Focusing on Energy Policy

Nevertheless, discussion surrounding the clean energy transition can easily become emotional, thus impairing necessary structural change. The clean energy transition will cost trillions of euros and it threatens to destroy jobs. Accordingly, we urgently need an intelligent political perspective. To this end, we should start by reaffirming several basic insights.

The issue is no longer “if” but “how”: The European climate targets – an 80 to 95 per cent reduction in CO2 emissions by 2050 compared to 1990 – are a matter of social consensus. The devil is in the details of “how”. The National Academy of Science and Engineering Acatech, BDI – The Voice of German Industry, and other institutions have proposed developmental trajectories for structural change. If we are smart and follow them, it’s going to be expensive. Today, German electricity consumers are already paying about 25 billion euros every year in renewable energy surcharges. And this is only the beginning. The additional costs to achieve climate goals are estimated to amount to around 2 trillion euros by 2050. This represents an annualised figure of over 60 billion euros a year. If we aren’t smart, the costs will be exorbitantly high, or the transition might fail.

The EU has fashioned an instrument that can direct structural change by creating the emissions trading scheme for CO2 certificates. Energy producers and energy-intensive firms in the EU must purchase certificates for their emissions, and these certificates are only offered in limited amounts. Furthermore, these amounts will continuously decline – between 2021 and 2030 by 2.2 per cent a year. For this reason, it does not matter when exactly Germany stops generating electricity from coal. Emissions that are not produced in Germany will be produced in the rest of Europe and vice versa. The total amount – fixed through emissions trade – is largely set. Further cancellation of certificates may come along with the fossil-fuel phaseout but could also be achieved elsewhere. In any case, this involves a separate decision not contingent on when we exit from coal. Therefore, the German coal exit commission would do well not to get side-tracked with the question of what year to exit from coal, and instead, to put more energy into identifying appropriate measures that support structural change.

However, energy policy does not begin and end in the domain of coal mining. The transformation to emissions-free power generation cannot succeed without a major expansion of the electricity grid. Indeed, a smart “settlement policy” for renewable energies might well have the effect of reducing the need for expansion, as is shown by the recent special report of the Monopolies Commission on Energy. Yet there is no way to completely circumvent the need for grid expansion.

Further measures will be required to encourage greater integration between the electricity, heat and transport sectors. Of prime importance is to create an integrated and optimised internationally coordinated pricing system for climate-damaging CO2 emissions. This means that the European emissions trading scheme needs to include the transport and heat sectors, supported by reforms in the areas of taxation, grid charges, and transfer systems. Until now, the system has disproportionately disadvantaged electrical power compared to other energy sources such as natural gas and petrol, thereby holding back the increased use of renewable energies.

In tandem with a rational energy policy, there is a need to train and qualify workers in those industries that are shrinking as a result of climate policy and to promote alternative industries. In this process, emotions can cloud one’s vision. Awareness for this problem is important, as our work is just getting started.

This article first appeared in the "Handelsblatt" on November 12, 2018.