Rede auf der Konferenz „Managing Decarbonization: The Cases of Germany and Canada“ an der UBC in Vancouver am 27. Oktober 2016.
Dear Ms. Arneil, dear Consul General Beck, dear Mr. Hübner,
Ladies and Gentleman,
Thank you for having me. And thank you for organizing this conference on what is probably the challenge of our century: the decarbonization of our global economy. Last year in Germany, the G7-heads of government made a commitment to facilitate decarbonization within the next eighty years. Today I want to talk to you about why this commitment is so important for our climate, for our security and for our economy. And why it’s worth very little unless we actually walk the walk. That’s why I will address the role that governments, industries and the international community have to play in this endeavor.
1 Why decarbonization is alternativlos
Our German chancellor Angela Merkel has coined a word that has sparked a contentious debate: Alternativlos – a policy without alternatives. Her health policy? Alternativlos. A giant construction project in the middle of Stuttgart? Alternativlos. Raising the retirement age to 67? Alternativlos. ‘Alternativlos’ is Merkel’s take on Margret Thatcher’s TINA approach to things: there is no alternative. Often times it is nothing but labelling unpopular decisions. When it comes to decarbonization, however, the term is extremely suiting. There is no alternative to getting rid of fossil energy. Or maybe more accurately: the alternative is a climate disaster which threatens our economies, multiplies conflicts and ultimately endangers our very survival.
2 Climate Change is now
I don’t think I have to convince anyone here, that climate change is real and – despite what Donald Trump tweets about it – our carbon industries are to blame. Industries is a plural. But even scientists and politicians that acknowledge the threat of climate change too often speak of it as a future problem. Climate change is already hurting millions of people right now.
2.1 Climate Change is a threat to our security
Every second a person is dislocated because of a natural disaster, according to the UN High Commission for Refugees. 22.5 million people a year are forced to leave their home due to climate- or weather-related events.
Last year the World Bank published a report that shows that climate change is an acute threat to poorer people across the world, estimating that it will push more than 100 million people back into poverty over the next fifteen years.
We can argue over the exact numbers. But we cannot escape the fact that millions of people have already felt the devastating effects of climate change and that its hitting those the hardest that have the least resources to protect themselves.
It shows that climate change is an issue of security. Because when droughts and extreme weather events destroy homes and livelihood of those already living in poverty it can fuel conflict and violence.
In the area formerly known as the fertile crescent, extreme draughts are 2 to 3 times as likely to occur now. Syria was suffering from such a drought between 2006/07 and 2010. During that time 1.5 million people took from the rural regions to the cities. The influx of people raised existing tensions in the cities building the hotbed for social uprising. The resulting civil war is still raging almost six years later.
The US Department of Defense has caught on to this development and has since categorized climate change as a threat to national security.
It took the German government a little longer to make the connection. Only recently, it has published its white paper on defense and security which talks about the role, climate change plays in starting and intensifying conflicts.
And of course, if we don’t put an end to the rapid heating of the earth’s atmosphere, it also poses an existential threat to our survival.
2.2 Climate change is a threat to our economy
The world community is in agreement over the fact that climate change has to be combatted. The Paris Climate Agreement is a huge milestone in this fight.
With the US and China streamlining the process two nations that have been on the sidelines for too long have joined the international community on this issue. The US and China, still the two biggest CO2 emitters in the world, seem to be moving from hinderer to driver of climate policy.
I am also very glad to see Canada back at the forefront of nations leading the fight against global warming.
The world agrees that any increase of the global temperature over two degrees Celsius has to be prevented under any circumstances. In Paris, they resolved to stay well below two degrees.
However, if we were to burn all known supplies of oil, coal and gas, that would get us up to four or even five degrees. If we want to stay below the two degree target that was confirmed in Paris, only 565 Gigatons of CO2 out of the remaining 3.000 Gigatons can be produced.
In short: Only one fifth of the remaining oil, coal and gas we know of can be burned. Four fifths have to stay where they belong – in the ground.
That is tough message for Alberta. The promise not to produce more than 100 Megatons of CO2 is one part. The other is: four fifth of their tar sands have to stay under the soil.
It is a tough message for Alberta, but for the fracking industry in the US, for Saudi-Arabia, for Qatar, for Russia, for Venezuela, for Iran, for Nigeria, for every fossil resources extracting country.
