Germany feels good about itself again. After its decision on the future of coal, it sees itself as a pioneer in transforming its energy production. In reality it still doesn’t want to think seriously about the problem.
Heiner Flassbeck is an economist, as well as publisher and editor of “Makroskop” and “flassbeck economics international”
Originally posted in German at Makroskop
Translated and edited by BRAVE NEW EUROPE
On January 28th, when Germany’s Coal Commission’s proposal to phase out the nation´s coal-fired power generation by 2038 was celebrated as a radical step to protecting the environment, the German media reported that air traffic in Germany had increased by almost five percent in the past year. It is also easy to discover that, in the past five years, between 50,000 and 100,000 new lorries have been registered each year and that their number has risen continuously to over three million. In 2017 the average engine power of new cars in Germany was – believe it or not – 152 horsepower, exceeding the 150hp barrier for the first time. Ten years ago the average was around 130hp, 20 years ago around 100hp. Why doesn’t anyone call for an end to additional aircraft or trucks? Why not limit the engines of cars to 150hp (or even 100)?
You can see from these randomly selected examples how arbitrary and contradictory German climate change policy is. It has now conceded in a very small area (measured against total primary energy consumption) where the state has direct access and gives the impression that Germany has fulfilled its voluntary global commitment. Measured against the unresolved problem areas and the global dimension of the problem, the roar of the lion turns out to be the squeak of a mouse. Once again the German government is providing a symbolic solution to the problem that is considered to be the most major one confronting mankind.
At least some people seem to understand that – among them the young people who now follow their Swedish role-model Greta and take to the streets every Friday. But apart from the renunciation of meat and tropical fruits, we do not hear much from them about what is really needed to achieve a global change in the consumption of fossil fuels.
However, neither the young people nor the Green politicians – who are repeating these superficial tropes – have understood that only a truly universal revolution in policy at the global level can bring about this change, and that there is currently no sign, no incentive, and no political initiative for such a revolution. The only solution imaginable for Germany is thus the hope that one country could become a pioneer or role-model for others through its “exemplary” behaviour. Unfortunately, however, this hope is shattered by the simplest economic logic.
Inconsistent policy as a global programme
It is not only Germany’s fault that this has happened. The nations of the world, with their commitment to combating climate change and with the help of national pledges to limit CO2 emissions, have chosen the very path that is ultimately doomed to chaotic failure. They have refused to acknowledge that limiting emissions from the burning of fossil fuels is a decision for massive state intervention in the world’s largest and most important market. There is a simple and undeniable principle, and I am afraid I have to stress this again and again: anyone who wants to achieve volume targets in a market economy – and that is precisely what restricting the burning of fossil fuels is all about – must not be afraid to intervene in the pricing of the market. This also applies to the German energy revolution, which produced a large share of renewables only because the state intervened massively in price formation.
But if you are afraid of this – as the political class certainly is – you will produce such perverse consequences as I have described above: on the one hand, super-cheap fossil fuels are inexorably consumed, on the other hand, individual states go through enormous contortions in order to at least come close to keeping their promises regarding CO2 emissions. This is highly inefficient because it may reduce consumption in places where it is incredibly expensive to do so, while consumption goes on elsewhere just as before.
Even more important, however, is the fact that – seen globally – this kind of “problem-solving” is the ultimate in failed climate policy. The reduction of one group of consumers of fossil energy is – owing to the ensuing drop in price – an invitation to another group of consumers to utilise fossil energy (i.e. falling oil and coal prices) to consume more. The effect of the pioneer is not admirable but detrimental, because he is responsible for the fact that the others can continue to consume ever cheaper fossil fuels.
The market is not the solution, but the problem
The market always distributes exactly what is currently available in fossil resources from the earth, regardless of what the governments of this world have decided. Economists say this is the market clearing itself. If indeed many governments of statistically significant countries were to attempt to drive up the price of oil, coal and gas through expensive CO2 certificates or higher taxation, the market price in the rest of the world would fall and directly frustrate these efforts.
So anyone who believes – like Jochen Wermuth, the biggest green financier – that the markets will turn the climate around if a few states (he mentions only Germany) make CO2 certificates more expensive, is fundamentally wrong. The price of oil and coal would fall so far in response that the question would once again arise how far the international community would have to take countermeasures to prevent increased consumption.
Ultimately, a consistent global strategy to reduce the consumption of fossil fuels amounts to an open battle with the suppliers of these raw materials. In this battle, however, it is unclear who would win. The coalition of the willing would be threatened with disintegration at any time if the population in one or more countries were no longer persuaded to forego super-cheap fossil fuels. This however is an idle question, because obviously no nation in the world is prepared to go in this direction – yes, they are not even prepared to talk openly about it.
