Europe's Energy Problem
Without a source of cheap energy, Europe is lost. Energy costs are economically the equivalent of a sales tax. At every stage of production, distribution and consumption of goods and services, energy is required, sometimes a lot, sometimes less. Whenever a good or service changes hands, sales tax is due. The higher the tax rate and the more often the good changes hands, the higher the tax revenue.
At every stage in the life of a good or service, energy costs become due. The more expensive energy is, the larger becomes the cumulative share of the sales proceeds absorbed by the energy suppliers.
Conversely, the more expensive energy is, the lower is the residual income remaining for the economic subjects.
Europe's energy problem: Since the end of cheap energy supplies from Russia, the residual income of Europeans after deduction of the energy “tax” has fallen drastically. Several European economies are stagnating. Europe is caught in an energy trap. Has Europe understood its dilemma?
No, not really. Europe is telling itself that it is fighting a vital battle to save the climate by striving for decarbonization, and that this battle is only temporarily throttling the economy until wonderful forms of renewable energy will again catapult the economy to new heights.
Just as Germany hoped for the miracle of the V-weapons during the Second World War (which never came), Europe is now hoping for the miracle of renewables.
And they are indeed coming. Slowly, drop by drop. New wind farms here, new solar panels there, better batteries, lofty talks of a hydrogen future. A lot is indeed happening, but it's not enough.
What is happening is not sufficient to save the climate. Nor is it enough to free Europe's economy from economic paralysis.As long as Europe is shackled by high energy prices, the continent will continue to fall behind.
High production costs will gradually drive the old brands of European industries out of the global mass markets and relegate them to the luxury segment. Only German discounters and French fashion houses will probably continue to retain their dominant role as proof that Europe is hampered by energy supplies but not by creativity.
Europe needs cheap energy if it is not to go under economically. Renewables are nice, they help with decarbonization, with saving the climate, but they do not solve the problem of the economy's hunger for energy. They are too little, too expensive, often too impractical.
For the competitors - Asia, America, Australia, Russia - decarbonization and saving the climate is at best one goal among others. In principle, growth comes before climate. From their perspective, Europe's efforts to show the world how to save the climate may seem rather funny, touching.
Where and how will Europe obtain enough cheap and carbon-free energy? Nuclear power is controversial and has been feared at least since Chernobyl and Fukushima. Nuclear fusion is still the subject of future novels, along with tidal power plants and the like. Europe needs a technical breakthrough, but this is nowhere in sight. Some suspect that the oil and gas industry is working hard to keep a tab on better renewables that could spoil their business, They certainly have a powerful ally for the next four years.
Burkhart Fürst