would seem to suggest
that demand for aviation within the EU was relatively inelastic,
while price increases as a result of climate mitigation measures
have resulted in demand reduction at stationary installations, a
point that will be confirmed when we examine energy consump-
tion in the EU since 1990 and the emissions intensity of industrial
energy use (see Figure 35). However, we should not assume that
aviation has been unaffected. While demand has increased, it is
entirely conceivable that the industry would have grown faster
had the ETS not imposed additional costs. There is a strong pos-
sibility of lost growth.
Reporting of the revenue received under the scheme was
not required until Phase 3 of the EU ETS began in 2013, so the
total cost can only be readily assessed after that date. The Com-
mission reports that between 2013 and 2021, approximately
€78 billion was raised, a total that is now increasing at about
€17 billion a year. These funds are taken as revenue by member
governments,4 and the ETS Directive specifies that at least 50%
should be hypothecated for spending on other emissions reduc-
tion policies. The Commission justifies this by claiming that over-
all ‘member states spend more on climate- and energy-related
purposes than their auctioning revenues’. It is further claimed
that as much as 75% of total revenues have been employed for
climate-related purposes, with the rest being diverted into con-
5
 solidated state funds. This must be doubtful, since these other
policies, even energy-efficiency subsidies, tend to have dedicat-
ed funding streams, usually drawn from consumers.5 Indeed, the
Commission itself now seems to recognise that member states
are relying heavily on ETS revenues for their own spending pur-
poses; in documents published to support the European Green
Deal in July 2021 (discussed at length below), it is proposed that
increased investment in clean technology will be encouraged by
‘strengthening rules to ensure that Member States use their EU
ETS auction revenues for clean investments’.6
On balance, it must be observed that the revenue presented
a large opportunity for EU states to increase their incomes, with
only doubtful pass-through to other environmental outcomes.
It can therefore be seen simply as a tax on energy use. Indeed,
member states have on occasion been compelled to redirect a
large fraction of the revenues to electro-intensive industries, so
as to compensate them for price rises prompted by the scheme.
Member states are required to notify the Commission if they
spend more than 25% of ETS revenues on such compensation,
and in 2020 five member states fell into this category (Table 1).
While the redirection of 37% of French and 25% of Dutch ETS
revenues to compensation is striking, the most important find-
ing here is the absolute magnitude of Germany’s compensation
package for a single year: some €546 million. While this is 17% of
Germany’s total ETS revenue in 2019, and thus below the notifi-
cation threshold, it is a very important indicator and, bearing in
mind that these payments were permitted within regulations to
prevent carbon leakage, is convincing evidence that the scheme
has had a strong and harmful effect on international competi-
tiveness. Governments would not intervene in this way if the ETS
were neutral or beneficial to national industrial interests.

Table 1: Indirect carbon cost Member state Compensation Auction revenues* Percent
compensation paid out by (€m) (€m)
EU member states in 2020.
Germany 546 3146 17
Belgium (FL) 89
354 31
Belgium (WL) 20
Netherlands 110 436 25
Greece 42 503 8
Latvia 1 84 1
Sweden 4 244 2
France 266 712 37
Finland 75 217 34
Spain 61 1225 5
Lithuania 11 17 63
Poland 77 2546 3
Romania – 748 NA
Total 1302 10232 12
*2019, excluding aviation allowances. Source: EU Commission, COM(2021) 962 final.

6
 The macro-economic effects of the costs of the ETS can be
assessed from the total cost of auctioned allowances, figures that
are readily available but not widely known outside expert circles.
Figure 3 is based on data published in a Commission working
document that was published alongside a report (COM(2021)
962 final) from the Commission to the European Parliament and
the Council.7

Figure 3: EU ETS costs 20

(general and aviation) 2013–
21, by member country.
Source: EU Commission, and, for
UK data 2021, Office for Budget 15
Responsibility. Chart by the author.

Other Spain
UK Greece
Romania Denmark
€m

Poland Germany 10
Netherlands Czechia
Italy Bulgaria
France

Bulgaria Czechia Germany Den

Greece Spain France Italy
0
Netherlands
2013 2014 2015 2016 2017 Poland
2018 2019 2020Romania
2021 Unit
Other

The economies of Germany, Poland, Italy, Spain, and the

United Kingdom bear the brunt of the EU ETS costs in absolute
magnitude, with Poland particularly burdened due to its heavy
dependence on coal for industrial use.
Note that receipts for the UK fell to zero in 2019 due to a
temporary suspension of the ETS during Brexit negotiations, and
the higher costs reported in 2020 are due to the resumption of
trading. The UK left the EU ETS in 2021 and now operates its own
emissions trading scheme.
In the third trading period, the German state has collected
some €15.4 billion in revenue from the EU scheme, the Polish
government €10.6 billion, Italy €7.5 billion, and the Spanish and
British governments €6.9 billion and €6.7 billion respectively.8 To-
gether these countries account for €47.2 billion, 60% of the €77.8
billion total revenue taken.
While costs exhibited a weak increase from 2013 to 2017,
there was a strong rising trend after 2018, interrupted only by
the global pandemic, which caused economic contraction and
therefore a reduction in demand for EU emissions allowances.
Emissions in the stationary sector were down 11.4% in 2020 and
in the aviation sector by 63.5%. The increase in total costs is ex-
plained by the fact that prices in the ETS have climbed sharply in
Phase 3, as can be seen in Figure 4.
7
Figure 4: Clearing prices 60
for auctions of general
allowances, January
2013 to 30 June 2021.
Source: Figure 2 in EU Commission: 40
COM(2021) 962 final.57

€/tonneCO2
20

0
2013 2014 2015 2016 2017 2018 2019 2020

This increase is the result of:

• the falling cap
• reductions in free allowances
• the withdrawal of 900 million permits by the Commission, in a
measure known as ‘backloading’ (Figure 4)
• the erosion of the cumulative surplus of available certificates
(Figure 5).

Figure 5: EU ETS allowances, 3 30

surplus of allowances and
auction prices, 2005–20.
Source: ETC/CME (2021).58 2 20

€/tCO2e
GtCO2e

Cumulative surplus
Supply of allowances
Verified emissions 1 10
Price

0 2005 2007 2009 2011 2013 2015 2017 2019

0
1st 2nd 3rd trading period
2005–07 2008–12 2013–20

The cumulative surplus has been calculated by the origi-

nal authors as the difference between the allocation of all EUAs,
whether allocated for free, auctioned or sold, plus international
credits surrendered or exchanged since 2008, minus the cumula-
tive emissions.
Even its critics will concede that, expensive though it has
been, the EU ETS might in time have delivered cost-effective re-
sults, had it been the sole policy instrument, putting a consistent
EU-wide price on carbon and encouraging invention and innova-
tion to reduce emissions and avoid the penalties. But the EU did
not permit the ETS to have a clear run, and instead resorted to
subsidies for renewable energy. This decision must be regarded
as a serious policy design error, since it will have produced no
8
 additional emissions savings under the ETS. This is because the
ETS not only guarantees the emissions reduction but actually
caps the saving in those sectors covered. This is little appreciated
outside expert circles. The renewables targets and subsidies pre-
vented the ETS from finding the cheapest emissions reductions
and instead compelled the adoption of renewable energy re-
gardless. As we shall see in the next section, the cost of reducing
emissions through renewable energy have been and continue to
be extremely high.

3. Growth in renewable energy

Subsidies to renewables
Subsidies to renewable energy in the EU27 now total €69 billion
a year, a sum that vastly outweighs the still very expensive an-
nual €17 billion a year cost of the ETS.
Many members of the public mistakenly believe that fossil
fuels in Europe are generously subsidised. The muddle arises be-
cause it is uncommon for print and broadcast media coverage of
the subject to distinguish between:
• tax expenditures (that is tax exemptions or lower rates of con-
sumption tax)
• direct income support, for example to renewable energy gen-
eration plant.
The economic effects are very different. Tax expenditures
are revenue foregone, and typically reduce costs to consum-
ers, either directly or indirectly. Direct income support typically
increases consumer costs, with levies added to bills in order to
transfer wealth to a selected recipient, such as the owner-inves-
tors of renewable energy generating equipment. Figure 6 charts
subsidies, excluding tax expenditures, by fuel type in the EU279
between 2008 and 2018.
Subsidies resulting in wealth transfers to the energy sec-
Fossil fuels

tor are dominated by renewable energy, which has grown enor-

120
Figure 6: Total subsidies 120
Renewables

by100energy carrier in
the80 EU27 excluding tax 100
expenditures, 2008–2018.
All energies

60
Source: Trinomics 2020,59 further
Fossil fuels

calculations and chart redrawn by 80

(€2018bn)

40
120
the author.
Electricity

Renewables

20
Fossil fuels 60
100

Renewables
0
80
All energies
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Nuclear

Electricity 40
All energies

60
Nuclear
40
20
Electricity

20

0
0
2008
2008 2009 2010 2010
2011 2012 2012
20132014 2015 20142017
2016 2018 2016 2018
Nuclear

9
 mously over this period. Subsidies to nuclear, unlabelled in the
chart for reasons of space, are about €3 billion a year or less and
are mainly given for decommissioning purposes. Non-tax ex-
penditure, direct subsidy to fossil fuels is in large part accounted
for by measures such as price support to fossil-fuelled combined
heat and power, which amounted to €8.6 billion in 2008 and still
stood at €5.4 billion in 2018. Such measures are part of the at-
tempt to improve efficiency and reduce emissions. Thus, and per-
haps bizarrely, these subsidies to fossil fuels can be regarded as a
climate-policy cost. However, this study does not approach them
in this way.
The major recipients of subsidy in the EU27 have been bi-
omass, solar, and onshore and offshore wind, as represented in
Figure 7.

Figure 7: Subsidies to 70
biomass, solar, and 60
onshore and offshore
wind in the EU27. 50
Source: Trinomics 2020, Chart
60

redrawn by the author. 40

Offshore wind 30
(€2018bn)

Onshore wind
Solar 20
Biomass
10

0
2008 2010 2012 2014 2016 2018

Figure 8 represents tax expenditures on the different fuel

groups over the same period. The reader should note that by far
the largest part of the expenditures charted here are waivers on
excise tax on fossil fuels, including carbon taxes. For example, in
2018 total tax expenditures amounted to €57 billion, of which
€31 billion were revenue waivers to fossil fuels and €9 billion rev-
enue waivers on electricity, both reducing costs to consumers.

Figure 8: Total tax 70

expenditures by energy 60
carrier in the EU27, 2008–18.
Source: Trinomics 2020,61 chart 50
redrawn by the author.
(€2018bn)

40
Fossil fuels 30
Renewables
All energies
Electricity 20
Nuclear
10

0
2008 2010 2012 2014 2016 2018
10
 Needless to say, the volumes of tax expenditure to fossil fu-
els are large because the volumes of fossil fuels consumed in the
EU economies are themselves large.
Having distinguished between tax expenditures and direct
subsidies, we can now return to the data summarised in Figure 6
and estimate the total non-tax expenditure subsidy to the renew-
able sector. In the EU27 (excluding the UK, where subsidy costs
now total about £10 billion a year) in the period 2008–18 this
amounts to about €570 billion, a figure that will have been rising
at the rate of approximately €69 billion a year to the present,10
giving an approximate total to date at the end of 2021 of about
€770 billion.
The EU’s commitment of subsidies to the renewable energy
sector is nearly 70% of the total across major economies, as can
be seen in Figure 9, which compares annual subsidies (including
tax expenditures) in the EU27, Japan, the UK, the US, and China.
Over the period covered in this figure, total subsidies to renew-
ables, including tax expenditures, amounted to €893 billion, of
which the EU was responsible for €612 billion.
Figure 9: Subsidies to 140
renewables in the major 120
economies, 2008–18.
Including tax expenditures. Source: 100
Trinomics 2020,62 chart redrawn by
the author. 80
(€2018bn)

China 60
USA
UK 40
Japan
EU27 20

0
2008 2010 2012 2014 2016 2018

Renewable electricity capacity growth

The scale of the subsidies directed to renewables has had signifi-
cant effects on the deployment of generation capacity. Figure 10
shows total renewable electricity generation capacity from 1990
to 2020 in the EU28.
Figure 10: All renewable 600
electricity generation 140
capacity: EU28 1990–2020.
120
Source: Eurostat. Chart by the
author. Note: Hydro includes 400 100
GW

pumped storage.
80

Solid biofuels 60

Solar 200
40
Wind
Hydro 20

2012 2013 2014 2015 2016 2017 2018 0

0 2008 2009 2010 2011 2012 2013 2014 201
Japan UK USA China 1990 1995 2000 2005 2010 2015 2020
EU27 Japan UK USA Chin
11
 Hydropower capacity has hardly changed over the period, in-
dicating that it was a fundamentally economic resource and fully
developed, within environmental constraints, before the introduc-
tion of climate policies. The principal growth has been in wind and
solar – fundamentally uneconomic, high-entropy sources of ener-
gy. Their expansion can be seen in Figures 11 and 12, which chart
the deployed capacity in selected EU states.

Figure 11: Wind power

capacity: selected EU 160
states 1990–2020.
Source: Eurostat; UK Government. 120
Denmark
Netherlands
GW

Sweden 80
Italy
France
UK 40
Spain
Germany
0
1990 1995 2000 2005 2010 2015 2020
Figure 12: Solar power
capacity: selected EU 120
states 1990–2020.
Source: Eurostat; UK Government.
GW

000 Belgium 80
000 Netherlands
000
France
Spain
000 UK 40
000 Italy
000
Germany
000 0
000
1990 1995 2000 2005 2010 2015 2020
000

0
Support for wind began earlier, stimulating rapid growth in ca-
pacity, but solar energy is closing the gap, reflecting the generosity
Germany Spain United Kingdom France Italy Sweden Netherlands of subsidies and its relative ease of development; wind energy pro-
Denmark

vokes fierce opposition, from neighbours onshore and, sometimes,

from wildlife protection bodies offshore.
Remarkable though this growth in capacity is in itself, it is even
more so in the global context. EU renewables capacity comprised
22% of the global total in 2012 and has only fallen to about 17%
in 2021. It exceeds that of the United States and India combined.
Indeed, Germany alone accounts for 5% of world total renewable
electricity capacity. The EU is, in scale of capacity at least, truly a
global leader in the deployment of renewables (see Figure 13), sec-
ond only to China, whose electricity system, to say nothing of its
economy, is very much larger.
These capacity increases have delivered substantial growth in
the generation of renewable electrical energy, although due to the
poor productivity (load factor, or capacity factor) of both wind and
solar, the volumes are smaller than might be expected, amounting
12
 Figure 13: Renewable 3500
electricity generation 3000
capacity in selected
countries, 2012–21. 2500
Source: International Renewable

GW
Energy Agency 2022,63 further 2000
calculations and chart by the
author. 1500
Rest of the world 1000
Brazil
India
USA 500
EU
China 0
2012 2014 2016 2018 2020

Figure 14: Renewable 1400

electricity generation in the
1200
EU28, by country: 2004–20.
Source: Eurostat.
1000
Other
UK
Sweden 800
TWh

Finland
Romania 600
Portugal
Poland 400
Austria
Netherlands
Italy 200
France
Spain 0
Germany 2004 2006 2008 2010 2012 2014 2016 2018

Figure 15: Electricity 4000

generation in the EU28
by fuel type, 1990–2020
Source: Data, International Energy 3000
Agency, Eurostat, UK Balancing
2019 2020
Mechanism Reports. Chart by the
author.
TWh

2000
Other
Wind
Solar PV
Hydro
Waste 1000
Biofuels
Nuclear
Natural gas
Oil 0
Coal
1990 1994 1998 2002 2006 2010 2014 2018

only to about 1200 TWh, with the bulk of the contributions coming
from Germany, Spain, France, Italy, the UK and Sweden, countries
where subsidies have been applied most vigorously (see Figure 14).
This increase needs, however, to be seen in the context of all
electricity generation by fuel type, as charted in Figure 15. While
the expansion of the renewable sources is large and rapid after
13
2005, we must observe that, in spite of the very large subsidy
expenditures discussed above, renewables still provide only a
minority of the electricity required by the EU’s member states.
Indeed, although fossil fuels have been displaced to some de-
gree, with oil now almost unused, much of the bloc’s electrical
energy is still supplied by coal, and a very large part now comes
from gas. Moreover, it is probable that gas, not renewables, is re-
sponsible for the displacement of coal; indeed, it is arguable that
a more economically efficient displacement of coal might have
been achieved through spontaneous market decisions under the
ETS, or even through simple laissez-faire.
The contribution from nuclear was more or less stable un-
til the early 2000s, with few new plants commissioned dur-
ing the period. However, installed capacity has been declining
since 2002, when the EU28 had 138.5 GW, as compared to about
114 GW today; as a consequence, output is declining too.
A similar story can be told for coal, oil, and natural gas, which
have seen a fall in output, partly due to coercive market-share
allocation to renewables, and partly due to falling demand. Com-
bustion-fuelled generation capacity has fallen sharply in the
EU28 since 2012, the result of environmental regulations and a
constricted market opportunity. Capacity stood at about 375 GW
in 2020, down from a peak of 448 GW in 2012.
A substantial part of the renewables input is derived from
hydropower, a mature technology for which the environmentally
tolerable opportunities in the EU are largely exploited. Modern
renewables – wind and solar – make up 20% of supply, arguably
a poor return for such overwhelming market distortions.
But, and this point cannot be overstated, the principal char-
acteristic that stands out from charts such as this is the stagna-
tion and decline in electrical energy use in the EU28 since the
middle 2000s. Consumption in the bloc now stands at just over
3000 TWh, a level last seen in the year 2000. Since the peak in
2007, consumption of electricity has fallen by just over 9%. The
sharp dip in generation from 2008 to 2009 can confidently be at-
tributed to the financial crash, while the rise in demand in 2010
is the result of the economic recovery consequent on regional
and global stimulus packages. But other explanations must be
sought for the sustained decline after 2010, which is a depar-
ture from the weak but obvious rising trend evident from 1990
to 2007. It is reasonable to infer that the sharply rising renewa-
bles input and the subsidy costs required to drive it have had a
significant braking effect on the post-crash recovery, resulting in
faltering demand for electrical energy. Given the superior, low-
entropy characteristics of electricity as an energy carrier and an
index of societal complexity and sophistication, this decline must
be regarded as extremely unwelcome and deeply concerning. A
society in which electricity consumption is falling is almost cer-
tainly regressing towards thermodynamic equilibrium, with soci-
etal entropy rising across the board, implying a decline in stand-
ards of living and a rise in underlying systemic fragility.
14
 4. Conventional electricity generation
Electricity generation productivity in the EU
We have reviewed renewable generation capacity increases in
the EU28 and seen highly significant rises in all technologies, no-
tably wind and solar. The widespread deployment of renewables
accounts for the overall increase in the bloc's total generation ca-
pacity, which has nearly doubled, from just over 500 GW in 1990
to just under 1000 GW in 2020. Figure 16 charts this remarka-
ble increase, which can be seen in the national fleets of nearly
all member states, but with especial prominence in Germany,
Spain, and Italy, all countries where renewable development has
proceeded at scale. France, which has only recently begun to
force renewable technologies into its electricity system, instead
relying on its substantial nuclear plant fleet, does not exhibit the
same trend.

