The Greens may never have a better opportunity to tackle climate change

In Germany that is.

Age before beauty they say.  But after last week’s inconclusive election in Germany it’s the forty-something leader of the Green party, Annalena Baerbock, and her generational compatriot, Christian Lindner of the market liberal Free Democrats (FDP), who are making the running in coalition negotiations, leaving the sexagenarians who head the Christian and Social Democrats out in the cold – for now.

The reasoning is that if the Greens and FDP can agree a common platform, they will be able to choose which of the main parties to govern with, and thereby set the terms.  The only escape for the main parties would be for them to continue their current – unpopular – grand coalition.

The Greens say their number one priority is climate change policy.  The FDP want the transparency and clarity of market signals, which drive change more effectively than regulation.  These are the makings of a grand bargain.  But it also has the potential for crowning failure; if a consistent climate policy can’t be achieved in these circumstances, in rich guilt-ridden Germany, then the hopes for lesser countries must be dim.

The starting point could be worse.  Germany has already made an expensive shift towards intermittent renewables.   German car makers expect electric vehicles to make up 40% of new car sales within four years.  And Europe’s natural gas supply crisis has the potential to further reduce demand for fossil fuels.

All that is needed is a consistent and least cost policy to discourage carbon emissions, while ensuring security of energy supply.  Simple.

That means not just letting the current energy price increases carry through, it means pushing them up quite a bit further, ideally through a broad-based carbon tax.  It means more variability in pricing to signal when consumption is optimal and whether battery or other storage is cost effective (clue: cheaper when the wind is blowing and the sun shining; more expensive when it’s cold and dark). 

The costs of buying and running electric cars will need to increase significantly, in order to bear the burden of taxation currently borne by the fuel and road levies on internal combustion vehicles.  Without significant technology-driven cost reductions, levels of car ownership would probably need to decline from the recent 572 per 1,000 people, but then Singapore manages with only 149 (New Zealand and Australia at more than 700 will find catching up a little harder).

A border tax of some sort (to price the embodied carbon used in the production of imported goods) will be essential to stop production continuing to shift to lower tax jurisdictions.  A decision is needed on whether to rely on Vladimir Putin for the natural gas used, at least transitionally, when renewables are not operating.  And there will be some difficult political negotiations to decide which parts of Germany’s middle class need to pay twice in order to subsidise the higher costs for their less-fortunate neighbours (capital taxes – even if the FDP could stomach them – are not a great option in a borderless world).

But probably the hardest thing for the party technocrats to come to terms with, is that they are not really in control of this.

The Daily Telegraph’s Jeremy Warner, channelling science guru Vaclav Smil:

Past energy transitions have taken a very long time, much longer than the 30 year horizon implicit in reaching net zero by mid-century – and that’s despite the fact that historically they have all been market driven and provided huge gains in efficiency over what went before. Today’s is unique, in that it is government led, and for now offers no advantage in efficiency.”

Accepting that the costs of ignoring market signals are much higher than responding to them will be hard for Germany’s Greens.  Explaining to their voters even harder. Still, this is what they went into politics for.

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