Thursday, March 23, 2006

Environmentalism -Not Oligopoly- Behind High Swedish Electricity Prices

Recently, Social Democratic politicians in Sweden have been complaining about high electricity prices in Sweden, which they all blame on the partial deregulation of the electricity market. Allegedly, the culprit is oligopolic behavior of electricity providers and therefore it is claimed that increased regulation and/or a "windfall tax" on energy company profits is needed.

The problem however, is certainly not the highly limited degree of deregulation of the energy sector, but the high degree to which the energy sector is regulated and taxed. To refer to the Swedish energy sector as an example of laissez-faire capitalism is simply absurd considering that 1) The Swedish government imposes heavy taxes on electricity and many sources of electricity, like nuclear power and fossil fuels. 2) The Swedish government have banned the construction of nuclear power plants and have indeed closed down the Barsebäck nuclear power plant. It is also illegal to construct Hydro-electric power stations and fossil fuels are heavily taxed. 3) The biggest electricity power company in Sweden is Vattenfall, which is 100% owned by the Swedish government. If they truly believed that energy companies behaved in a oligopolic way, they could just order their own company to stop doing that.

So the Swedish government who have done everything it can in order to raise electricity prices in the form of high taxes and artificial limitation of supply and who owns the biggest power company have the nerve to blame the free market for high electricity prices. This is a simply unbelievably shameless form of audicity.

Indeed, it is hypocritical of the Social Democrats to decry the existence of high electricity prices. Isn't that what they want for environmentalist reasons? Isn't that the purpose of energy taxation and the various limitations of energy supply? They should really be happy about high electricity prices given how that have been what they have tried to achieve for environmentalist reasons. The brazen hypocricy that they now display is probably just a way for them to deflect the anger from ordinary Swedes and energy intensive manufacturers over high energy prices.

The story of how the limited degree of deregulation in the Swedish energy sector is blamed for high energy prices is all too reminiscient of how the limited degree of deregulation of the energy sector in California was blamed for the energy crisis in California, rather than the price controls and the environmentalist supply limitations.


Post a Comment

<< Home