It's widely accepted that many problems can be solved with money. Apparently, this insight guided leaders of the German coalition in reaching their decisions on Wednesday evening. Their plan is a benchmark paper that will cost billions. Whether the money is well spent is more than questionable, making the end result of the summit meeting more than modest.
Bavaria’s minister-president, Horst Seehofer, played a very significant role. For months, he has been turning himself into the Alexis Tsipras of energy policy. His irrational policy of obstructionism threatened the complete reformation of the energy supply system. Now, he has softened his tone and given in, but the resulting costs are incalculable.
At least there was agreement that two electricity highways planned to run from North and Northeast of Germany to Bavaria can proceed. Chancellor Angela Merkel, vice chancellor and federal minister of economic affairs and energy Sigmar Gabriel and Mr. Seehofer agree both power lines are equally needed. Just a few days ago, Mr. Seehofer had declared that at least one of the lines was expendable.
Financing Germany's energy transition with tax money is not wrong
His change-of-mind, however, will cost a bundle.
Mr. Seehofer demanded underground power lines become the standard rather than the exception. Many engineers shake their heads in disbelief when they hear the government’s plans. Some of the alternatives proposed by coalition leaders haven’t yet been perfected, making an exact calculation of the costs impossible. But there’s no question laying power lines underground will greatly multiply the costs, but by how much remains unclear.
Mr. Gabriel can rejoice in Thursday’s resolutions and proclaim he is right on schedule in implementing the energy transition. No one can contradict him. But he paid a hefty price that will be passed on to electricity consumers. He and Rainer Baake, the state secretary at the federal ministry for economic affairs and energy, likely are peeved that their proposal of a climate tax on coal-fired power plants didn’t succeed. It certainly would have been a far cheaper solution.
Now, the economic minister’s declaration there would be no welfare assistance for old power plants has been completely reversed. It’s a bitter setback for Mr. Gabriel and Mr. Baake, who now must admit what they sought in a climate policy isn’t achievable politically.
Even worse for Mr. Gabriel and Mr. Baake is that over the course of the lengthy proceedings an alliance was formed including IG BCE trade unions to the BDI, the Federation of German Industries and the states of North Rhine-Westphalia and Brandenburg. This group will make its views forcefully known in future climate policy initiatives.
The trio in charge –Ms. Merkel, Mr. Gabriel and Mr. Seehofer—have largely decided on especially elegant financing for their elaborate and expensive plans and won’t need to further justify the resulting costs. The money will come from the pockets of customers via their monthly electricity bill. The government is spared the bothersome debate over tax increases or additional burdens for the federal budget. Real parliamentary control won’t take place.
This financing variant is especially practical and will be used frequently. The resolution reached by the coalition leaders makes that abundantly clear in three areas: The levy to support cogeneration will increase, the tax financing the electricity grid will rise and the solution to old brown coal-fired power plants will be financed by a completely new levy.
Energy transition in Germany should be a task for the whole of society. Financing it with tax money isn’t wrong. A move in this direction would bring more honesty to the debate and halt the all too carefree handling of consumer money displayed yet again by Ms. Merkel, Mr. Gabriel and Mr. Seehofer.