On the failed energy and climate policy in Germany

_ Dr. Rupert Pritzl, Bavarian Ministry of Economic Affairs, lecturer, FOM Hochschule Munich. August 16, 2022.*

The Ukraine war reveals the serious misconduct in energy and climate policy in Germany. The reason for this is the enormous discrepancy between the ideological and moral ideals and the reality of the energy industry. Reasonable climate policy must meet the criteria of efficiency and effectiveness and be fundamentally based on research and innovation.

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Every day we hear in the speeches of politicians and in the comments of the journalists about “a turning point” and “upheaval” and about the fact that the really urgent problems should now be tackled pragmatically and decisively. Just recently, the philosopher Peter Sloterdijk asked “Are we living in a time of wishful thinking?”. [12] And Federal Foreign Minister Annalena Baerbock said on 24 February 2022, on the day of the Russian attack on Ukraine, that “we woke up in a different world today.” But is it really a different world? Or did we not wake up drowsy from years of daydreams, ideologically nurtured and morally upheld wishful thinking and the consistent denial of reality (“illusion of reality”) and have found ourselves in an energy-economic reality with a fatal energy dependency on a warlike autocrat in the Kremlin? [8] It is high time that we got honest and reasonable in German climate and energy policies.

Desire and reality in German energy and climate policy

The background is the considerable discrepancy between the perceived truth and the actual truth in German energy and climate policy, which is becoming more and more virulent and urgent. The felt truth consists of plausible and pleasant-sounding wishful thinking and euphemistic paraphrases, which, however, do not fit together at all with scientific laws and the real factual context, i.e., the actual truth. Statements in the coalition agreement of the traffic light government: “Renewable energies serve to ensure security of supply” reflect pure wishful thinking and simply testify to a misjudgement of the reality of the energy industry, as long as the central question of energy storage is still as far away as maybe one manned mission to Mars. [13]

We know from psychology that wishful thinking is influenced by individual concern and by personal benefit considerations as well as social recognition within one’s own group or society. It is therefore only understandable that the beneficiaries of the generous e-mobile funding, the homeowners with photovoltaic systems on the house roof and the comrades of citizens’ energy systems like to believe in their felt climate policy wishful thinking (would like to). And the more and the more widely the state distributes subsidies motivated by climate policy, the more people consider the state climate policy to be true and correct. Shareholders and beneficiaries are therefore unlikely to object or criticize.

Oath of disclosure of German climate policy

Unfortunately, however, the actual truth and thus reality are quite different. The “opening balance sheet on climate protection” presented by Federal Minister of Economics Robert Habeck on 11 January 2022 was an oath of disclosure of the failed German climate policy. The euphemistic wording in it is: “The initial situation could hardly be more challenging”. [2] Conversely, doesn’t that mean a complete failure of the climate policy in Germany, which has been financed with hundreds of billions of euros up to now? Didn’t the German Council of Experts describe German energy and climate policy as “inefficient, fragmented, expensive and (largely) ineffective” as early as 2019? [10] And don’t we in Germany suffer from the highest electricity prices in Europe and still fail to meet the emission reduction targets we have set ourselves every year? And don’t we see extensive de-industrialization processes of around 25 to 45 percent in metal production, paper industry and building materials industry in Germany over the past 25 years? [6] With regard to the “Opening balance sheet on climate protection” one should consider that during her term in office Chancellor Angela Merkel had largely implemented the energy and climate policy demands of the Greens, which Robert Habeck freely admits, not without self-affirmation. [4] With the “Opening balance sheet on climate protection”, the traffic light government is therefore continuing the previous energy and climate policy even more ambitiously and forcefully and is aiming for a doubling and tripling of the expansion rate for renewable energies by 2030. It is astonishing how far apart perceived truth and actual truth in climate policy are and how the former was still the guiding principle for politics!