Figure 16: Total electricity 1000

generation capacity in
the EU28, 1990–2020
by member state. 800
Source: Eurostat, Digest of United
Kingdom Energy Statistics. Chart by
the author.
600
Other Hungary
UK Italy
Sweden France
Finland Spain
GW

Romania 400
Greece
Portugal Germany
Poland Denmark
Austria Czechia
Netherlands Belgium 200

0
1990 1994 1998 2002 2006 2010 2014 2018

Bearing in mind that this greatly enlarged generation fleet

now serves a smaller market, it follows that the productivity of
the EU28 electricity sector has fallen. In 1990, the fleet of 531 GW
generated 2594 TWh, implying a load factor of 56%, while in
2020 a capacity of 957 GW generated 3065 TWh, with a load fac-
tor of just 37%. A collapse in productivity of this order should be
a matter for grave concern, particularly given the fact that the
unit costs of renewables are so high.11
Figure 17 charts the decline in EU generation fleet load fac-
tor since 1990, based on the author’s calculations from data pub-
lished by the International Energy Agency and Eurostat. Since
fleet capacity figures tend to underestimate the capacity of em-
bedded renewable generation (connected to the low-voltage
15
Figure 17: EU28 electricity 60
generation fleet load
factor 1990–2020.
Source: Author calculations from
40
Eurostat and International Energy

Percent
Agency data.

20

0
1990 1994 1998 2002 2006 2010 2014 2018

distribution network), which is often poorly documented or de-

liberately excluded from the statistics, it is likely that the decline
in productivity is understated.
The figure can be read as showing that the fleet load fac-
tor was stable at around 55% from 1990 to about 2005, when
it began a steady decline, reaching a plateau in about 2012 as
substantial quantities of conventional capacity were closed (dis-
cussed in relation to the Large Combustion Plant Directive on
page 17), a change that increased the utilisation of the remain-
der. However, fleet load factor now appears to be entering a new
period of decline; from 2005 to 2020 it has fallen by 18 percent-
age points.
Individual conventional generators will exhibit this decline
to different degrees, according to the role that they play in the
market but, taken as a general characteristic, falling fleet load
factors represent a strong disincentive to invest in any form of
dispatchable generation. This destruction of incentive is all the
more remarkable and harmful since dispatchable generation
remains essential to guarantee security of supply in the face of
high levels of wind and solar capacity. As a result, several mem-
ber states have resorted to Capacity Mechanisms – further subsi-
dies – in an effort to prevent existing plant from leaving the mar-
ket, and to give encouragement, albeit weak, to investors in new
generation.12 These mechanisms, which are in effect payments to
exist – that is, payments to generators regardless of output – are
extremely expensive. The UK scheme13 has cost consumers £900
million in the year 2021–22, a figure that is expected to rise to
£1.5 billion per year by 2025. However, as we shall see in the next
section, declines in conventional capacity continue at a signifi-
cant rate, despite these subsidies.

Conventional thermal capacity in the EU

Although there have been large increases in the capacities of re-
newable generation, the fleets of wind and photovoltaic genera-
tors contribute little or nothing to system security, a weakness
arising from the high entropy (disorder) of their fuel flows: the
wind and the solar flux. Consequently, the national electricity
systems of individual member states and the interconnected Eu-
16
 Electricity Generation Capacity (Combustion fuels)
500,000

450,000 ropean system as a whole are still dependent on conventional

400,000
generators to guarantee security of supply. Given this reliance,
it is very striking that both combustion capacity and nuclear ca-
350,000 pacity show significant declines over time, as can be seen in Fig-
ures 18 and 19.
300,000 Nuclear capacity rose steadily, though only modestly, from
1990 to the late 2000s, but has declined significantly since that
250,000
time, as the closure rate has exceeded the replacement rate. On
200,000 the other hand, generation capacity based on the combustion
of fuels, mostly coal and increasingly gas, rose steadily up un-
150,000 til 2012, when it abruptly began an equally steady decline. This
100,000

Figure 18: Nuclear

50,000electricity 160
generation capacity in
the EU28, 1990–2020.
0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Source: Eurostat, Digest of United
Kingdom Energy Statistics. Chart by 120
the author. Belgium Czechia Denmark Germany Ireland

Others Greece Spain France Italy Lithuania

UK Hungary Netherlands Austria Poland Portugal
Sweden
Finland Romania Finland Sweden United Kingdom Others
GW

80
Romania
Hungary
Lithuania
city (Combustion
France fuels)
Spain
Germany 40
Czechia
Bulgaria
Belgium

500,000
0
1990 1994 1998 2002 2006 2010 2014 2018
0
Figure 19: Combustion fuel 500
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020

electricity generation
Belgium in the EU28,
capacity Czechia Denmark Germany Ireland
1990–2020.
Greece Spain France 400 Italy Lithuania
Source: Eurostat, Digest
Hungary of United
Netherlands Austria Poland Portugal
Kingdom Energy Statistics. Chart by
theRomania
author. Finland Sweden United Kingdom Others

300
Others Lithuania
UK Italy
GW

Sweden France
Finland Spain
Romania Greece 200
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020

Portugal Ireland
Poland Germany
Germany
Austria Ireland Denmark
Italy Netherlands
LithuaniaCzechia 100
Hungary Belgium
Poland Portugal
United Kingdom Others
Electricity Generation Capacity (Combustion fuels)
00,000 0
1990 1994 1998 2002 2006 2010 2014 2018

0
17
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
was the result of the Large Combustion Plant Directive of 2001
(LCPD)14 and its successor, the 2016 Industrial Emissions Direc-
tive (IED).15 These directives are not part of the climate package,
but were intended to reduce the release of pollutants, particu-
larly acidifying pollutants, particulate matter, and precursors to
ozone. As the EU itself puts it:
Control of emissions from large combustion plants - those whose
rated thermal input is equal to or greater than 50 MW – plays an
important role in the Union’s efforts to combat acidification, eu-
trophication and ground-level ozone as part of the overall strategy
to reduce air pollution.16
These may have been laudable goals, but in practice they
have had damaging consequences. The LCPD limited the opera-
tion of older combustion plants unless they fitted costly equip-
ment such as flue gas desulphurisation (to reduce the release of
sulphur dioxide), selective catalytic reduction (to limit release of
oxides of nitrogen), and measures to reduce the release of fine
dust particles. Those plants that chose not to fit such equipment
opted out of the scheme and were forced to close after a further
20,000 operational hours, or by 2015 at the latest. Some mem-
ber states, such as the United Kingdom, whose coal stations were
older, had high opt-out rates, and saw quite sharp declines in
combustion-fuelled electricity generation capacity, but nearly all
EU fleets were affected to some degree, as Figure 19 shows.
The IED applies to industrial operations in general, including
electricity generation plant, and requires the use of ‘best avail-
able technologies’ to reduce the release of pollutants. The criteria
are so strict and the costs of compliance so high that investment
in new power plant has, in effect, been discouraged, and many
existing installations have applied for exemption on the grounds
that modifications required do not pass a cost-benefit analysis.
The combined effect of the LCPD and the IED, together with
the market distortions favouring renewables, can clearly be seen
in Figure 19. The EU’s fleet of combustion-based electricity gen-
erating plant has fallen from a peak of about 450 GW in 2012 to
about 375 GW in 2020, a 17% decline in less than a decade. Were
the renewables fleet dispatchable and contributing significantly
to securing supply, the erosion of thermal capacity might be a
matter of little concern, but wind and solar are inflexible and only
controllable to a limited degree, and cannot promise with any
high degree of confidence to meet demand. Consequently, the
rapid decline in thermal capacity, just as wind and solar capac-
ity reached very high levels, is a powerful indicator that the EU’s
electricity system is becoming fragile. Interruptions in supply are
not yet at levels high or widespread enough to cause public anxi-
ety, although the United Kingdom did experience a serious na-
tionwide blackout on 9 August 2019, when a lightning strike on
a transmission cable caused a voltage disturbance that resulted
in quantities of generation with inadequate fault ride through
characteristics, including one large wind farm, to disconnect.17
18
The Electricity System Operator, National Grid, was compelled
to disconnect 5% of load – about 1 million customers, including
railway networks and airports – in order to protect the remainder
of the system. Debate around the proximal causes of the event
is largely beside the point. The general and distal cause of the
blackout is system fragility. Lightning strikes on transmission ca-
bles are not uncommon, and a robust system should be able to
manage such events without consumer disconnection. In this
case it could not.
But the UK blackout was an exceptional event. For the most
part, electricity systems are revealing their fragility and the prob-
lems caused by declines in dispatchable capacity through in-
creased balancing costs. Again, the UK provides good evidence.
In the early part of the 2000s, annual balancing costs were un-
der £500 million, and they were still at this level in 2015. By 2020
they had risen to £1.3 billion,18 a trend that has continued, with
the costs in the last year, April 2021 to 2022 amounting to £2.2
billion in the Balancing Mechanism.19 Not all of this increase can
be attributed to the presence of renewables, but much of it can
be. It would be in the public interest if there were an economet-
ric study of balancing and transmission costs in the European re-
gion over the last twenty years; it could determine how much
more expensive this essential ancillary service has become as a
result of the coerced introduction of renewables and the decline
in flexible thermal plant.

5. Renewable heat and cooling

The provision of heating and cooling is one of the most difficult
areas to decarbonise. Renewable energy has no direct option for
high-temperature heat and relies on low-temperature sources
such as the combustion of biomass, gaseous biofuels, solar ther-
mal energy, and geothermal, or on a secondary carrier such as
electricity to drive heat pumps. Another carrier, hydrogen, is ex-
pected to be deployed for both domestic and industrial heat in
the future. However, both electricity and hydrogen are likely to
remain relatively expensive ways to provide heat, due to losses
and system costs. Figure 20 charts the EU27’s progress in increas-
ing the renewable share in energy for heating and cooling, and
demonstrates the difficulties experienced by member states.
Progress over the decade has been significant, with a 26% in-
crease on the 2011 level; in 2020, renewables accounted for 23%
of the total energy used for heating and cooling in the EU, having
risen from 12% in 2004.20 But the overall total of renewable heat-
ing and cooling remains only moderate, at 105 million tonnes of
oil equivalent (mtoe) per year. To put this figure into context, the
EU27's final consumption of energy is about 975 mtoe per an-
num, and primary input amounts to about 1,800 mtoe.
But of particular interest is the very broad spread of achieve-
ment in this sector, with some countries, such as Sweden, having
achieved high shares, and others only relatively low ones. By and
19
 Figure 20: Renewable energy 120
for heating and cooling in
the EU27, 2011–2020.
Gross final consumption. Source: 100
Eurostat.

Others 80
Sweden
Finland
Romania

mtoe
Portugal 60
Poland
Austria
Hungary
Italy
France 40
Spain
Germany
Denmark
Czechia 20

0
2011 2012 2013 2014 2015 2016 2017 2018 2019

large, those member states with high shares tend to be small,

or less industrialised, and with access to low-cost biomass, such
as Sweden itself. Larger, more industrialised states, such as Ger-
19 2020
many, have low shares of renewable energy in their heating and
cooling demand, in spite of exceptional efforts in renewable en-
ergy overall. Figure 21, an infographic generated by the EU, pro-
vides a graphic representation of this variation, with the larger,
industrial economies around or below the mean.

Figure 21: Renewable energy

used for heating and cooling.
Percentage of gross final
consumption in 2020. Source:
Eurostat.64

20
 6. Renewable transport fuel
Transport fuels are the only area in EU energy and climate pol-
icy where there is a specific and mandatory share of sectoral
consumption imposed on member states. The 2009 Renewable
Energy Directive (RED; 2009/28/EC) mandated that 10% of en-
ergy used in this sector should be from renewables, but allowed
member states to make their own decisions elsewhere. The man-
datory transport percentage proved to be very difficult, and not
all member states were successful in meeting the target. Howev-
er, at the overall EU level, 10% of transport fuel was derived from
renewable sources in 2020. Growth in the sector can be seen in
Figure 22.

Figure 22: Renewable 30

transport fuel in the
EU27, 2011–20.
Gross final consumption. Source:
Eurostat. 20
mtoe

Others Hungary
Sweden Italy
Finland France 10
Romania Spain
Portugal Germany
Poland Czechia
Austria Belgium
Netherlands 0
2011 2012 2013 2014 2015 2016 2017 2018 2019

The proportional increase is clearly significant, with 2020 lev-

els 127% above those in 2011, but, as with renewable heat, per-
formance over the EU member states is uneven. As the European
Environment Agency itself concedes: ‘The overall EU target was
reached thanks to overachievement in a handful of countries.’21
Figure 23, redrawn from an EU Environment Agency chart, repre-
sents output in 2005 and 2020, and compares both figures with
the 2020 target.
Once again, smaller, less industrial states, and particularly
those with access to cheap biomass, tend to have met their tar-
gets easily or even exceeded them, while larger, industrial states
have only just met them, or missed them by some margin.
Notwithstanding these difficulties, the 2018 Renewable
Energy Directive has increased the mandatory target to 14% of
transport fuel by 2030. However, the European Green Deal an-
nounced by the Commission in 2021 can be read as suggesting
that enthusiasm for biofuels is waning. While the Commission in-
sists that ‘transport needs to cut emissions by 90% by 2050’,22 the
emphasis is now on extending the Emissions Trading Scheme to
road transport and the maritime sector, and on electric vehicles
and hydrogen-fuelled cars, vans, and trucks. There are references
to a 2.2% target for ‘advanced biofuels’, but overall one has the
strong suspicion that the Commission is allowing the liquid bio-
2017 2018 2019 2020
fuel agenda to slip quietly into history.

Italy Hungary Netherlands 21

Sweden Other
 Figure 23: Renewable use Sweden
in transport in Europe, Norway
2005 and 2020.
Finland
Share of energy from renewable
sources. Source: European Luxembourg
Environment Agency.65 Netherlands
Estonia
2005
2020 Iceland
Hungary
Belgium
Slovenia
Italy
Malta
Austria
Ireland
EU27
Germany
Portugal
30 35 Denmark
Spain
Czechia
Slovakia
France
Bulgaria
Romania
Cyprus
Latvia
Poland
Croatia
Lithuania
Greece
0 10 20 30
Percent

7. Total renewable energy progress

The EU has slightly exceeded its target for renewable energy
in gross final energy consumption, as can be seen in Figure 24.
However, this achievement must be judged according to its ex-
traordinarily high cost – in the region of €770bn, as we have seen
– and against the background of stalling and then falling energy
consumption, particularly in electricity. The price of success is not
always acceptable, and in this case the long-term damage to the
European economies is likely to be substantial and difficult to re-
pair. Putting these questions aside, we can turn to another metric
that sheds an important light on the achievement of the targets,
namely the emissions abatement costs and their relation to the
estimated harms of climate change: the social cost of carbon.
22
Figure 24: Historical 100
trends and sources on 0.7 1.1
renewable energy shares.
80
Percentage of renewable energy in

Renewable energy share (%)

gross final energy. Source: European
Environment Agency.66
Actual 60
Member state action plans
Renewable energy directive
40
Targets:
2030 proposed (40%)
2030 current (32%) 20
2050 (range)

0.7 Rate of change (% 0

points per year) 2005 2010 2015 2020 2025 2030 2035 2040 2045

8. Costs and benefits

The key test of any emissions mitigation policy is the comparison
of the abatement cost and the social cost of carbon. The abate-
ment cost represents the bill to be paid in preventing or avoiding
the release of a quantity of carbon dioxide, while the social cost
of carbon is a monetised estimate of the harm to human wel-
fare that would be caused by the release of that carbon dioxide.
In policy evaluation, abatement costs should, obviously, never
exceed the social cost of carbon; otherwise the cure would be
worse than the disease.
Abatement costs, though frequently intricate in calcula-
tion, are not deeply problematic and there is little real disagree-
ment about them, although there is some uncertainty about the
full system cost of renewables. However, estimates of the social
cost of carbon are complex and prone to deep uncertainties,
because there is so much disagreement about the sensitivity of
the ocean-atmosphere system to the release of additional car-
bon dioxide, and consequently about the scale and pace of cli-
mate change and the threat that it poses. This debate results in a
broad range of estimates for the social cost. Nevertheless, there
is general agreement it is in the region of $50 (at 2007 prices) per
tonne of carbon dioxide equivalent ($50/tCO2e), with estimates
under that level being low and those above being regarded as
high. A recent study by Rögnvaldur Hannesson, of the Norwe-
gian School of Economics, has calculated the abatement costs
from EU policies and compared them to the ‘very high, if unlikely’
social cost estimate of $105/tCO2e reported by President Oba-
ma’s Interagency Working Group on Social Cost of Greenhouse
Gases.23 The Working Group’s central range was in the region of
$11–56/tCO2e. Studies prepared for the Commission in 2020 take
a somewhat different view and use a figure of about €100/tCO2e
as their central benchmark.24
23
 Hannesson’s findings are summarised in Figure 25, with
the €100/tCO2e level of SCC represented by the blue area, and
abatement costs to households and industries represented by
the yellow and brown bars respectively. As can be seen, nearly
all abatement costs in these EU economies, whether industrial or
household, are very significantly in excess of the estimated social
cost of carbon. We should note in particular that abatement costs
in France are six times as high, as are those to German house-
holds. The harm to human welfare from the mitigation policies
is much greater than that of the climate change they aim to pre-
vent. This finding is consistent with the price rises observed in the
EU and, this paper argues, with the alarming falls in energy and
particularly electricity consumption across all member states.

Figure 25: EU abatement costs

and the social cost of carbon.
Carbon abatement costs as of
Austria
2015, for industry and households,
Denmark
compared to a high estimate of
the social cost of carbon. Source: France
Hannesson 2019.
Germany
Abatement cost for:
Industry Greece
Households
Ireland
Social cost of carbon
Italy

Portugal

Spain

UK

0 200 400 600 800 1000 1200

€/tCO2

It must be emphasised that these are not controversial find-

ings, and they are readily replicated by examination of the costs
of national renewable energy support mechanisms and emis-
sions abatement in the relevant systems. Table 2 is drawn from
work published by the present author and Dr Lee Moroney of
the Renewable Energy Foundation in 2018, and calculates the
abatement costs of various renewable technologies in the Unit-
ed Kingdom.
Such figures can be compared with other estimates of the
social cost of carbon, for example, in Marten (2011), which sug-
gests a range of $0–206/tCO2,25 or work by the Environmental
Protection Agency of the United States government, which finds
a value ranging from $12–120/tCO2 in 2015, depending on dis-
count rate, and $29–240/tCO2 in 2050.26
24
Table 2: Estimated Technology type and band Subsidy cost
abatement costs per
tonne of carbon dioxide $/tCO2
in the United Kingdom. Roof mounted solar PV 380–1450*
Free-standing solar PV 228
Small onshore wind (<500 kW) 608
Large onshore wind (>1 MW) 137
Offshore wind 274
Dedicated biomass 198
Hydro 0–137–380*
Anaerobic digestion 274–380*
Incinerated municipal biomass 0
Source: Calculations by the authors from subsidy and grid average abatement figures from
the United Kingdom’s Department of Energy and Climate Change and the Department of
Environment, Food, and Rural Affairs; where multiple costs per tonne of CO2 appear, this
reflects the increasing level of subsidy as the size of the generator decreases. Redrawn from
Constable and Moroney 2018.67 *Where ranges of subsidy costs are reported, this results from
different levels of subsidy offered to sites of varying generating capacities, smaller sites gener-
ally having high levels of subsidy.

