Germany’s Ineffective Green Unilateralism

Hans-Werner Sinn

Project Syndicate, May 20th, 2021.

Climate change is a serious problem for humanity, but ambitious unilateral action by governments is self-defeating and will achieve little. Without binding international agreements, Germany and the European Union risk becoming global guinea pigs whose fate will deter others from emulating them.

Germany already has one of the world’s most ambitious climate programs. Now the country wants to become the global leader in terms of climate goals. But this strategy will not be able to slow down climate change.

Chancellor Angela Merkel’s government recently signaled its intent by presenting a draft law to reduce carbon dioxide emissions by 65% by 2030 and by 88% by 2040, relative to their level in 1990 – the reference year of the Paris climate agreement. Under the proposed legislation, Germany plans to become entirely climate-neutral by 2045, five years earlier than previously planned.

The plan is embedded in the European Union’s European Green Deal, which targets a 55% reduction in CO2 emissions by 2030 and climate neutrality by 2050, because Germany had always agreed to bear a disproportionate share of Europe’s climate-mitigation efforts in recent years. The government’s decision to enhance its climate targets reflects a sense of responsibility for global environmental stability. This is a sentiment born of the green movement, which originated in Germany almost a half-century ago and is stronger than ever.

The immediate trigger for Merkel’s new targets was an April ruling by Germany’s Federal Constitutional Court in a case won by environmental activists. The court recognized the concept of a strict carbon budget and the target of limiting global warming to 1.5 degrees Celsius relative to pre-industrial levels in order to prevent major climate damage. It argued that the remaining carbon budget for future generations would be too small if Germany consumed as much as previously planned in the years leading up to 2030.

Moreover, some opinion polls are now suggesting that the Greens could be the largest party in the German Bundestag after this September’s general election. Merkel’s government thus appears to have adopted a strategy of “asymmetric demobilization,” with the chancellor seeking to coopt core Green policies, in order to keep the Greens down.

Merkel did much the same to the Social Democratic Party early in her chancellorship, and succeeded in attracting their voters, pushing the SPD to the left and reducing its popularity. But her strategy of trying to keep the Greens at bay has been failing since 2011. Back then, within days of the Fukushima nuclear disaster in Japan, Merkel, seeking to boost her Christian Democratic Union’s electoral prospects in Baden-Württemberg, pushed through plans to phase out Germany’s nuclear power plants until 2022. Instead, that election led to the installation of the first-ever Green president of a German state, seemingly because voters preferred the original to a copy. Something similar could happen in September.

The problem with such hasty strategic choices based on the current zeitgeist is that the government had no time to carefully consider their likely effectiveness and cost. It relied on climate models in which economic considerations regarding industrial competitiveness and the reaction of global fuel markets do not figure at all.

Germany is planning to base its power supply primarily on electricity generated from wind and solar energy to be consumed directly or indirectly via hydrogen production. However, as of today, the share of wind and solar power in total final energy consumption, including traffic, heating, industrial processing, and the like, is less than 7%, even though the entire country is sprinkled with wind turbines and solar roofs. It is true that the share in electricity production already is a third, but the electricity itself is only one-fifth of the total.

Today, Germany has the Western world’s highest electricity prices, because “green” electricity from wind and solar power is very volatile and needs the entire conventional generating network, though possibly one converted to natural gas, to compensate for the fluctuations, in particular for the frequent dark dulls. This doubling of fixed costs explains the high electricity price. In addition, a rising market share for wind and solar power will imply excess power spikes that would need intermediate storage devices if they are to be used. That means three times the fixed costs.

With its strategy of relying almost entirely on fluctuating green energy while shutting down nuclear power stations, Germany is in danger of ruining its industry. The chemical sector alone would consume as much electricity as Germany currently produces if it were to rely on electricity instead of fossil fuel. And automotive traffic – which is to become completely electric, directly or indirectly via hydrogen – also would require as much or even more.

German and European efforts will hardly be able to slow down climate change, because they are based on a semantic definition of climate neutrality. In fact, only the CO2 emissions from EU territories, and not the emissions caused by the EU’s actions, are taken into account.

If the EU is to realize its climate ambitions, it must phase out not only coal, whose stocks it can control, but also oil and gas, which are internationally tradable. Abandoning oil and gas means subsidizing their consumption in other parts of the world, because it will directly and inevitably cause a reduction in global prices, unless the EU stores the unused quantities. If not, the CO2 that Europe saves on imported fuels will be emitted elsewhere. Even customs duties on the import of CO2-intensive goods would not prevent this as other countries could use the fuels set free by the EU for non-exported goods.

Nearly 200 governments signed the Paris agreement, but only 30 of them have accepted binding limits on CO2 emissions. The overwhelming majority that have not will be even less inclined to shoulder harsh restrictions, which would force them to block their citizens’ additional fossil-fuel demand induced by the fall in prices.

Climate change is a serious problem for humanity, but ambitious unilateral action by governments is self-defeating and will achieve little. Without binding international agreements, Germany and the EU risk becoming global guinea pigs whose fate will deter others from emulating them.

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