After APECs confirmation of what had increasingly seemed inevitable - that the Copenhagen summit wouldn’t be the major breakthrough it was heralded to be - the chances of swift and effective action on climate change seem to have faded. But Europe has not been the leader on this issue its rhetoric would suggest. And the German example exemplifies this trend.

First, take Angela Merkel: she likes to point to Germany’s record as a leader on environmental technology and climate change policy; indeed, climate change featured prominently in her speech to the US Congress. Yet, at the same time Merkel seemed to constitute the major block against concrete EU-pledges of financial aid for climate change adaptation to developing countries at the EU summit at the end of October; and that even though the head of the German federal environmental agency (Bundesumweltamts) argues that Germany will need to spend €5 billion a year in adaptation funding to developing countries.

Another telling sign of ambiguity was her stance about attending the Copenhagen summit in person. Faced with opinion polls that show 90 percent of Germans in favour of her attending the summit, Merkel first announced she was going to attend the summit, only to have her press spokesman relativise this statement the next day, stating Merkel would only attend the summit if there were ‘chances for a significant breakthrough‘. As of this morning Merkel was once again set to attend the summit. A good sign, surely, but a week of changes to her decision can hardly be seen as a sign of unwavering commitment and belief.

The ambiguity about how much a priority climate change should be politically does not stop with Merkel. Dirk Niebel, development minister and member of the CDU’s liberal coalition partner FDP, drew widespread criticism by suggesting as early as last week that he thought a binding agreement at Copenhagen was unlikely to materialise - and placing any possible blame for this on large transitional economies like India, Brazil and Mexico. In retrospect Niebel’s perception of likely failure has been realistic, but statements like this always have a certain quality of political self-fulfillment. It certainly did not help Norbert Röttgen’s dramatic rhetorical attempts to convince other countries and the German public that ‘failure in Copenhagen is not an option‘. A new government always needs some time to speak with a unified voice and define priorities. But given the danger of outright failure in Copenhagen, Germany has certainly not played the proactive role that it could have. But it is definitely not alone in this failure.

 EU leaders failed to agree on a financing proposal for developing countries after their two-day summit this week, leaving the EU’s negotiating position on the issue open-ended.

A Kenyan riverbed: developing countries are expected to bear the brunt of climate change because of their geography and their lack of capacity to adapt to change (Image: Matt & Kim Rudge @Flickr)

In a set of conclusions that were long on rhetorical concern about accelerating climate change but short on any new commitments for the EU, the European Council effectively endorsed the views set forth in the Commission communication on funding that I discussed a few weeks ago. This means that the 27 Member states have agreed a common view of the amount of funding required for adaptation and mitigation in developing countries – €100bn annually by 2020 – but not over how much of this should come from the EU and its members.

One of the reported reasons for the failure to reach an agreement is reported to be, as usual, down to differences between the richer and poorer members of the EU. A coalition of East European countries allegedly resisted specific commitments due to concern over their ability to afford the proposals. But the BBC also reported differences over negotiating strategy as a cause for the ambiguity of the Council’s position. Germany, it is suggested, believed that providing an explicit figure would provide less of an incentive for other developed countries to make similar commitments.

How much the EU is really willing to pay for climate change mitigation and adaptation in developing countries, then, remains to be seen. But the failure of EU leaders to establish a common position underlines the political difficulty associated with large transfers of wealth to countries whose citizens don’t vote in European elections.

Angela Merkel’s CDU (with their Bavarian sidekicks, the CSU) and the free-market FDP - the main winner of Germany’s federal elections - will form the next governing coalition. This is almost certainly bad news for German climate change policy - both domestically and on the international stage - but the policy setbacks in this area will arguably be more limited than what the FDP would prefer. Looking at international negotiations and energy policy as examples will show why.

