Hit & Run

President Obama, Please "Cede Wind and Solar" to Germany and China

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Wind Turbine
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Back in March, 2012 President Barack Obama declared in a speech on "American-Made Energy" at the Ohio State University that …

…I am not going to cede the wind and solar and advanced battery industries to countries like China and Germany that are making those investments. I want those technologies developed and manufactured here in Ohio, here in the Midwest, here in America. By American workers. That's the future we want.

That's not the future we want, as the recent turmoil over Germany's failed solar and wind policies clearly shows any dispassionate non-ideological observer. The Frankfurter Allgemeine Zeitung newspaper is reporting a new study by Germany's government-appointed Expert Commission on Research and Innovation that finds Germany's aggressive renewable fuels policy under its Renewable Energy Resources Act (EEG) is near complete failure. The commission concludes that the renewable fuels subsidy programs under the EEG neither protects the climate nor spurs innovation and therefore should be entirely abolished.

The Britain-based Global Warming Policy Foundation summarizes the newspaper report:

The expert commission lists a number of reasons for their radical advice: There is the spiraling cost of 22 billion euros in green energy subsidies last year; there is also the over-estimated impact of climate change and especially the threat posed by the promotion "very low technology-specific innovation impact in Germany " . The technology argument in particular plays an important role in the political debate. […]

The EEG stipulates the subsidies for the sale of electricity from renewable energy sources. This enlarges the market for renewable technologies. The result is that the subsidies incentivise companies to exploit market potential rather than invest in research and development. Due to the rapid expansion of old technologies, accompanied by cost reductions, barriers to entry for new technologies could also emerge. The conclusion of the expert committee is devastating:  "The EEG can not be justified in its current form, not least from the perspective of innovation policy."

"For both reasons, therefore, there is no justification for the continuation of the EEG ," concludes the report which will be presented to German Chancellor Angela Merkel on Wednesday.

The result of Germany's drive to make energy more expensive is that companies are fleeing Europe to make investments elsewhere. As the Financial Times reports:

BASF, the world's biggest chemical maker by sales, will make the most of its capital investments outside Europe for the first time, as it responds to the continent's higher energy costs and growing demand in North America and emerging markets such as China….

"In Europe we have the most expensive energy and we are not prepared to exploit the energy resources we have, such as shale gas. We have relatively high wage costs and we have a stagnating market," said Kurt Bock, BASF chief executive. 

Mr Bock has been a prominent critic of German and European Union climate and energy policies, arguing these are ineffective, raise costs for industry and cause job losses.

President Obama, please cede failed subsidy and industrial policies to Europe. Steeply rising energy prices and further deindustrialization is not the future you should want.