The lessons of the European elections

Nick Butler

The results of the European elections held at the beginning of June are being presented as a triumph for the hard right and a serious setback for the climate agenda.  The reality is more complicated.

The hard right-wing blocs – the Reformists and Identity and Democracy won seats as did the AfD in Germany which is not affiliated with either of those groups.   The Greens and their social democratic partners in Germany the SDP lost.  But behind these headlines some more detailed facts need to be taken into account.

Europe is not a single state, and the European Parliament is not Congress.  To many voters across Europe, the Parliament is remote and irrelevant – passing resolutions but without the power to determine what happens in Berlin or Paris.  The first fact to note is that turnout for the elections was only just over 50 per cent across the EU, and only 28 per cent in Lithuania and 21 per cent in Croatia.  Across the continent the numbers voting were far lower than is the case in national elections.

The second point to note is that the two main groupings to the right of the European People’s Party won 118 seats but did not win power.  The bulk of the seats in the new European Parliament continue to be occupied by the mainstream parties of the central right and the centre left. They remain the main forces in politics at the European level.  There are particular shifts in individual countries and perhaps the most interesting result was in Germany where the centre right party the CDU pushed aside both the Greens and the SDP.   The present unwieldy coalition government in Berlin now looks vulnerable and could fall apart over the next few months.  But across Europe as a whole, the political balance is only marginally different.

The votes cast were in many cases votes against incumbents who have failed to provide rising living standards.  Europe’s growth rate last year has averaged just 0.5 per cent; painfully below that in the US.  At the same time, inward migration – some of it illegal – has continued to put pressure on already strained local services such as housing and health care.  If anything, immigration is an even more powerful issue in Europe than in the US.  The unpopularity of Governments is hardly surprising and is shaping politics not just in the EU but also in Britain where it now seems certain that the Tories will lose power on June 4th.

The next fact is that the climate agenda was not abandoned.  The centre-right and the centre-left do not differ materially on the issue.  Polling across Europe suggests that for many it remains a major issue of concern.  But it is not the only topic which matters nor the most immediate issue.  The cost of living and the weak state of the European economy matter more at the moment.  Those campaigning on climate, in many cases fervent about the overwhelming, existential importance of their cause should be reminded by the results that in political terms climate is simply one issue on voters’ minds.

The polling we have undertaken over several years is clear in one crucial conclusion – the public recognise the issue of climate change but are not yet ready to pay higher taxes or retail bills to fund the required response.  They expect others – particularly business – to solve the problem without imposing significant additional charges.

The idea that the energy transition will deliver energy at a lower cost has proved to be an illusion.  The upfront capital costs of switching vehicles or home heating systems or the power supplies which run a factory are very considerable and though in the long run supplies of electricity from sources such as solar should be cheaper, the question of who pays for the immediate capital costs involved is unresolved.

The votes in the European elections confirm this view and pose a challenge to those wanting to halt climate change.  The loss of support by both the Greens and the Social Democrats in Germany demonstrates the seriousness of the challenge.  Even in a country deeply committed to the protection of the natural environment policies which impose high upfront costs are not acceptable.

How then can Governments subject to periodic tests at the ballot box both deliver serious action on climate change and win votes?

So far, the most successful example of pragmatic progress has come from the US with President Biden’s Inflation Reduction Act which is stimulating investment in infrastructure and in new sources of low carbon energy.  The funding involved creates an economic opportunity.

No country in Europe can match the IRA because public finances are already overstretched after Covid, limiting the ability to extend Government borrowing. A different answer is necessary.

To be viable both in Europe, and even more important in countries across the developing world where populations, energy use and emissions are all growing, the imperative is to find a lower cost energy transition which is affordable by the mass of the population rather than simply a minority of socially conscious individuals who can afford to change their lifestyles without difficulty.

Past changes in the way we live – the extension of the distances we travel and the way we communicate for instance – have come about because the means of change – the development of cars, or planes or mobile phones for instance have been achieved by economic breakthroughs which have reduced costs. 100 years ago, private cars were reserved for the privileged few – now they are within the reach of the vast majority.

Similar breakthroughs are needed now to make low carbon energy the natural economic choice at all levels of society.

Wind and solar power have made those breakthroughs – thanks in very large part to the actions of the Chinese government in subsidising mass production of the key components.  A similar process is underway with electric vehicles and while European Governments are now resisting the growth in the numbers of subsidised EVs being imported from China, they have not found a way to reduce the costs of comparable vehicles produced in Germany or Sweden.  If Europe pursues a protectionist route, imposing tariffs on products from places such as China or India, the net result will be that the overall cost of the energy transition will rise.

Because energy policy is still primarily a responsibility of the 28 nation states which make up the European Union rather than of the Commission or the Union as a whole, different countries will respond in different ways to the election results.

France, now facing a new national parliamentary election, is not likely to shift materially from its chosen belief in nuclear power as the solution.  If that policy is to change it will result not from political change but from the dawning realisation that France has lost its once dominant position in the nuclear industry.  More likely to change is the already limited attempt to impose lower carbon solutions on the agriculture sector.

In Germany, the pace of change may slow particularly if the Greens leave the Government and the rundown of the coal industry could be slowed down. There is no immediate prospect of the return of nuclear power, which the plants are now beginning to be decommissioned and the accumulated skills of the workforce have already been lost.  Berlin has placed a substantial bet on hydrogen but as yet the costs remain high.

In Britain – not part of these elections but still an integral element of the European energy system – a new Government after the election on July 4th will turn up the rhetoric on the move to net zero but will meet resistance to the costs involved and higher bills which will follow.

Overall then the results confirm that there is a long way to go before net zero is achieved.  Across the EU almost 70 per cent of final energy demand comes from oil, gas and coal. The lower cost options – more wind and solar power developments will proceed and will become the dominant sources of electricity supply over the next decade – but beyond that the overall pace of change will slow until costs can be brought.

That is the challenge facing each of the Governments in Europe.  Can the corporate sector be encouraged (as in the US) to find technical and engineering solutions which cut the cost of the transition, or will Europe find itself relying on the achievements of China’s powerful industrial policy for the products required?  The European election has sharpened the question but has provided the answer.