Main Reason Behind Europe’s “Energy Price Explosion” Is Green Policy In Europe And Germany

The major reason for Europe’s energy price explosion is green policy in Europe and Germany

By Prof. Fritz Vahrenholt
(Text translated/edited by P. Gosselin)

The media are now taking up the issue of exploding electricity and gas prices. It’s becoming increasingly obvious how dramatically the price increases are affecting private households, but above all small and medium-sized industry. Yet, when it comes to the reasons, one usually doesn’t get to the heart of the matter. The most significant price drivers are the European emission certificates, which have catapulted to over 90 €/tonne of CO2.

Prices have nearly tripled

The politically intended shortage and increase in the price of European CO2 certificates alone have doubled to tripled electricity prices since late 2020. At the current level of 93.8 €/tonne of CO2, the certificates burden lignite-based electricity with 9 €ct/kWh, hard coal-based electricity with 7 €ct/kWh and gas-based electricity by 4 €ct/kWh.

1100% in 5 years

By way of comparison, the price of electricity on the stock exchange has been around 4-5 €ct/kWh in recent years. In addition, there has been the rising price of gas, which had to meet the rising demand for electricity due to the closure of 20,000 MW of coal-fired power plants in Europe over the last 4 years and also became scarce.

The price of European CO2 certificates have increased ten-fold over the past five years. (Die kalte Sonne) 

Difficult to cope

In addition to the increase in electricity prices due to emission certificates, the Fuel Trading Act is hitting German small to medium size enterprises. In 2022, €30 /t CO2 will have to be paid for petrol, diesel, heating oil and natural gas. This corresponds to:

9.5 €ct/liter diesel
9.0 €ct/liter gasoline
0.72 €ct/kWh natural gas

For a medium-sized company with 100 million kWh of natural gas consumption, this means additional costs of 720,000 €. Many businesses in the metal and plastics processing industry no longer know how to cope. And although the energy price crisis was already in full swing at the turn of the year, the federal government increased the CO2 tax rate from 25 to 30 €/tonne of CO2 on January 1st, 2022.

Poor will be hardest hit

But the grand finale is yet to come because now fertilizer prices are also rising and with them food prices. The outlawing of oil and gas exploration by the listed western oil companies from Shell to BP through green guidelines from investors will continue to drive up oil and gas prices, but also wheat and soy prices worldwide. Only China, Russia and the Arab oil companies will profit from this.

Nitrogen fertilizer price per tonne in euros. (Die kalte Sonne) 

The poor in the world will be the worst hit.

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