Plight of German energy and climate policy

The background to the misery is as follows: in 2011, with its unilateral effort in energy policy (nuclear energy phase-out by 2022), Germany had put itself on the sidelines in energy policy and gambled away trust capital internationally. With the decision in 2019 to phase out coal, Germany continued its dirigiste energy and climate policy and put everything on the last remaining card, namely massive gas imports (from Russia). In the coalition agreement of November 24, 2021, gas was even politically ennobled as a so-called “bridging technology” and, at the instigation of Germany, was implemented in the EU taxonomy on 1 January 2022 as “climate-neutral energy” – against the resistance of most other European countries. The horror on 24 February 2022 was great when it suddenly became apparent that Germany had not undertaken sufficient diversification in the supply of energy, especially gas, and had completely underestimated the supply risks for a long time. [1] It seems as if Germany’s energy policy, narrowed by blinders, has ignored the basic rule of diversification and avoidance of cluster risks, for which a bank board member would certainly have been immediately removed from his post for incompetence. The energy policy target triangle of security of supply, affordability and environmental friendliness, which has always been proclaimed like a mantra, has completely collapsed.

“The illusions of the energy transition are currently bursting like balloons” – Eisenkopf A. (2022). [5] It is to “square the circle” to achieve a sufficiently available, affordable and climate-friendly energy supply and at the same time to want to do without energy imports from Russia as well as coal and nuclear energy. Does this look like our desired “national energy sovereignty” for Germany as an industrial location with a well-meaning expansion of wind and photovoltaic systems in a spirit of ethics? With a high proportion of volatile energies, how is the security of supply guaranteed in Germany as an industrial location, and what about the obstacles of a shortage of skilled workers, competition for land use and social acceptance with a widespread NIMBY attitude (“Not in my backyard”) in the population? Wish and reality are miles apart. This is where the image of Robert Habeck comes to mind as the knight “Don Quijote” of the sad figure who – in complete misjudgement of reality – is campaigning not against windmills, but for more wind turbines!

Wake-up call from energy policy daydreams

The Ukraine war is proving to be an unmistakable wake-up call from Germany’s daydreams about energy policy. Or isn’t it a joke in the history of energy policy that since 24 February 2022 we have been increasingly turning to climate-damaging lignite and hard coal and to the exploration of domestic fossil energy sources (gas in the North Sea and perhaps also fracking for shale gas in northern Germany) and with consistent party-ideological narrowing or refusal to prevent a pragmatic continuation of the nuclear power plants? But: Aren’t these exactly the energy sources that we have been trying to get out of since 2010 with our morally exemplary “energy transition”? Isn’t that a complete roll backwards in the entire energy transition to the time before 2010?

However, word does not seem to have gotten out everywhere that climate policy is a “global, non-excludable common good”. This means that although all countries worldwide benefit from the reduction of greenhouse gas emissions, no country wants to contribute to climate protection through national measures. The global nature of the problem and national problem-solving competence diverge, so that international cooperation between sovereign states is essential for effective climate protection. [9] We know from behavioural economics that, despite intrinsic and emotional motivation, in the long term and after learning effects, rational, self-interested behaviour will prevail in view of the global problem nature of “climate policy”. The aim must therefore be to use international cooperation to introduce uniform CO2 pricing as the central steering instrument of climate policy. However, the fact that the individual countries naturally have different interests makes this international cooperation more difficult, which was made clear by Federal Foreign Minister Annalena Baerbock’s inaugural visits to Poland and France.

Demand for efficiency in climate policy

In its most recent report dated 24 March 2022, the Federal Court of Auditors warns: “All climate protection measures must be put to the test: their focus must be on effective and economical greenhouse gas reduction.” In fact, the financing of the climate policy funding programs (so far) has hardly played a role. And with CO2 avoidance costs of up to 2,400 euros/t for state subsidies for e-mobility, we are 30 times higher than with EU emissions trading, which is currently around 80 euros/t. [14] We therefore urgently need a reorientation of climate policy towards cost efficiency, which simply means maximum CO2 savings per euro spent. The size of the climate policy challenge and the considerable anti-social distributional effects of the subsidies and, last but not least, the feared considerable restrictions on social freedom make this absolutely necessary.