Even on a small scale, price control and thus behavioural changes are largely taboo. Although almost all political parties affirm that they want to prevent the plundering of the only earth available to us, they are not willing or able to push people to adapt. The phase-out of coal can be sold as a measure that does not hurt anyone, because until then there would be so much renewable energy capacity built up that nobody had to restrict their energy consumption. Whether or not this will really be the case is another question, but at any rate no one is getting restless at the moment because politicians are warning that their citizens will have to give up their accustomed way of life.
By far the greatest obstacle to consistent price control on a global scale, as we have repeatedly pointed out, is the inevitable distribution effect. Those who want to control structural change in a democracy in a system-compliant manner by raising prices in the direction of ecological prudence, cannot achieve this without massively relieving the burden on the lower incomes, because otherwise these groups – measured by their income – bear a far greater share of the total burden than the upper incomes.
The failure regarding this question has put the yellow vests on the streets in France, but the parties in Germany and elsewhere have not learned from it. Even the Greens are afraid to really address the two aspects that lie at the heart of the issue (price control and redistribution of wealth). How half-heartedly they still talk about it can be seen in the German newspapers. As long as this is an absolute taboo in most Western democracies in the times of neo-liberalism, one can make any number of Sunday speeches on the subject of ecological and climate protection: it has nothing to do with a serious contribution to solving the problem.
The Chinese dimension
After all, it would be high time, especially in Germany, to take a closer look at the dimension of the global target and the German contribution to it. Electricity generation in Germany, which is usually measured in TWh (terawatt hours), was around 600 TWh in 2018 according to the graph taken from the Fraunhofer Institute (to be found here). Of this, 325 TWh is accounted for by non-renewable sources including coal (lignite and hard coal together about 200 TWh).
As the left part of the graph shows, if the announced withdrawal from coal occurs in Germany, about 200 TWh will disappear by 2038 and will be replaced by other energy sources. What these will be is largely an open question, as no one can currently predict how many gas-fired power plants (and how much they will be used over the course of a year) and other reserve sources of energy will be needed to compensate for weather-related fluctuations in renewables output. In any case, the phasing out of coal means a saving of much less than the 200 TWh that is now on the books.
In China, which many consider to be a model for switching to renewables, the annual output of electricity generation, as the pie chart below shows, is around 7000 TWh, more than ten times as much as in Germany. According to Chinese figures (to be found here), the mix is such that almost 5000 TWh comes from the combustion of fossil fuels (called thermal, which includes coal, oil and gas).
It becomes dramatic when you look at the changes in this high level of fossil-based electricity, which are of course marked by China’s high GDP growth figures. In 2018 (as shown in Figure 3), the increase in production from fossil fuels of 324 TWh was significantly higher than the total German production from lignite and hard coal combined. This is not an isolated case: growth in 2017 was 220 TWH and in 2016 around 100 TWH. Only from 2014 to 2015 was there a small slump, according to these figures. By contrast, the growth rates for renewables are very high, but measured against the total output at hand, their absolute contribution is still very limited.
The Chinese dimension of the issue shows that even the most powerful measure to be adopted in Germany, the exit from coal, is a global action of dwarf proportions. Surprisingly, even the experts who are well aware of this do not like to talk about it. If you want to hold on by force to the idea that one must be a pioneer and a role model, then the other countries would follow suit. China even seemed to be a state that followed the German example. But on closer inspection there is not much left of it. Why should the world’s largest economic power follow a small Central European country in a few years’ time? The USA, currently the largest economic power, has already bid farewell to the global mini-consensus in Paris.
Children in command?
In these days the song of Herbert Grönemeyer comes to my mind again and again: he wanted to give the children power and command. But I’ve always been astonished about this song: what’s good about putting the world in the hands of people who cannot calculate what they are doing?
These days, young people repeatedly have microphones shoved in front of their faces, so that they can say that their elders should finally stop doing arithmetic. Coal-fired power stations should simply be switched off immediately without calculating what will happen. That sounds good and the symbolic figure, the Swedish Greta, is such a nice girl that many immediately stop thinking and prefer to join this moral imperative. Instead of advocating a real global change and explaining to people what this means, one or the other policy is judged to be harmful to the climate in a completely arbitrary way.
But this is dangerous, because the moral approach wears off very quickly. If everything is viewed through the lens of climate change, frustration quickly sets in if there are no real global successes to report. It is good for young people to get involved, but there is no point if adults are unwilling or unable to explain the connections that need to be understood in order to form a well-founded policy.
The decisive connection also exposes the moral approach as a completely nonsensical tool: if the market clearance for fossil energy is not prevented by a global political action, any well-intentioned saving of fossil fuels is pointless for us, because it calls on others on this planet to consume more than before via the market.