Climate protection at any cost makes no sense

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV Media network.

The chances of concluding a broad-based agreement at the UN climate talks in Cancún are slim as a result of divergent economic interests, write Graham Weale and Alexander Nolden from German energy utility RWE AG. Subsidised jobs in the renewable energy sector are already costing jobs elsewhere, they warn.

Graham Weale is chief economist at RWE AG. Alexander Nolden is Vice Director Public Affairs/Energy Policy at RWE AG. They contributed this commentary in exclusivity for euractiv.com.

"The former German president, Richard von Weizsäcker, once said: 'I always preferred building bridges to digging trenches.'

Building a bridge is also the objective in Cancún, where the international community is meeting for the World Climate Change Conference. But the prospects for achieving a global agreement are slim – until now there have been more trenches than bridges. Given the present state of play it will be counted a success if the international community achieves at least some modest agreements such as were made at Copenhagen.

All international environmental and trade agreements to date have been difficult and time-consuming. The challenges facing the World Climate Change Conference are even greater due to the number of countries involved, the divergent interests, the complexity of the subject matter and the question as to how to penalise treaty violations. In many countries, climate protection ranks far below economic growth and securing energy supplies. So the outlook for concluding a broad-based climate agreement is bleak.

At least one major objective was agreed at Copenhagen: limiting a temperature increase to two degrees. The current view is that this requires a halving of the global CO2 output by 2050. Yet how can we achieve this? Do mega-conferences really get results? Or do we need an alternative approach?

Sobering facts

The facts are sobering. The global population will increase dramatically by 2050. By then, nine to ten billion people will be living on planet Earth – 50% more than today. 1.5 billion people are still without electricity. They will be demanding secure energy. The IEA [International Energy Agency] is expecting that the world will be using nearly 40% more energy in 2035 than today. This already assumes that countries will fulfil their existing climate protection commitments.

Global CO2 emissions in 2009 reached 31 billion tonnes. At 7.1 billion tonnes, China, the largest emitter, has a clear lead over the USA (5.5 billion tonnes). These are followed by Russia, India and Japan. But it is Germany that is setting the pace for climate protection. We pay out a lot for our effort but this so far makes little impact on the global climate.

Of course it is a success that CO2 emissions have fallen in Germany and that state-directed climate protection has resulted in a hundred thousand "green jobs". But even this coin has two sides. The risk that Germany is taking upon itself as the climate protection trailblazer is high. The bedrock of energy-intensive industry continues to decline. Yet over five million jobs are still dependent upon industry – many more than have been created or are expected to be created in future through green technologies.

For years, economists have been warning that subsidised jobs in the renewable energy sector are already costing jobs elsewhere, where there are no subsidies. Unfortunately their cry has fallen on deaf ears.

Danger of over-taxation

The danger of over-taxation is great. For example, consider the Renewable Energy Sources Act (EEG). The additional contribution payable by consumers for the EEG are already standing at €8 billion this year and are likely to reach €13 billion in 2011. Through photovoltaic technology (PV) in particular a hefty debt is accruing for future generations. The overall tax load for electricity consumers resulting from PV funding is likely to be in the region of €100 billion in the next few years.

Climate protection at any cost makes no sense: it has to be efficient. And it has to lead to the creation of fair market conditions. In any case Europe's solo effort to date has been questionable. The USA and China are continuing to rely on a broad mix of energy sources instead of forcing change with the sole use of wind power, solar energy and biomass.

China is planning 32 Gigawatts of new coal-fired power stations and around 25 new nuclear power stations. China is also investing in renewable energy sources, yet these will only contribute 15% in 2020 according to their own strategy.

The USA, on the other hand, has the largest coal reserves in the world and derives half of its electricity from coal. According to IEA estimates, their CO2 output up to 2035 will continue to rise – not fall. And even this is an optimistic prognosis as it already assumes a policy change towards more renewable energy sources and more nuclear.

So what difference will it make if Europe makes massive reductions in its CO2 emissions and global CO2 output increases by over 20% in the next 25 years, as the IEA predicts in the 2010 World Energy Outlook?

In many countries the catch-up process is in full swing. Africa, the Middle East and South America produce about 10% of all greenhouse gases today. The energy consumption per head in China is just one third of that of Western industrial nations.  China's CO2 emissions are likely to reach 10 billion t in 2020 – one third more than in 2009.

Climate protection, profitability and affluence really can go hand in hand. Cancún will be another attempt along this path. That is praiseworthy. But we should not rely on mega-conferences alone. The risk is too great that they will go for the jackpot and end up with empty hands. It makes sense to have an additional alternative, a plan B for global climate protection! A bridge that may not link up the entire world but that still achieves something worthwhile because it is guided by the art of the possible.

Interim steps on the way to a global carbon market

As an important initial step the JI/CDM (Joint Implementation / Clean Development Mechanism) provisions of the Kyoto Protocol are financing CO2 mitigation projects in Asia, Africa and Latin America whilst simultaneously issuing credit notes in the form of CO2 certificates.

Greenhouse gas savings can be made swiftly and effectively using CDM. CDM projects are driven by the market economy and are already leading to substantial financial, know-how and technology transfers today. Greenhouse gases are demonstrably reduced and the living conditions of the people at the project locations are improved.

So far European companies are able to substitute about 1.6 billion certificates with credits from JI/CDM projects in the period from 2008 to 2020. Significantly more would be welcome. To give up CDM, on the other hand, would be fatal. It would not be a decisive step forwards but more of a Eurocentric step back.

We have to stick to the goal of a global carbon market. It would set a price signal for CO2 thereby creating the basis for fair and equal market conditions worldwide. But why should there not be other interim steps on the way? Why should the EU not negotiate bilaterally with progressive climate states like California on an extension of its emission trading system (ETA) – for as long as the process is being stalled in the US at the federal level? Can the EU not export its ETS and link further regions with the European ETS?

Limited negotiation forums of this kind would still be large and ambitious enough and definitely have more chance of success than yet another mega-conference. Successes at this level could also breathe new life into the halting UN process.

Cancún is well conceived but the pitfalls are many. Evolution is often a quicker way to reach a goal than revolution – and more sustainable. A global climate treaty would only be successful when it is economic and efficient. Therefore let us make progress with some of the smaller gains rather than risk another standstill and a mud-slinging contest in the quest for an unreachable Post-Kyoto Treaty."

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