Results such as these shed a harsh and critical light on the

EU’s emissions reduction policies. Regardless of whether one
takes Hannesson’s position and sees €100/tCO2e as a high esti-
mate or accepts the Commission’s view that this is a central value,
the data in Figure 25 indicate that after almost twenty years of
subsidy support, the abatement routes selected by EU policy-
makers remain economically irrational.

9. Energy efficiency
Energy efficiency measures have been central to the EU’s climate
policies since the introduction of regulations in 2006, but they
have become progressively more prominent, and figure very
large in the new European Green Deal (see Figure 52 and adja-
cent discussion below).
The Energy Efficiency Directive approved by the European
Parliament on 11 September 2012 set out targets for energy ef-
ficiency. It aimed to reduce EU primary energy consumption in
2020 by 20% to no more than 1,474 mtoe at the primary energy
level, or no more than 1,078 mtoe at the final energy consump-
tion level. The target was revised on the accession of Croatia to
the EU in 2013, and now specifies 1,483 mtoe of primary energy
or no more than 1,086 mtoe of final energy.
Considerable quantities of public funds have been directed
towards encouraging energy efficiency. Figure 26 charts subsi-
dies for energy efficiency in the EU27 from 2008 until 2018, ana-
lysed by support type.
For 2008 to 2018, the total committed amounts to about
€120 billion. As can be seen, tax expenditures are the single larg-
est type of support, amounting to €5.3 billion in 2018, or about
36% of the total in that year. Tax expenditures in this case seem
25
Figure 26: Subsidies for 16
energy efficiency in the EU27, 14
2008–18, by support type.
12
Source: Redrawn from Trinomics
2020.68 10

(€2018bn)
Energy efficiency obligations 8
Soft loans
6
Grants
Tax credits 4
Tax allowances
2
0
2008 2010 2012 2014 2016 2018
entirely legitimate since they remove an artificial discourage-
ment and leave individuals and companies to decide whether
and how to make use of the opportunity. Grants, soft loans, and
energy-efficiency obligations, on the other hand, run the consid-
erable risk of prejudicing judgment and creating the conditions
for suboptimal decisions. Such potentially counterproductive
and counter-economic interventions represent the majority of
the EU's support for efficency measures – some €79 billion – in
the eleven years under consideration. Since there is no reason for
believing that households or businesses will neglect energy ef-
ficiency – it is, after all, cash on the table – the present author re-
gards this expenditure as either redundant or positively harmful.
However, the deepest problem with the Commission’s ap-
proach to energy efficiency lies in what was expected and prom-
ised from the widespread adoption of measures in this area. From
the outset – the 2006 Action Plan for Energy Efficiency27 – the
Commission has believed that improvements in energy efficien-
cy would deliver energy conservation and reduce consumption,
writing that ‘Europe continues to waste 20% of its energy due to
inefficiency’:
A paradigm shift is required to change the behavioural patterns of
our societies, so that we use less energy while enjoying the same
quality of life. Producers will have to be encouraged to develop
more energy-efficient technologies and products, and consumers
will need stronger incentives to buy such products and use them
rationally. (p. 3)

But this approach is grounded in a simple conceptual error: effi-

ciency and conservation are entirely distinct concepts. Efficiency
does not and cannot lead to conservation. As W. S. Jevons wrote
in 1865, it is:
…wholly a confusion of ideas to suppose that the economical use
of fuel is equivalent to a diminished consumption.

Indeed, as he went on to explain:

The very contrary is the truth. As a rule, new modes of economy will
lead to an increase of consumption.28
26
Nothing has changed in the intervening century and a half, and
Jevons’ contention remains robust. The literature on his observa-
tion is now large, and many refinements have been proposed,
mostly concerning short-run or localised effects, but nothing has
been produced to controvert the fundamental logic of his posi-
tion as it applies to the macro-economy over time. This was not
only brilliantly reasoned in his book, but was entirely free of the
wishful thinking that clouds the majority of subsequent analyses.
In essence, Jevons’ position is that an improvement in the
efficiency of an energy conversion process, a steam engine for
example, makes that process more productive and thus makes
its output cheaper. Consequently, demand for the output will
tend to rise, and where demand is inelastic the energy conserved
will simply be economised for another purpose, thus delivering
economic growth. Indeed, Jevons sees improvements in energy
efficiency and productivity as the fundamental cause of the ob-
served growth in wealth and in energy consumption over human
history:
It needs but little reflection, indeed, to see that the whole of our
present vast industrial system, and its consequent consumption of
coal, has chiefly arisen from successive measures of economy.

Paraphrasing the German chemist Justus von Liebig’s pro-

found and parallel observations to the effect that ‘Civilization…is
the economy of power’, Jevons continues:
It is the very economy of the use of coal that makes our industry
what it is, and the more we render it efficient and economical, the
more will our industry thrive, and our works of civilization grow.29

That is to say, when demand for a process is elastic, an im-

provement in efficiency will make it more desirable, and demand
for that process will increase, causing an overall increase in en-
ergy consumption. Where demand is inelastic, the energy con-
served in that area is, as Jevons puts it, ‘only saved from one use
to be employed in others’ (p. 115), causing overall demand for
energy to rise.
Thus, energy efficiency improvements have never and can-
not lead to conservation, though they may offset the downward
pressure on human welfare resulting from energy conservation
resulting from other causes, such as the rationing of goods and
service by legal intervention or by price. We have already noted
falling energy and particularly electricity consumption in the EU.
Bearing in mind the iron-clad logic of Liebig and Jevons, this de-
cline is unlikely to be the result of energy-efficiency measures,
which would deliver economic growth and rising consumption,
but must be the outcome of another factor. Bearing in mind the
approximately €770 billion added to consumer bills to fund re-
newables, the likeliest candidate for this pressure is price ration-
ing, and it is to EU energy prices that we will now turn.
27
 10. Energy prices in the EU
Electricity prices
Figure 27 is drawn from work conducted for the EU Commis-
sion by Trinomics. It compares electricity prices in the EU27 with
equivalents for the G20, the latter being weighted by trade share
with the EU.30

Figure 27: Electricity prices in 250

the EU and the G20, 2008–19.
EU27 weighted average and G20
200
(trade) weighted average. Source:
European Commission, Study on
energy prices, costs and their impact (€2018/MWh)
on industry and households: Final 150
Report (2020).69
EU27 households
100
G20 households
EU27 industry
G20 industry 50
EU27 wholesale
G20 wholesale
0
2008 2010 2012 2014 2016 2018

Household electricity prices in the EU are nearly double

those in the G20, and have been so since 2008, with a clear up-
ward trend from 2008 to 2013, and a weak or stagnant trend
since.
Perhaps still more remarkably, G20 household prices have
been comparable to EU27 industrial prices over the entire period
studied, while G20 industrial prices have been significantly lower
than EU27 industrial prices. A bizarre thought experiment sug-
gests itself: an EU business could, as far as electricity goes, prof-
itably relocate to the G20 even if it had to buy its electricity at
household prices.
Importantly, wholesale prices in the EU27 and the G20 are
comparable, and move in approximate synchrony, indicating
that the very salient excess costs in the EU27 result from policy.

Natural gas prices

Trinomics conducted parallel work on gas prices for the Commis-
sion, and Figure 28 charts the results.’31
The story for natural gas prices in the EU27 is similar, in
broad outline, to that for electricity prices. Household prices in
the EU are significantly higher and more volatile than in the G20,
where prices were weakly rising from 2008 to 2015, and then fell.
EU prices have remained high and exhibited sharp rises and falls
around that high level.
G20 household gas prices are only slightly higher than EU27
industrial prices, a very remarkable fact, and G20 industrial gas
prices are significantly lower than EU27 industrial prices, al-

28
Figure 28: Natural gas 80
prices in the EU and
the G20, 2008–19.
Comparison of weighted average 60
natural gas prices in the EU27 with
weighted average prices in the G20

(€2018/MWh)
(trade).70
EU27 households 40
G20 households
EU27 industry
G20 industry
20
EU27 wholesale
G20 wholesale

0
2008 2010 2012 2014 2016 2018

though the latter have exhibited a falling trend since 2012, which
has to some degree closed the gap.
But once again, EU27 and G20 wholesale prices are similar
and closely correlated across the study period, indicating that
the differences in retail prices to consumers of all types result in
large part from EU policy.

Transport fuel prices

Trinomics also prepared comparisons of EU27 and G20 transport
fuel prices (see Figure 29).32
The authors note that EU prices are roughly 40% higher than
in the G20, and attribute this to taxation in the EU, adding that
‘Excluding taxes, EU average prices are comparable or lower than
most G20 countries for petrol and diesel.’ Once again policies are
responsible for the higher costs to EU consumers, and in the case
of transport fuels actually seem to have overwhelmed an under-
lying wholesale price advantage.

Figure 29: Transport 1.8

fuel costs in the EU and 1.6
the G20, 2008–19.
Comparison of weighted average 1.4
transport fuel (petroleum and
alternative fuels) prices in the EU27 1.2
(€2018/litre)

with weighted average prices in the

G20 (trade).71 1.0

EU27 petrol 0.8

G20 petrol
EU27 diesel 0.6
G20 diesel 0.4

0.2

0
2008 2010 2012 2014 2016 2018
29
Conclusion: energy prices in the EU27 and the G20
Combining these three price comparisons, we can see that ener-
gy and climate policies in the EU27 have put it at a marked disad-
vantage. High household prices for gas, electricity and transport
fuel will also have placed strong upward pressure on wage de-
mands, while high energy input costs for industry will have made
it extremely difficult for manufacturers, in particular, to remain
internationally competitive.
The Commission’s own study of these matters seeks con-
solation in the fact that, over the period 2008–17, energy costs
were typically only 1–10% of total operational costs (p. 14). But
reasoning of this kind is misleading. As already noted, high en-
ergy costs to households will have increased manufacturing op-
erational costs indirectly via wage demands, and this point can be
extended to all other input costs. Since all resources are improb-
able states of matter, the improbability being the result of energy
conversion at points in time both distant and close at hand, high
energy costs contribute to the cost of future non-energy inputs.
The EU’s high energy costs will therefore sooner or later be re-
sponsible for an increase in many non-energy input costs.
This may already be a concern, as suggested by the Com-
mission’s consultant’s note that while ‘energy costs increased in
absolute terms…total operating production costs increased at a
larger scale’, resulting in a falling energy cost share in total costs.
Unfortunately, the consultants fail to recognise that the rise in
total operating production costs will be the result of the delayed
pass-through of higher energy costs. But that pass-through is a
crucial consideration, and probably plays a very large part in lim-
iting the gross operating surplus of most manufacturing sectors
in the EU to a modest 5–10%, meaning that direct energy costs
are relatively large in comparison, and that further increases in
those energy costs place considerable short-run pressure on
profits. Overall, it is not surprising that, as the Commission’s au-
thors candidly report:
EU manufacturing sectors are on average less profitable than non-
EU G20 counterparts.33

We turned to consider energy prices in the EU27 with a view

to evaluating the hypothesis that price rationing was responsi-
ble for the observed fall in energy consumption in the EU mem-
ber states. It seems to the present author that there is ample
evidence in these price comparisons to support that view: the
Emissions Trading Scheme, the subsidies to renewables, taxes,
and other policy measures have contributed to elevating EU en-
ergy costs to well above those in the G20. This is the case despite
similar wholesale costs, and in the case of transport fuel whole-
sale costs that may actually be lower. In the light of this conclu-
sion, energy production, consumption and productivity deserve
further consideration.
30
 11. Energy production, consumption and
productivity
Primary fuel consumption trends
Figure 30 shows total primary energy input in the EU27 from
1990 to 2020.

Figure 30: EU27 primary 2500

energy input, 1990–2020.
Source: Eurostat. Chart by the author. 2000

mtoe 1500

1000

500

0
1990 1994 1998 2002 2006 2010 2014 2018

We should note the gentle but sustained rising trend up to

2005, the onset of the 2008 financial crisis, a small recovery as the
stimulus packages took effect, followed by stagnation and then
more recently a decline, made worse by the economic lockdown
imposed to address the global pandemic. As with the electricity
consumption data examined earlier, it would seem that EU ener-
gy consumption did not recover after the 2008 event, in spite of
aggressive action from central banks and governments, and has
subsequently been sluggish. This gives cause for concern for the
post-Covid recovery.

Final consumption trends

Similar observations to those concerning the EU's primary ener-
gy input can be made in regard to its final energy consumption,
which is represented in Figure 31.

Figure 31: EU27 final energy 1000

consumption 1990–2020.
Source Eurostat. Chart by the author. 960

920
mtoe

880

840

800
1990 1994 1998 2002 2006 2010 2014 2018
31
 As with primary energy input, there is a rising trend up to
2005–06 and the onset of the 2008 crash, a short rally, then a
marked downturn, and substantial slump caused by coronavirus.
We cannot say with any confidence that the rising energy costs
resulting from European and global energy and climate policies
had a causal role in the 2008 crash, and it should be emphasised
that, given the then moderate level of cost impacts, it is unlikely.
But we know that costs were rising sharply after the crash, and
that prices to EU consumers were high relative to the G20. It is
likely that these prices have suppressed and impeded recovery,
and there is therefore good reason to fear that they will have the
same braking effect on the post-pandemic recovery.

Production and imports

One of the principal benefits claimed for the development of re-
newable energy in the EU is that it will mitigate dependency on
imported fossil fuels. This is clearly an attractive argument, even
to those familiar with the pitfalls of the energy sector. But this ar-
gument is specious, as we shall see.
The dependence of the EU on imported energy is long-
standing and beyond doubt. Figure 32, reproduced from Euro-
stat, represents energy flows in 1990 and in 2020.
In 1990, the countries of the EU27 were producing more coal
than they imported, and domestic production of gas was nearly
equivalent to imports. Oil production was, however, a small frac-
tion of total demand and was dwarfed by imports. Total energy
supply amounted to about 74 million terajoules (TJ) of which
43 million TJ, or 57%, were imported.
By 2020, consumption of coal had fallen dramatically, with
imports and domestic production still roughly balanced. Domes-
tic production of renewable energy had grown significantly, giv-
ing the impression that overall import dependency was more or
less constant in spite of falling fossil fuel production. In 2020, to-
tal energy input to the EU27 amounted to about 76 million TJ, of
which 50 million TJ, or about 67%, were imported.
However, as noted above, renewables contribute little or
nothing to security of electricity supply because they are weath-
er dependent. Security in this important sector has therefore
become increasingly reliant on natural gas, which is the sole re-
maining scalable and thermodynamically competent fuel, coal
having been largely driven from the system. This fact gives par-
ticular significance to the sharp fall in European production of
natural gas, which is now dwarfed by imports. Fortunately, about
16% of the EU’s imported natural gas is obtained from Norway,
a stable democratic state, which also has just under half of the
European region’s proven reserves. On the other hand, 41% of
EU natural gas imports come from Russia. Moscow also supplies
27% of the EU’s oil and 47% of its solid fuel, although the latter is
a relatively small absolute quantity.34 Options for increasing do-
mestic production of fossil fuels will be discussed further below.
32
 (a) 1990

Direct use
Total inputs
Total outputs

493

995
Final con-
sumption
1020

Imports

1773

1430
Energy
sector

1279
use

Other
Production
743

Exports
Transformation

275
Transformation
Other
343 losses

(b) 2020

Total inputs Direct use Total outputs

Final con-

975
sumption
633
1203

1203

Imports
1542
1804

Energy
sector
use
1171

Other
Production
575
575

Transformation
410

Exports
Other Transformation
262
losses

Oil and petroleum Gas Renewables Solid fuels

Nuclear heat Electricity Heat Other

Figure 32: EU27 energy flows.

(a) 1990; (b) 2020. Millions of tonnes of oil equivalent. Source: Redrawn from Eurostat data.

33
 Energy productivity
The EU is keen to draw attention to what appears to be the rising
energy productivity of its aggregate economy and of individual
member states, pointing to data (see Figure 33) indicating that
the ratio of Euros per kg of oil equivalent has been rising since
2000.

Figure 33: Energy 14

productivity of wealth in
the EU27, and selected 12
countries, 2000–2020.
Source: Eurostat. Chart by the author. 10
€/kg oil equivalent

UK 8
Italy
Germany 6
France
Spain 4
EU27

0
2000 2005 2010 2015 2020

But these results follow simply from falling energy consump-

tion and rising Gross Domestic Product, and are therefore vulner-
able to criticism of GDP as a relevant measure; few would take
GDP simplistically as a fully reliable indicator of societal wealth
and wealth production. Moreover, carbon leakage – where GDP
is increased by the trading of goods manufactured elsewhere
with cheap and higher emitting energy – must be regarded as
a significant contributor to these otherwise attractive results. As
discussed below in the context of the European Green Deal, the
fact that a carbon tax is to be imposed on goods entering at the
EU’s external borders is an implicit admission that leakage has
been taking place, and that a rising GDP-to-energy ratio signifies
little. Further data-gathering and econometric analysis of this im-
portant area is highly desirable.

12. Emissions in the EU

When lost in the details of support mechanisms for renewable
energy and their consequences, it is easy to forget that these are
not ends in themselves, but only a means to the end of emissions
reduction. We have already noted that the causal efficacy of the
ETS is by no means certain, and we have paused to consider the
abatement costs of renewables and compared them to the so-
cial cost of carbon, finding the policy costs to be economically
irrational. But it is as well to re-examine the emissions trajectory
itself, since this looms so large in the minds of the EU’s most en-
thusiastic supporters.
34
 Total emissions: society and economy
Greenhouse gas emissions in the EU have fallen very significantly
since 1990, as can be seen in Figure 34.

