Expert Statement on the German Federal Government’s Decision to Establish a Capacity Reserve: Shutting Down Coal-Fired Power Plants Costs Billions – and Contributes Nothing to Protect the Climate

Dr. Martin Achtnicht, Senior Researcher and Acting Deputy Head of the ZEW Research Department "Environmental and Resource Economics, Environmental Management", assesses the climate effects resulting from the German Federal government's decision to establish a "capacity reserve" system of brown coal power plants.

Germany's grand coalition government has agreed to set up a "capacity reserve" of lignite-fired power plants. These plants are being retained to generate electricity whenever supplies run short until the end of the decade before being put out of service. This is supposed to save an additional 22 million tons of carbon emissions to meet the national climate targets. Martin Achtnicht, senior researcher at the Centre for European Economic Research (ZEW), considers this a misguided approach regarding the climate target:

"Mothballing coal-fired power plants alone will yield nothing but billions of costs for the compensation of electricity companies. We have to be aware that the energy sector is subject to European emissions trading, and thus has to comply with a pan-European emissions cap. So far, that has not been considered in the federal government's concept. Transferring several German brown coal power plants into the capacity reserve scheme does improve Germany's climate balance. But it does nothing to actually reduce emissions. Because the excess certificates of German electricity providers will be sold on the market, which leads to emissions in other countries or sectors. National emissions reductions in the energy sector therefore have no effect at a European scale. They are merely statistical figures of symbolic value.

To make matters worse, the planned capacity reserve weakens European emissions trading, today's most important tool to protect the climate. The lack of demand caused by the shut-down of coal-fired plants will further reduce the already low price for emissions certificates. If emitting carbon hardly costs anything, polluters have no incentives to save emissions or take even the most cost-effective mitigation measures. Climate policy will thus become more expensive, but not better.”

For further information please contact

Dr. Martin Achtnicht, Phone +49(0)621 1235-208, E-mail achtnicht@zew.de