Europe’s Disruptive Energy Policy – Econlib

In a Republican ad during Ronald Reagan’s run for president in 1980, a Tipp O’Neill lookalike is driving while oblivious to the fact that his car has run out of gas. Republicans meant that Democrats weren’t paying attention to the mess the country was in, a mess they helped create. But what I took from it was more literal: the idea that Democrats’ energy policy, one of the worst parts of Jimmy Carter’s four years, was a disaster that Democrats refused to acknowledge. (Previous presidents Richard Nixon and Gerald Ford actually initiated bad policies, but that’s another story.)

I have the same reaction now looking at energy policy in Europe. Apart from that, one of the proponents of destructive power policy, Liz Truss of Britain, advocate of free market and former Prime Minister Margaret Thatcher is claiming the position. In setting his policy, he ignores some very basic economics. And the European Union is making the same mistake.

This is David R. Henderson, “Destructive Power Policy in Europe,” from Defined conceptsSeptember 22, 2022.

Another quote on how bad the truss plan is:

From October, Britain’s government will cap overall energy consumption by households. The Truss announced that households would pay no more than $2,875 per year for energy. The government will pay for all energy use beyond $2,875. There are probably many families already in that range So consider what would happen if they wanted to use more energy. In a normal market, they would pay more and therefore have some incentive to save. But Truss is telling them that no matter how much they use, they won’t pay more than $2,875. So any additional use will cost them zero. Lease Truss is declaring to the British that energy use beyond certain levels is a free good. Expect a lot more energy to be used, though I hope that when he sees it happening, he’ll crack down on the “energy hogs”. Recall that when President Carter chose to keep the Nixon/Ford price controls, he condemned Americans for excessive consumption. At one point, Carter’s flagging Department of Energy even proposed banning powerboat use on weekends. I made that proposition in a speech in the late 1970s, “In other words, the only time you can’t use a boat is.” Fortunately, that proposal went nowhere. We will see what happens in Britain.

And Ursula von der Leyen of the European Commission:

To make her proposal to tax producers even heavier, European Commission President Ursula von der Leyen said, “At this time it is wrong to profit from war and benefit from extraordinary record profits behind consumers.” “Profits must be shared and channeled to those who need it most,” he added. Karl Marx could not be reached for comment.

Read the whole thing.

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