1) International negotiations

Within the Grand Coalition that governed Germany for the past 4 years, Germany’s stance at international negotiations was never a hotly contested political terrain, for several reasons. Because Germany started important environmental measures earlier than other countries (and cleverly pushed for CO² emission-reduction targets to be based on 1990, before the heavily eastern German industry was mostly shut down) being progressive in contrast to international negotiating partners was never particularly hard, because it did not necessitate painful domestic policy measures. While this is changing to an extent, Germany, and indeed Europe, are not the crucial barriers to a post-Kyoto. And Angela Merkel, a former environment minister and early believer in the science behind climate change is unlikely to give up control over negotiations to an extent that would endanger a progressive German position.

Nevertheless, another danger is more real. Sigmar Gabriel (SPD), German’s environment minister had four years in which to build relationships with other negotiators and governments, get a feeling for the limits of other countries’ room for political maneouvre and learn the tricks of the trade. Given the lack of high-profile candidates in the area of environmental and climate change policy within the FDP and CDU/CSU, Gabriel successor will almost certainly struggle to make a similar impression. And, in addition, she or he will only have had three weeks at the most to get their head into an issue that is among the most complicated and tricky of any ever attempted to be dealt with by international negotiations.

2) Energy policy

While it is fair to say that climate change policy did not feature in the run-up to the federal elections at all, this is not true for energy policy. A long string of lies about nuclear energy was masterfully publicised by SPD environment minister Sigmar Gabriel. They included cover-ups about leaks in the site of Germany’s proposed site for the long-term storage of nuclear energy, high costs for cleaning up an alternative site borne by the tax-payer, the existance (and subsequent denial of this fact) of a strategy paper commissioned by an energy major and outlining communication strategies to promote nuclear energy in the election campaign (conclusion: keep quiet and point out nuclear energy’s green credentials). In addition to further accidents in a notorious north-German nuclear power plant and the emotive nature of many Germans’ thinking about nuclear energy made the CDU/CSUs and FDPs election pledge of ‘exiting-the-exit’ of nuclear energy (Ausstieg vom Ausstieg) one of the few clear dividing lines in an otherwise uneventful election campaign.

The high percentage of Germans who want to exit nuclear energy doesn’t seem to have helped the SPD very much. Nor is there a clear-cut impact of nuclear policy on climate change. Nuclear energy is clean (with regards to CO² emissions), and not extending the life of nuclear power plants would almost certainly have meant building more coal powered ones, even at the breakneck speed of German renewables growth. While there is a valid argument that being able to keep written-off nuclear plants running will decrease the pressure for large energy companies to invest in renewables, this would have been equally true for investment in coal that is already happening. If the new government sticks to the CDUs election pledges of not building new nuclear and taxing nuclear providers half the extra profits they make from extending their lifetime to invest this money in renewable energy, then this may not actually be bad news for preventing climate change. Yet this is doubtful. The traditional energy companies are not friends of renewables, and their deep pockets and lobbying prowess may mean they will push further, for government-subsidised new nuclear power stations and reductions in funding for renewables. If the market knows best, skepticism may prevail. On Monday morning after the election the shares of EON and RWE jumped, while those of renewable technology producers fell sharply…

Two weeks ago, a group of 20 German companies announced they would be forming a consortium called ‘Desertec’ for an investment in solar thermal power plants in northern Africa that would provide 15 percent of Europe’s electricity needs. The companies include re-insurer Münchener Rück, technology company Siemens, as well as utilities EON and RWE. It would require an investment of 400 billion € in the next decade.

It’s a grand vision but not one without critics. Among the most prominent is Hermann Scheer, a solar energy pioneer in the Social Democratic Party (SPD). He argues that for two reasons, focusing on projects like Desertec, which require large subsidies and long time scales for realization, is not the most effective way of building up renewable energy supplies. One is the difficulty in realising a project on this scale, involving EU as well as north African countries and difficult geographical conditions would be liable to huge time and cost overruns. The second is the speed at which decentralised solar is becoming cost competitive. Scheer estimates that solar electricity will have reached cost-parity with traditional fossil and nuclear plants in the next three years and that technologies such as electric cars will solve storage problems for intermittent electricity output from solar and wind.

