What if the Green Facts Don't Add Up?

Beneath the green rhetoric: A worrying picture is emerging, revealing that the EU’s green agenda may be stifling economic growth, compromising security, and undermining preparedness. Is the EU really in a position to afford the luxury of prioritising green ideals over the essential needs of its citizens’ economic well-being and national security?

The EU’s economy is facing a number of challenges, from high energy costs to low productivity. But behind the official rhetoric lies an assumption that is rarely questioned: that the green transition will automatically lead to economic growth and increased prosperity. But is this really true?

In Germany, which is once again forced to bear the label “Europe’s sick man”, Chancellor Olaf Scholz is struggling with alarmingly low confidence figures ahead of the election in February. But perhaps this is not so surprising. German industrial production has been trending downward since the green agenda became fashionable. Energy-intensive production has decreased by a full 20% in just a few years. Volkswagen is closing factories, Thyssenkrupp is massively laying off employees , and more than three million pensioners are at risk of poverty .

If this is Europe’s “man on the moon” moment, as EU Commissioner von der Leyen expressed it in 2019 , then it’s not much to brag about. At least, not if you’re not a sadist.

The former ECB chief Mario Draghi’s report on the EU’s competitiveness has been discussed previously. One of the problems pointed out was that European companies have significantly higher energy costs than their American competitors, with electricity prices 2-3 times higher and natural gas prices 4-5 times higher.

Germany is perhaps worst off, thanks in part to former Chancellor Angela Merkel’s decision to completely phase out nuclear power (a decision that not only lacked popular support but which she also refuses to acknowledge as a mistake). The sabotage of Nord Stream made the situation worse.

Without Real Capital, No Economic Prosperity

Germany’s phasing out of nuclear power plants is an example of how political decisions have contributed to reducing the economy’s capacity. The same applies to the sabotage of Nord Stream. Real capital, such as buildings, machinery, and equipment, is crucial for the economy’s productivity (e.g., measures such as GDP per hour worked). A larger and more efficient capital stock enables the production of more goods and services with the same amount of labor, leading to greater production, higher wages, and increased material prosperity. This is basic economics. On the other hand, when real capital is declared obsolete due to political decisions, as in the case of the shutdown of nuclear power, it reduces the economy’s capacity. The same applies when real capital is destroyed, as was the case with Nord Stream.

More Working Real Capital Will Be Put on the Back Burner

EU Commissioner von der Leyen promises improvement. She seems convinced that the EU’s decline can be reversed by tripling down on the bloc’s green goals, and listed decarbonization as one of three key pillars in a new “Competitiveness Compass”. When reality does not live up to expectations, you can always press “Ctrl+Alt+Slogan” and hope that no one notices that nothing has improved.

However, her plans mean that existing and currently functioning real capital will be written off to an even greater extent in the future. This can be compared to a nation that gradually expands its nature reserves year after year. As it happens, this is also taking place. The Kunming-Montreal framework for biodiversity means that 30% of all areas, on land and at sea, must be protected by 2030. A country that currently conserves less than that must therefore identify additional areas that can be protected. The process of protecting 30% of all areas will likely reduce the economy’s productive potential. With shrinking fields, there will be fewer carrots (unless significant technological progress is made).

Security Policy and Preparedness Consequences

On the current path, more real capital will be put on the back burner, which can have far-reaching consequences, not least for our security policy. For example, if Russia can produce artillery shells about three times faster, at a cost that is roughly a quarter of what it costs Ukraine’s Western allies , then it’s clear that this has security policy consequences. Similarly, if electricity prices in Germany are five times higher than in China, which is currently the case , then this will also have negative security policy consequences. Compared to the EU, China actually has a higher carbon dioxide emission level per capita, with a difference of about 50% according to available data . Adjusted for international trade, China emits 10% more than Sweden per capita .

A preparedness perspective can also be found. In the early 1990s, Swedish farmers produced nearly 75% of the country’s food. Today, Sweden’s population has increased significantly, but food production has not kept pace. Every other bite is imported today. In Sweden, we can even boast that we cannot even provide for ourselves with the simplest of crops - potatoes . Can we really be sure that significantly expanded nature reserves, as prescribed by the Kunming-Montreal framework for Sweden, will not further deteriorate our food preparedness?

Reminds One of Little Gnomes

I am reminded of an episode from the 90s TV series South Park, where little gnomes collect underpants . When asked about their plan, they described their method:

1. collect underpants
2. ???
3. profit!

Translated to the green transition (the German Energiewende):

1. destroy real capital and conserve land and sea
2. ???
3. economic prosperity!

What Can the EU Really Afford?

Economics is fundamentally about managing scarce resources, which many people seem to have forgotten. It’s high time to question what the EU can really afford. Can we really afford to arm ourselves for war against Russia, China, and Iran while at the same time tying our own hands with green promises of reduced carbon dioxide emissions and increased biodiversity? This in a situation where the next US administration is likely to invest heavily in increasing its competitive advantages through deregulation, lower energy prices, tax cuts, and a withdrawal from the Paris Agreement ?

When von der Leyen was responsible for the German military, the situation became “catastrophic ”. All six of the country’s submarines were out of commission . At times, not a single one of the country’s 14 transport aircraft could fly. German soldiers had to use broomsticks instead of guns during exercises.

Hopefully, von der Leyen will show more success in her handling of the EU’s economy, defense, and preparedness than she has shown in her role as German Defense Minister. However, it may also be time for more people to challenge the prevailing narratives that shape our policies. What if the facts don’t quite add up to the truth we’re being told?

Cover image: AI