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OSW COMMENTARY NUMBER 188 1 Ces of Carbon Allowances in the EU Emission Tra- Ny

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OSW COMMENTARY NUMBER 188 1 Ces of Carbon Allowances in the EU Emission Tra- Ny Centre for Eastern Studies NUMBER 188 | 20.10.2015 www.osw.waw.pl The uncertain future of the coal energy industry in Germany Rafał Bajczuk Germany’s current energy strategy, known as the “energy transition”, or Energiewende, involves an accelerated withdrawal from the use of nuclear power plants and the development of renewable energy sources (RES). According to the government’s plans, the share of RES in electricity production will gradually increase from its present rate of 26% to 80% in 2050. Greenhouse gas emissions are expected to fall by 80–95% by 2050 when compared to 1990 levels. However, coal power plants still predominate in Germany’s energy mix – they produced 44% of electricity in 2014 (26% from lignite and 18% from hard coal). This makes it difficult to meet the emission reduction objectives, lignite combustion causes the highest levels of green- house gas emissions. In order to reach the emission reduction goals, the government launched the process of accelerating the reduction of coal consumption. On 2 July, the Federal Ministry for Economic Affairs and Energy published a plan to reform the German energy market which will be implemented during the present term of government. Emission reduction from coal power plants is the most important issue. This problem has been extensively discussed over the past year and has transformed into a conflict between the government and the coal lobby. The dispute reached its peak when lignite miners took to the streets in Berlin. As the govern- ment admits, in order to reach the long-term emission reduction objectives, it is necessary to completely liquidate the coal energy industry in Germany. This is expected to take place within 25 to 30 years. However, since the decision to decommission nuclear power plants was passed, the German ecological movement and the Green Party have shifted their attention to coal po- wer plants, demanding that these be decommissioned by 2030 at the latest. The problem with reducing wever carbon emissions were falling at a slower greenhouse gas emissions by 2020 rate than expected, and even rose in 2011–2013. There were several reasons for this trend, the Climate policy is the source of the internal Ger- most important being increased power produc- man conflict over lignite. Germany is among tion by coal power plants after eight nuclear po- those countries (along with e.g. the United King- wer plants were decommissioned following the dom, France and the countries of Scandinavia) Fukushima disaster. The decision to withdraw which are most strongly engaged in the global from the use of nuclear power plants coincided reduction of greenhouse gases. In 2007, Berlin with the shale revolution in the USA, which led unilaterally adopted the goal to reduce emissions to a reduction in demand for coal and, consequ- by 40% by 2020, compared to 1990 levels1. Ho- ently, falling gas prices on the global market. This led to an increased share of coal in electri- 1 Klimaagenda 2020: Der Umbau der Industriege- city production in EU member states, including sellschaft, April 2007, http://www.bmub.bund.de/filead- min/bmu-import/files/pdfs/allgemein/application/pdf/ Germany. This trend coincided with the fall in pri- hintergrund_klimaagenda.pdf OSW COMMENTARY NUMBER 188 1 ces of carbon allowances in the EU emission tra- ny. Carbon emissions are expected to have fal- de system resulting in increased production of len to 749 million tonnes in Germany by 2020 energy from lignite in Germany. In effect, even (in 2013 they reached 951 million tonnes). Ac- though in 2010–2013 electricity consumption in cording to most recent Eurostat data (for 2012), Germany fell by 15% and electricity production Germany is EU’s largest greenhouse gas emit- using RES increased by 47%, energy production ter and accounts for 20.6% of all emissions. In from coal also rose by 23% and thus contributed this ranking, Germany is followed by the United to higher carbon emissions. Hence the “Ener- Kingdom (13.1%), France (11%), Italy (10%) and gy Transition Paradox” mentioned by German Poland (8.6%). German emissions per capita are experts – even though energy production with above the EU average level of 9 tonnes of CO2 the use of emission-free renewable sources has equivalent per capita annually. As compared to been developing at a rapid rate, carbon emission Germany (11.4 tonnes), emissions are higher only levels have been growing. Already in 2013, Pe- in the Czech Republic (12.5 tonnes), Ireland (12.8 ter Altmaier (CDU), who was then the minister tonnes), Estonia (14.5 tonnes) and Luxembourg for the Environment, said that Germany wo- (22.6 tonnes)3. Poland (10.4 tonnes) has lower uld not be able to reach the goal of reducing emissions per capita than Germany. emissions by 40% by 2020. However, when the government changed, the Social Democrats be- The dispute over the climate levy came the new coalition