The Corona recession is teaching us that we don’t need a culture of sacrifice or concepts of sufficiency, but rather massive investments in CO2-neutral technologies. We must develop new climate-friendly production and energy generation technologies and make them marketable on the world market. Here, Germany should present itself as the technology world champion and not ostentatiously present itself as the “moral world champion”. After all, Germany’s share of the global market for environmental and efficiency technology is 14 percent, while Germany’s share of global greenhouse gas emissions is 1.6 percent. This gives us a much larger lever to contribute to climate protection with climate-friendly technology “Made in Germany”. And at the same time, we create added value, prosperity and jobs in our country. Economist Hans-Werner Sinn put it aptly: “Climate-political self-torture is of no use to us” (2020). [11]

Climate protection through research and innovation

We also need more research and innovations because, despite the massive need for investment, the energy transition is not a growth story in the foreseeable future. [7] The well-sounding notion that “more investment = more growth” is an illusion. Because we make a functioning technology obsolete and have to develop new technologies for it in order to ultimately produce the same products. An economic rate of return may come from this over the long term, provided the rest of the world cooperates. Because if there were a growth dividend to be earned with the energy transition, we would not have a global coordination problem in climate policy. – Unfortunately, felt truth and actual truth do not go together.

It is finally time for us to conduct the climate debate in Germany honestly, to say goodbye to cherished wishful thinking and to select efficient and effective instruments. There must be no more bans on thinking!

Notes

  1. AGEB (2022). Energieverbrauch in Deutschland im Jahr 2021. Berlin. URL: ag-energiebilanzen.de/AGEB_Jahresbericht2021_20220425_dt.pdf
  2. BMWK (2022). Eröffnungsbilanz Klimaschutz, Berlin, online abgerufen am 25.1.2022 unter: Eröffnungsbilanz Klimaschutz. URL: bmwi.de
  3. Bundesrechnungshof (2022). Bericht nach §99 BHO zur Steuerung des Klimaschutzes in Deutschland. Bonn.
  4. Habeck R. (2018). Wer wir sein könnten. Warum unsere Demokratie eine offene und vielfältige Sprache braucht. Köln.
  5. Eisenkopf A. (2022). Das Energie-Entlastungspaket. Ein Menetekel aktionistischer Wirtschaftspolitik. Wirtschaftliche Freiheit.
  6. Heymann E. (2022). Deutsche Energieversorgung an einem historischen Wendepunkt. Deutsche Bank Research. Deutschland-Monitor.
  7. Kooths S. (2022). Klimapolitik: Kein Wachstumsmotor für die 2020er Jahre. Austrian Institute. URL: austrian-institute.org
  8. Pritzl R. (2020). Realitätsillusion der deutschen Klimapolitik. Wirtschaftsdienst. Nr. 9.
  9. Pritzl R., Söllner F. (2021). Rationale Klimapolitik – ökonomische Anforderungen und politische Hemmnisse. List-Forum für Wirtschafts- und Finanzpolitik. Nr. 46.
  10. Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung (SVR) (2019). Aufbruch zu einer neuen Klimapolitik:.Sondergutachten. Berlin.
  11. Sinn H.W. (2020). Das grüne Gewitter in der Klimapolitik. FAZ.
  12. Sloterdijk P. (2022). Wir sind in einer Ära der zweiten Zensur. Welt am Sonntag.
  13. SPD, Bündnis90/Die Grünen, FDP (2021). Mehr Fortschritt wagen. Bündnis für Freiheit, Gerechtigkeit und Nachhaltigkeit. Koalitionsvertrag 2021–2025. URL: https://www.spd.de/fileadmin/Dokumente/Koalitionsvertrag/Koalitionsvertrag_2021-2025.pdf.
  14. Weimann J. (2021). CO2-Preise und Kosten der CO2-Vermeidung bei Anwendung ordnungsrechtlicher Maßnahmen im Vergleich zur Erweiterung des EU-ETS. Kurzgutachten im Auftrag der FDP. August 2021. URL: https://www.fdp.de/sites/default/files/2021-09/Kurzgutachten_CO2_Weimann.pdf

The author expresses his personal opinion.

* Published with kind permission of the author from the original publication on Oekonommenstimme.

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