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The EU’s Trouble with Being Green

By Griffin W. Huschke, Mayme and Herb Frank Research Fellow


Last month, the largest creditor in the world, The People’s Republic of China, took out a $668 million loan from the European Union to help China use more renewable energy and increase the number of energy efficiency projects.  While the loan itself is chump change to the EU, which recently created a $668 billion fund to bail out European economies,  the move is uncharacteristically self-interested for a bloc that has been so forceful about its work for the environment.

See, part of the reason the EU gave money for energy efficiency projects was because some of Europe’s finest shaver/energy efficiency companies (i.e. Phillips and Siemens) are in a prime position to capitalize on the growing Chinese energy market.  China will likely spend some of that loan money on bringing European firms to China, which will then have a foot in the door when the People’s Republic decides to enact energy efficiency projects on its own.

The loan is also somewhat mystifying because developed countries, like the U.S. and those in the EU, stand to gain a lot more out of energy efficiency projects domestically than in the PRC.  A couple of years ago, the whiz-kids (along with direct supervision from whiz-adults) at McKinsey figured out that energy efficiency projects could save the US economy $700 billion in the next decade, while meeting 23% of the US energy demand and reducing the carbon output by 1.1 gigatons–the equivalent of every passenger car and light truck in the US.  A lot of the discussion on energy topics center around “low-hanging fruit” to reduce carbon emissions, and for most developed countries, the sweet nectar of energy efficiency is so low that they don’t even have to stand on their tippy-toes.

Instead of loans to promote energy efficiency with an eye to its own business, the EU should have given credit lines to developing countries for cleaning up coal.  Developing countries, like China and India, don’t have a lot to gain from energy efficiency, but they are heavily dependent on coal, one of the world’s most carbon-intensive fuel sources.  Coal’s fire-sale price has helped these countries bring power and jobs to millions of impoverished people and laid the foundation for their modern economy.   When faced with environmental arguments against the fuel that has helped turn their countries into growing international powers—especially from countries whose own development was largely coal-fueled—officials from China and India are understandably unmoved.

China and India aren’t going to give up coal, so the best move for developed countries is to help their rapidly developing—and polluting—brethren deploy clean coal technology.  There is currently a lot of research around the globe on Carbon Capture and Storage/Sequestration (its friends call it CCS), which sucks the carbon out of the air before it gets into the atmosphere.  Currently, CCS technology is a long way from deployment, and there are significant hurdles that need to be overcome before its ready for primetime.  But if the EU really wanted to do some good for energy in China, they would simply encourage information sharing among the myriad research organizations, governments, NGO’s, and private companies that are doing work on CCS.  Eggheads don’t necessarily talk to each other when they make a find, which leaves every government and country kind of making up the rules to CCS as they go along.  With better information sharing between and among developed and developing countries, the EU can finally put its money where its mouth is.


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