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Why German politics should better not fight climate change (the way it does)
German politics has a serious problem with fighting climate change properly.
Combating climate change is seen by the German public (for good reasons) as one of the most urgent tasks. Consequently, politicians in Germany want to deliver. But the issue is European. As a result, climate change is being fought on at least two levels. On a European and a national level (sometimes also on a local level). This often leads to double the costs without double the benefit.
What do I mean by this?
The climate problem knows no borders. Therefore it is best to combat climate change at the highest possible political level. Everything else is of little use and leads to free-rider behaviour. What one country saves, the other is inclined to emit.
The good thing is that there is a working mechanism in Europe that reduces CO2 emissions – namely, the so-called EU ETS.
The European Union Emissions Trading System is a "cap and trade" scheme where a limit is placed on the right to emit specified pollutants over an area, and companies can trade emission rights within that area.
This mechanism, introduced in 2005, ensures that CO2 emissions currently fall by 2.1 percentage points every year.
But there is a problem. The EU ETS covers only 45 per cent of the EU's greenhouse gas emissions. Emissions from buildings and road transport are not included. It's now taking its toll on the fact that before the introduction of the EU ETS, politicians caved in to the most powerful lobby group: residential, car-driving voters.
Yesterday the Federal Environment Agency presented figures on the estimated CO2 emissions in Germany in 2022. The building and road transport sectors were above the targets. It's no coincidence that the bar is torn precisely in the sectors not covered by EU ETS.
So is there a need for action at the national level?
Yes, but only for the non-EU ETS sectors and only for a limited time. Because there is good news too. EU ETS II will launch in 2027. It will extend emissions trading to the buildings sector and road transport.
If the EU didn't exist, it should be invented for this purpose alone.
But as said, for politics in Berlin, this is a problem. The government is being urged to act on climate change, but in some ways, it isn't necessary. As a result, it shows activism (for instance, it decided to phase out coal till 2037 and wants to ban oil-fired heating) and instead of promoting good politics in Brussels.
Because not everything is going right there either. The fact that an emission certificate trading system for road transport will be established, but at the same time, a ban on combustion engines from 2035 is decided, simply makes no sense.
EU ETS will ensure that cars powered by fossil energy will no longer be seen on European roads in the near future since certificates will become scarcer year by year. Nobody will be able to afford to drive with fossil fuels anymore. However, a ban on combustion engines in general discourages inventiveness towards a climate-friendly future since there might be CO2-neutral fuels for combustion engines to a sufficient extent in the future. A ban would take away this opportunity.
So at the European level, there is also a tendency to achieve the same goal with more than one means. This unnecessarily increases the costs of climate protection.
We do not need activism but reducing CO2 emissions precisely and as cost-effectively as possible. We should support such politics. We should support it on the European level. And if possible beyond.
The Strolling Economist