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A sign outside of a gas station in London, United Kingdom, states that they have no fuel. (AFP/Yonhap News)

Rising energy prices in Europe and Asia are casting dark clouds over attempts to recover from the COVID-19 pandemic’s effects on the global economy.

It’s an energy crisis that some have described as “greenflation” — a reflection of the eco-friendly post-carbon policies that countries around the world have been adopting in response to climate change. In Europe, some countries can already be seen trying to renege on their original plans.

However, because this crisis is rooted in the political dynamics between respective countries, there has also been considerable outcry calling for even bolder action to combat climate change.

In Europe, natural gas prices have recently been spiking, reaching 93.63 euros (US$108) per megawatt-hour as of Friday. That number was down slightly from the day before — but still six to seven times higher than the same period in 2020.

The situation led to a number of gas and electricity retailers going bust in the UK during the month of September, with operations suspended at fertilizer plants and other factories that use large amounts of energy.

Household electricity charges have also been rising sharply since July and August, prompting European countries to come out with response measures, including the French government’s plan to pay subsidies of 100 euros (US$116) to 5.8 million households in September.

Foreign news outlets like the Financial Times and Nikkei have attributed the situation largely to countries pursuing post-carbon policies, replacing their power plant fuel with natural gas, which causes lower greenhouse gas emissions.

The rise in prices has continued unabated as Russia has failed to respond to International Energy Agency demands for it to increase its natural gas supplies to Europe.

Even China, which bills itself as the “world’s factory,” has seen its factory operations halted amid a suspension of electricity supplies to certain regions late last month, including Jiangsu Province.

Conscious of the intense strategic competition waged by the US, Chinese President Xi Jinping announced at the UN General Assembly in September 2020 that China intended to achieve carbon neutrality by 2060. Local governments subsequently stepped up their energy consumption restrictions to meet the state’s emission targets, resulting in disruptions to coal supplies and gaps in the country’s electricity distribution.

Some are now voicing concerns about the impact extending to supply chains amid the resulting suspension of operations by Taiwanese companies supplying parts to US businesses like Apple and Tesla.

Chinese Premier Li Keqiang attempted to smooth things over in a meeting on Thursday with newly appointed ambassadors to China, saying that the government would guarantee energy and power supplies to ensure a stable production supply chain.

According to the National Bureau of Statistics of China, electricity consumption between January and August 2021 was up by 14% from the year before, while coal production increased by just 4%. China needs imports to fill the gap, but it has had difficulty coming up with a solution amid souring relations with Australia, a top exporter of coal.

With the world anxious over energy supplies and analysts raising the specter of “greenflation,” a debate is mounting within Europe. The European Parliament has suggested that a July plan for imposing carbon taxes on transportation and heating should be withdrawn — but quite a few observers are calling for even bolder steps.

The situation appears poised to create problems for the South Korean economy too.

Raw material price information shared by the Ministry of Trade, Industry and Energy showed that steam coal for electricity generation cost US$206.30 per ton, a rise of 125.5% from the year before, while the South Korean import price of liquified natural gas was up by 68.4% to US$534.90 per ton.

Joo Won, director of the Hyundai Research Institute’s economic research department said, “Since South Korea lacks its own resources and is structurally focused on heavy and chemical industries, we could be in for a more serious blow than other countries with our reliance on raw materials and our trade dependence on China.”

By Shin Gi-sub, senior staff writer

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