Climate emergency

Germany’s great environmental failure

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Source: Getty Images/ Illustration Uwe C. Beyer

Angela Merkel wore green to the annual German Industry Day meeting in Berlin last month. There, she told a crowd of 1,200 CEOs, entrepreneurs and lobbyists that carbon-emissions targets for the car industry shouldn’t be too overly ambitious — a 30 percent reduction goal by 2030 was perfectly fine. “Anything beyond that carries the risk of killing off Europe’s car industry,” she warned.

That was music to the ears of Ms. Merkel’s audience that day. But the irony wasn’t lost on observers: The German chancellor, cloaked in green, hacked away at environmental hopes — yet again.

It hasn’t always been like this. In fact, a decade ago, both Germany and Ms. Merkel were seen as global environmental leaders, boldly plotting a course to reform industrial society and devise a sustainable future. Unfortunately, measured by its own standards, Berlin has since failed to follow through on its lofty environmental promises.

Reunification as an accidental green boost

Despite Germany’s much-vaunted energy reform, the country is now certain to fail to reach its key environmental benchmark – a reduction in overall CO2 emissions by 40 percent by 2020, measured by 1990 levels. Berlin has all but dumped that original target. At this point, the government will be happy with 30 percent.

German carbon emissions have not decreased for the last nine years (see chart below), and transport emissions have not fallen since 1990. “We have to draw up a very sober balance sheet. And the fact is, we have now lost an entire decade,” Ottmar Edenhofer, incoming head of the Potsdam Institute for Climate Impact Research, told Handelsblatt.

It even turns out that the country’s initial reputation as environmentally progressive may have been exaggerated. A 1990 benchmark was a very convenient one for Berlin: It was the year of the German reunification. Within a few years, most of East Germany’s highly polluting industry went bust, as it wasn’t competitive in a market economy. Retrospectively, this made Germany’s CO2 reduction look a lot better than it actually was.

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America’s carbon record beats Germany

Some speculate that Berlin lost some of its environmental zeal as the international situation worsened. High hopes of concerted international action turned to despair when Donald Trump abandoned the Paris climate agreement last year. But the truth is that in recent years the United States has reduced its carbon emissions more than Germany, in both relative and absolute terms.

It’s not that Berlin has stopped caring about the environment. “We in Germany must admit that we need to improve,” the chancellor pleaded at a climate summit in Berlin last June. A former environment minister herself, Ms. Merkel hasn’t lost her penchant for rousing speeches about global warming. A year ago, she called it a “vital question for humankind.”

But for many, it’s all talk. “The federal government sends no signals that it is ready for a forward-looking climate policy,” said Michael Schäfer, a climate expert with the World Wildlife Fund (WWF).

Others believe that Germany simply has not really felt the brunt of climate change yet, although this summer’s drought was an ominous warning of things to come. For Martin Faulstich, former chair of the government’s environmental advisory council, this has led to “a reckless complacency we can ill afford.”

Hit by the rebound

That complacency includes hopes for easy technical solutions. These are unlikely to be enough in themselves, not least because of the so-called “rebound effect,” which can quickly cancel out technical progress. This means, for example, that while flat-screen televisions use much less energy than old-fashioned models, we now buy – and throw away – many more of them. Engines are more efficient, but cars have grown larger and larger. And today’s houses may be more energy efficient, but they are also bigger.

For real change to happen, the time may be coming for painful choices, the kind no politician wants to present to voters. Most people agree that carbon must become a lot more expensive, and this will have tough consequences in each of the five main areas where large emissions savings can be made: energy generation, transportation, industry, agriculture and construction.

The energy sector has so far seen the greatest change and has shown the way forward for potential green growth. Germany now generates 36 percent of its power from renewables and has created a lot of jobs along the way: 160,000 are now employed in the wind-power sector alone. That’s eight times the number of employees in the coal industry.

But this comes at a cost. Around €25 billion in subsidies flows to renewables every year, mostly through premiums paid by consumers, rather than by taxpayers. The renewables boom has also raised other questions, notably whether the country’s overstrained power grid can cope with the changes.

Mainstream industry opinion has shifted substantially in recent years: Climate change deniers are few and far between, and industry lobbyists can sound like environmentalists of a couple of decades ago. But industry voices also warn they cannot bear all of the costs. And Germany’s powerful industrial sector is wary of competition from countries with lower standards.

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Capture that carbon

Ultimately, there are limits to emissions reduction for some industrial processes. The five industries with heaviest carbon use — steel, metals, chemicals, paper and cement — are already part of the European emissions trading system.

In the medium term, some pin their hopes on carbon capture technology, which would separate carbon emissions and store them deep underground. Mr. Edenhofer, the climate researcher, says that for many industries, there may be “no alternative” to carbon storage. The trouble is that carbon capture technology does not yet exist in usable form and will take decades of intensive research.

There is also a more immediate incentive for Germany to improve its environmental performance. Berlin has pledged specific carbon targets for a variety of economic sectors, including transport, construction, and agriculture. If it falls short, it will have to buy emissions permits, at a possible cost of €60 billion.

It may not all be doom and gloom. Environmental transformation could offer an improved quality of life for all and may ultimately strengthen many economic sectors. Climate emergency has the potential to drive real innovation for German industry, putting it in pole position for a new epoch of climate-neutral capitalism.

But the emergency is real, and the alternatives are grim. Mr. Edenhofer pulls no punches: “Time is running out.”

Silke Kersting reports for Handelsblatt from Berlin, focusing on consumer protection, construction, environmental policy, and climate change. Klaus Stratmann covers energy policy and politics for Handelsblatt in Berlin. Brían Hanrahan adapted this article for Handelsblatt Global. To contact the authors: stratmann@handelsblatt.com, kersting@handelsblatt.com

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