Figure 34: Historical trends and 5

projections of net greenhouse
gas emissions, 1990–2050.
Source: Adapted from European 4
Environment Agency, Trends and
Projections in Europe (2021), 8.72

Historic 3
Gt CO2e
Projected:
Existing policy measures
2
Additional policy measures

2030 target 53 137

1
2050 target
53 Annual reductions (MtCO2e)
0
1990 2000 2010 2020 2030 2040 2050

We should, however, note the sharp drop in emissions from

1990 to 1995, caused by the de-industrialisation of the former
East Germany. This was followed by a period, up to 2008, dur-
ing which emissions rose very slightly, and then a sharp drop
caused by the global financial crisis. Then there was a brief rise
in emissions consequent on the recovery, followed by a further
sustained fall as the climate policies prevented a return to the
growth trend, and finally a precipitate fall reflecting the impact
of public health measures to address the global pandemic. The
narrative resembles that given above in relation to total prima-
ry energy and final energy consumption, and the consumption
of electricity. Insofar as climate policies have reduced emissions,
they would appear to have done so in tandem with economic
difficulties caused by other, exogenous, factors, and it is perhaps
reasonable to conclude that the contribution of climate policies
has been largely to prevent the economies concerned from re-
turning strongly to trend after those crises.

Industrial emissions intensity per unit of energy

The emissions per unit of energy used by industry in the EU28
has fallen since 1990, from just over 50 gCO2/MJ to 36 gCO2/MJ, a
decline of about 28% (see Figure 35).
This effect would be highly significant if the industrial char-
acter of the member states of the EU28 had remained the same
over the period. But, as is so well known as to need no demon-
stration, there has been considerable economic restructuring in
most member states, other than Germany, and industries in gen-
eral and energy-intensive users in particular have not prospered.
35
Figure 35: Carbon 60
intensity of industrial
energy consumption in
the EU28 1990–2019. 40
Source: IEA, chart by the author.

gCO2/MJ
20

0
1990 1995 2000 2005 2010 2015 2020

The EU’s own statisticians, Eurostat, remark of this phenomenon:

…outsourcing of production and services from developed coun-
tries to low-cost developing countries…is closely related with the
industrial restructuring which has been one of the main economic
developments in Europe and other developed countries in recent
decades. This is seen both in the context of deindustrialisation and
concerns regarding social and environmental standards.35
The character of the economies in Europe has changed, and
it is not unjust to characterise this quite simply as deindustrialisa-
tion. Consequently, the reduction in emissions intensity cannot
be considered in isolation from the overall context. It reflects, in
all probability, the closure of higher emitting industries. A very
similar phenomenon was seen in the former Soviet Union states,
and notably in the former East Germany, as observed above.
Comparison of European industrial emissions intensity with
a less flexible sector, such as transport, the emissions of which
cannot be exported to another location, is instructive, and is dis-
cussed80 in the following section.

Carbon intensity of energy consumption in transport

As can be seen in Figure 36, the carbon intensity of transporta-
tion in the EU28 fell only very slightly between 1990 and 2019,
from 71 gCO2/MJ to 68 gCO2/MJ.
For practical purposes the carbon intensity of transport fuels
is almost unchanged after nearly thirty years of policy.

Emissions reductions: conclusion

It would appear, therefore, that the emissions reductions ob-
served in the EU member states are only indirectly related to cli-
mate-change policies. The principal effect of those policies has
been to suppress energy demand and hasten a trend towards
economic restructuring, perhaps economic decline, and it is this
that has caused the reduction in emissions. This conclusion finds
further support from consideration of EU manufacturing and
employment, with particular reference to ‘green jobs’, considered
in the next section.
36
Figure 36: Carbon intensity 80
of energy consumption
for transport in the
EU28, 1990–2019. 60
Source: IEA, chart by the author.

gCO2/MJ
40

20

0
1990 1995 2000 2005 2010 2015 2020

13. Green jobs and other jobs

Renewables equipment: manufacturing and jobs
Against the background sketched in a preceding section, com-
paring energy costs in the EU27 and the G20, it is significant that
even Germany is now unable to manufacture renewable energy
generation equipment competitively, having lost both its solar
industry and, with the recently announced closure of the Nor-
dex plant in Rostock, its last wind turbine blade manufacturing
plant.36 The fundamental reasons for this closure are not difficult
to determine, as the CEO of Nordex remarks:
The wind industry operates in a highly competitive, global mar-
ket that is mainly cost-driven. Against this background, we must
optimize our global production and sourcing processes in order
to ensure profitable production and to secure the Nordex Group’s
competitiveness. As a German and European-based company, we
particularly regret that we do not see an alternative to this painful
measure. We need an industrial policy that aims for a sustainable
and comprehensive way to decarbonize and foster supply chain in-
dependency.
A reader might be forgiven for thinking that all markets, ex-
cept that for military equipment perhaps, were ‘mainly cost-driv-
en’, but the idea is relatively novel to those in the renewables sec-
tor. With governments increasingly under pressure to respond to
consumer distress by closing or limiting subsidies, the wind and
solar industries have attempted to prolong non-market prices
and support by claiming significant progress in cost reduction;
honouring this promise has meant moving manufacturing to
parts of the world where industry still has unfettered access to
low-cost energy sources, mostly fossil fuels. Nordex has sites in
Germany and Spain, but also in Brazil, the United States, India,
and Mexico.
The parallel collapse of the European solar photovoltaic in-
dustry is starkly evident in Figure 37.
37
Figure 37: Photovoltaic 100
module production by
region 1990–2020. 80
Percentage of global capacity
produced. Source: Fraunhofer ISE.73

Percent
60

Rest of World 40
North America
Europe 20
Asia
0
1990 1995 2000 2005 2010 2015 2020
The point at which Asian production came to dominate the
sector coincides with the increase in EU energy costs, particularly
for households, leading to the suspicion that much of the nega-
tive impact of the climate policies has been an indirect one, via
upward pressure on wages. In Germany, in fact, industries were
protected against direct impacts, since renewable subsidy costs
were disproportionately loaded onto domestic consumers.
It is also relevant that Asian dominance of the solar panel
markets coincided with the absence of a recovery in energy con-
sumption, and by implication a lack of fundamental economic
health, after the 2008 crisis. It was not simply that the climate
policies harmed European businesses, but that they prevented a
vigorous recovery after the crisis. The competition, mainly in Asia,
was able to benefit both from supplies of cheap energy and also
from rising demand in Europe, prompted by various economic
stimulus packages, including subsidies to renewables.
The absolute quantities of solar panels manufactured from
2010 onwards reveal a disastrous picture. While PV manufactur-
ing has grown slightly in Europe, growth in Asian output has
been overwhelming (see Figure 38).
It is clear that renewable energy equipment manufacturing
has no future in the EU, and indeed manufacturing of any kind
exposed to international competition will struggle to survive, ex-
cept in niche areas. The causes of this constriction were not the
result of technological disadvantage, although as China (and Asia
generally) bank their fossil-fuelled wealth as progressively great-

160
Figure 38: Global
annual photovoltaic
module production by 120
region 2010–20.
GWp

Source: Fraunhofer ISE.74

80
Rest of World
North America
Europe 40
Asia

0
2010 2012 2014 2016 2018 2020
38
 er societal sophistication, this is likely to become an increasingly
important factor. In the period with which we are concerned, the
EU's disadvantage is simply one of proximal input cost, notably
through household prices and the upward pressure on wages
exerted indirectly by its renewables policies. Circumstantial evi-
dence in favour of this interpretation is that the German PV in-
dustry, including installers and other non-manufacturing jobs,
has responded to its problems by aggressive improvements in
labour productivity, reducing its employee base from 60,000 in
2008 to 20,000 in 2016, a trend that was replicated throughout
the European solar industry (see Figure 39).
The all-but-total collapse of the Spanish solar industry in
the space of eight years is quite extraordinary, and is doubtless
in large part explained by the curtailment of subsidies, which
caused a rapid contraction in the installation as well as manufac-
turing of solar generation. The recovery of employment through-
out the EU in the period 2016 to the present is probably the result
of an increase in the construction of new solar sites, well-docu-
mented in the UK for instance,37 typically using cheap imported
solar panels, but employing Europeans in posts related to devel-
opment permitting and construction.
Nevertheless, these industries have not been able to recover
market share. Global employment in the renewable energy in-
dustries is dominated by markets where labour costs are low:
China, India, Brazil, and the Rest of the World. High labour cost
areas, such as the USA and the EU27, fare less well (see Figure 40).

Figure 39: Employment in 300

the European solar industry.
Total full-time equivalent jobs 2008,
2016, and 2021, by country. Source: 200
Statista. Chart by the author.
000s

Romania UK
Belgium Rest of EU
Poland Italy 100
Greece Germany
Netherlands Spain
France
0
2008 2016 2021

Figure 40: Global employment 5

in renewables, by sector.
Estimated direct and indirect jobs 4
in renewable energy worldwide,
2019–20, by country and technology. 3
Millions

Source: IRENA. Chart by the author.

2
Solar PV Solid biomass
Liquid biofuels Biogas
Hydro Geothermal 1
Wind CSP
Solar heating/ 0
cooling China Brazil India USA EU27 RoW
39
 Tellingly, as can be seen in Figure 41, the EU has dominant
and substantial market share only in those areas where, due to
the nature of the business, there is little international competi-
tion, for example biomass.

Figure 41: Employment Solar PV

in renewables by Liquid biofuels
country and sector. Hydro
Estimated direct and indirect jobs
in renewable energy worldwide, Wind
2019–20, by country and technology. Solar heating/cooling
Source: IRENA, chart by the author. Solid biomass
Rest of world
Biogas
EU27
USA Geothermal
India CSP
Brazil
China 0 1 2 3 4
Millions

Perhaps most significantly, the large expenditures and ex-

tensive market distortions involved in driving the major expan-
sion of renewables capacity in the EU have not given its member
states a thriving domestic renewables equipment manufacturing
industry. The number of employees in the sector has increased
over time, from just under 1.2 million in 2013 to about 1.6 million
at present, but this is sluggish growth compared to the rest of the
world, and particularly China (see Figure 42).
The EU’s share of global employment in the renewable en-
ergy sector has declined from about 20% in 2012 to about 13%
in 2020, in spite of an increase in absolute numbers. Bearing in
mind that the EU still figures very prominently in total capacity of
renewable electricity generation installed – capacity remains at
around 50% of the total in the much larger Chinese market – this
is a matter of concern. As shown above, EU renewables capac-
ity represented 22% of the global total in 2012 and that figure
has only fallen to about 17% in 2021. Its capacity share has held
up better than its industrial share. It would appear that the EU’s
policies have created work in China and in the rest of the world.
Further, it is probable that estimates of employment in Europe
are generous, in the sense that they include many ancillary and
clerical positions related to planning and site development, for
Figure 42: Renewable energy 14
sector employment in 12
selected countries, 2012–20.
10
Source: Base data extracted from
Millions

the International Renewable Energy 8

Agency (IRENA) annual reports,
Renewable Energy and Jobs, which 6
began in 2013. Further calculations 4
by the author.
Rest of World USA 2
Brazil EU 0
India China 2012 2014 2016 2018 2020
40
 instance the legal process required for development permitting
in heavily regulated societies. Job totals in China are likely to be
dominated by positions in manufacturing and industry.
It is also interesting to observe that Germany, the European
Union's pre-eminent manufacturing state, has seen a contrac-
tion in renewable energy employment since 2012. Figure 43 is
derived from the same dataset as Figure 42 but separates Ger-
many’s employment totals from those of the rest of the EU, and
compares them with that of China.
7
Figure 43: Employment in
renewables, Germany, the rest 6
of the EU, and China, 2012–20.
Source: Base data extracted from 5
the International Renewable Energy
4
Agency (IRENA) annual reports,
Millions

Renewable Energy and Jobs, which 3

began in 2013. Further calculations
by the author. 2
EU
Germany 1
China
0
2012 2014 2016 2018 2020

It would seem fair to conclude that Germany has not benefit-

ted from the boom in renewables manufacturing jobs, a particu-
larly surprising fact given that, due to generous subsidies from
German consumers, it accounts for about 25% of EU installed re-
newable electricity generation capacity and a truly remarkable
5% of global capacity. These figures have been stable from 2012
to the present day and have been sustained by a dramatic 77%
increase in German capacity over this short period. Figure 44
shows Germany’s share of world renewables generation capacity
since 2012.
In return for this costly effort, Germany has received little in-
dustrial benefit, a conclusion that should be of concern to other
European states, and to the EU as an economic entity, since Ger-
many’s positive trade balance is at the heart of European pros-
perity.

Figure 44: Renewable energy

capacity, Germany and the
Rest of the World, 2012–21. 3
Source: Base data extracted from
Terawatts

the International Renewable Energy

Agency (IRENA) annual reports, 2
Renewable Energy and Jobs, which
began in 2013. Further calculations
by the author. 1
Germany
Rest of World
0
2012 2014 2016 2018 2020 2020
41
 Trade balance
The EU has a positive trade balance, but since 2016 the surplus
appears to be on a declining trend. This coincides with the sharp
rise of costs in the EU Emissions Trading Scheme, and the onset
of substantial renewable energy price impacts (Figure 45).
300
Figure 45: EU trade
balance 2011–21.
Source: Eurostat.75 Chart by the 200
author.

(€bn)
100

-100
2011 2013 2015 2017 2019 2021

The timing is at least worth further investigation, and while

no firm conclusions can be drawn, there is no ground for com-
placency, particularly when seen against a deepening trade im-
balance with China, for which the downward trend began some-
what earlier, in around 2013 (Figures 46 and 47).

Figure 46: EU imports 500

from and exports to
China, 2011–21. 400
Source: Eurostat. Chart by the author.
Imports 300
(€bn)

Exports

200

100

0
2011 2013 2015 2017 2019 2021
Figure 47: EU trade balance 0
with China, 2011–21.
Source: Eurostat. Chart by the author.

-100
(€bn)

-200

-300
2011 2013 2015 2017 2019 2021
42
 Furthermore, the EU’s overall trade balance would appear to
be fragile and vulnerable to its climate policies, since it is heavily
dependent on exports of chemicals and related products, and on
machinery and transport equipment (Figure 48).
Figure 48: Extra-EU trade
balance 2016, 2020, and 400
2021, by commodity type.
Source: Eurostat. Chart by the author.
Other manufactured goods
Machinery and transport equipt. 200

(€bn)
Chemicals and related prod.
Food, drink, tobacco 0
Raw materials
Mineral fuels, lubricants
-200

-400
2016 2020 2021

This relatively narrow base is clearly a cause for concern. Both

sectors are vulnerable to high energy costs in the short term, and
the declining surplus in machinery and vehicles is perhaps a sign
that they are already under pressure. The Commission’s official
view is that the introduction of low-carbon transport, in particu-
lar electric vehicles, will give the EU a distinct advantage. In writ-
ing of the European Green Deal, the Commission declares that:
With our green transport shift, we will create world leading compa-
nies which can serve a growing global market.38
But this may be wishful thinking. European manufacturers
have a strong technological lead in internal combustion engine
and power-train design, resulting from historical priority and
lengthy experience. A rapid shift to electrical motors, batteries
and the new power trains required is very likely to throw this ad-
vantage away, and put Asian companies – and particularly Chi-
nese ones – on the same starting line and perhaps even hand
them an immediate advantage, since they already have consider-
able expertise in the fields of electronics. There are reasons, then,
for thinking that the EU’s positive trade balance is vulnerable to
the failure of the EV gamble, handing parity, or even superiority,
to China in an area where Europe was struggling to maintain an
historical advantage. The decline in the trade surplus in the ma-
chinery and transport sector could be taken as an ominous sign.
We should also note that the EU trade surplus is heavily de-
pendent on Germany, and thus on the German motor sector (Fig-
ures 49 and 50). Germany has been protecting its industries from
renewables costs by charging all subsidies to household con-
sumers in the first instance, but this simply delays the impact.
Eventually households will pass high cost of living through to in-
dustry as rising wage demands. Industries may respond with at-
tempts to improve labour productivity by reducing employment,

43
Figure 49: Extra-EU Germany
trade balance by EU Italy
member state, 2021. Ireland
Sweden
Source: Eurostat. Chart by the author. France
Denmark
Austria
Finland
Lithuania
Latvia
Estonia
Luxembourg
Cyprus
Malta
Croatia
Slovakia
Portugal
Bulgaria
Slovenia
Romania
Hungary
Czechia
Belgium
Greece
Poland
Spain
Netherlands
-200 -100 0 100 200
(€bn)

but will then be faced with governments seeking higher corpora-

tion taxes to fund social welfare programs. German industry may
come to regret not having fought more vigorously against the
EU’s determination to increase costs when it was first introduced.
Germany’s positive trade balance is nearly three times that
of the EU overall, and without it the EU would have a large trade
deficit. Should German industry falter, the consequences for the
EU will be significant.

2500
Figure 50: EU27 extra-
EU exports and imports
by member state.
Source: Eurostat. Chart by the author. 2000

Other Denmark
Netherlands France
Spain Sweden 1500
Poland Ireland
(€bn)

Belgium Italy
Austria Germany
1000

500

0
Exports Imports
44
14. Has the EU learned from its experiment?
In spite of the clear evidence that climate policies have result-
ed in falling productivity in the energy sector in the European
region, there is no sign that the Commission has even recog-
nised the facts, let alone learned from the experience. Indeed,
from their response, one would think it had been a resounding
success. In December 2019, the Commission declared that the
member states would achieve climate neutrality by 2050 and an-
nounced that the policies necessary to this end would be known
as the ‘European Green Deal’.39 This commitment was made le-
gal in March 2020 with the introduction of the European Climate
Law (ECL), and in December of that year an interim target of a
55% reduction in emissions by 2030 compared to 1990 levels
was added to the obligations imposed.
The ECL entered into force in June 2021, and in July the Com-
mission presented a package of new policies, and reinforcements
of existing ones, ‘to transform our economy’. This confirmed the
legally binding targets, and added the ambition that economic
growth will be ‘decoupled from resource use’.40 This is surely wish-
ful thinking, and without theoretical foundation.
However, the Commission believes that climate change is
not only ‘the biggest challenge of our time’, but ‘an opportunity to
build a new economic model’, comprising a transformation that
will ‘reduce emissions…create jobs and growth…address energy
poverty…reduce external energy dependency and improve our
security of supply [and] improve our health and wellbeing’.41 In
pursuit of these outcomes, the Commission proposes: ‘greater re-
newable energy use’, ‘clean new cars and cleaner fuels for cars,
planes and ships already on the market’, ‘an extension of Europe-
an carbon pricing to more sectors’, ‘targets to save energy’, ‘taxa-
tion [of ] energy sources in line with climate goals’, and ‘support
for vulnerable citizens, to protect them against additional costs
during the transition’.
The regulatory and legal framework required to deliver the
targets includes:
• revisions to the Renewable Energy Directive (RED)
• revisions to the Energy Efficiency Directive (EED)
• an energy taxation directive (ETD)
• a carbon border adjustment mechanism (CABM)
• the FuelEU Maritime Initiative
• a new Social Climate Fund (SCF) to mitigate cost increases to
those on low incomes
• revisions to the EU Emissions Trading Scheme (EU ETS)
• the Alternative Fuels Infrastructure Directive (AFID)
• the ReFuelEU Aviation Initiative
• a new emissions trading scheme for road transport and build-
ings
45
 • revisions to the Land Use, Land Use Change, and Forestry
(LULUCF) regulations
• the Effort Sharing Regulation (ESR), to set annual emissions
targets for member states
• new emissions standards for cars and vans
• a new EU forest strategy.42
The Commission chooses to group its policy instruments
and detailed targets under the headings Transport, Industry, En-
ergy, Buildings, the Sustainable Use of Natural Resources, and Re-
search and Innovation Actions. The main features of the European
Green Deal are summarised under these titles below.

