ZEW Hosts Parliamentary Evening of the Rhine-Neckar Metropolitan Region - Europe Is Facing Major Challenges in Energy and Climate Policy

The effort of the federal government to transform the German energy system, the energy transition ("Energiewende"), is an ambitious, large-scale environmental policy project that fundamentally changes Germany's energy supply framework. At the same time, Europe has committed itself to meet climate targets referred to as "the most ambitious climate project in the world" by the European policy-makers. All that has visible effects on the German economy. What are the consequences for companies and the key energy policy challenges? These questions were addressed at the third Parliamentary Evening of the Rhine-Neckar Metropolitan Region (MRN) titled "Deutsche Energiewende und Europäische Klimapolitik. Was bedeutet dies für die Wirtschaft?" (The German Energy Transition and European Climate Policy - Economic Implications). The event was hosted by ZEW in Mannheim on February 2, 2015.

"Germany is lagging behind in several areas connected to the energy transition," said Andreas Löschel, professor for economics at the University of Münster and ZEW research associate, in his opening lecture. He explained in front of some 180 guests that Germany, a leader in the expansion of renewable energies, is clearly failing to achieve its targets in reducing carbon emissions and improving energy efficiency. Löschel also pointed to the fact that the power grid has been expanded at a much slower pace than expected. The costs of current policies, he added, are already heavily impacting electricity prices. "But the German industry is still able to carry that burden," said environmental economist Löschel. All in all, Löschel painted a mixed picture of the progress of the German energy transition. He also criticised the international community's failure to achieve an agreement on binding climate targets.

The opening speech was followed by a panel discussion chaired by Gerhard Augstein, editor of SWR television. On the panel sat Reinhard Bütikofer and Daniel Caspary, two Members of the European Parliament, Dr. Markus Binder, Commercial Director at Grosskraftwerk Mannheim AG, Johannes Heger, Chief Executive Officer at HegerGuss, and Dr. Peter Vest, Chief Executive Officer at Wircon GmbH.

All panellists agreed that a successful climate and energy policy requires international cooperation, and that Europe still has a long way to go. But when it came to the design of a support scheme for renewables, such as the Renewable Energies Act levy (EEG-Umlage), the MEPs had different opinions. Christian Democrats member Caspary referred to the German support scheme as obsolete and is worried it may create false incentives for companies. Reinhard Bütikofer, Co-Chair of the European Green Party (EGP), defended the EEG levy as a "viable support scheme". According to Bütikofer, we should take a closer look at the European level when discussing incentive problems. The European countries, he said, are not willing to compromise and are thus unable to set ambitious climate targets. "Right now, the US is contributing more to international climate policy than Europe, because the Americans are increasing their level of ambition while the Europeans are cutting back their efforts," explains Bütikofer.

Wircon CEO Vest called for a better investor protection in Europe. Many useful investments in the energy sector, Vest said, are simply not made because the European countries are apparently unable to agree on common targets, let alone set up legally binding regulations. Johannes Heger from HegerGuss, a voice of the energy-intensive manufacturing industry, emphasised the importance of energy costs as a key factor in the choice of location. "We need to make use of every relief in electricity prices we can in order to protect our competitiveness." Still, he said, companies need to be open to new concepts. As an example he mentioned energy-intensive production processes that could also be powered using green energy generated on-site.

Dr. Markus Binder pointed out that conventional fossil fuel generation continues to be important. "A coal-fired power plant is like an indispensable substitute player who enters the pitch whenever there is not enough wind or sun," said Binder, commercial director at Grosskraftwerk Mannheim. The government is facing the challenge of finding regulations that offer substitute players an adequate compensation and to make sure that they can operate in a profitable way. This is, Binder said, the only way to ensure supply security, an indispensable requirement in industrialised countries like Germany.

The audience had the opportunity to ask questions, which led to a lively discussion. ZEW's Director of Business and Administration, Thomas Kohl, commented: "Promoting dialogue between the spheres of academia, business and politics is a major goal of this event. ZEW conducts excellent research and provides science-based economic policy advice, but we are also interested in entering into dialogue with the wider public. The Parliamentary Evening is a great opportunity to do so."