A tale of two energy revolutions: How Germany got it astonishingly wrong and the United States got it astoundingly right. Now the whole of Europe needs to choose

Charles Dickens novel A Tale of Two Cities famously begins:

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness.”

Dickens was referring to London and Paris, and since I do not want to get caught up plagiarising the great British author, let me tell you a story of two countries instead of two cities.

Both countries underwent a revolution, one successful, the other one a disaster – or, in Dickens’ words, one of wisdom, one of foolishness.

The first country is Germany, once the poster child of the Green Revolution.

After almost 20 years of transitioning, the evidence of the revolution’s failing is hard to overstate: On an almost quarterly basis, GDP forecasts for Germany need to be corrected downwards, and even Green minister of the Economy, Robert Habeck, has to admit that Germany is “doing dramatically bad.”

The economy is predicted to shrink in 2024, and investors are expecting a longer term slump, discouraging future long term investments in what once was an industrial superpower.

How, one might wonder, did all of this happen? According to German businesses, the answer is simple: high energy prices, too much regulation, and a lack of skilled labour.

Knowing all of this, the government in Berlin has decided to double down on all three of those: First, they turned off 170 terawatt hours per year of nuclear power – which is more than twice as much electricity than the whole of Belgium uses per year.

Then they supported the idiotic Carbon Border Tariff (CBAM), which forces companies to keep track of the emissions of imports and implement complex carbon accounting mechanismus. This is, in the words of Wolfgang Entrup, the chief of the German chemical industry association, unbelievable bureaucratic madness.

And finally, when it comes to skilled labour, Germany has created all the right incentives to attract unskilled immigration, deter skilled immigration, and expanded a more or less basic universal income (the so-called Bürgergeld) in such a fashion that being on welfare with part-time jobs tends to pay better than actual full-time work.

Chancellor Scholz and his coalition partners are now half-heartedly trying to correct some of their past follies. “One of Europe’s biggest expansions of gas-fired power plants” is under way, in order to compensate for the loss of nuclear power.

In fact, the decision to end nuclear power was such a blunder, that the ministry of the economy refused to publish the assessment that justified it.

Or supposedly justified it – a few days ago a court ordered Robert Habeck to hand over the relevant documents to the magazine Cicero. The expectation is that they will show that the negative consequences were fully anticipated, but the government moved forward anyways.

Germany, as the first of our two countries, has decided to commit economic suicide.

The story of our second country begins in 2003, around the time when Berlin embarked on its green energy revolution.

We are talking about the United States, which had been expected to become a net energy importer since the late 1990s. Alas, one did not take the ingenuity of the American economy into account.

While there was much activity to build LNG import facilities all along the US Gulf coast, another revolution happened.

The so-called shale revolution: Until the early 2000s, the idea of tapping into shale was seen as a ludicrous idea, and the “scientific consensus” was that even thinking of it was a waste of time and money.

As it turned out, however, they could not have been more wrong: Instead of becoming an importer of natural gas, the US became the world’s major exporter, with “natural gas production in the US accounting for an astonishing 6 per cent of the total primary energy consumed worldwide, a sum that includes all contributions from oil, natural gas, coal, nuclear, solar, wind, biomass, and hydro.”

All those LNG import facilities now had to be reversed to become export facilities, because instead of suffering from a lack of energy, the US was suddenly awash in it.

Not surprisingly, with cheap and abundant energy at its disposal, the US economy stubbornly refuses to go into recession, and is poised to experience a manufacturing boom in the years to come:

“US manufacturers ushered in 2024 with one of the biggest payrolls increase since the pandemic-related hiring rush two years earlier, suggesting factory managers are more sanguine about the economy.”

The future of Europe’s economy depends on which of the two revolutions it chooses to embrace. The evidence is in, the ball is now in the court of the decision makers.