carbon crunch

Man in the Middle

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Searching for alternative solutions in the energy debate.
  • Why it matters

    Why it matters

    Germany’s ambitious energy transition hinges on cleaner renewable energy. But damage to traditional industries like mining looms.

  • Facts

    Facts

    • Unions and the energy industry say a climate tax would make operating brown coal power stations unprofitable.
    • Sources say the economics minister met with representatives from unions, companies and German states to discuss how the energy sector could reduce carbon emissions by another 22 million tons – without a climate tax.
    • The union for the mining, chemical and energy industries called for expanding power-heat coupling, increasing capacity reserves and promoting more efficiency in the heat market.
  • Audio

    Audio

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Germany’s economy minister seems to be stuck between a rock and a hard place over climate change.

Pressure from German states, businesses and labor unions last week forced Sigmar Gabriel, the country’s deputy chancellor and head of the economy and energy ministry, to partially back down on a controversial new climate tax that was seen as overly burdensome to the economy.

But now his new, more limited plans to tackle the carbon emissions from power plants have instead drawn the ire of the country’s powerful green lobby, a traditional ally.

These are difficult times for Mr. Gabriel, who has struggled over the past year to curry favor with business without alienating his own political base. The chairman of the center-left Social Democratic Party, the SPD, the junior member of a governing coalition under Chancellor Angela Merkel, can’t seem to please anybody at the moment.

Mr. Gabriel is battling criticism on several fronts, from the unions to the opposition and even within his own party.

Most German policymakers have long agreed on the need to reduce carbon emissions and tackle climate change, but with the burden on businesses already higher than in most countries, the disagreements over how to carry this out have been growing louder.

The latest disagreement involves an ambitious new climate tax on power plants. Last week, Mr. Gabriel announced he would change his proposal to meet some of the business’ concerns.

Originally shaped to cut 22 million tons in CO2 emissions mostly at brown coal power stations, his ministry has now changed the proposal so that brown coal stations would only have to save 16 million tons in CO2 emissions.

The proposal for a climate tax would have placed a heavy burden on traditional power plants and was widely opposed by companies and state governments who feared that it would lead to losses of jobs and profits.

Mr. Gabriel’s latest compromise, however, met criticism from the Green party, angered that in their view he had cow-towed to pressure from companies and politicians.

Mr. Gabriel is battling criticism on several fronts, from the unions to the opposition, to his coalition partners and even within his own party over the new climate policies.

Members of Ms. Merkel’s Christian Democratic Party, the CDU, have accused Mr. Gabriel of violating a coalition agreement that laid out the terms for their governing partnership at the start of last year.

Armin Laschet, the vice chairman of the CDU, argued the initial proposal for an additional tax on traditional power stations was “neither considered nor even discussed” in negotiations that led to the two governing parties’ coalition contract. The criticism was leveled in a letter from Mr. Laschet to Mr. Gabriel, cited by Germany’s Die Welt newspaper.

Facing this opposition from his own coalition partners, Mr. Gabriel last week began to look for new ways to cut carbon emissions that could side-step some of the criticism.

His compromise has focused on other incentives for reducing carbon emissions – without using a climate tax.

Last week, he listened to a proposal from IG BCE – the union for the mining, chemical and energy industries – on expanding co-generation to reduce carbon emissions by another 22 million tons.

 

The Greening of Germany-01 climate Co2 coal

 

In addition to expanding co-generation, the trade union’s proposal called for increasing capacity reserves and promoting more efficiency in the heat market.

The proposal, which has been seen by Handelsblatt, suggests providing incentives for co-generation, a bonus for scrapping dated heating equipment, and a large number of reserve power stations.  The paper outlined the cost of these new suggestions for taxpayers and how much carbon dioxide each measure would save.

Mr. Gabriel spoke in favor of the proposal, saying, “I am very grateful to IG BCE.” He added that it was important to consider companies’ and unions’ concerns. “Anything else would be illogical,” he said.

The union responded that it was optimistic that the proposal would receive serious consideration. “At least we have opened up the discussion,” Michael Vassiliadis, the head of the union, wrote in a letter to the union’s board, which has also been seen by Handelsblatt. “We can show what is possible, when there’s a will.”

The next step is for the economy ministry to look into both suggestions before holding further talks.

According to industry sources, the possible compromise means there is optimism among power companies that burn brown coal – RWE, Vattenfall and Mibrag – that a climate tax can be avoided.

They believe Mr. Gabriel understands such a tax would cause serious upheavals. In April, for instance, 10,000 employees in Berlin took to the streets to demonstrate against the tax.

The unions and companies which would be affected by the tax turned to auditors to bolster their argument that a climate tax would make many brown coal power plants unprofitable. That would have a domino effect on surface mining operations as well, they say.

Brown coal proponents and the economics ministry had argued over possible economic fallout from a climate tax, because the ministry used different figures than companies in their calculations. Auditors, however, found that RWE, Vattenfall and Mibrag used plausible estimates, according to sources at the meeting.

In addition, auditors said the climate tax would reduce profit margins of providers so much that they could no longer meet other obligations, such as re-naturalizing mining areas.

The economy ministry has now commissioned a more extensive report to show how the planned climate tax would operate. In April, unions had criticized the ministry for the brevity of its explanation of the implications of the tax.

Mr. Gabriel is fighting on a further front as the Christian Social Union, the CDU’s sister party in Bavaria, has called for power lines carrying green energy to be built around Bavaria, rather than through the state. On Sunday, Mr. Gabriel offered a limited compromise but refused to back down on plans to build the power lines throughout Germany, including through Bavaria.

It seems more discussion is needed before Germany can make real progress in further cutting carbon emissions.

 

Daniel Delhaes reports on politics, transport and airlines from Handelsblatt’s Berlin office. Jürgen Flauger covers energy and Dana Heide writes about energy policy, innovation and mid-sized companies. To contact the authors:  delhaes@handelsblatt.com, heide@handelsblatt.com, flauger@handelsblatt.com

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