Making a Safe and Affordable Energy Transition

Between energy transition and market economy principles

As an industrial nation, Germany can secure itself a resilient energy supply with renewable energies if the structural conditions are right, which is why grounding the energy transition in market economy principles is paramount. Germany’s competitiveness and compliance with climate targets must go hand in hand, however. In other words, business models will only be successful in the future if they take both the energy transition and climate protection into account – a challenging but promising opportunity for Germany as a business location.

The climate protection policies of past years are already having an effect: “CO2 emissions are falling drastically while renewable energies are taking the place of coal-fired power,” said Altmaier.  Up until now, the energy transition has primarily been an electricity transition. For this to continue, though, what’s desirable must be in balance with what’s feasible. A simultaneous phase-out of coal and nuclear power is therefore not sensible, according to the Minister. “Germany is on target for the expansion of renewable energies. The German economy has grown by around 25 per cent since 2005, yet CO2 emissions have fallen by 13 per cent,” explained Altmaier.

“Energy transition only works if we get more horsepower on the road”

On closer inspection, however, this is not even half of the situation. In the EU Commission’s Green Deal under Ursula von der Leyen, Germany agreed to be greenhouse gas neutral by 2050, going far beyond the current electricity transition and certainly presenting the country with new challenges. Though the energy sector and industry are already well positioned to take them on, the transport and building energy sectors have some catching up to do. “With emissions trading, we have opted for a market-based measure in order to meet the targets and ensure competitiveness,” the Federal Minister of Economics explained.

Germany also has to become more climate neutral in the area of mobility. Achieving this means creating appropriate incentives by increasing competition between the various forms of mobility. On this point, Altmaier advocated the expansion of hybrid electric flying, but he was careful to stress that mobility must still be affordable, as it is a part of overall quality of life. “Together with business and research, we’re striking a path of new innovations and ideas not only in theory, but increasingly in practice as well. Energy transition only works if we get more horsepower on the road,” said Altmaier. His central message: “Continuing to drive forward the energy transition in a safe, affordable, and environmentally sound manner.”

Germany with a pioneering role internationally

Following the lecture, ZEW President Professor Achim Wambach opened the exchange with the Federal Minister of Economic Affairs and Energy. Professor Wambach emphasised at the beginning of the discussion that the energy transition will be felt more readily in the future, raising the question as to whether the government should not already be showing more initiative in discussing new climate and energy policy measures with the people. A solution is only to be found together and with all parties involved, emphasised Altmaier on this point. In the current social discourse – for example, regarding the faltering expansion of onshore wind power – emotional arguments often gain the upper hand over objective reasoning.

Asked whether more international solutions for climate change were needed, the Minister explained how Germany stands as a prime example worldwide. “If we protect climate and resource consumption, the market economy will help raise growth potential in the world. And only if Germany maintains its competitiveness and advances successfully as an industrial and economic nation will climate policy efforts bear fruit globally,” stressed Altmaier.

Further questions from the audience entered the discussion round. From the current climate policy standpoint, should more consideration be given to the use of “Carbon Capture and Utilization” (CCU) and “Carbon Capture and Storage” (CCS)? What incentives does the government offer for investing in gas power plant energy? What mechanisms can be used to make regulations more credible? All good points that require joint action by politics, business, scientific research, and society.