Maintaining the Advantage: Why the U.S. Should Not Follow the EU's Energy Policies

Executive Summary

Over the past decade, the United States and the European Union have taken markedly different approaches to the electricity markets that power their economies. Seeking drastic reductions in carbon emissions, the EU has emphasized rigid and extensive mandates, market interventions (including a "cap and trade" regime to reduce emissions), and subsidies aimed at promoting renewable energy. The U.S. government, as well as numerous states, while also promoting renewables and seeking lower emissions, has interfered far less. U.S. electricity markets operate more freely than their European counterparts. So, too, do other U.S. energy sectors. This has contributed to the recent boom in extraction of both oil and natural gas in the U.S.

As a result of these policy differences, electricity prices in Europe now are far higher than those in the United States, for both residential and industrial consumers. Between 2005 and late 2013, the average price of residential electricity in the EU rose by 55 percent, and industrial electric rates jumped by 26 percent. The average U.S. household now pays 12 cents per kilowatt-hour—about a third of what the same amount of electricity costs in Germany. European steelmakers now pay twice as much for their electricity as do U.S. manufacturers.

Instead of emulating Europe’s failed policies, the U.S. should:

• Eliminate its own renewable-energy subsidies.
• Remove excessive restrictions on coal-fired electricity generation plants.
• Encourage “N2N” (natural gas to nuclear) sources of electricity.
• Not impose unnecessary regulations on the process of hydraulic fracturing, which is essential to the production of natural gas from shale.
• Maintain and improve safety standards in all facets of energy production, transportation, and storage.

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Robert Bryce is a senior fellow at the Manhattan Institute. Follow him on Twitter here.