partners for the Chri- stian Democrats and forced the coalition to set On 27 March 2015, the Ministry for Economic the goal of a 40% emission reduction by 2020. Affairs and Energy led by Sigmar Gabriel (SPD) presented a plan for reforming the energy mar- ket with the proposal to impose a carbon emis- The CDU/CSU–SPD coalition government sions tax on coal power plants, the so-called has set itself the goal of reducing green- ‘climate levy’ (German Klimaabgabe). Accor- house gas emissions by 40% by 2020 ding to the government’s proposal, a levy of when compared to 1990 levels. By the end 18–20 euros per tonne of CO2 would be impo- of the decade emissions are to decline by sed on old coal power plants in operation for 21% from 951 million tonnes in 2013 to more than 20 years. In the ministry’s opinion, 749 million tonnes. this proposal would bring the following positi- ve effects: it would eliminate the oldest coal po- wer plants from the market and reduce power SPD politicians were nominated Minister for Eco- exports, since excessive electricity production nomic Affairs and Energy and Minister for the has destabilised the market in Germany and Environment. In December 2014, the govern- neighbouring countries (in the past few years ment adopted the Action Programme on Cli- Germany sold the largest amount of electricity mate Protection 20202. The document specified in its history)4. This proposal was received po- a number of actions to be taken in order to re- sitively by organisations involved in the protec- duce emissions in individual sectors, including tion of environment, scientists, the RES lobby, the power production sector which accounts and municipal companies. for 40% of greenhouse gas emissions in Germa- 3 Eurostat, http://ec.europa.eu/eurostat/statistics-explained/ index.php/Greenhouse_gas_emission_statistics#Main_tables 2 4 Rafał Bajczuk, ‘Niemieckie problemy z redukcją emisji See Agora Energiewende, Neuer Rekord beim Stromex- CO2’ OSW Commentary, 16 December 2014, http://www. port, 17 July 2015, http://www.agora-energiewende. osw.waw.pl/pl/publikacje/komentarze-osw/2014-12-16/ de/de/presse/agoranews/news-detail/news/1-neuer-re- niemieckie-problemy-z-redukcja-emisji-co2 kord-beim-stromexport/News/detail/ OSW COMMENTARY NUMBER 188 2 Energy producers, trade unions and some politi- Following the attack from the industry, the tra- cians from the Christian Democratic and Social de unions and CDU/CSU and SPD politicians, the Democratic parties have reacted negatively to this Ministry for Economic Affairs and Energy led by proposal. It has been argued that the imposition Sigmar Gabriel (SPD) halted its efforts to impo- of additional taxes on coal power plants will lead se the climate levy on coal power plants. A new to job losses and the collapse of the lignite sector5. proposal to reduce emissions from coal power plants was published on 2 July as a Political Agreement between the SPD, the CDU and the Due to lobbying from German industry as- CSU on the Future of the Energy Transition6. Ac- sociations and business-oriented factions cording to the agreement, lignite power plants of the CDU, the government has given up with a capacity of 2.7 GW (i.e. 13% of the ca- the climate tax from lignite power plants. pacity of German lignite power plants) will be classified as the so-called emergency standby ‘reserve’. This means that these power plants It has also been argued that power supplies could will only be put into operation in emergency be interrupted if too many coal power plants di- situations, when the remaining power plants scontinued operation within a timeframe of seve- operating on the market are unable to cope ral years. Opponents of the tax on power plants with demand. The coal power plants classified could count on support from politicians. Their as the power reserve will receive compensation demands were backed by politicians from all par- for remaining on standby for four years, and ties, with the exception of the Greens. Politicians will then be closed. The ministry’s new proposal from the SPD (including the ministers-president of will result in a reduction of carbon emissions by North Rhine-Westphalia and Brandenburg) and power plants – 11 million tonnes by 2020. The the CDU have been especially active. Lobbyists original plans envisaged a reduction in carbon representing the coal energy sector, including emissions 22 million tonnes by 2020. The emis- Peter Terium, the CEO of RWE, Hildegard Müller, sion reduction goal as a whole is to be reached the head of the German Association of Energy by increased energy saving and the construction and Water Industries (BDEW) and Stanislaw Til- of new combined heat and power plants. This lich (CDU), the minister-president of Saxony, took solution will require additional budget subsi- part in the talks on the struggle to continue ligni- dies on energy efficiency (around 1.2 billion eu- te production in North Rhine-Westphalia during ros annually), and on the development of com- a convention of CDU politicians from this federal bined heat and power plants (around 0.5 billion state on 23 April.
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