A big part of our industries and many political leaders have yet to wake up to that fact. We talk a lot about decarbonization in the abstract.
But this simple calculation shows how our carbon based way of producing is a threat to the global economy and our financial systems.
The mentioned 3.000 Gigatons of carbon translate to over 7 trillion US Dollars in fossil investments worldwide.
These are investments in the destruction of our planet.
But if we commit to burning only one fifth of the remaining carbon there suddenly is a lot of dead capital listed in many of the biggest companies worldwide.
This carbon bubble, that is still inflating as we speak, is a problem for our economy. Europe’s biggest bank – HBSC – estimates that it will lose up to 60 percent of its worth if this bubble bursts.
That’s why decarbonization is not just a way to achieve the goals set in Paris, it is also a way to deflate the economically dangerous carbon bubble.
The Rockefeller foundation has seen the writing on the wall. They already stopped investing in fossil energy.
CITIGROUP, one of the largest banks in America, estimates that over the next ten years one trillion dollars will be pulled out of fossil investments and instead be invested in renewable energies.
It doesn’t take a degree from a great university such as UBC – though that can’t hurt – to know that in the long run it’s always smarter to invest in the future, not the past.
3 Subsidies for fossil energy are a threat to a new green economy
In some ways the market has already signaled the end of fossil energy.
In 2014, for the first time ever, more renewable than fossil capacity was installed worldwide. That same year, 310 billion dollars were invested in renewable energies.
We now need a framework to sustain and strengthen this trend. The Paris Agreement aims to do this via non-binding national goals.
Europe’s climate target is -20% CO2 until 2020, 20% of renewable primary energy, 20% energy efficiency (mandatory)
and until 2030 -40% CO2, 27% renewable primary energy and 27% energy efficiency (all figures related to the base year 1990).
Germany’s climate target is to become greenhouse gas neutral until 2050. That means reduction up to -95% with the targets of -40% in 2020 and -55% in 2030.
Germany has set ambitious national goals – but it has no road-map how to get there. Like many other governments, the German government is still subsidizing big coal in a big way. Just last year the dirtiest coal – lignite – power plants in Germany were granted over 1.6 billion Euros in subsidies, while new restrictions were set up for renewable energies.
We can’t achieve decarbonization if we continue to subsidize carbon and keep curtailing carbon-free alternatives.
It’s time to start promoting low carbon industries by providing the industry with clear goals.
4 A framework for carbon-free investment
I think the example of the German Energiewende – organized by a coalition of Greens and Social democrats in the early two thousands – shows how governments can provide frameworks for investment in low carbon or carbon free industries.
However, it also shows what happens if governments waiver in their support for this framework and give in to the powerful interests of the fossil lobby – like the now governing grand coalition is doing.
I want to present three main pillars of this framework for low carbon and carbon free investment: the production of electricity, the issue of energy efficiency and the transition into electro mobility. And I will discuss how the actual German government is self-sabotaging in these areas.
4.1 Renewable energy
When I was Minister of the Environment in 2000, I passed a law on renewable energies. Back then, the Green Party and I were laughed at for setting a goal of 20 percent renewables in the electricity mix by the year 2020.
We reached that target in 2012 – not in 2020. Today, in 2016, the share of renewables in Germany is already well past 30 percent of the electricity mix.
We have already surpassed our ambitious goals. Because we dared. Because we did not fear confrontation with a powerful fossil lobby.
And because we managed to establish a framework that enabled investments in green energy and allowed it to compete with heavily subsidized fossil energies.
Over the last years, 20 billion Euros were invested annually in new energy plants in Germany. Today renewables are not a niche-technique anymore.
In the best times, we created some 400.000 jobs in the renewable industries.
Renewable energy in Germany means business for citizens and small and medium sized companies. Electricity generation is no longer for big business. The renewable third of our electricity mix is owned by farmers, funds and cities.
Germany’s big utilities that had a quadropole hold by RWE, E.ON, EnBW and Vattenfall decided not to invest in renewables. Ten years later they have lost market shares. Their shares lost more than 50 % and this year again Moodys and Standard & Poors rated them down.
However, the current situation in Germany is also an example for what happens if governmental support begins to waiver.
While solar industries world-wide are booming, they are reclining in Germany. The global boom has a simple reason. The massive investment in Germany has mad renewables competitive.
Solar and wind are now down to 7 Cent per kWh, a cost reduction of 90 % in PV and 80 % in wind energy within ten years.
