Europe's Big Risk Test

December 10, 2012 | 00:00

Europe's Big Risk Test

"Democracy isn't the best model for sustainability. The ground has to be prepared – in industry, technology, training programs, higher education. Morocco is doing a coherent job of this."

This telling statement was made the other day by Gerhard Knies, one of the founders and guiding spirits of the famous Desertec Foundation. Knies was comparing the inconsistent energy policies of democratically elected EU leaders to the policies of, as he put it, of "state leaders who think in the long term", like Morocco's King Mohammed VI.

It would be easy of course to point to the flaws in this argument, or even to accuse Knies of "anti-democratic" tendencies. The fact is that Knies put his finger on a very sore spot. Go to any energy conference in Europe and you can hear the exact same complaint being made by just about everyone. The present generation of democratic leaders in Europe are continuously riding the waves of the people's will – or what they think is the people's will – and those waves are quite wild and unpredictable. The result is wildly unpredictable energy policies.

Shale gas is a good example. The list of EU countries that have turned against shale gas exploration and production is long, and includes key countries like France, Germany, the Netherlands and the UK (although the latter has just announced it might reverse its shale gas policy – see under Headlines & Viewpoints below). In the past year even heavily import-dependent countries in Eastern Europe , which would benefit the most from new gas resources, have "joined the group of shale gas sceptics", as Tomasz Daborowski and Jakub Groszkowski of the Centre for Eastern Studies (OSW) in Warsaw report in a new article for EER.

In this fascinating article, the two authors, who work for the Centre for Eastern Studies (OSW) in Warsaw, describe how electoral considerations turned policymakers in the Czech Republic, Bulgaria and Romania, against shale gas. "In each of the three countries the shale gas debate overlapped with different types of electoral campaigns", the authors note – with fatal results for the prospect of shale gas in those countres.

Such populist policies have serious economic consequences – both in Western and Eastern Europe. Whereas the US is enjoying what is called a "re-industrialisation" thanks to cheap energy (with Apple even considering bringing back manufacturing jobs to the US), in Europe politicians are resorting to threats of nationalisation to keep factories open. In a recent interview with EER, Fatih Birol, Chief Economist of the International Energy Agency (IEA), warned that "European countries missed a big opportunity by closing their doors to shale gas in a dogmatic way." He noted that European gas prices are 4 to 5 times higher (!) than in the US, whereas in the past they were more or less equal. "The energy decisions being made in Europe right now are pushing Europe into difficult economic times", said Birol.

In the meantime, the not-so-democratic rest-of-the-world is following the example of the US (where shale gas was developed before politicians and the public became fully aware of it!) and developing not only shale gas, but also shale oil reserves. The latest country to join the shale boom is Jordan. This tiny country currently has "the fourth largest shale oil accumulation in the world", as news agency UPI recently reported. We are talking about reserves here comparable to Russia's. Countries like Libya and Algeria have shale gas reserves comparable to the US's. Saudi Arabia may have three times as much. All those countries are ready and willing to develop their resources to help grow their economies.

Do I mean to say, then, that decision-makers should not pay attention to what the public thinks? Far from it. What I do believe is that politicians should not have any opinion on shale gas or any other form of energy. Their job is to put in place a proper regulatory framework that guarantees safety and protects the environment, then let the law take its course, fairly and equally applied to everyone.

Right now Europe is in the embarrassing position, as Daborowski and Jakub Groszkowski write, of being reduced to hoping that cheap shale gas in the US and elsewhere will lead to lower prices here, while being "unwilling to take the risk and costs themselves." Do our leaders really believe that avoiding risks will get us out of the economic graveyard?


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