Transport
The Commission proposes that emissions from cars should be re-
duced by 55% by 2030, and that new cars should be zero-emis-
sion by 2035. An emissions-reduction target of 50% by 2030 ap-
plies to vans, and new vans must have zero emissions by 2035.
The Alternative Fuels Infrastructure Directive will introduce
targets for alternative fuel infrastructure, for example electrical
charging and hydrogen refuelling stations. One refuelling station
will be available every 150 km along the still-to-be-completed
Trans-European Transport Network and in every urban node. The
scale of this ambition can be gauged from the nine ‘Core Net-
work Corridors’, which are due to be completed by 2030, and
then supplemented by a comprehensive network that covers all
European regions. This is planned for completion by 2050 (see
Figure 51).
The Commission expects 30 million zero-emission vehicles
to be on European roads by 2030, and notes that 1 million EVs
were registered in Europe in 2020, three times the number regis-
tered in 2019.
From 2026, road transport will be covered by emissions trad-
ing, and fossil fuels used for air travel, maritime transport, and

Figure 51: The core of

the Trans-European
Transport Network.76

46
fishing within the territory of the EU’s member states will not be
fully exempt from energy taxation.
The EU ETS already applies to domestic aviation and has
done so since 2013. The Commission now proposes to extend the
scheme to all international aviation departing from EU airports.
In addition, these airports will be required to provide electrical
power to all departure gates to reduce aeroengine use while dis-
embarking, refuelling, and boarding.
Carbon pricing will also be extended to the maritime sec-
tor, and will apply to any ship arriving at or departing from an EU
port. Penalties will be levied on vessels that do not meet certain
regulatory requirements. The Commission will also compel ports
to provide electrical power to all docked vessels, to reduce fuel
use while loading and unloading.
There will be a mandatory blending target for sustainable
aviation fuel used by all operators in Europe, a minimum tax on
kerosene, and free allowances for aviation will be phased out.

Industry
The EU ETS will be strengthened, with a view to increasing rev-
enues, and a revised Innovation Fund, doubled in size, will aim to
ensure that those revenues are directed towards creating further
emissions reductions. The fund is currently designed to be sup-
ported by the 450 million industrial emissions allowances due to
be issued between 2021 and 2030. Under the revised plan, that
figure will be increased to 500 million, and the fund will also ben-
efit from 150 million new allowances relating to road transport
and buildings, and an unspecified number of allowances ‘freed
up by the Carbon Border Adjustment Mechanism’. The extended
Innovation Fund will have more funding instruments to encour-
age early uptake of innovative technologies and a selective focus
only on those ‘projects aligned with the European Green Deal’.
The Commission expects these changes to compel the reno-
vation of 35 million industrial buildings and create 160,000 ad-
ditional ‘green’ jobs in the construction sector alone, with many
more created across the industrial value chain. The electrifica-
tion of the economy and the transition to renewable energy are
expected to create many of these positions, with the transport
regulation ‘providing major opportunities for the European car in-
dustry’ (the Commission’s emphasis, not mine). The failure of the
renewables industry to seize global market share, as described
above, does not suggest that these hopes are well-founded.
Revisions to the state-aid rules will permit member states
to intervene more forcefully to ‘support business to decarbon-
ise their production processes and adopt greener technologies’,
a tacit admission that spontaneous adoption will not meet the
Green Deal targets and that subsidy – that is to say, a coerced
transfer of wealth – will be required.
Participants in the EU ETS will be required to cut emissions
by 61% by 2030, with a one-off reduction in the annual limit on
total emissions to align this cap with actual emissions observed.
47
The annual rate of reduction required in the ETS will be 4.2%.
Allocation of free allowances will be made conditional on
decarbonisation efforts, and there will be new measures to en-
courage energy-intensive industries to use innovative clean
technologies.
The Modernisation Fund, which draws revenue from the ETS,
and supports the eleven lower-income member states in their
efforts to reduce emissions, will be doubled in size, a clear sign
that the Commission recognises that cross-subsidy from richer to
poorer member states is required to maintain consensus support
for the agenda. The fund’s share of ETS revenues will more than
double, to 4.5%.
EU industry will be protected, and we can use the term advis-
edly, by a Carbon Border Adjustment Mechanism, which will put
a carbon price on imports ‘of a targeted selection of products’ –
in the first instance: cement, iron and steel, aluminium, fertiliser,
and electricity – to prevent carbon leakage. The Commission be-
lieves that ‘this will ensure that European emissions reductions
contribute to a global emissions decline’, a claim that can be in-
terpreted as a tacit admission that the emissions reductions since
2005, and the introduction of the ETS, have in fact only exported
emissions to overseas production. Whether the mechanism will
deliver the required outcome is doubtful, particularly in the con-
text of a widening gulf between the Western and Asian econo-
mies (China, Russia, India), which may result only in the higher-
carbon Chinese and Indian economies preferring to trade with
each other rather than face what are in effect hostile and exclu-
sionary tariffs in Europe.
The mechanism will be introduced in a transitional phase by
the end of 2025, and will be fully operational in 2026. From that
point onwards, EU importers of goods affected will be required
to register with national authorities to purchase certificates to
cover their imports. The price will be determined by the weekly
average auction price of emissions allowances. Importers can re-
duce the cost by demonstrating that the goods have a low car-
bon footprint or that a carbon tax has already been paid in the
country of manufacture.
European industries will also be required to increase their re-
newable energy use by 1.1 percentage points per year, presum-
ably up to 2030, with a separate annual target of a 1.1 percentage
points increase in renewable energy for heating and cooling.
There will be a binding target, of an as-yet unspecified mag-
nitude, requiring industry to use a certain quantity of non-bio-
logical renewable fuel– such as hydrogen – as a feedstock or en-
ergy carrier. This measure is intended to prevent switching from
natural gas and coal to biomass for process heat. It seems likely
to impose very high costs, encouraging closure and relocation
to more favourable jurisdictions, probably in Asia where coal use
will be tolerated and perhaps even encouraged. As noted above,
biomass accounts for some 60% of all the EU’s renewable ener-
gy and has been preferentially selected by industries for process
48
heat where possible as an alternative to electricity. The Commis-
sion presumably wishes to restrict this avenue in the interests of
forestry sustainability. That may be admirable in itself, but the
economic consequences seem likely to be adverse.

Energy
Energy accounts for about 75% of the total emissions of the EU,
and has been a principal focus of its climate policies, as discussed
above. The EU currently generates about 20% of its energy from
renewable sources, but has a target for that figure to rise to 30%
by 2030. However, this is judged to be insufficient to put the EU
on course for the Green Deal targets, so the Commission propos-
es that the target be increased to 40%. Specifically, there will be
a binding increase of 1.1 percentage points per year in the use of
heating and cooling at a national level, and an indicative target
of 2.1 percentage points per year of renewable energy and waste
heat and cold in district heating and cooling. A 13% greenhouse
gas intensity target in transport will be introduced and, as noted
above, industry will be required to increase its use of renewable
energy by 1.1 percentage points per year. A new benchmark tar-
get requiring a 49% share of renewable energy use in buildings
will also be introduced.
A ‘credit mechanism’ will support electrification of transport,
and there will be sub-targets for, and certification of, renewable
hydrogen. The Commission will also act to compel member states
to accelerate permitting for renewable energy projects and pro-
mote cross-border co-operation through the renewable energy
financing mechanism.
The Commission will also act to facilitate renewable power
purchase agreements, an important development that is like-
ly to be used to provide hidden subsidies to generators, with
above-market prices concealed in the costs of goods and ser-
vices. Commercial consumers will come under great pressure,
as they already are in the United Kingdom, to enter into these
bilateral deals with renewable energy generators as a means
of demonstrating compliance with environmental, social and
governance (so-called ‘ESG’) guidelines. Prices to consumers of
goods and services will inevitably rise, but these end-purchasers
will be unaware of the causes and will inevitably blame retailers
and service providers, who should take warning. Energy compa-
nies, particularly in the UK, are now paying the price of having
in effect collected green taxes through consumer bills to fund
renewables. Shops and businesses who wish to avoid a similar
problem should insist that governments levy and collect taxes
themselves.
The Commission notes (their emphasis) that ‘reducing energy
consumption is essential’ to achieving these targets, and proposes
a reduction of 39% in total primary energy input, and a reduc-
tion of 36% in final energy consumption, as against projections
made in 2007. Member states will be required to reduce con-
sumption at a mandatory rate of at least 1.5% per year overall,
49
 with the public sector required to deliver reductions of 1.7% per
year. This represents a 9% increase in the scale of demand reduc-
tion required over the levels pledged in 2020 in member states’
National Energy and Climate Plans.
Indicative member state contributions to the demand re-
duction requirement will be introduced. An ‘Energy Efficiency
First Principle’ is to be applied in policy and investment decisions,
although the details are not currently known.
In practice, the Commission calculates that these plans will
mean that total primary energy must fall to 1023 million tonnes
of oil equivalent (mtoe) in 2030, and that final energy consump-
tion must fall to 787 mtoe.43 These are very surprising values.
Figure 52 displays empirical data for these two measures for the
EU27 (i.e. not including the UK) from 1990 to 2019, and indicates
the target levels and the percentage reduction required on 2019
levels. A 27% reduction in total primary energy and a 22% reduc-
tion in final energy consumption are required in less than a dec-
ade. Bearing in mind the demand decline already observed, it is
difficult to see how further reductions can be achieved without
severe adverse effects on European wealth and standards of liv-
ing.
The twin goals of increasing the use of renewable energy
and reducing total demand are to be supported by revisions to
the tax system, specifically aligning the minimum rates for heat-
ing and transport, thus removing the exemptions widely offered
in the EU at present to heating fuels. The Commission also pro-
poses to remove exemptions and entitlements to reduced rates
for fossil fuels used in industry and commerce, for example in avi-
ation and shipping.
As also noted above, the Commission is concerned, quite
reasonably, that heavy dependence on cheap biomass may have
undesirable environmental consequences. It therefore proposes
to prohibit the use of primary forests, peatlands, and wetlands as
biomass sources. There will be no support for forest biomass for
electricity-only generators after 2026, and there will be a prohibi-
tion on national support for the use of saw or high-quality ‘veneer’
logs, or stumps or roots, for energy generation. All biomass heat
1800
Figure 52: Energy targets
for the EU27. 1600 1572
1436 1408
Source: Empirical data: International 1400
Energy Agency; Target magnitude,
European Commission.77 Chart by the 1200
1023
author. 1000
Mtoe

1092
995 1015
Total primary energy 800
Final energy consumption 787
600
400
200
0
1990 2000 2010 2020 2030
50
and power installations will be required to meet new minimum
greenhouse-gas saving thresholds.
We have already seen that hydrogen is to be supported,
both for transport and as an alternative to biomass for heat. The
Commission will introduce targets for at least 40 GW of renew-
ably fuelled hydrogen electrolysers, with the goal of producing
10 million tonnes of renewable hydrogen per year by 2030. 2.6%
of transport fuels must be renewable fuels of non-biological ori-
gin – in other words, hydrogen or wind or solar electricity – and
industry will be required to show that 50% of the hydrogen it
uses has been derived from renewable sources. This is important,
since it constricts the market available to the use of steam meth-
ane reforming with carbon capture, which is already central to
some national plans because it is by far the cheapest means of
generating hydrogen. The UK, for example, hopes to produce
about 200 TWh of hydrogen from methane in 2050, mostly to
decarbonise tricky areas such as agricultural traction and marine
transport.
The Energy Taxation Directive will set preferential rates for
the use of renewable and low-carbon hydrogen. The directive
will also set revised rates for all fuels according to their energy
content, rather than their volume, and their environmental im-
pact. Tax exemptions that favour fossil fuels and polluting eco-
nomic sectors will be removed.
Exemptions for home heating will be phased out, so that
member states will be unable to tax heating fuels at lower rates,
requiring them to find alternative means to support low-income
households. As noted above, fossil fuels used by air, maritime
transport and fishing within the EU will not be fully exempt from
energy taxation.

Buildings
On the basis that buildings account for 40% of the EU’s final en-
ergy consumption, and 36% of its greenhouse gas emissions,
the Commission proposes a broadscale ‘renovation’ programme.
Member states will be required to renovate 3% of the total floor
area of all public buildings annually, to set a benchmark of 49%
of renewable energy supply for buildings in 2030, and to legis-
late so as to increase the use of renewable energy in heating and
cooling by 1.1 percentage points per year until 2030.
In the interests of social justice, these measures will also be
supported by grants from the Social Climate Fund, amounting
to €72.2 billion over seven years. However, some of this will be
spent on access to zero- and low-emission transport and ‘even to
income support’.

Sustainable use of natural resources

The Commission believes that ‘Restoring nature and enabling
biodiversity to thrive again offers a quick and cheap solution to
absorb and store carbon’, and therefore proposes to ‘restore Eu-
rope’s forests, soils, wetlands and peatlands’.
51
 Revisions will be made to the Land Use, Land Use Change
and Forestry (LULUCF) regulations, with the goal of achieving a
new target of 310 million tonnes of carbon in the natural carbon
sink. The Commission proposes a roadmap to plant 3 billion trees
by 2030. There will be legally binding targets for nature resto-
ration, and ‘payment schemes’ (subsidies) for forest owners and
managers for the ‘provision of ecosystem services’. Remote sens-
ing will be used to monitor the state of the EU’s forestry, with ‘citi-
zen involvement’ through a Map-My-Tree scheme to keep track
of the 3 billion trees planted.
Given that biomass energy forms so large a part of the EU’s
renewable energy programme, some 60% of all renewable ener-
gy and 12% of all energy, there is concern that the sustainability
criteria may not be sufficiently tight, so the Commission propos-
es the introduction of ‘strict new criteria to avoid unsustainable
forest harvesting’. How these rules will work on the ground is un-
clear.

Research and innovation actions

To support all the activities described above, the Commission will
ensure that the €25 billion of research funding under the Horizon
Europe scheme is co-ordinated with the European Green Deal, so
as to ‘underpin the implementation of Europe’s 2030 climate and
energy targets’. It aims to deliver 100 climate-neutral and smart
cities in Europe by 2030, as showcases of experimentation and
innovation, although funding levels are not specified. Some €4
billion will be directed to the Zero-Emission Waterborne Trans-
port Partnership, to ‘eliminate all harmful environmental emis-
sions, including water and noise pollution’ in the maritime sector
by 2030. The ‘Towards Zero-Emission Road Transport’ Partnership
will receive €1.2 billion to accelerate zero tailpipe emission road
transport, in co-operation with the Batteries Partnership. The
Clean Aviation Joint Undertaking will invest €3 billion in reduc-
ing aviation emissions by at least 30% by 2030. The Clean Energy
Transition Partnership will receive €800 million to develop, scale
and implement decarbonised technologies and energy systems.
The Clean Hydrogen Partnership will receive over €2 billion in
funding to ‘maintain and strengthen the competitiveness of the
EU clean hydrogen value chain’. Finally, the Clean Steel Partner-
ship will receive €1.7 billion over the next decade to develop cli-
mate-neutral steel production.
This amounts to a total research and development spend of
approximately €38 billion, either directly related to, or at least co-
ordinated with, the Green Deal initiative.

The Green Deal in summary

The legislative and administrative agenda implicit in the Europe-
an Green Deal is vast, and suggests that the Commission and the
EU itself has become subservient to the climate agenda. The Eu-
ropean Commission now appears to identify the moral and po-
litical concept of EU with that of climate policy leadership. The
52
bloc is now in effect a climate policy agency, and even the Grand
Projet itself is a vehicle for protecting the world against global
warming. Consider these sentences from the Commission’s over-
view brochure European Green Deal: Delivering on our targets (the
use of bold type for emphasis is as per the Commission’s text):
The European Green Deal has already set a positive example and
led major international partners to set their own target dates for
climate neutrality. Now we are ready to [sic] lead show the way
again, with our detailed plan to meet these targets.
Leading the global climate action provides advantages for our
companies. With our investment in renewable energy technolo-
gies, we are developing expertise and products which the rest of
the world also needs. With our green transport shift, we will create
world leading companies which can serve a growing global mar-
ket.
In addition, we are helping raise global ambition to tackle climate
change. By working with our international partners, we will reduce
emissions together in maritime transport and aviation around the
world.
[…] Through our policy experience, industrial leadership, climate
diplomacy and climate finance, the EU is boosting significantly
the global fight against climate change.44
One might quarrel with almost everything here. The exam-
ple set by the declaration of the European Green Deal is far from
positive. Indeed, it suggests a perverse determination to ignore
the discouraging results of twenty years of experimentation with
a renewables-centric emissions reduction policy. Furthermore,
the detailed plan, reviewed above, suggests hubristic bureau-
cratic overreach rather than sane determination.
Even a sympathetic but historically informed reader will
surely be troubled by the possibility that this is nothing less than
another warning that ‘seeing like a state’ comes with terrible dis-
advantages. Several centralised bureaucracies in modern history
have attempted a ‘detailed plan’ for economic transformation.
None have succeeded in the way that they expected, and several
have failed catastrophically.
And then there is the extraordinary claim that investment
in renewable energy technologies has resulted in Europe ‘devel-
oping expertise and products which the rest of the world also
needs’. On the contrary, as we have seen, Europe has lost its so-
lar industry to Asian competition and is in the process of losing
wind power manufacturing to the same low-cost, fossil-fuelled
economies. Furthermore, it is Europe, not the rest of the world,
that believes it needs these technologies, and is importing them.
And as remarked above, in discussing trade balances, the green
transport shift will almost certainly be precisely the opposite of
what is expected by the Commission, handing China an advan-
tage in the manufacture of electric vehicles.
53
 When the economic claims are put aside, as they must be,
we are left with pretentions to moral example, to acting in a
way that, perhaps selflessly and with accompanying self-harm,
raises global ambition in climate-change policy. At this point it
becomes apposite to recall that those states which have expe-
rienced the most disappointing results from ideologically driv-
en economic planning – Soviet Russia and Mao’s China – were
also those that, like the EU, suffered from narcissistic delusions
of global moral leadership. This combination occurs because the
concept of virtue contains and entails the concept of self-denial;
to be virtuous is to willingly frustrate one’s own wishes and deny
self-satisfaction. Thus the manifest failures of the favoured policy
to deliver wealth and prosperity become perversely persuasive
evidence that the policies are succeeding in a higher and moral
sense. The pain is proof of virtue. Whether this will be politically
sustainable in the longer term is, however, extremely doubtful.

