EIKE has a piece today called Super Expensive Energy. It perhaps could serve as a reminder for President Obama, who thinks passing cap & trade and stopping reliance on fossil fuels will somehow plug the hole. My feeling is that Obama is using the oil disaster as a political instrument to drive through a dangerous cap & trade law.
Cap & trade means subsidising industries. Governments can do this as long as they can afford it. But that’s rarely the case. Most often they cannot. Europe is a prime example for Obama to look at.
Take a look at socialist Spain, for example. Driven by a green ideology, and all the promises it brings, Spain went ahead and subsidised wind and solar energy with unbridled abandon, thinking it could create thousands of new green jobs and usher in the next economic wonder.
Well, it has. But not the kind of wonder a sane person welcomes. Today Spain is bankrupt and unemployment is at (twenty) 20%. Spain has since been forced to drastically cut its subsidies, and the solar bubble has popped. Spain is now begging other countries for a bailout.
Even in a country that has abundant sunshine, like Spain, solar energy still cannot compete on the free market without generous subsidies. Consumers prefer reliable and inexpensive energy.
You’d think that with solar energy being completely uncompetitive in a country where sunshine is plentiful, leaders in other countries with gray, rainy climates would avoid such a source of energy. Not Germany. Even with its gray dismal climate, leaders went full throttle ahead in subsidising solar panels and energy. They simply forced the power companies to buy up green power from people who have solar panels on their roofs at exorbitant prices.
The power companies of course simply pass the higher costs on to the consumers. Industry is among the consumers of power. Companies that have energy-intensive processes are moving operations, and the jobs that go with them, out to countries that have much lower pollution standards.
Cooking your own goose
State-guaranteed price for solar power in Germany is far above the actual sales price to the market. Such a method was used in former communist East Germany (the country that built a wall to keep its people from running away). For example, a person there could sell a goose they had raised in his backyard to the local markets at the state-guaranteed price of 30 East German Marks. A few hours later the same seller could go back to the market and buy the same goose for only 15 Marks, slaughtered and ready to cook. Today it’s the same with green power producers. They sell their power for 43 cents/kwh, and then buy it back for 22 cents. Does that make sense?
Only if you want to send the economy to hell in a handbasket, and quickly.
In Germany green laws have been passed that will cost hundreds of billions of euros over the next 15 years, all based on the bogus claim they protect the climate. According to EIKE:
These billions burden the economy in 2 ways: 1) They lead to higher electricity rates for producers, meaning their products become more expensive, and 2) lead higher energy bills for consumers, and thus less buying power. Eventually this will choke the German economy and its growth, which eventually will hit already strapped governments fiscally. Absolute foolery.