Energy Transition E.ON chief scolds industry, government on emissions

Utility executive calls for carbon price floor and criticizes Berlin climate policy as weak and unfocused.
Listen up - we're not doing enough.

E.ON CEO Johannes Teyssen was in a pugnacious mood on Tuesday as he criticized the Berlin government and his own industry for doing too little to reduce carbon emissions.

Speaking at a Berlin energy conference organized by Handelsblatt, the utility executive urged adoption of a carbon floor price to incentivize everyone from utilities to carmakers to do more to reduce emissions. He said the carbon trading scheme in Europe had been a failure because the price for carbon credits has collapsed and no longer encourages investment to reduce emissions.

The price for a ton of emissions has fallen to just €7 ($8.60) to €8. “At such prices, no one will invest in climate change,” Mr. Teyssen declared. The price needs to be €25 to €30 to be effective, he suggested. “Emissions trading needs a carbon dioxide floor price,” he said.

His remarks came just a week after E.ON cut its last ties to fossil fuel power generation by selling off its 47-percent share in Uniper, the unit it spun off in 2016 to focus exclusively on renewable energy. They were a slap in the face to RWE, Germany’s largest utility, which pursued the opposite strategy – keeping the legacy power generation and spinning off renewables into Innogy.

A discussion of national carbon dioxide targets is absolute nonsense. Rolf Martin Schmitz, CEO, RWE

And RWE’s chief executive, Rolf Martin Schmitz, was quick to respond. “I would like to say very clearly – a discussion of national carbon dioxide targets is absolute nonsense,” he said at the conference.

The faceoff between the two German executives comes as French President Emmanuel Macron has called for a Europe-wide minimum price for emissions, urging the same level as that suggested by Mr. Teyssen. France abandoned its plan in 2016 to set a floor price, ironically, after E.ON’s Uniper threatened to close the two coal-fired plants it operates in France if it followed through.

In a separate interview, Mr. Teyssen said he thought the carbon floor price would eventually be adopted if utilities pushed for it. He noted that other European countries, notably France, we’re also seeking a minimum price. “Do we really want to leave Mr. Macron hanging?” he asked.

The battle over the pace of emissions reduction and the government’s role in it continues as the political parties attempting to form a new coalition have quietly abandoned Germany’s target of reducing emissions by 40 percent from 1990 levels by 2020. The country has been lagging in its goal since it decided to shut down all nuclear power generation, increasing its reliance on coal, and it is now virtually unattainable.

Mr. Teyssen had sharp criticism for the energy policy outlined in the blueprint for coalition talks between Chancellor Angela Merkel’s Christian Democrats and the Social Democrats. The plan demonstrates “an energy and climate policy that I consider not sufficiently solid,” he said Tuesday. There are too many things that are “still unclear,” he said. In general, the energy executive lambasted his countrymen for “skepticism and despondency” in their discussion of climate goals.

For RWE’s Mr. Schmitz, however, the current policy is just about right. The proof, he said, is in a report showing that the European Trading Scheme resulted in a 3-percent reduction in emissions in 2016 across the continent. “It doesn’t make any sense to undermine this effective European instrument with an additional national regulation – that won’t even help the climate,” the RWE chief said.

Mr. Teyssen acknowledged that competitive issues raised in a unilateral national policy, both for industry and consumers, but recommended government action to offset those drawbacks. A carbon tax to support a floor price would bring in funds to finance such offsets.

Nonetheless, Mr. Teyssen was brimming with optimism for the future of the industry. Intensive investments have brought down prices on alternative energies, and utilities are adapting to the shift to a much more customer-focused service industry. “The concept of an energy company has to be rethought in every aspect regarding customers,” he said. “Just selling as much energy as possible is no longer a sustainable business model.”

Jürgen Flauger and Franz Hubik are energy reporters for Handelsblatt. Darrell Delamaide is a writer and editor for Handelsblatt Global in Washington, DC. To contact the authors: [email protected], [email protected], and [email protected].