15. The energy transition illusion and the

future of European prosperity
A dark future or a distressed policy correction?
Introducing its climate policy vision, the European Commission
describes the next ten years as a ‘make-or-break decade’.45 For
once one can agree. The Commission presumably believes that
the coming years will make Europe a global low-carbon power-
house and a moral exemplar, but on the evidence of its own pol-
icy outcomes since 1990, the new European Green Deal seems
all but certain to break European economic and socio-political
power, rendering it a trivial and incapable backwater, reliant on –
and subservient to – superior powers.
We can be certain that there will be an eventual reversal of
direction, and there have even been small signs that the EU and
its member states are beginning to adjust their positions – if only
slightly and without fanfare. One example can be found in the re-
cent revisions to the Green Taxonomy, which offered more toler-
ance to both natural gas and to nuclear. However, these changes
were overtaken by the Russian invasion of Ukraine on 24 Febru-
ary 2022. This has become an extended war, with no rapid culmi-
nation likely; its effects on global low-carbon policies are now a
key focus of attention.
For the time being, the Commission remains committed to
the climate agenda, on the grounds that European dependence
on fossil fuels has given the Russian state its power, and that the
‘energy transition’ (energiewende) already required by the emis-
sions reduction policy will pay geopolitical dividends, liberat-
ing member states from their need to import gas, and to a lesser
degree coal and oil, from companies controlled by Moscow. As
should be clear from the material reviewed in previous chapters,
this is not a sound response.
Firstly, and simply enough, the concept of an energy transi-
54
tion has no evidential reality in the past or present, and seems
unlikely to have one in the future. At the global level, there is not,
and never has been, any evidence of a transition away from fossil
fuels, as demonstrated by the scale and character of Asian, and
particularly Chinese, energy use.
Secondly, where renewable energy has increased as a frac-
tion of total supply, mostly in the West, the result has been stag-
nant or declining energy consumption, and an implicit depend-
ence on manufactured goods from areas where fossil fuels are
still consumed, principally China.
Finally, where modern renewables such as wind and solar
have been adopted in high proportions relative to the overall en-
ergy sector, mostly in Europe, energy systems have become criti-
cally dependent on natural gas to guarantee security of supply.
It is these three facts in combination that make the Russian
invasion of Ukraine so important. They will also determine the
eventual response of the NATO economies, their allies such as Ja-
pan, and after that perhaps even the European Commission itself.
It should be emphasised that the EU’s environmental meas-
ures were already running into difficulties before the war in
Ukraine. Russia’s invasion has simply accelerated the process
through which failure is becoming evident. As gas prices rose
as economies recovered from the pandemic, it was already clear
that, paradoxically, the states most affected were those that are
most heavily committed to renewable energy. European envi-
ronmental policy was thus revealed as a natural gas strategy,
with wind and solar generators deployed as mere status symbols
(Veblen goods, in the economic jargon).
The strategic response that must follow if EU member states
are to remain capable (and defensible) will recognise that the
thermodynamic characteristics of the fuels selected are an es-
sential, not incidental, consideration, and that there is now no
alternative but to ‘steer into the skid’ and wind down all the en-
vironmental measures instituted in preceding decades. It is pos-
sible, but far from certain, that environmentalism may survive as
an end. If it does, a new and pragmatic approach, grounded in ro-
bust physical reasoning, such as a gas-to-nuclear trajectory, will
be vital. Greenhouse gas emissions would fall over time, but the
ambition of achieving Net Zero emissions by 2050 would not be
realised.
Governments globally will doubtless take warning from the
EU’s experience. However, policy correction will proceed at dif-
fering paces and with varying priorities according to local cir-
cumstances, and will be masked by politically motivated ges-
tures towards renewable energy and emissions reductions. At
the general or global level, state action will be characterised by
a short-run scramble to acquire non-Russian oil and natural gas,
particularly to fuel industrial process heat, with all sources, both
conventional and unconventional, being explored. It is likely that
coal will be tolerated in the short term and it may return on a
larger scale in both the medium and longer terms as an insurance
55
against difficulties in obtaining acceptable gas supplies, and also
against delays in the development of nuclear plant. There will be
emergency legislation, and perhaps financial support, to allow
the continued operation of existing coal and nuclear stations.
These measures might be supplemented by the suspension or
moderation of emissions trading schemes so as to reduce indus-
trial consumer costs.
Given the pressure on the overall economy, it is highly likely
that there will be a broad reconsideration of the scale and pace of
measures encouraging electric vehicles and heat pumps, at least
until electricity prices can be brought under control and security
of supply resolved through diversification of generation technol-
ogies.
In countries particularly exposed to the price of natural gas,
we can expect to see construction of more modern combined-
cycle gas turbines, their higher thermal efficiencies reducing
the consumption of gas per unit of electricity generated. Where
countries have access to natural gas resources, however modest,
there will be efforts to reverse years of policy suppression and
once again increase production. At the same time, we may ex-
pect to see accelerated plans for nuclear power, both for gen-
eration of electricity, and, crucially, production of high-temper-
ature heat, to be used in industrial processes and perhaps also
for generation of hydrogen for transport. Nevertheless, prudent
governments will also plan for ultra-supercritical coal generation
of electricity as a backstop, should nuclear fall behind schedule
or gas prices remain high. Coal resources are widely distributed
globally, and renewed interest in their extraction cannot be ruled
out, even in Europe.
In those jurisdictions, particularly in Asia, where renewables
policies have been only token, we may expect to see renewed
emphasis on conventional energy development and on more or
less aggressive geopolitical moves to secure natural resources
worldwide. Renewables are playing an insignificant role in Asian
growth and there is no reason to think that this will change.
China, in particular, will generate as much wealth and societal
sophistication – including military power – as possible from fossil
fuels, before proceeding directly to advanced nuclear fission and
fusion.
While this necessary retreat from renewable energy has
been looming for some time, though little appreciated outside
specialist circles, it has been brought into sharp focus, again
paradoxically, by gas price increases and a constriction of sup-
ply for which the EU was all but completely unprepared. It had
been assumed that the only likely cause of interruption would be
hostile Russian action, and it was further assumed that Russia’s
need for overseas income would limit their actions to gestures.
The possibility of the West opting to reject Russia’s supplies in
the longer term has never been debated at the public or political
level, and is unlikely to have been considered a significant prob-
ability even in far-sighted security circles. Insofar as government
56
departments were concerned about reliance on Russian gas, it
was assumed, incorrectly, that renewables would mitigate this
dependency rather than creating and compounding it, as is in
fact the case. However, the UK’s Department of Business, Ener-
gy and Industrial Strategy is reluctantly coming to accept that
exploration of conventional resources in the North Sea is neces-
sary, though it remains opposed to shale gas for the time being.
This is in spite of the fact that the British government’s position
is that the cost of offshore wind and renewables generally has
fallen so significantly that fossil fuels are now intrinsically more
expensive. A return to fossil fuel production is seen, or at least
presented, as a short-term emergency measure on the path to
green energy. However, it will prove to be a permanent feature.
The claimed falls in renewable energy costs, always implausible
on the grounds of the high entropy of the fuel flows, are readily
falsified by reference to the published accounts of offshore and
onshore wind companies, where it is clear that capital costs have
not fallen significantly, if at all, since the early 2010s, and that op-
eration and maintenance costs, particularly offshore, are actually
rising.46 Solar energy in the UK and in Europe is similarly troubled.
Enthusiasts for renewables will point to the high prices cur-
rently paid for fossil fuels as evidence of the incipient competi-
tiveness of renewables, but those prices do not reflect the under-
lying costs of production, which remain low, but are the result of
intense competition for a share of the currently available rates of
flow of these superior and highly desirable sources of energy. In
this context it is therefore likely that capital that might have been
committed to renewable technologies (so as to take advantage
of policy support, including subsidies and coerced market share)
will now prefer to support fossil fuel exploration, where physical
fundamentals rather than political whim underly spontaneous
determination of market value. The appearance of a sustained
move to renewable energy in Europe will be revealed as a mirage
of policy.
That this will come as a severe shock to the EU Commission,
and to many member states, is due to an error in the general and
even the professional history of energy, namely the concept of
energy transition, whereby one fuel replaces another. This gov-
erning idea is found everywhere in EU documents relating to its
climate policies; renewables are consistently projected to replace
fossils, and emissions reduction is for practical purposes identical
with the imagined move from one source to another. But there is
no empirical evidence for the existence of energy transitions in
the past, and no theoretical foundation for supposing that one is
likely in the future. This is so important an intelligence error that
it deserves separate consideration

The myth of the ‘Energy Transition’

With the doubtful exception of the decline of hunter-gathering
and the expansion of agriculture, there has never been a global
energy transition in human history, and there is no evidence of
57
 such a transition happening today in Europe, or indeed in any
other place.
As a matter of demonstrable fact, with small local excep-
tions such as the decline of firewood in London in the 19th cen-
tury, the total history of energy is characterised by expansion of
all sources, and not transition to a new source. Figure 53 charts
world total primary energy consumption from 1800 to 2015, and
is drawn from the data of Vaclav Smil.
As can be seen, no fuel, not even traditional biofuels, dis-
appear from the global fuel mix, and all fuels tend to expand in
quantity over time. The very small contribution from wind and
solar, the red line just visible in the 2015 data, does not justify the
claim of an energy transition. Reference to EU fuel-mix informa-
tion from 1990 to 2020 tells the same story (Figures 32 and 57).
The obvious conclusion is that global energy consumption
over the last two centuries, as over more recent decades, has been
characterised by the expansion of all sources and is dominated by
the overwhelming expansion of thermodynamically competent
– that is to say, low entropy – sources of energy, such as coal, oil,
natural gas and fissile uranium. These fuels have a high energy
return on energy invested (ERoEI), rendering the energy sector
600

400
Exajoules

200

0
1800 1850 1900 1950 2000 2015
Modern biofuels Wind and solar Nuclear Gas
Oil Coal Hydro Traditional biofuels

Figure 53: World total primary energy: 1800–2015.

Redrawn by the author from data in Vaclav Smil (2017).78

58
 highly productive and permitting vast wealth creation outside
it. Organic economies in the past relied on low-ERoEI renewable
flows, mostly from farmed crops, and were compelled to reinvest
the majority of the available wealth in the energy sector itself, for
example in farm wages and the management of land, leaving lit-
tle over for wealth creation in other areas. An economy based on
modern renewables would necessarily be very similar in struc-
ture, with wealth and socio-political power concentrated in the
hands of those owning the low-productivity energy generation
assets. This would be politically unstable.
Energy expansion, not transition, can be confirmed by ref-
erence to another data source, that of the International Energy
Agency (Figure 54).

Figure 54: World total primary

energy supply: 1971–2019. 600
Data: International Energy Agency.
Chart by the author.
Exajoules

Nuclear
Gas 400
Crude, NGL feedstocls
Coal, peat, shale oil
Renewables, waste
200

0
1971 1981 1991 2001 2011

Note that all renewables combined, that is modern (wind,

solar) and traditional (biofuels and waste, hydro), constituted
about 13% of global supply in 1971 and 14% in 2019, almost un-
changed proportionally in spite of real absolute growth. Remark-
ably, given the intense policy pressure, subsidy, and publicity in
favour of renewable technologies, particularly in the EU, global
markets simply have been unable to reduce fossil fuel input. This
is unsurprising. The physical properties of fossil fuels, notably
their low entropy, make them superior as a means of changing
the world in accordance with human wishes, changes that we
refer to as wealth creation. Consequently, when societies wish
to augment their own wellbeing, and generally speaking they
do nothing else, they increase consumption of fossil fuels as the
most effective means of doing so. This overall global rising trend
is strongest in Asia, and particularly in China (Figure 55).
All renewables constituted 24% of China’s energy in 1990
but only 9% in 2018, even though the absolute quantity of re-
newable energy has increased. Again, there is no transition; all
sources of supply have increased.
This point should be borne in mind when evaluating reports
that China has installed record levels of offshore wind power ca-
pacity in 2021 – some 17 GW or so, with a cumulative total of
about 26 GW – and has a total onshore wind capacity of about
59
Figure 55: Total primary 160
energy in the People’s
Republic of China 1990–2019.
Source: Data from International 120
Energy Agency. Chart by the author.

Exajoules
Wind, solar etc
Nuclear 80
Gas
Oil
Coal 40
Hydro
Biofuels

0
1990 1995 2000 2005 2010 2015

270 GW, with about 20 GW a year being added. By European

standards these are large numbers, but in the Chinese context
they are a minor contribution. China’s total installed capacity of
electricity generation in 2016 was about 1800 GW and is prob-
ably over 2000 GW at present, with about 1000 GW of that being
coal-fired. For comparison, the UK’s total installed capacity of all
technologies is about 100 GW.
China’s 14th Five-Year Plan projects a total addition of 40–
50 GW of new gas-fired capacity by 2025, giving a total gas-fired
capacity of about 150 GW, but even this is modest by that coun-
try's standards. Consequently, 17 GW of offshore wind in one
year can be regarded as window dressing, serving to generate
good headlines and provide a showcase for its export-oriented
renewables manufacturing industry. Even 300 GW of wind is far
from overwhelming in the Chinese context, a point confirmed by
reference to the overall trend in its generation of electrical en-
ergy (Figure 56).

Figure 56: Electrical energy 9

generation fuel mix in
8
China, 1990–2020.
Source: International Energy Agency 7
data, chart by the author.
petawatt hours

Wind 6
Solar
Biofuels 5
Waste
Nuclear 4
Hydro
Coal and oil
3

0
1990 1995 2000 2005 2010 2015 2020
60
 This is exactly what would be expected from the historical
record of energy expansion, not least because the progressively
wider adoption of electricity as an energy carrier is a basic in-
dex of modernity. China is generating just short of 8000 TWh of
electrical energy per year at present, mostly from coal and envi-
ronmentally controversial large hydro. For comparison and scale,
the UK generates about 300 TWh per year, and is on a falling con-
sumption trend (discussed below; see Figure 59). Generously as-
suming a load factor of about 40%, we can estimate the output
of the 26 GW of Chinese offshore wind at just under 100 TWh, or
about 1% of its electricity generation.
Overall, Chinese energy demand appears to be increasing
rapidly in every area, and with all fuels except traditional biomass
showing signs of growth. In the EU28, by contrast, energy con-
sumption is falling (Figure 57).

Figure 57: EU28 total primary 80

energy, 1990–2019.
Source: Data from the International
Energy Agency. Chart by the author. 60

Wind, solar etc

Gtoe

Nuclear 40
Gas
Oil
Coal
Hydro 20
Biofuels
0
1990 1995 2000 2005 2010 2015

That renewables have grown significantly in the EU in both

absolute and relative terms is undeniable: all renewables consti-
tuted 4.6% of EU28 supply in 1990 and 16.2% in 2019. But such
growth is wholly unsurprising given both the scale of subsidy
and the legislative support for that outcome (described above).
In any case, some part of the increase is attributable to declin-
ing energy input. Assuming total primary energy in 2019 to be
about 82 million TJ, as predicted by the very weak linear trend
from 1990 to the peak in 2006, renewables would constitute just
under 13% of energy supply. Indeed, it is the decline in energy
consumption that is the most striking feature of the data, not the
expansion of renewables. Sustained contraction of energy use is
unprecedented in modern economic history.
Charts for the individual member states of the EU – Germa-
ny, or the United Kingdom (a member of the EU until recently)
– are very similar to the aggregate picture, although the United
Kingdom shows a particularly marked shift to natural gas. Both
the decline and the extremely significant dependence on natural
gas are particularly evident in the field of electricity generation
(Figure 58).
Note in particular the disappearance of coal (to some degree
offset by the introduction of biomass burning in converted coal
61
 Figure 58: Electricity 350
fuel mix in the United 300
Kingdom 2009–21.
Source: BM Reports. Chart by the 250
author. Note: Transmission connected
200

TWh
generation only.

Interconnectors 150
Biomass
100
Wind, solar etc
Hydro 50
Nuclear
Coal 0
2018 2019 2020
Gas 2021 2009 2011 2013 2015 2017 2019
Dutch Int Nemo Int Nor Int
stations such as Drax), the decline of nuclear, and the expansion
of renewables and imports over interconnectors with Europe.
However, interesting though these changes in fuel mix undoubt-
edly are, the most important macroscopic feature of this figure is
the overall decline in electricity generation, making a sharp con-
trast with China. In historical context, this is even more striking.
Figure 59 charts electricity supplied in the UK in the century from
1920 to 2020.

Figure 59: UK electricity 400

supplied 1920–2020.
Source: Dept. Business, Energy &
Industrial Strategy. Chart by the
300
author.

200
TWh

100

0
1920 1940 1960 1980 2000

Electricity consumption in the UK is now at levels not seen

since the early 1970s, in spite of a much larger population. It goes
without saying that the fall in supply is the most sustained and
the largest in the record, making it objectively extraordinary that
this has not attracted more comment and concern. In all prob-
ability, analysts are taking false comfort from the view that this
is energy efficiency at work. However, as explained above, this
is logically incoherent, since improvements in efficiency deliver
growth, not conservation. Some other force is responsible for
this decline, and in this case, as with the EU (discussed above),
the explanation is almost certainly price rationing and the sup-
pression of demand.
In the UK, as in much of the EU, gas is the only thermody-
62
namically competent and immediately scalable generator left
on the system, since plant currently operating at low load factor
can increase output when required, as in 2021 when wind power
output slumped by about 20% due to unfavourable winds and in
spite of an increasing capacity. The electricity mix for the UK, in
Figure 60, also shows that security of supply in 2009 was provid-
ed by gas and coal, with support from nuclear, whereas in 2020,
only gas guaranteed security, with a declining contribution from
nuclear. This erosion of fuel diversity is still more clearly manifest-
ed in the two flow charts of UK energy supply and consumption
in 1995 and 2019 presented in Figure 60.
In 1995, UK fuel inputs were balanced over natural gas, coal,
primary electricity from nuclear, and oil, with large fractions of
within-country production of both oil and natural gas. While gas
was responsible for a large part of domestic heating, and much
industrial and commercial heat, the electricity industry was ap-
proximately evenly balanced over coal, natural gas and nuclear,
all high-grade fuels with superior physical properties rendering
them storable and controllable. The UK was clearly exposed to
gas, an effect mitigated by domestic production, but with a re-
spectable degree of fuel diversity, underwritten by a substan-
tial and at that time expanding component of nuclear electricity
generation. This was an economic and well-engineered system.
In 2019, the system has a fuel input profile that is concentrat-
ed on natural gas and oil, both areas where imports have grown
significantly to offset falling in-country production. The expected
growth in nuclear has not materialised, and in fact its input has
halved. Coal has almost disappeared, and gas is the dominant el-
ement, not only in domestic heating but also in electricity, where
it is the only high-grade fuel that is upwardly scalable – nuclear is
operating at close to maximum load factor, whereas gas genera-
tion is underutilised.
Renewable energy has grown significantly, but much of this
is wind and solar, a low-quality source. Biomass fuel for electricity
and heat has grown greatly, with a large fraction accounted for
by imported fuels for electricity generation. This does contribute
to security of supply, since the stations in which it is burned are
similar in character to coal plant, and indeed one of the largest,
Drax, is a converted coal plant. However, biomass for electricity
is extremely expensive and has questionable environmental cre-
dentials, with stack emissions that are actually higher than those
of a coal station. It is only regarded as low emitting on the ba-
sis of claimed offsets achieved by replanting in harvested areas,
claims which are much disputed.
We therefore conclude that Europe and the United Kingdom
both exhibit declining consumption of energy, with the UK expe-
riencing a significant decline in fuel diversity and an increasing
exposure to natural gas.
We are principally concerned here with the European region,
and the harm that these states have inflicted on themselves, but
the EU’s climate diplomacy has not been without significant col-
63
(a) 1995

Direct use
Total inputs Total outputs
Imports Final con-
74

144
sumption

150

287
Energy
339 sector use
Other
257

Production

188
Exports

111
Transformation
Other 52 Transformation
losses

(b) 2019

Direct use
Total inputs Total outputs

Final con-

129
sumption
132
140

Imports
234

Energy
263

sector use
188

Other
Production
121

Exports
76

Transformation
Other 29 Transformation
losses

Oil and petroleum Gas Renewables Solid fuels

Nuclear heat Electricity Heat Other

Figure 60: UK energy flows 1995.

