“European emissions trading is a good thing”

Kassel. Joachim Weimann, Professor of Economic Policy at the University of Magdeburg, discusses political measures to protect the climate and the impact of Germany’s energy and climate policy in an interview.

Mr. Weimann, do we need political measures to protect the climate?

Yes, because we have a climate problem. But if want to implement successful countermeasures, we must have good, i.e. cost-effective, climate policies. The available resources for climate protection are limited, therefore CO2 reduction per euro spent has to be maximized. Or to put it the other way round: We have to minimize the costs of reducing CO2 emissions per ton.

How can that be achieved?

CO2 must be avoided where it’s cheapest to do so. In Portugal, for example, power can be generated at low costs and in an environmentally-friendly way using photovoltaic systems. And we have a tool in the shape of European emissions trading to create a balance between low-cost and expensive CO2 avoidance. Unfortunately, the German government’s climate policy ensures that the very opposite occurs.

In what respect?

Under the National Climate Protection Plan, Germany intends to achieve its target of a 40 percent reduction in CO2 ten years earlier than prescribed by the EU, namely by 2020. In addition, the German government aims to make the reductions domestically and has defined expansion of the use of renewable energies as the only way to do so. Yet that’s far more expensive than acquiring emission allowances and ensuring that CO2 is avoided where it can be at lower costs. Germany is thus squandering resources.

Has European emissions trading proven to be ineffective?

No, trading definitely works. It is a pure quantity-based tool to achieve the cap, i.e. the politically defined upper limit for emissions. Therefore, it’s also compatible with every climate target and contributes to reliably achieving objectives. The fact that CO2 avoidance is not cost-effective in practice is not the fault of emissions trading, but a consequence of countries pursuing their own strategies.

What impact does Germany’s energy and climate policy have on the rest of the EU?

If we make our climate targets more stringent as part of the energy transition, the other countries won’t be able to follow suit. On the contrary: If we shut down our coal-fired power plants, more CO2 can be emitted in the rest of Europe. The emission allowances freed up here may be transferred to Polish coal-fired power plants, for example. That’s also the reason why there’s so little criticism of Germany’s climate policy from its neighbors.

Germany has promoted expansion of renewable energies with its Renewable Energy Act for more than 15 years. How successful has that been?

The law does not result in emissions actually being reduced at the end of the day, for the reasons mentioned earlier. However: The Renewable Energy Act shifts CO2 avoidance to where it costs up to 50 times more than in the European emissions trading sector. The costs are borne by German citizens: Germany has the highest electricity prices in Europe after Denmark.

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