Emissions error Death By 1,000 Cuts

Germany's attempts to set its own pollution reduction targets are naive. Only an effective European emissions trading system can cut CO2 levels, says a leading German energy economics expert.
Lower emissions in Germany don't mean lower emissions globally.

German energy policy, already a minefield of regulatory absurdities, is now being enriched by a further masterstroke.

To reach its self-imposed, totally arbitrary goal of reducing carbon dioxide emissions by 40 percent compared to 1990 levels by 2020, the government aims to force operators of coal-fired power plants to cut their emissions by 22 million tons a year.

It is still unclear how this plan will be harmonized with European law and the German constitution, but the intention has been made clear. Germany's neighbors, who will be affected by the decision, have not been consulted.

From the perspective of global climate protection, unilateral attempts at emissions reductions, such as those by Europe or Germany, are a double-edged sword. It has not been determined how reduction at one site affects emissions at another.

Markets for energy and goods are interconnected in many ways. Without a set of globally agreed regulations, a domestic reduction of demand for fossil fuels leads to worldwide compensatory effects whose extent cannot be reliably gauged.

Whether such a “pioneering role” makes it more likely that a global treaty will be enacted is open to debate.

Even if one believes that a national emissions-reduction target makes sense, the planned special reduction in the German electricity sector seems like a foolish act. The effect it will have on greenhouse-gas emissions is already clear — none.

Ever since 2005, the Germany electricity industry has been part of the European emissions-trading system, a platform that allows major polluters such as power companies to buy and sell certificates representing their E.U.-set emissions allowances. This also means that the country has been subject to a Europe-wide upper limit for emissions.

A measure enacted in Germany cannot reduce the overall emissions in Europe. Thus, there is no effect on climate policy.

A measure enacted in Germany cannot reduce the overall emissions in Europe.

Companies in sectors subject to emissions trading that want lower emissions than those recently decided upon by Europe's leaders therefore have only one choice — namely to purchase polluting rights and to permanently remove them from the market.

At a rough estimate, the German government wants to cut CO2 emissions by a further 300 million tons by 2030. At the current certificate price of €7 ($8.73) per ton of CO2, around €2 billion would have to be spent for this purpose.

The additional efforts at reducing emissions would, for the most part, not take place on German soil, but the German government could nonetheless enter this additional reduction on its climate balance sheet. This would be much like airplane passengers paying to make their flight “climate-neutral.”

Since the certificates are so cheap at the moment, the government could extend this purchase program to cover the entire gap that separates it from its 2020 goal. Its other measures, such as improving building insulation, are  probably much more expensive than purchasing certificates. So this would be the cheapest way to meet the goal.

These considerations are of course purely academic, with no relation to the political games in Berlin. But the very fact that they seem to have been conceived in an ivory tower shows one thing: those in power who are using the likely failure to meet the 40-percent goal as an excuse for further interventions in the energy markets are more concerned with policies involving distribution and structure than with reducing greenhouse gases.

An effective and efficient reduction of greenhouse-gas emissions in Europe requires a strengthening and deliberate use of the European system of emissions trading. In comparison, the current plans of the German government seem to be politics involving empty symbols.


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