(a) 1995 and (b) 2005. Millions of tonnes of oil equivalent. Source: Eurostat

64
 lateral damage. Even the United States, long resistant to the EU’s
global decarbonisation arguments, now also exhibits stagnat-
ing energy consumption. However, it is also markedly more fuel
diverse than many parts of the EU, with a substantial, though
declining, residual input from coal, and an increasing share of
natural gas, much of which is produced from within-country re-
sources such as shale deposits (Figure 61).

Figure 61: US primary 120

energy: 1949–2020.
100
Source: Chart by the author, data
from the US EIA.79
80
Wind
Quads
Solar 60
Geothermal
Nuclear
40
Gas
Petroleum
Coal 20
Hydro
Biomass 0
1949 1959 1969 1979 1989 1999 2009 2019

In 1949, renewables constituted 9% of supply in the Unit-

ed States, a figure that rose to 12% in 2020. Total consumption
seems to have peaked in about 2006, stagnating thereafter, a
trend similar to that observed in the member states of the Euro-
pean Union. Indeed, while there have been significant declines
in consumption before, during the first oil shock and in the early
1980s, the recovery was rapid and strong. The current flatlining is
extended and surely significant. It is interesting to note that this
flatlining coincides, as does the decline in the EU, with the onset
of climate-change policies in the early 2000s, and with the eco-
nomic turbulence of 2008, of which energy consumption seems
to some degree to have been an anticipatory harbinger, with de-
clines in evidence in 2006–07.

The Western energy anomaly and the return to fossil

fuels
We have seen that the concept of energy transition, with one
fuel replacing another, has no empirical support, historically or
in the present day. As a matter of fact, what we observe currently
is global energy expansion, as before in human history, but with
strong local perturbations in the developed world, rippling out
from the EU, where there is growth in renewables and stalling
and falling total consumption. This effect is being offset by super-
normal energy expansion in China and Asia generally, where the
share of renewable energy has actually fallen very significantly
since the early 1970s, in spite of absolute growth. Contemporary
patterns of Western energy use, with the coerced introduction
of inferior fuels and falling consumption, are highly anomalous
when considered historically and are very unlikely to persist for
65
much longer, particularly in the face of growing evidence that
Asia is taking advantage of European errors and has maintained
authentic and effective fuel diversity, while largely escaping any
negative consequences from renewable energy adoption. In-
deed, insofar as the West rejects Russian supplies of oil, coal and
gas, China/Asia will benefit by purchasing those supplies at fa-
vourable prices.
It is possible that the United States will lag behind the EU in
changing course. Due to early and successful exploitation of shale
gas and oil resources, there will be less pressure for either nuclear
or coal, although there are good economic and security grounds
for increasing both. The Biden administration is opposed to fossil
fuels in principle, and many of its supporters are demanding ex-
pansion of renewables. However, the wind resources of the Unit-
ed States are concentrated in three areas, a central zone onshore
in the Mid-West, which has been broadly exploited with mixed
results, and offshore on the East and West coasts, a resource that
has yet to be developed. The onshore zone is very distant from
the major centres of load in the bicoastal areas, which explains
the current enthusiasm for offshore wind. As noted above, the
claimed cost reductions for offshore wind in Europe are false,
thus indicating that electricity from these sources will be very ex-
pensive by any standards, and certainly by North American ones.
This is particularly true for the West coast resource, since the Pa-
cific Ocean shelves rapidly and almost all the offshore wind an-
ticipated for that area must consequently be installed on floating
platforms, a technology that is extremely and intrinsically expen-
sive. Nevertheless, there may still be growth in renewables in the
United States, because relatively cheap and secure gas supplies
will make these gestures politically viable in the short and me-
dium term.
The EU, on the other hand, finds its hopes for an energy tran-
sition to be an illusion. The claim that renewables would diversify
supply and increase security has been falsified; the appearance
of fuel diversity was a mirage concealing a fragile natural gas pol-
icy. We may therefore expect, as anticipated above, that the Eu-
ropean Union will sooner or later be compelled, force majeure, to
seek more gas, and more fossil fuel sources generally, from non-
Russian sources. Much of this will have to be obtained by trad-
ing, where possible, and through increasingly ingenious diplo-
macy. But in tandem, and as the desperate consequences of the
European Green Deal come to bear on the member states, many
governments will be under intense pressure to address their dif-
ficulties by bringing the European energy anomaly to an end by
increasing domestic fossil fuel production. The potential for such
expansion is real and valuable, although limited.

Increasing EU fossil fuel production

Europe’s proven reserves and contingent resources of fossil fuels
– coal and natural gas, and some oil – are large. If swiftly exploited
in the short to medium term, they could have a significant effect
66
on the prices of those fuels to European consumers, as well as re-
ducing imports from Russia. This would address the energy secu-
rity crisis, which has been caused by undue dependence on im-
ported natural gas, and guarantee supply in systems dominated
by uncontrollable weather-dependent renewable energy flows.
The result would be far short of energy self-sufficiency, which
could only be delivered by a long-term gas-to-nuclear strategy,
but is nonetheless highly desirable.
Europe is in the midst of the worst energy crisis for a gen-
eration or more, a crisis that has been in the making for many
years. Since the late 1990s, European policymakers, notably
those of Germany and the EU itself, have deprecated fossil fuels
in an effort to seize international leadership on climate change.
In addition, they have promoted renewable energy through in-
struments coercing consumers to buy it at above market prices.
Together, these policies have discouraged exploration for fossil
fuels and the development of available resources of coal, oil and
natural gas. For example, output from the North Sea has declined
remarkably; UK natural gas and oil production peaked in the year
2000 at about 108 million tonnes of oil equivalent (mtoe) and
138 mtoe respectively. In 2020, these figures had fallen to 38
mtoe and 54 mtoe, the key factor in a dramatic fall in overall UK
production of energy, and in spite of an increase in renewable
electricity generation. The UK’s Department for Business, Energy
and Industrial Strategy (BEIS) reports that in 2021, total UK ener-
gy production including renewables was 106.9 mtoe, 14% down
on that in 2020 and ‘the lowest level in over 50 years’.47
Furthermore, the United Kingdom, along with all other Eu-
ropean states, has rejected the use of hydraulic fracturing for
natural gas and oil, a process that has transformed the energy
economics of the United States in less than two decades. Howev-
er, as many analysts predicted in the early 2000s, and in a seem-
ing paradox, the policies favouring renewable energy have also
made many European states more exposed to natural gas. This
is because only gas-fired power stations are sufficiently flexible
to respond to the fluctuating output of wind and solar, and thus
guarantee security of supply. Many countries in the European re-
gion, with the UK prominent amongst them, therefore find them-
selves in the strange position of discouraging fossil fuel explora-
tion and development while also creating a critical exposure to
the cost of natural gas.
Similar effects were also seen across Europe in relation to
oil and coal. The result has been increased imports of all fossil
fuels, particularly from Russia. In 2021, as the world’s economy
recovered after the global pandemic, international competition
for fossil fuels began to grow, and the lack of fuel diversity in the
European region became apparent. The problem was brought
sharply into focus by a slump in wind power output, which was
much lower than in 2020, down by nearly 20% in the UK for ex-
ample, leaving many countries scrambling for additional imports
of natural gas. High regional prices resulted.
67
 The subsequent invasion of Ukraine compounded these dif-
ficulties. It also confirmed the anxieties raised in 2014, after Rus-
sia’s annexation of the Crimea, namely that relying on Moscow as a
supplier of natural gas might represent a strategic liability, as well
as being deeply unpalatable because of the income that gas sales
generate for the Kremlin. The naïve response to the crisis is to sug-
gest that Europe should add yet more renewable energy to its sup-
ply in the hope of reducing fossil fuel demand. But as already not-
ed, the lack of fuel diversity and the extreme dependency on the
availability and price of imported natural gas to guarantee security
of electricity supply is the result of policies favouring (inferior qual-
ity, high entropy) energy sources such as wind and solar, while sup-
pressing domestic production of (high quality, low entropy) fossil
fuels. Writing for Net Zero Watch, my colleague Andrew Montford
and I have argued that the correct and indeed the only possible
short-term response to the acute aspects of the current crisis is as
follows:48
• Move as quickly as possible to increase domestic production of
fossil fuels, in the North Sea for example.
• Simultaneously reduce renewable energy generation, thus sta-
bilising demand for natural gas, enabling traders to obtain long-
er-term supply contracts from non-Russian sources at less disad-
vantageous prices.
• Speedily upgrade gas-fired fleets to the latest models, which are
more thermally efficient and therefore use significantly less gas
per unit of electricity generated.
• Permit exploratory fracking for natural gas and oil, the full po-
tential of which is unknown, but deserves verification, as will be
seen when the scale of the resources is touched on below.
• In the longer term, Europe should clearly be aiming to build new
fleets of advanced nuclear reactors for electricity and, in particu-
lar, for high-grade heat for industrial purposes, a function cur-
rently supplied by natural gas and coal.
• We also noted that it would be wise on security grounds to recog-
nise that the development of nuclear energy might be delayed
and that plans should be prepared to instal advanced supercriti-
cal coal fired power stations for the generation of electricity.
The urgent need to increase fossil fuel availability from non-
Russian sources, and ideally from sources in Europe itself, raises the
obvious question as to what quantities of fossil fuels are present in
the European region. These may be:
• reserves (deposits that are known to be economic to extract
with current technology and at current market prices)
• contingent resources, discovered and understood with a high
degree of confidence, but dependent on a higher price to be-
come economic
• prospective resources (deposits that are believed to exist but are
as yet unexplored)
68
 Table 3 summarises data from the BP Statistical Review of
World Energy (2021), reporting the proven reserves of coal, oil
and natural gas in Europe, proven reserves being ‘those quanti-
ties that geological and engineering information indicates with
reasonable certainty can be recovered in the future from known
reservoirs under existing economic and operating conditions’.
These are what Europe currently has immediately to hand in spite
of more than twenty years of policies discouraging exploration
and development. Had the policies not been in place, the proven
reserves available today would almost certainly be greater still,
as the market responded to the signal of rising prices. But even
so, they are far from trivial, with European coal reserves amount-
ing to nearly 13% of the global total, and sufficient to support
current, admittedly low, levels of production for nearly 300 years.
Europe’s oil reserves amount to a little under 1% of the global
total, and its gas reserves to just under 2% of the world total but
would still be sufficient to meet current production levels for
more than ten years and more than fourteen years respectively.
There is headroom for increased production.

Table 3: Proved fossil fuel

Fraction Reserve/pro-
reserves in Europe.
of global duction ratio
Reserve/Production ratio is calculated
by dividing the proved reserves at a 2020 total (years)
given point in time by the production Coal 137,240 12.8% 299
in that year. Source: BP Statistical (million tonnes)
Review. Oil 13.6 0.8% 10.4
(billion barrels)
Natural gas 3.2 1.7% 14.5
(trillion cubic metres)

It is, of course, true that European production of fossil fuels

is only a small fraction of its total requirements at present, but it
is equally clear that both reserves and production would certain-
ly have been higher in the absence of climate policies, and that
the current levels of both could be readily increased, with useful
effects on prices and security. This can be appreciated by refer-
ring to the energy flow diagrams for the European Union in 1990
and in 2020 (see page 33), where the EU’s increasing exposure
to imported fuels, particularly gas, which guarantees security of
supply on many of member state grids, is clearly evident.
In this context, even modest increases in proven reserves
and levels of production within the European region could have
considerable economic and geopolitical benefits. The potential
for such increases can be gauged from estimates of the contin-
gent and prospective resources of these fuels. Such estimates are
inherently uncertain, but they provide a reasonable indication of
the order of magnitude of a potential fuel resource.
Table 4 summarises data on resources and proven reserves
of coal published in 2012 by the European Commission. The
69
 study estimates that resources and proven reserves for the EU27
together amounted to over 800 billion tonnes. As noted above,
BP’s Statistical Review estimated that proven reserves in 2020
amounted to about 140 billion tonnes. Thus, the EU27’s coal re-
sources are very approximately four times larger than its proven
reserves, and could last for many centuries, even at increased lev-
els of consumption. It should be noted that this estimate does
not include the very large additional coal resources believed
to lie under the North Sea, as reported recently in the industry
press.49
It is interesting to note in passing that the same study re-
ported substantial resources of hard coal in Ukraine.
Table 4: European
Hard coal Brown coal
coal as at 2012.
Mt Mt
Sum of resources and
provenreserves. Austria — 333
Belgium 4,100 —
Bulgaria 4,112 4,574
Czech 9,946 16,627
France 160 114
Germany 82,921 77,000
Greece — 6,430
Hungary 5,351 7,717
Ireland 40 —
Italy 610 29
Netherlands 3,247 —
Poland 176,738 228,183
Portugal 3 66
Romania 2,446 9,920
Slovakia 19 1,061
Slovenia 95 656
Spain 4,231 319
Sweden 5 —
UK 187,071 1,000
Total EU27 481,095 354,029

Croatia — 300
Macedonia — 632
Albania — 727
Bosnia 630 4,182
Norway 78 —
Serbia 855 31,012
Turkey 1,190 12,114
Ukraine 81,045 —
Total other European countries 83,798 48,967
Source: EU Commission DG Energy (2012). https://ec.europa.eu/energy/sites/ener/files/
documents/20121217_eu_co_res_report.pdf.

70
 In summary, proven reserves are very substantial, and con-
tingent and prospective resources are still greater. As Table 4
demonstrates, there is a great deal of coal in Europe, and even
if consumption were increased considerably there would be suf-
ficient for several centuries.
In 2014, and in response to an earlier phase of the Ukraine
crisis, the EU undertook research into regional energy security.50
This reported work by the German Federal Institute for Geoscienc-
es and Natural Resources to the effect that technically recover-
able shale gas resources in Europe amounted to some 14 trillion
cubic metres (494 trillion cubic feet), between four and five times
greater than the proven reserves of natural gas reported for 2020
in the BP Statistical Review quoted above. Most of these resources
are thought to be concentrated in France and Poland, but the
figures for the UK, Germany, the Netherlands, and Denmark add
up to a substantial additional resource, equivalent to about half
of the French total. Similar findings are reported in work by the
United States Energy Information Administration (US EIA) pub-
lished in 2013 (see Table 5).
This substantial resource remains all but completely unex-
plored at present due to successful campaigning by environ-
mental pressure groups.
The two most significant holdings of oil and gas in the North
Sea are in UK and Norwegian waters. BP’s Statistical Review re-
ports, for 2020, proven reserves of 7.9 billion barrels of oil and
1.4 trillion cubic metres of natural gas in Norwegian waters, and
2.5 billion barrels of oil and 0.2 trillion cubic metres of natural gas
in UK waters.

Table 5: Wet natural gas production in Europe, and resource estimates

2011 production Reserves Unproved TRR* Total
Proved Shale† Conventional‡
Europe 10 145 470 184 799

Bulgaria 0 0 17
Denmark 0 2 32
France 0 0 137
Germany 0 4 17
Netherlands 3 43 26
Norway 4 73 0
Poland 0 3 148
Romania 0 4 51
Spain 0 0 8
Sweden - - 10
United Kingdom 2 9 26
*TRR, technically recoverable resources. †2013 EIA/ARI estimate. ‡2012 US Geological Survey estimate, including reserve growth. Source: Extract
from US Energy Information Administration 2013.

71
 Norwegian Petroleum reports that contingent resources –
in fields and discoveries and undiscovered resources – probably
amount to about 2.5 times proven reserves of oil, and about 1.6
times proven reserves of gas.51
The UK’s Oil & Gas Authority (recently renamed the North
Sea Transition Authority) reports that its contingent resource lev-
el of 6.8 billion barrels of oil equivalent of oil and gas (of which
about 70% is oil and 30% gas) is about one and a half times larger
than the proven reserves that could sustain UK Continental Shelf
production to 2030, implying that another decade or more of
production at current levels might be sustained from these re-
sources.52
In passing, it is interesting to note that other sources report
natural gas reserves in Ukraine only slightly smaller than those of
Norway.53
In reviewing the potential of shale gas to contribute to en-
ergy security, in 2014 the European Commission concluded that
‘the volumes produced will not make Europe self-sufficient in gas
but could help to reduce prices’.54 That conclusion is obviously
correct, and applies with equal force to coal, oil, and conven-
tional natural gas resources. No-one would argue from the data
reviewed in this study that the European region can become
self-sufficient in fossil energy, but it is equally clear that further
exploration of the very substantial resources of these fuels could
enlarge proven reserves, increase production, and have a signifi-
cant effect on regional prices and overall security.

16. Conclusion
The prosperity generated from even a modest increase in domes-
tic fossil fuel production in Western Europe could be the basis for
a reversal of energy policy and a return to the gas-to-nuclear tra-
jectory that alone has thermodynamic theory on its side and was
being spontaneously adopted by the markets in the early 2000s,
but which was mistakenly cancelled by policy intervention. This
will require a recognition that the attempt to induce an energy
transition by means of intense support for renewable energy
has been a mistake and that emergency measures are needed
to support a corrective course. Writing off the malinvestments
made in wind and solar, many now owned by European pension
funds, will be painful in itself, but providing resources to support
the required remedial investment in conventional fossil fuels and
advanced nuclear will also require considerable sacrifices in Eu-
ropean standards of living. There is much lost ground to be made
up. Consequently, there is no easy path out of the difficulties, and
the future for the European peoples is arduous whichever course,
wise or foolish, is taken.

