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Re-Energizing the Eurozone

UTRECHT – As Europe’s sovereign-debt crisis threatens to unravel the common currency and roils the region’s banks, Europe’s pioneering “green energy” sector could be at risk. In a recent article, the Dutch economist Sweder van Wijnbergen argued that addressing the eurozone’s economic woes would require debt reduction and an investment program. In fact, Europe’s financial crisis and its looming energy crisis can be tackled with one program: converting existing debt into renewable-energy concessions.

The eurozone’s troubled periphery – including Greece, Italy, Portugal, Spain, and Ireland – offers excellent conditions for harvesting renewable energy from the sun, wind, and geothermal sources. By lending small areas of their territory for renewable-energy concessions, these countries would benefit in the short term by reducing debt and stimulating their economies. They would also help to put the eurozone – as well as the global economy – on an environmentally more sustainable long-term development path.

Consider a scheme in which such concessions’ size is commensurate with that of a country’s debt. For example, Ireland’s sovereign debt totals €40 billion ($50 billion), so it might “concede” 550 square kilometers – which amounts to less than 1% of its territory. Portugal, with €78 billion in debt, should concede 1,000 square kilometers, or 1% of its territory. And Greece, with €210 billion in debt, should concede 2,800 square kilometers, or 2% of its territory. Assuming 2.5% average annual inflation, a modest €0.15 profit per kWh in 2020-2045, and a conservatively estimated annual yield of 70 GWh per square kilometer, these countries’ debt could be reduced by up to 30%.

Projects would not have to be large-scale, or use significant expanses of contiguous land. On the contrary, concessions for projects could be distributed more widely among smaller areas.