How Green Fanaticism and the Sanctions Regime Destroyed the German Economy

by | Aug 24, 2023 | Blog Articles, Energy, Finance, Inflation, Politics

When in 2018 then U.S. President Donald J. Trump warned Germany’s political leadership of the dangers their energy policies posed for the future of their nation, he was scornfully mocked and laughed at by the arrogant and self-satisfied representatives of the European Union’s largest economy. No one is laughing now.

The German economy, the fourth largest in the world, has ground to a standstill. There is no growth. Manufacturing is depressed, trade is weak, inflation is high, jobs are scarce. Germany is now the sick man of Europe, and misguided energy policy is largely to blame.

Germany has just recorded its third consecutive quarter of recession, marked by negative GDP (gross domestic product) growth. The central bank expects the rest of the year to be no better. Germany has recently experienced its highest rate of inflation in a quarter century. Amongst the highest in Europe, German inflation remained stubbornly high at 6.2 percent in July, compared with 5.3 percent for the Euro Area as a whole. This despite the fact that German manufacturing is facing “its sharpest slump … since May 2020,” i.e., when the entire world was locked down.

What Trump was referring to in 2018 was Germany’s increasing dependence on Russian gas, which in turn resulted from “green” energy polices implemented over the previous decade. These near-sighted and self-sabotaging policies effectively destroyed Germany’s highly efficient and inexpensive domestic energy production capacity derived from world-class coal and nuclear power. Prior to this decade of folly, Germany’s coal plants were among the most modern and efficient in the world. Low carbon nuclear energy produced a substantial portion of Germany’s power needs. But all of this was forsaken in quixotic pursuit of a utopian vision of zero-carbon green energy.

Import of Russia gas thus became essential to the German economy. Germany imported over 1.7 trillion cubic tons of gas from Russia in 2021, constituting nearly half of their total gas usage that year. As a result of the Russia Ukraine war, the sanctions regime imposed on Russia by the United States and the West, and the sabotage of the Nord Stream pipelines, Germany has been forced to find alternative sources of emergency fuel stock to keep its lights on and its citizens from freezing.

As a result, Germany’s electricity prices are now amongst the highest on the planet. The only countries paying more per kilowatt hour anywhere in the world are Denmark and Italy. Along with Germany, Italy’s energy supply was most impacted by the disruption of Russian gas. Overall, those European nations that relied most heavily on Russian gas are paying more for electricity than other countries and suffering worse inflation as a result.

For background, coal had been essential to German energy and thus to the economy as a whole. But, facing intense pressure from green politicians and evangelists of a looming climate apocalypse, Germany embarked on a plan to completely eliminate coal and other fossil fuels from its energy complex. This despite the fact that Germany’s consumption of coal was relatively minor as a portion of global totals (according to the IEA, China, India and Southeast Asia consume three-quarters of global coal) and was processed with much lower environmental impact.

Germany reversed course on coal in 2022, as the geopolitical crisis forced “energy security to trump climate goals.” Decommissioned plants were reactivated, and plans to mothball others were postponed. Germany consumed over 8 billion tons of coal in 2022, up 19 percent from 2021. Despite the increase and because of the efficiency of German production, carbon emissions near the end of 2022 were nonetheless at their lowest level in 30 years.

The German government’s position is that this increased use of coal was “a last resort and short-term backup to secure energy supply” amidst the emergency. Despite the stark reality on the ground, the nation’s leaders say they remain committed to eliminate coal by 2030 as part of their long-term objective to achieve “net-zero emissions.”

Even without coal, Germany had viable alternatives for energy independence and thus energy security.

Nuclear could have saved Germany

At its peak, Germany had thirty-six nuclear reactors capable of producing 26,375 Mwe (Megawatts electric) output of low-carbon power annually. Under political pressure from anti-nuclear factions, by 2011, only 17 reactors remained. But even still, Germany still obtained one-quarter (133 TWh) of its electricity consumption from nuclear power. As a result of relentless assail from the Green Party supported by environmental activists, and then the anti-nuclear fearmongering that prevailed following Japan’s Fukushima nuclear reactor accident in 2011, all but a handful of Germany’s remaining reactors were promptly shut down.

Despite the flashing red light warning of Russia’s encroachment on Ukraine and the imminent threat to cut off Germany’s gas supply from Russia, the German government proceeded to close the remaining six reactors, three on the last day of 2021—i.e., less than two months before Russia’s invasion—and three in April 2023, after Russia’s actions were fait accompli and the knock-on effects on Germany’s energy economy visible to all.

Virtue signaling straight into the abyss

According to ClimateWatch, just three countries: China, India and the United States, produce 42.6 percent of global greenhouse gas (GHG) emissions. On the other hand, Germany produces 1.75 percent of global GHG emissions. A twenty five percent reduction in Germany’s emissions—devastating to German GDP—would bring the proportion down to 1.3 percent of global GHG emissions.

So in other words, Germany’s leaders have been willing to bankrupt its economy, impoverish its people, and plunge the nation into darkness for a rounding error. While German leadership virtue signals to their way to perdition, China and other countries have been unapologetic in their intentions to increase GHG emissions as their economies grow.

The proposed solution of German leaders has been for its citizens to consume less and its factories to produce less or move manufacturing offshore. But why should the German people suffer for the idiocy of their leaders? Why should German industry be sacrificed to benefit other economies at the expense of their own?

Germany’s beleaguered citizens appear to have had enough of this disaster. Political change is in the winds. The populist conservative party, Alternative for Germany (AfD), has just emerged as Germany’s second strongest party, with 20 percent support polled nationwide, and over one-third in some regions. The centerpiece of the AfD’s platform is “as an aggressive opponent of the government’s energy and climate policy.”

Perhaps it is not too late for Germany after all.

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