Energy Policies and Electricity Prices: Cautionary Tales from the European Union

Since 2005, members of the European Union have aggressively pushed policies aimed at addressing climate change. These policies have resulted in dramatic increases in electricity costs for residential and industrial consumers.

• Between 2005, when the E.U. adopted its Emissions Trading Scheme, and 2014, residential electricity rates in the E.U. increased by 63 percent, on average; over the same period, residential rates in the U.S. rose by 32 percent.
• E.U. countries that have intervened the most in their energy markets—Germany, Spain, and the U.K.—have seen their electricity costs increase the fastest.
• Emissions reductions achieved by the E.U. since 2005 have been greatly exceeded by increases in emissions in the developing world: during 2005–14, the E.U. reduced its carbon-dioxide emissions by 600 million tons per year; over that same period, the combined emissions of four developing countries—China, India, Indonesia, and Brazil—increased by 4.7 billion tons per year, or nearly eight times the reduction achieved in the European Union.

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