By Steven Cohen, Ph.D., Director of the M.S. in Sustainability Management program, School of Professional Studies
Listening to Donald Trump free associating about Green-Iceland and the green new scam is background noise that I only take seriously because he is the world’s most powerful leader. His attack on green energy and its impact on European economic growth is echoed by some conservative politicos in the United States and Europe. But when his attack on renewable energy is repeated by a New York Times columnist I admire, I decided I needed to look closer at the impact of renewable energy on economic growth. The columnist, Bret Stephens, was discussing the impact of Trump’s Davos show on Europe and observed that Europeans are now:
“…being forced to recognize these truths as never before, including through meaningful increases in defense spending and a reconsideration of their costly green-energy ambitions, which have slowed growth and spurred populist backlashes.”
Stephens’ sources for this conclusion included an article about high electricity prices in Germany. His second source was about Germany’s decommissioning of nuclear power after the Fukushima disaster. These two pieces fail to mention the successes of Germany’s renewable energy deployment. The transition to renewables is complicated, and it is important to avoid oversimplifying it. In the case of Europe, renewables can both accelerate and inhibit economic growth. Renewables accelerate growth because they cost less than fossil fuels, and since Europe must import nearly all its fossil fuels, renewables provide limits to price instability. Renewables can accelerate economic growth over the medium-to-long run, but they can inhibit or appear to reduce growth in the short run when the high transition capital costs must be paid or there are system dysfunctions, such as electric grid bottlenecks. The balance of costs and benefits and the timing depend on how the transition is managed. Battery storage, smart grids, and thoughtful increases in the capacity to generate electricity are important. An unplanned transition responding to political demands for rapid greenhouse gas reduction can result in energy cost spikes.
Nevertheless, renewable sources are powering an increased percentage of European electricity. Apart from transition costs, renewable energy is starting to have a moderating influence on electricity prices in Europe. According to the European energy think tank EMBER:
“Wholesale electricity prices increased in 21 EU countries in 2025 compared to 2024, with annual rises ranging from 22% in Austria to 3% in Greece. The main cause of these price increases was sharp spikes during morning and evening hours. These are periods that align with the highest gas use, when more power from costly gas generators is needed to meet demand…During peak gas-use hours in 2025, prices were on average 11% higher across the EU than in 2024. By contrast, in the hours when clean power (especially solar) was abundant, typically between 7am and 4pm, wholesale electricity prices rose by only 3%. In Germany, for instance, electricity prices jumped by 19% during high gas-use periods but grew only by 8% when solar generation was plentiful.”
In other words, fossil fuel gas increases the cost of electricity while solar power reduces costs. The issue of climate change accelerated the political demand for a transition away from fossil fuels. The use of nuclear energy varies in Europe. For some, it is an acceptable approach to decarbonization; for others, to quote the late Barry Commoner, “It’s a hell of a complicated way to boil water.” France relies heavily on nuclear power, while Germany has shut down its nuclear power plants. The political culture of each nation was heavily influenced by the aftermath of World War II. But today, we see an effort to decarbonize all over Europe. In Europe’s case, there are ample economic arguments for moving off fossil fuels. Unlike the United States, Europe must import its fossil fuels. Russia and America are major sources of gas supplies in Europe, and, as we learned after the invasion of Ukraine and in Davos last week, neither is a reliable partner.
If the transition to renewable energy were sold as a way of reducing energy costs while increasing its reliability, it would be less of a political issue than it is today. Fossil fuel advocates praise its reliability and ease of use and find renewables unreliable and intermittent. They argue that the required grid upgrades and storage needs for renewables increase costs and that green advocates are promoting a technology that is not yet ready. Of all these points, the issue of technological readiness is one that has some merit and is worthy of debate.
While some of today’s technologies may not be ready for prime time, the technology of renewable energy is advancing rapidly, and the key technology of battery storage has already demonstrated dramatic improvement. Critically, the price of battery storage is going down. According to EMBER:
“Using batteries to store renewable energy for later use at times of high demand is another solution to lowering price spikes, and one that could be rapidly scaled up thanks to the favourable economics of battery projects. An average 20% annual decline in battery costs over the last decade, combined with large and widening intraday price spreads, made investing in battery storage more financially attractive than ever in 2025.”
In the United States, where we have a large supply of fossil fuels, the issue should be framed differently. We have a growing demand for electricity due to the increased use of electricity in our daily lives. We remain a highly mobile and tech-oriented culture, and as electric vehicles replace the internal combustion engine and the computing requirements of artificial intelligence grow, our demand for electrical power will also increase. Despite its short-term advantages, the fossil fuel business is well past its prime. The oil-rich nations of the Middle East know it and are investing all they can in diversifying their economies. The only people who haven’t figured it out are a few ideologues and oil lobbyists who have more influence with the U.S. President than they will have on our energy future.
It's simple. Fossil fuels are finite, and they must be pumped and transported before they can be burned. There is only so low that their prices can go before they become unprofitable. They also have utility in chemical manufacturing, and a century from now, people will be amazed that we burned these valuable finite resources. The sun will outlast our species, and the technology of transforming its radiation into electricity and storing that energy gets better and less expensive every day. The long-term energy future is straightforward. The more complicated issue is the pace of the transition from fossil fuels to renewable energy and the role of government in that transition.
Donald Trump’s hostility to wind and solar power and his visceral hatred of anything related to Joe Biden have caused widespread questioning of renewable energy subsidies. Government intervention in the economy is a recurring theme in American politics. The fact that many American industries benefit from government subsidies is ignored as pundits question government’s ability to pick “winners and losers.” This is something that our government and indeed all governments have always done. Simply put: Henry Ford built the Model T, but he never built any roads. Government built the roads. Without government-built roads, no one would buy any cars. The oil depletion allowance allows companies to claim a capital loss on their taxable income when they extract oil or gas, because they are depleting a finite resource. For many decades, America has provided tax subsidies to encourage fossil fuel production. So, let’s put the issue of government’s role in the private sector aside. The United States, like every developed country, has a mixed economy. It includes free market capitalism and government intervention. The only issue is the degree of intervention. The energy transition requires government to play a role, if only because nearly every electrical utility is a state-regulated monopoly (or is a publicly owned utility), and the grid’s development and maintenance are government responsibilities.
This brings me to the role of renewable energy in economic growth. An aging, fossil fuel-powered electrical grid guarantees that the price of electricity will continue to grow. A more modern, renewable energy-based, computer-controlled, energy-efficient grid will result in a more reliable and lower-cost supply of electricity. This, in turn, will make the states and cities with modern grids more capable of attracting business and will ensure that the price of energy will be lower than in places that did not invest in modernizing their grids. Finally, the grid itself will be less important as distributed forms of energy generation benefit from technologies that make solar energy and batteries less expensive, enabling households to decouple from the grid. We’ve seen it with landline telephones, cable TV, and wireless internet. Someday, we will see it with electricity. All these transformations will stimulate and not impede economic growth.
Views and opinions expressed here are those of the authors, and do not necessarily reflect the official position of Columbia School of Professional Studies or Columbia University.
About the Program
The Columbia University M.S. in Sustainability Management program offered by the School of Professional Studies in partnership with the Climate School provides students cutting-edge policy and management tools they can use to help public and private organizations and governments address environmental impacts and risks, pollution control, and remediation to achieve sustainability. The program is customized for working professionals and is offered as both a full- and part-time course of study.
