This is a guest post by Ella Kay.
Last month, the German government announced a €54b (NZ$96 b) klimaschutz (climate protection) package to address climate change. The plan comes in response to growing pressure on the German government to step up to the climate challenge, as Germany comes closer to 2020 with only a third of CO2 emissions reduced (from a 1990 baseline). The plan was unveiled as a way to get Germany back on track to meet an overall 55% reduction in CO2 emissions by 2030, and to be carbon neutral by 2050. While there is room for improvement, a third isn’t all bad considering that New Zealand’s gross CO2 emissions have actually increased by 23% in that time (from a 1990 baseline).
For background, here’s a map of Germany’s Gross Energy Production in 2014.
- Red (Kohle) = coal
- Orange (Erdgas) = natural gas
- Yellow (Kernenergie) = nuclear energy
- Blue (Erneuerbare Energien) = renewable energy
- Grey (Sonstige) = other
The proposed klimaschutz package for the 2030 horizon has four key policies:
- Pricing of CO2 emissions
- Promoting and incentivising CO2 savings
- Using the yield from CO2 pricing to reinvest and relieve citizens
- Regulatory provisions
The main areas of focus for these are transport and housing, underpinned by renewable energy, with some high level indications as follows:
Transport: Promotion of EV s and build up of EV infrastructure, subsidised train travel, levies for shorter flights (particularly within Germany), build up of cycleway infrastructure and ÖPNV (public personal transport), vehicle levies will shift to being based on CO2 emissions.
Housing: Upgrading heating systems, using yield from CO2 pricing to promote renovation of buildings so that they are more energy efficient, establishing advisory services for energy. The goal is to reduce household CO2 emissions from 210 m tonne (1990 baseline) to 70 m tonne by 2030.
How do the financials work? This diagram is titled “Relief of citizens and economy”:
- reduce power cost
- increase commuters’ flat rate (subsidy)
- relieve low income renters
- swap bonus for old oil and gas heating (in homes)
- promote energy remedial measures (I think this can be interpreted as funding innovation for energy solutions)
From 2021, a levy of €10 will be applied to every ton of CO2 emitted (increasing to €35 by 2025) through a trading scheme. The accrued levies will be invested into subsidising and offsetting the costs of individual efforts towards klimaschutz and enable a smooth transition to behaviour resulting in lower emissions. Some indicated subsidies include a reduction in the cost of electricity (in hand with bolstering renewable sources), a flat rate subsidy for commuters to offset their travel, relief for lower income renters, a bonus for swapping out older oil and gas heating and the promotion of energy efficient renovation of housing. Overall, beyond the initial investment the package is couched to be revenue neutral and will not impact Germany’s debt borrowing restrictions.
from Taking Bikes on Board the S Bahn
What has the reception been?
A clear theme has been that the package falls short of the ambition needed to make a genuine attempt at a carbon neutral Germany by 2050. To this end, feedback has been that the package is not sufficiently detailed past 2030, and is only focussed on interim individual measures without any clear path to phase out fossil fuels. The strong focus of not burdening individual users has been controversial in terms of disincentivising private vehicle use, with suggestion that a proposed subsidy for private vehicle commuters for every kilometre over 21km travelled effectively offsets the incentive to use alternative modes put in place by the CO2 emissions levy. Finally, there is the view that the proposed CO2 levies are not high enough to actually influence the market economy, rendering the CO2 pricing mechanism as an add on rather than a core basis to effect change. To put context around the €10 figure (increasing to €35), here are some previously conceptualised costs of CO2 emissions:
- The Umweltbundesamt (Federal Environment Agency) assumed damages of €180 per tonne of emitted CO2 in a November 2018 report (based on Germany’s greenhouse gas emissions in 2016).
- To reach the targets established at the UN climate conference in Paris (2015), it was estimated that CO2 would need to be priced between US$40 – $80 by 2020, with an increase to US$50 – 100 by 2030.
- The NZ Productivity Commission estimates that CO2 needs to be priced between NZ$75 – $152 per tonne to reach a ‘low emissions economy’ by 2050, and between NZ$200 – $250 per tonne to achieve ‘net zero’ emissions.
The extent to which CO2 pricing in and of itself should act as a catalyst for behavioural change is a classic example of a ‘carrot or stick’ argument – where should a policy best be struck to incentivise good behaviour or punish bad behaviour. Elements of both are needed to ensure effective outcomes, and striking a good balance involves a mastery of the minefield of politics as well as translating best practice. Overall, the proposed €10 levy and many of the package offerings indicate a strong focus on carrots rather than sticks. Despite this, there were still small voices amongst the feedback suggesting that the proposed changes would be an affront to the German quality of life.
“and from what revenue results, will be given back to the citizens”
What might have caught my attention more than the proposed package was the pragmatism embedded in the way that the package was announced, as though all of this is simply a practical inevitability. In a video released earlier in the week to preempt the announcement of the package, the German Chancellor took a few minutes to connect the dots between why the changes are necessary, what is being proposed, and how this impacts the individual.
The drivers behind the policy were set out as follows:
- Germany needs an effective klimaschutz to achieve its commitments and obligations
- In establishing this, the government will work with economic sensibility
- Any changes must be socially amenable so that individuals can contribute to achieving klimaschutz.
The Chancellor is clear to point out that the government’s aim is not to make money, but rather to reinvest revenue from CO2 pricing back to the citizens’ efforts, in as far as that relates to fostering klimaschutz behaviour at the individual level. There is no talking around the fact that klimaschutz will cost money, but it is clearly stated that the cost will eventually be a lot higher than if effective steps are made now.
It is hard to ignore the focus on the individual within the announcement, and the package itself has a strong theme of relieving or ensuring no adverse effects on the individual. A lot of emphasis in the announcement was on laying a platform to ensure effective buy into the changes, which sidesteps a focus on the politiking of whether the changes will be effective or not, whether the targets are reasonable or not, or what the government’s role has been in not managing to keep the country on track with targets until now. I don’t know if this tone is just inherently part of the practicalities of the German psyche, but the politics of klimaschutz seemed clever – demonstrating some progress in hand with ensuring that Germans buy into it without experiencing any adverse effects.
Incidentally or not, the announcement of the package occurred simultaneously with the worldwide climate strike, in which an estimated 1.4 m Germans (and many millions around the world) protested for real and meaningful responses to climate change. In a poll released on the day of the German strike by public broadcaster ARD, 63% of Germans favoured prioritising climate action at the cost of economic growth. In April, the German Greens achieved 20% of the vote at the European level (compared to 8.9% at federal level). There does seem to be an atmosphere of collective responsibility, or a more direct connection between actions at the individual level with negative climate outcomes here. I wouldn’t be surprised if the klimaschutz bunch of carrots doesn’t manage to appease an increasing appetite for green policies in Germany.