It is time for Europe to become energy independent

In war, truth is the first casualty. It seems that the same adage can be applied to economic sanctions. Whereas in March hawks were calling for Europeans to stop importing gas from Russia, we are now afraid Russia is going to halt exports. In the space of a few months the sanctioned appears to have become the sanctioner. In this game, image is everything. Is Putin the mighty tyrant threatening to send Europe into a deadly winter? Or is Putin in charge of an impoverished rogue state, teetering on the edge of collapse, only hanging on thanks to natural gas revenues? The truth is bound to be somewhere in the middle. Be that as it may, both in financial markets as in European capitals, fear is everywhere. Mainly Germany, the European production powerhouse, is dependent on Russia for over half of its natural gas imports. Although natural gas can be used as a source of power (it is the cleanest reliable source, after nuclear) it is indispensable for industrial production and for heating homes and offices in the winter. The Germans fear they will have to halt production in multiple factories. The Dutch economy, little more than a subcontractor to their eastern neighbor, are also considering shutting down production if demand from Germany would dry up. Experts are nervously eyeing the Nord stream pipeline, afraid that the flow will be decreased. Meanwhile the Germans and Russians are blaming each other for any hick-ups.

Reducing natural gas usage

The first solution that Europe has agreed on is to reduce natural gas usage by 15%. This proposal is fundamentally sound. In a situation of serious scarcity we have to manage the impact as much as possible. I for one would not mind reducing the heat at home or keeping on my jacket when visiting bars or public buildings. It will be a bit weird, but we can make it work. Perhaps unsurprisingly, the southern Europeans were less thrilled with the plan. The Iberians were wondering why they should help Germany, as they are both not using as much gas, and what they do use does not come from Russia. The Cypriots pointed out that their island is not connected to the European gas network at all: so why should they be included in the plan? Hungary went even further, vowing to import as much Russian gas as possible and refusing to share it with the other EU members. With a few opt-outs however, in the end everyone agreed. Another remarkable showing of European solidarity that is to be admired.

Quo vadis?

This solution however, can only be considered as a temporary stop gap. The fact of the matter is that multiple EU countries have made themselves weak and dependent. Europe has to wake up to the fact that other countries will not just give us what we need if we do not give them something valuable in return. Yes, the EU has a limitless supply of Euros, but that very lack of a limit makes the euro’s value uncertain. Replacing Russian imports by imports from other countries will leave Europe just as dependent as before, possibly on even more unsavory regimes.

Some readers may have strong faith in the energy transition, a process in which huge public investments are used to force a move away from reliable energy sources to intermittent energy from biomass, solar panels and windmills. We simply do not have the money to pay for these huge public funds. Moreover, wherever these power sources have been added to the grid in serious quantities they have caused massive problems that can only be solved through more government intervention at the taxpayers’ expense. Perhaps most damning is the fact that this transition has not led to a reduction in CO2 emissions. Biofuels, the burning of plants at lower efficiency and with maximum emissions, has already been relegated to the dustbin of history. Windmills, solar panels and electrical vehicles (predating and displaced by the far more efficient internal combustion engine) will follow in the coming years.

The latest pipe dream, and arguably the most absurd, is the production of hydrogen. A gas that can be used similarly to natural gas, but the production of which always takes more energy than it can ever produce. This capital destruction is to take place in Saudi Arabia and other faraway countries, then to be moved by tanker to the European main ports. This highlights another folly of the green politicians: they are fully comfortable with pollution, as long as it takes place abroad. Particularly the delving of the metals necessary for electrification has already had catastrophic environmental impacts in Serbia, Bolivia and elsewhere. Perhaps the height of European hypocrisy has been reached in Africa, where Europeans are trying to ramp up production of natural gas while denying the African countries the investment they need to consume the gas themselves. Apparently using natural gas is bad for the environment: rules for thee but not for me.

The real lesson that needs to be drawn from all these catastrophes is that governments should not be in charge of finding the solution to such a complex problem. Their responsibility is to ensure the safety and foster the well being of their citizens. On energy policy we need a complete 180 degrees turn. In stead of making energy as expensive as possible, the EU should aim to make it as cheap and reliable as possible. This would allow us to solve environmental problems at home, in stead of exporting them for the Russians and Africans to deal with.

In 2020 the EU was dependent on imports for 58% of its energy needs. Although much of this is imported from Norway, the UK and the US, we are also dependent on exports from Asia and north-Africa. Russia delivered 29% of oil imports, 43% of natural gas and 54% of coal. This import dependency has been growing in recent years due to political considerations. Nuclear plants have been closed down in Germany, Poland has been pressured to close its state of the art coal plants while the Netherlands have started an absurd policy of getting rid of natural gas consumption, while sitting on the largest natural gas field in Europe… But it does not have to be that way.

Hope for the future

A country that has managed to reduce CO2 emissions in the last ten years is the United States. They have achieved this not through ham-fisted government intervention but through technological innovation and private enterprise. The shale boom has allowed the Americans to extract natural gas from previously inaccessible sources. Although Americans are hit by fluctuations in global energy prices as much as Europe, they are able to respond by increasing domestic production of oil and gas. Thereby making the US more independent and flexible in weathering global crises. Europe could do the same but has so far refused to do so, not by economic considerations but due to government intervention.

Instead of constructing LNG ports all over the continent to increase imports, we should be focusing on our own production. Impressive shale fields are there, waiting to be developed. In fact, the greatest opportunities are expected to be in France. While France has already been very successful in meeting their energy needs through nuclear power, developing its shale gas reserves would allow it to export even more to its neighbors, thereby balancing its exports vis-à-vis Germany. Development of fields could be coordinated by the EU to take place mainly in those members with a negative trade balance or lack of employment, hereby addressing internal imbalances while creating energy security for all of us. Renewed interest in developing gas fields near Cyprus sparks hope and should inspire similar developments across Europe.

Taking back control of energy production could help to re-industrialize Europe while reducing expenditure for households. At the same time it could be used to re-balance the different EU economies to foster more convergence. Through unparalleled innovation and serious standards we will also finally be able to reduce CO2 emissions, not just here, but globally. All this while seriously and structurally reducing dependence on Russia. What are we waiting for?