NCPA - National Center for Policy Analysis

United States Should Not Follow EU Energy Policies

February 24, 2014

The United States should not follow the European Union's lead in crafting energy policy, says Robert Bryce, a senior fellow at the Manhattan Institute.

Electricity prices in Europe are far higher than those in the United States.

  • The average price of residential electricity in the EU increased by 55 percent between 2005 and 2013, and industrial electricity rates have risen by 26 percent.
  • Today, a German household pays three times what an American household pays for electricity, thanks to European energy policies marked by government interference.

EU energy costs have gone up thanks to massive subsidies for renewable energy producers, renewable energy mandates, and a cap-and-trade system that distorts the market and discourages efficiency.

Still, some American lawmakers have called for a European-style energy policy. Such a policy would raise prices -- increasing household energy bills by 29 percent -- and destroy America's energy competitiveness.

The European Union recently issued a mandate requiring wind and solar to generate 27 percent of overall energy. What would happen if the United States did this?

  • Assuming no increase in electricity consumption in the United States in future years, producing a megawatt-hour of electricity from wind will cost an additional 32 percent more than from natural gas.
  • And an additional megawatt-hour of solar will cost 120 percent more than natural gas.
  • One natural gas megawatt-hour of electricity would cost $65.60, but producing that from wind would be $86.60 and from solar $144.30.
  • A 27 percent mandate would require a cost of $43.4 billion per year, adding $31.41 on average to each household's bill per month.

Instead, the United States should do away with subsidies for renewable energy and craft policies that would encourage energy development. By removing restrictions on coal-fired electricity plants and keeping fracking free of unnecessary regulations, the United States can reduce energy costs even further.

Source: Robert Bryce, "Maintaining the Advantage: Why the U.S. Should Not Follow the EU's Energy Policies," Manhattan Institute, February 2014.


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