Need more manure for energy but deplore its production? EU left with bullshit

Germany’s ruling coalition may be an awkward marriage of ideological rivals, but it does benefit from the absence of the Greens, who pushed many of the economically injurious policies that drove Olaf Scholz’s government into a ditch. This week brings news that the impending 2029 ban on gas-fired boilers – one of the Greens’ signature achievements – has been repealed.  Homeowners are no longer required to install expensive heat pumps powered by some of the world’s highest electricity prices, but may continue to heat their homes with gas. But it’s not all good news for financially strapped Germans stuck in a no-growth economy: The deal struck between coalition partners will raise the price of that gas with a mandate that utilities must add expensive biomethane to the fuel mix by increasing annual percentages.  

The EU consumes roughly 300 billion cubic metres of natural gas a year, but produces only 7 billion cubic metres of biomethane, largely from animal waste and decomposing silage.  Each billion metric tons of biomethane requires 50 to 80 million metric tons of manure. Meeting the EU’s stated 2030 goal of 35 billion metric tons of biomethane will require up to 2.8 billion tons of manure. Where will all this poop come from? The Netherlands only produces 74 million tons of manure a year, and as readers of this publication know, roughly one third of Dutch dairy farms are facing closure due to EU greenhouse gas rules limiting, yes, methane.  So are cows harmful to the environment or a valuable feedstock for the biomethane industry? The EU hasn’t decided, but will surely introduce yet another regulation requiring inspection of climate-friendly cow patties. A new European MSc programme in manure certification will inevitably follow. 

This conflict between policies that restrict manure production and those that require its expansion is emblematic of the contradictions that haunt the European Union’s forced march toward Net Zero and renewable energy. European industry requires cheap reliable power to compete in global export markets, but the EU’s climate rules have made electricity expensive and unreliable. Germany has spent roughly a trillion Euros on windmills and solar farms, yet today produces less power than it did when it depended exclusively on coal, nuclear and gas. Renewables create instability in the power grid and require additional fossil fuel standby when the wind stops and the sun doesn’t shine. Germany restarts dirty brown coal power plants to maintain grid stability during winter Dunkelflaute. Leading European firms are directing capital investments to North America and China, where cheap energy and a light regulatory touch permit profitability.  

Rather than reverse the deleterious effects of the 2019 Green Deal, the EU in its usual manner introduced yet more regulatory complexity. The Clean Industrial Deal agreed last year is designed to square the circle of net zero with subsidies meant to offset the costs of carbon emissions goals. The Industrial Accelerator Act is still rattling around in the bowels of the Berlaymont but once it emerges will use public procurement to create “lead markets” for green production in carbon intensive industries like steelmaking. Rather than government contracts issued on best price, the Industrial Accelerator Act will “shape” markets and “stimulate demand for products aligned with climate objectives.” Left unmentioned are the poor taxpayers, who pay for those additional subsidies and higher cost tenders.  

The pretty story that reconciles these conflicting goals is the hope that dumping public money on companies suffering under the EU’s net zero campaign will create new business opportunities and grant the EU a leading role in an emergent green economy. History begs to differ: President Obama promised a wave of job creation after his own 2009 green subsidy scheme, yet was mystified when these jobs failed to appear. Instead, US taxpayers were stuck with the bill when state supported green projects went belly up. More recently, Europe’s embrace of renewables created a roaring market in solar panel production … in China, which has run EU firms out of the market entirely. Hooking European corporations up to a drip feed of public money is unlikely to result in the gains in productivity and innovation Europe desperately needs.

For example, the Industrial Accelerator Act aims to make steel a “lead market” in green production through the magic of the “circular economy.”  Rather than coal-fired blast furnaces that smelt raw iron ore, new electric-arc furnaces will turn recycled scrap into new steel. Giving these “mini-mills” privileged access to public procurement will not boost European productivity as this is already a mature technology, pioneered by US giant Nucor a half century ago. What mini-mills do require is vast amounts of cheap electricity to operate profitably. They cannot wait for windy days but need a massive power plant infrastructure to make steel at scale. The EU’s ambition to create a circular economy in steel will remain unrealised without substantial investment in power generation.

Industries require cheap and reliable energy to accelerate. Beggaring the sources of European prosperity in the name of a climate crusade that the rest of the world now largely ignores will only relegate Europe to the second rank of industrial economies.  The elite policy mechanisms installed by the founders of the European project have left the EU incapable of reversing grave policy errors. Instead, it depends on subsidies and industrial carveouts that often end at cross purposes. As any farmer could tell you, should you need more cow manure but deplore its production, all you are left with is bullshit.