72
About the author
John Constable is an independent energy policy analyst, and the Energy Director for the Glob-
al Warming Policy Foundation (GWPF) in London. Dr Constable has appeared before several par-
liamentary select committees, including the House of Commons Environmental Audit Commit-
tee and the House of Lords Committee on Economic Affairs. He is a frequent invited and plenary
speaker on energy and climate policy to both mixed and specialist audiences. In 2009 he deliv-
ered the Alworth International Lectures at the University of Minnesota, in 2015 he was a plenary
speaker at Kyoto University’s ‘Global Energy Problems’ conference (2015), and in 2016 he delivered
a Newcastle University ‘Insight’ public lecture, now published as Energy, Entropy, and the Theory of
Wealth (2016). In 2021 he was an invited speaker at the 21st Mont Pelerin Society conference, held
in Guatemala City, where he spoke on the relationship between low-entropy energy sources and
the emergence of liberal societies. Dr Constable has also worked with the Hartwell Group of inter-
national climate policy analysts, being an author in the third Hartwell study, The Vital Spark (2013).
The following articles and monographs are a selection from Dr Constable’s many other publi-
cations on energy policy ‘US Offshore Wind Prospects: Overblown Promises and Blown-Up Costs’,
National Review (February 2021); A Little Nudge with a Big Stick (2021); Hydrogen: The once and future
fuel? (2020); The Brink of Darkness: Britain’s fragile power grid (2020); Offshore Wind Strike Prices: Be-
hind the Headlines (with Gordon Hughes and Capell Aris, 2017); Energy Intensive Industries: Climate
policy casualties (2016); ‘Economic hazards of a forced energy transition: inferences from the UK’s
renewable energy and climate strategy’, Evolutionary and Institutional Economics Review (with Lee
Moroney, June 2016); Shortfall, Rebound, Backfire: Can we rely on energy efficiency policies to offset
climate policy costs? (2012), Energy Policy and Consumer Hardship (2011), and The Green Mirage: Why
a low carbon economy may be further off than we think (Civitas: London, 2011).

73
Notes
1. COM(2021) 962 final, p. 3.
2. ETC/CME Eionet, Trends and projections in the EU ETS in 2021, 18.
3. ETC/CME Eionet, Trends and projections in the EU ETS in 2021, 32.
4. See Table 5.1 in EC SWD(2021) 308 final: https://ec.europa.eu/clima/system/files/2021-10/
swd_2021_308_en.pdf.
5. COM(2021) 962 final, p. 14–15.
6. EU Commission, Industry Factsheet, ‘Leading the Clean Industrial Revolution’ (July 2021):
https://ec.europa.eu/commission/presscorner/detail/en/fs_21_3675.
7. https://ec.europa.eu/clima/eu-action/eu-emissions-trading-system-eu-ets_en.
8. Calculated from figures in SWD(2021) 308 final.
9. Much EU and Commission data now removes the UK from its records, though sometimes pro-
viding the data in a separate line in the statement. It is not always possible or desirable to recom-
bine the data to provide statements for the EU28, and this study reports data for both the EU27
(excluding the UK) and the EU28 (including the UK) as seems appropriate.
10. The annual increment could begin to decline in the near future if subsidy entitlements expire
and no new subsidies are introduced.
11. See Gordon Hughes, Wind Power Costs in the United Kingdom (REF: London, 2020), and The
Performance of Wind Power in Denmark (REF: London, 2020): https://www.ref.org.uk/ref-blog/365-
wind-power-economics-rhetoric-and-reality.
12. https://energy.ec.europa.eu/topics/markets-and-consumers/capacity-mechanisms_en.
13. https://www.gov.uk/government/collections/electricity-market-reform-capacity-market.
14. https://ec.europa.eu/environment/archives/industry/stationary/lcp/legislation.htm.
15. https://ec.europa.eu/environment/industry/stationary/ied/legislation.htm.
16. https://ec.europa.eu/environment/archives/industry/stationary/lcp/legislation.htm.
17. https://www.nationalgrideso.com/information-about-great-britains-energy-system-and-
electricity-system-operator-eso.
18. https://www.elexon.co.uk/article/bsc-insight-increasing-costs-for-balancing-the-gb-system/.
19. https://data.nationalgrideso.com/balancing/mbss.
20. https://ec.europa.eu/eurostat/web/products-eurostat-news/-/edn-20220211-1.
21. https://www.eea.europa.eu/ims/use-of-renewable-energy-for.
22. https://ec.europa.eu/commission/presscorner/detail/en/fs_21_3665.
23. Rögnvaldur Hannesson, ‘How much do European households pay for green energy?’, Energy
Policy 131 (2019), 235–239.
24. Trinomics, Final Report Summary: Energy Costs, taxes, and the impact of government interven-
tions on investments (2020). Doi: 10.2833/827631. See page 12.
25. Marten AL (2011) Transient Temperature Response Modelling in IAMs. Econ E-J 5:2011–2018.
26. United States Environmental Protection Agency (2015). http://www3.epa.gov/climatechange/
EPAactivities/economics/scc.html.
27. ‘Communication from the Commission: Action Plan for Energy Efficiency Potential: Realising
the Potential’ (Brussels 19.10.2006) COM(2006)545 final.
28. W. S. Jevons, The Coal Question (1865), p.103.
74
29. Coal Question (1865), p.105. Liebig’s remark appears in Justus von Liebig, Familiar Letters on
Chemistry (Taylor, Walton, & Maberly: London, 1851), p. 462, and reads: ‘Cultivation is the economy
of force. Science teaches us the simplest means of obtaining the greatest effect with the smallest
expenditure of power, and with given means to produce a maximum force’.
30. As the authors explain: ‘The G20 weighted averages are calculated on the basis of all available
data for a particular year, weighted in total price by the share a country had in EU imports + exports
2017–2019. Coverage ratios of total trade range from 84–99% (household prices), 76–99% (indus-
trial prices) and 36–74% (wholesale prices).’
31. On the weighting used to construct the G20 averages, the authors comment that these are ‘cal-
culated on the basis of all available data for a particular year, weighted in total price by the share a
country had in EU imports + exports 2017–2019. Coverage ratios of total trade range from 84–98%
(household prices), 77–99% (industrial prices) and 60–97% (wholesale prices)’.
32. The authors explain that the G20 weighted averages ‘calculated on the basis of all available
data for a particular year, weighted in total price by the share a country had in EU imports + exports
2017–2019’.
33. Trinomics, p. 16.
34. https://ec.europa.eu/eurostat/cache/infographs/energy/bloc-2c.html#carouselControls?lang
=en.
35. https://ec.europa.eu/eurostat/documents/3859598/13590301/KS-GQ-21-014-EN-N.
pdf/11cc1e2f-49b6-14d3-4102-5ecaa4c91049.
36. https://www.nordex-online.com/en/2022/02/nordex-se-nordex-group-plans-to-cease-rotor-
blade-production-at-rostock-site-in-germany/.
37. John Constable, Solar and the threat to food security (Net Zero Watch: London, 2022). https://
www.netzerowatch.com/content/uploads/2022/02/Constable-Solar-Update.pdf.
38. European Commission, European Green Deal: Delivering on our targets (2021): https://ec.europa.
eu/commission/presscorner/detail/en/fs_21_3688, p. 25.
39. https://eur-lex.europa.eu/resource.html?uri=cellar:b828d165-1c22-11ea-8c1f-
01aa75ed71a1.0002.02/DOC_1&format=PDF, and https://eur-lex.europa.eu/resource.
html?uri=cellar:b828d165-1c22-11ea-8c1f-01aa75ed71a1.0002.02/DOC_2&format=PDF.
40. https://ec.europa.eu/info/strategy/priorities-2019-2024/european-green-deal_en.
41. European Green Deal: Delivering on our targets.
42. European Green Deal: Delivering on our targets, p. 9.
43. https://ec.europa.eu/info/news/commission-proposes-new-energy-efficiency-directive-2021-
jul-14_en.
44. European Green Deal: Delivering on our targets, 25.
45. European Commission, European Green Deal: Delivering on Our Targets (July 2021), p. 4. See also
the speech by President von der Leyen: https://ec.europa.eu/commission/presscorner/detail/en/
speech_21_1361.
46. See Gordon Hughes, Wind Power Costs in the United Kingdom (REF: London, 2020), and The
Performance of Wind Power in Denmark (REF: London, 2020). https://www.ref.org.uk/ref-blog/365-
wind-power-economics-rhetoric-and-reality.
47. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_
data/file/1064799/Energy_Trends_March_2022.pdf.
48. https://www.netzerowatch.com/radical-plan-to-end-the-energy-crisis/.
49. https://www.worldcoal.com/coal/31032014/coal_discovered_in_north_sea_674/.
75
50. https://ec.europa.eu/energy/sites/ener/files/documents/20140528_energy_security_study.
pdf.
51. https://www.norskpetroleum.no/en/petroleum-resources/resource-accounts/.
52. https://www.nstauthority.co.uk/media/7764/rr-report_final-22-september-2021.pdf.
53. https://hir.harvard.edu/ukraine-energy-reserves/.
54. h t t p s : / / w w w. e u ro p a r l. e u ro p a . e u / R e g D a t a / e t u d e s / B R I E / 2 0 1 4 / 5 4 2 1 6 7 / E P R S _
BRI(2014)542167_REV1_EN.pdf.
55. https://www.eea.europa.eu/publications/the-eu-emissions-trading-system-2/the-eu-
emissions-trading-system.
56. https://ec.europa.eu/clima/system/files/2021-10/com_2021_962_en.pdf.
57. https://ec.europa.eu/clima/system/files/2021-10/com_2021_962_en.pdf.
58. ETC/CME Eionet, Trends and Projections in the EU ETS in 2021: The EU Emissions Trading System in
Numbers (2021). https://www.eionet.europa.eu/etcs/etc-cme/products/etc-cme-reports/etc-cme-
report-9-2021-trends-and-projections-in-the-eu-ets-in-2021-the-eu-emissions-trading-system-in-
numbers.
59. Trinomics for the EU Commission, Final Report Energy Subsidies: Energy costs, taxes and
the impact of government interventions on investments (2020): http://trinomics.eu/wp-content
/uploads/2020/11/Final-Report-Energy-Subsidies.pdf.
60. Trinomics for the EU Commission, Final Report Energy Subsidies: Energy costs, taxes and the
impact of government interventions on investments (2020): http://trinomics.eu/wp-content/
uploads/2020/11/Final-Report-Energy-Subsidies.pdf.
61. Trinomics for the EU Commission, Final Report Energy Subsidies: Energy costs, taxes and the
impact of government interventions on investments (2020): http://trinomics.eu/wp-content/
uploads/2020/11/Final-Report-Energy-Subsidies.pdf.
62. Trinomics for the EU Commission, Final Report Energy Subsidies: Energy costs, taxes and the
impact of government interventions on investments (2020): http://trinomics.eu/wp-content/
uploads/2020/11/Final-Report-Energy-Subsidies.pdf.
63. https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2022/Apr/IRENA_RE_
Capacity_Statistics_2022.pdf.
64. https://ec.europa.eu/eurostat/documents/4187653/13722717/Renewable_energy_heating_
cooling_2020.png/.
65. https://www.eea.europa.eu/ims/use-of-renewable-energy-for.
66. https://www.eea.europa.eu/publications/trends-and-projections-in-europe-2021. The EEA
appends a note to this chart: EEA note: ‘The current 2030 target, adopted from the Renewable En-
ergy Directive (2018/2001/EU), is a 32% renewable energy share of gross final energy consumption
(RES share). The proposed target from the ‘Fit for 55 package’ is a more ambitious 40% RES share
in 2030. The 2050 values represent the indicative share of renewable energy in the EU’s gross final
consumption as presented in figures 5 and 8 in a Commission staff working document (EC, 2020a)
of scenarios that achieve a reduction of at least 55 % in 2030.’
67. Constable, J., Moroney, L. Economic hazards of a forced energy transition: inferences from the
UK’s renewable energy and climate strategy. Evolut Inst Econ Rev 14, 171–192 (2017). https://doi.
org/10.1007/s40844-016-0041-6.
68. http://trinomics.eu/wp-content/uploads/2020/11/Final-Report-Energy-Subsidies.pdf.
69. https://op.europa.eu/en/publication-detail/-/publication/16e7f212-0dc5-11eb-bc07-
01aa75ed71a1/language-en.
76
70. https://op.europa.eu/en/publication-detail/-/publication/16e7f212-0dc5-11eb-bc07-
01aa75ed71a1/language-en.
71. https://op.europa.eu/en/publication-detail/-/publication/16e7f212-0dc5-11eb-bc07-
01aa75ed71a1/language-en.
72. https://www.eea.europa.eu/publications/trends-and-projections-in-europe-2021. EEA note:
‘The historical development of greenhouse gas emissions is shown excluding land use, land use
change and forestry (LULUCF) (light blue solid line, labelled ‘emissions’) and including LULUCF (dark
blue solid line, labelled ‘net emissions’). Both of these trend lines include approximated values for
2020. The light blue line relates to the scope of the 2020 target, while the dark blue line reflects the
2030 target’s scope; both include international aviation. Projections are shown in dashed and dot-
ted lines according to the 2030 target’s scope, starting from 2019. The projections reflect the most
recent data submitted by all Member States; Germany’s projections are only preliminary. The pace
notations in the bar at the top indicate the actual average annual change in net emissions (includ-
ing LULUCF and international aviation) for 1990-2020. The necessary future change to achieve the
net 55 % reductions between 2020 and 2030 is calculated on an average annual basis, assuming a
maximum LULUCF contribution of 225 Mt CO2e (carbon dioxide equivalent) in 2030.’
73. https://www.ise.fraunhofer.de/content/dam/ise/de/documents/publications/studies/
Photovoltaics-Report.pdf.
74. https://www.ise.fraunhofer.de/content/dam/ise/de/documents/publications/studies/
Photovoltaics-Report.pdf.
75. https://ec.europa.eu/eurostat/statistics-explained/index.php?title=International_trade_in_
goods.
76. https://transport.ec.europa.eu/transport-themes/infrastructure-and-investment/trans-
european-transport-network-ten-t_en.
77. https://ec.europa.eu/info/news/commission-proposes-new-energy-efficiency-directive-2021-
jul-14_en.
78. Vaclav Smil, Energy Transitions: Global and National Perspectives 2nd Edition (Praeger: Santa
Barbara, 2017), 240–241.
79. EIA, Monthly Energy Review (July 2018), Table 1.3.
80. United States Energy Information Administration, Technically Recoverable Shale Gas Resources:
An Assessment of 137 Shale Formations in 41 Countries Outside the United States (June 2013), p. 6.
https://www.eia.gov/analysis/studies/worldshalegas/pdf/overview.pdf.

77
Review process
GWPF publishes papers in a number of different formats, with a different review process pertaining to
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• Our flagship long-form GWPF Reports, are all reviewed by our Academic Advisory Panel.
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This means that, for most publications, we also invite an external review from a party who we
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This enhanced review process for GWPF papers is intended to take the content and analysis be-
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As an organisation whose publications are sometimes the subject of assertive or careless criti-
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Final responsibility for publication rests with the Chairman of the Trustees and the GWPF Director.
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About the Global Warming Policy Foundation

People are naturally concerned about the environment, and want to see policies that protect it,
while enhancing human wellbeing; policies that don’t hurt, but help.
The Global Warming Policy Foundation (GWPF) is committed to the search for practical poli-
cies. Our aim is to raise standards in learning and understanding through rigorous research and
analysis, to help inform a balanced debate amongst the interested public and decision-makers.
We aim to create an educational platform on which common ground can be established, helping
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hunger for knowledge.
THE GLOBAL WARMING POLICY FOUNDATION
Director Honorary President
Benny Peiser Lord Lawson

BOARD OF TRUSTEES
Dr Jerome Booth (Chairman) Professor Michael Kelly
Steve Baker MP Terence Mordaunt
Professor Peter Edwards Graham Stringer MP
Kathy Gyngell Professor Fritz Vahrenholt

ACADEMIC ADVISORY COUNCIL

Professor Christopher Essex (Chairman) Brian Leyland
Professor J. Ray Bates Professor Richard Lindzen
Sir Ian Byatt Professor Ross McKitrick
Dr John Constable Professor Robert Mendelsohn
Professor Vincent Courtillot Professor Garth Paltridge
Professor John Dewey Professor Ian Plimer
Professor Peter Dobson Professor Gwythian Prins
Christian Gerondeau Professor Paul Reiter
Professor Larry Gould Professor Peter Ridd
Professor William Happer Dr Matt Ridley
Professor Ole Humlum Sir Alan Rudge
Professor Gautam Kalghatgi Professor Nir Shaviv
Professor Terence Kealey Professor Henrik Svensmark
Bill Kininmonth Dr David Whitehouse
 RECENT GWPF REPORTS
17 Lewin Hubert Lamb and the Transformation of Climate Science
18 Goklany Carbon Dioxide: The Good News
19 Adams The Truth About China
20 Laframboise Peer Review: Why Scepticism is Essential
21 Constable Energy Intensive Users: Climate Policy Casualties
22 Lilley £300 Billion: The Cost of the Climate Change Act
23 Humlum The State of the Climate in 2016
24 Curry et al. Assumptions, Policy Implications and the Scientific Method
25 Hughes The Bottomless Pit: The Economics of CCS
26 Tsonis The Little Boy: El Niño and Natural Climate Change
27 Darwall The Anti-development Bank
28 Booker Global Warming: A Case Study in Groupthink
29 Crockford The State of the Polar Bear Report 2017
30 Humlum State of the Climate 2017
31 Darwall The Climate Change Act at Ten
32 Crockford The State of the Polar Bear Report 2018
33 Svensmark Force Majeure: The Sun's Role in Climate Change
34 Humlum State of the Climate 2018
35 Peiser (ed) The Impact of Wind Energy on Wildlife and the Environment
36 Montford Green Killing Machines
37 Livermore Burnt Offering: The Biomess of Biomass
38 Kelly Decarbonising Housing: The Net Zero Fantasy
39 Crockford The State of the Polar Bear Report 2019
40 Darwall The Climate Noose: Business, Net Zero and the IPCC's Anticapitalism
41 Goklany The Lancet Countdown on Climate Change: The Need for Context
42 Humlum The State of the Climate 2019
43 Alexander Weather Extremes: Are They Caused by Global Warming?
44 Constable Hydrogen: The Once and Future Fuel?
45 Kessides The Decline and Fall of Eskom: A South African Tragedy
46 Goklany Impacts of Climate Change: Perception and Reality
47 Constable A Little Nudge with a Big Stick
48 Crockford The State of the Polar Bear Report 2020
49 Alexander Weather Extremes in 2020
50 Humlum The State of the Climate 2020
51 Humlum The State of the Climate 2021
52 Constable Europe’s Green Experiment
53 Alexander Extreme Weather: The IPCC’s Changing Tune

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Foundation, please visit our website at www.thegwpf.org.
The GWPF is a registered charity, number 1131448.