Rhein on Energy and Climate

At their last preparatory meeting for the Copenhagen Climate Conference the EU environment ministers, October 20-21, have agreed to offer a 95 percent reduction of their green house gas emissions until 2050. This is praiseworthy; but it remains void of meaning unless the EU comes up with answers on three critical questions:

What concrete steps ought to be taken, and in what time frame, for attaining the goal of a largely emission-free economy by the middle of the century?

Is it possible to reconcile an emission-free economy with a high level of prosperity?

How should the necessary transformation of the energy system be financed?

Read also: Climate Change Lecture Series: Setting The Right Economic Incentives

A group of researchers of the Prognos-Institute in Basle and the Oeko-Institute in Freiburg have tried to answer these questions for Germany.

According to them, Germany is able to reduce its emissions to close to zero by 2050 without impairing its status as a high prosperity country and encountering insurmountable problems of financing.

It will, however, only succeed if government takes revolutionary steps in three key areas:

  1. No new fossil power plants should be commissioned unless they are equipped with carbon capture and storage devices. This is the only way to make sure that all electricity will be generated from renewable sources by 2050 latest.
  2. The energy input for heating/cooling of buildings, which accounts for some 40 percent of emissions, must be reduced to almost zero.
  3. New buildings – with a life expectancy of 100 years- should only be authorised, if equipped with super-insulation combined with PV panels and solar or biomass heating, so that they will become almost self-sufficient with energy. This requires a radical and rapid tightening of existing standards, from which Germany is still far away. The extra cost will be minimal compared to the energy saving.

It will also require a complete energetic overhaul of the existing stock of buildings. This is a more sensitive issue. But the government will have little choice but to give real estate owners a delay of, say 20 years to adapt existing buildings to the tough new standards or to replace them. The transformation should start with private and public office buildings very rapidly.

The stock of automobiles and trucks must be converted to electric traction latest by 2050. Much more traffic will also need to be transferred to rail and urban mass transit systems.

Read also: What Future for the Automobile Industry?

This process has started across the EU thanks to the regulatory framework adopted in December 2008 imposing C02 emission limits of 130g/km.

Germany as the major manufacturer of automobiles in the EU bears a great responsibility for advancing the electrification of motor vehicles.

The financing of such a comprehensive 40 year programme will not pose major problems. Annual investments are expected to peak around 2030 at a level of no more than € 30 billion, the equivalent of the present German defence budget. The bulk of investments will have to be financed by business and households. There is no way of escaping this reality.

The government’s role is to provide the necessary regulatory framework of standards, taxes and subsidies, which should induce business and ordinary citizens to transform their consumption habits and undertake the appropriate investments.

In view of giving the right incentives government will have to consider a profound reform its tax system, raising C02 taxes while lowering income taxes.

This framework needs to be integral part of a 40 year roadmap defining the main measures to be taken. Without such a roadmap the risk of deferring necessary action will be unacceptably high.

The government will need to undertake a huge effort of information and persuasion; it has largely failed on that account in the past 10 years. Citizens must understand that higher fossil energy prices are inevitable and that energy saving is the best way to neutralise the expected price rise.

Without the active contribution from citizens the necessary energy revolution will not happen.

Before 2012, the EU Commission should prepare an EU-wide road map defining the stages for an emission-free economy. This should be the principal assignment for the incoming environment commissioner. To that end, the Commission should call upon the huge amount of expertise that has been accumulated in the last 20 years and engage EU citizens in a wide-ranging debate.

Indeed, whatever the outcome of the Copenhagen Climate Conference, the EU must press ahead with an ambitious climate strategy for the coming 40 years:

This is in its economic interest. New energy technologies will create the jobs in the coming 50 years.

It is the only way to ensure Europe’s long-term energy security.

It is the best contribution to the preservation of the climate, as the rest of the world will have little choice but to follow suit.

Brussels 22.10.09 Eberhard Rhein

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