While renewables globally are booming, the grand coalition in Germany is on the brake.
We went from top student to class clown.
The government nipped the rise of solar in the bud with compulsory competitive tendering, a ban for PV on open spaces and the so-called sun tax.
Just when electricity you had produced at home with your PV technology had gotten cheaper than that offered by the public utility companies, Minister for the Economy and Vice Chancellor Gabriel introduced the sun-tax. This tax targets electricity that is self-produced and self-used but does not target electricity used for extraction of lignite.
The result of government intervention has been disastrous. The policies cost us 40.000 jobs in the renewable energy sector.
40.000 jobs were lost by a government which fights tooth and nail for 20.000 jobs in coal mining.
4.2 Energy Efficiency
A study has shown: if we go all the way on the energy transition, we’ll save about the amount of gas that we import annually from Russia by 2030.[4]
However, if we want to get there, we need more energy efficiency. For example: 85 percent of our natural gas goes into heating. We need to get that number down. That’s why we need to talk about the proper insulation of houses.
We need to invest more in energy-efficient refurbishment of buildings. Yet, lo and behold, there’s little movement in refurbishment.
If we refurbish 3 % of our buildings annually we have substituted in 2030 the amount of energy we now import from Russia.
The best instrument for reaching that rate is a tax subsidy for the owners of the building. But this instrument for more energy efficiency is blocked by the government of the grand coalition.
The same government is defending another subsidy. Germany’s chemical industry gets its oil without taxation. This environmental harmful subsidy cost some 1,6 billion Euros every year. That hampers recycling and CO2-neutral resources in the chemical industry. But these technologies are urgently needed for decarbonization.
A framework for investment in low carbon industries has to stimulate efficient technologies and stop fossil subsidies.
4.3 Electro mobility
If we want to meet our climate goals, there’s no way around a turnaround in the transportation sector.
This sector alone is to blame for a fourth of all CO2 emissions. In Europe, it’s the only sector in which emissions have risen since 1990. World-wide, we are up 22 percent! Today, there are about one billion cars polluting the planet. By 2030, we’ll have twice as much – if we don’t intervene.
German state intervention, however, has been counter-productive to say the least. And not just because we are the home of Volkswagen.
Every year, the German government subsidizes the car sector with 28 billion Euro. The cheap Diesel you get at a German the gas stop? Subsidized by 7.8 billion a year.
These subsidies hurt the environment.
And they reward the wrong track. The German car industry has been dead set on Diesel engines for years. They were so determined, they ignored that large parts of the world have zero interest in this technology:
- The United States only have a 3 percent Diesel ratio.
- China has 1 percent.
- Japan has less than one percent.
- And Brazil drives on gas and sugar cane.
- Only in India did the ratio of new registrations rise to 30% – until they issued a ban on new registrations for Diesel above an engine displacement of 2 liters at the end of last year.
The Diesel subsidies make no sense economically. And they hurt all efforts to further electro mobility.
Once upon a time, we were leading the pack on electro mobility. Did you know that the first ever Porsche was an electric car? The single-engine vehicle was built in 1898 by Ferdinand Porsche.
The first all-wheel Porsche was the Lohner-Porsche – built in 1900. Its top speed was 60 km/h. And its energy conversion efficiency lay at 86%! Combustion engines today still can’t reach that.
But those days are gone. The German car industry is lagging behind. Only in the wake of the Volkswagen scandal are they waking up to the future.
That is the background why the second German chamber – the Bundesrat – now voted for a ban on fossil combustion engines in 2030.
The reason is simple:
If you want to bring down the CO2-Emissions to 10 % of 1990 – that is necessary to meet the Paris-targets, you have to organize that in 2050 no combustion cars are on the road – and no fossil power plant is at the grid.
5 Conclusion
All this goes to show:
- We are aware of the problem posed by global warming.
- We have the concepts to tackle the problem. We have the energy transition. We know what needs to happen in regard to renewable energies, energy efficiency and electro mobility.
Now we got to walk the walk.
Put our money where our mouths are. Knowing what we know now, we cannot justify subsidizing dirty coal and diesel.
Low Carbon and Carbon free Industries are the future. We need them to meet our climate and decarbonization goals.
Industries like photovoltaic, wind, innovative motors, smart grids have the potential for growth of some 200 billion $ until 2020 – each.
It pays to invest in a greener future.
Thank you.