Guest essay by Eric Worrall
The unfolding Greek financial crisis is front page news. The repercussions – bank runs, unsustainable debts, deadlocked creditors – could easily lead to major consequences worldwide. However misconceived the Euro currency was, its downfall will be painful on a global scale.
How much of Greece’s current economic problems were caused by the made Hellenic dash into renewable energy? The answer, unsurprisingly, is most likely quite a lot.
Greece, like many small European economies, has placed a substantial focus on green energy, seeing it as a quick leg up into the big league – an easy way to attract generous funding from rich green neighbours like Germany. On paper it must have seemed a fantastic opportunity – build green energy infrastructure, using a mixture of easy finance and generous grants from Germany and other rich green neighbours, then sit back and profit from selling carbon credits, on the pan-European, or even a global carbon market.
The promised European carbon market never really manifested, thanks mostly to an embarrassing oversupply of carbon credits – a surplus which was created through a combination of domestic overissuing of carbon credits, and through clever gaming of the defects in the Kyoto accord.
The consequences for Greece of this economic miscalculation have been nothing short of tragic. With money in short supply, Greece has been forced to retroactively roll back generous carbon credits, which has undoubtably bankrupted local investors, and which likely contributed to a sense that investing in Greece is unsafe.
I’m not suggesting all of Greece’s financial problems are due to Greece embracing the false promise of green wealth. But the massive misallocation of resources and domestic green wealth destruction can’t have helped. Greece now stands on the brink of defaulting on a $1.73 billion IMF payment – a payment which Greece might have been able to afford, had they not been lured into squandering billions of Euros of borrowed money, on the empty renewable energy pipe dream.