And indeed, a quieter ‘revolution’ may already be happening in Germany. Driven by cheap roof-top solar modules from China and Taiwan (per kW, prices have dropped nearly 30 percent over a year) and generous public subsidies, even in cloudy Germany solar power has become a paying proposition for small-scale investors. While only providing half a percent of German electricity production today, growth rates in solar deployment are high. While in 2008, 1,500 MW of new capacity was installed, this year it is likely to hit 2,000 MW, according to industry estimates.

Both Greenpeace, and the Desertec foundation argue that it is wrong to frame the argument as one between large-scale and small-scale solar energy production. Greenpeace argues that in order to hit state climate change targets it is necessary to both increase German domestic production through Germany’s renewable energy law and invest in visionary projects such as Desertec. Scheer’s argument implies a choice in which decentralised solar production will be marginalised while the long time-scale of Desertec would provide a convenient political excuse to invest in a new generation of coal or nuclear power plants. Which of these arguments is proven right will have to be seen. German citizens’ willingness to pay higher subsidies linked to a growth in domestic solar capacity AND new subsidies that would likely be necessary to finance Desertec might deteriorate in the harsher economic climate. And federal elections in September will prove decisive for crucial political decisions in energy policy, namely those on whether to delay de-commissioning of nuclear power plants and the ban on building new ones; the regulation of new coal-fired plants with regards to CCS-requirements; and the level of future funding for renewable energy sources in the renewable energy law.

Proponents of Carbon-Capture-and-Storage (CCS) have long hailed the technology as the silver bullet that will enable the world to both fight climate change and keep using coal reserves. In Germany, the debate about the merits and pitfalls of this approach has once again surfaced. It highlights three key problems with using CCS to solve the climate crisis. Ordered from least to most damaging to the proponents of CCS, they can be summarised as: 1) The technological challenges in bringing the technology to large-scale applicability and the amount of money needed to reach this point. 2) The economic uncertainties over the competitiveness of CCS-generated energy vis-a-vis other forms of energy. 3) The opportunity costs of investing in CCS given the proven potential and fast growth rates of other renewable energy sources.

1) The technological challenges in bringing the technology to large-scale applicability and the amount of money needed to reach this point.

To deploy CCS technologies to a degree necessary to substantially reduce CO² emissions from coal-based energy generation will require not the creation of an infrastructure similar in scale and technological complexity to that of the oil- and gas-supply. Furthermore, it will require sustained investments by governments and energy producers in fitting and possibly retro-fitting existing plants. This combination of the costliness of the infrastructure necessary and the technological challenges involved means that the technology will be deployed too late, when the peak of coal-based energy production has already been reached, argues Richard Heinberg, from the Post Carbon Institute.

2) The economic uncertainties over the competitiveness of CCS-generated energy vis-a-vis other forms of energy

Caused in part by uncertainties about the costs and feasibility of CCS, in part by uncertainties about future supplies and cost changes of other renewables, there is considerable uncertainty about the economic prospects of CCS-generated energy. Richard Heinberg argues that deploying CCS will lead to strong increases in electricity prices, because a) CCS will be deployed after coal production has peaked, and b) because the technology lowers the efficiency of energy production.

Long-term considerations aside, in Germany doubts about the economics of CCS have appeared from unusual quarters. Johannes Lambertz, head of RWE Power, stated that with increasing construction costs and the potential costs for CCS the economic case for constructing coal-fired power stations was hard if to make.

3) The opportunity costs of investing in CCS given the proven potential and fast growth rates of other renewable energy sources.

While the points made above merely express scepticism about the chances of successfully fighting climate change using CCS technology, they don’t seem to justify to not at least try (we should try everything, after all, if we take climate change seriously). But this misses the crucial point of the case against CCS - opportunity costs: The cost of an alternative that must be forgone in order to pursue a certain action. The question is, would investment in other forms of renewable energy or measures not make more out of public and private investment?

Axel Berg, deputy energy spokesman of the SPD-Fraktion, is one making this argument. He argues that while using CCS sustains an outdated mode of energy creation based on large utilities running large power plants, the technology cannot easily be exported, especially not to developing countries, and shift attention away from policies focusing on energy efficiency measures and new renewables technologies, the only sustainable solutions to climate change.

Overall, the debate around CCS will continue, and it is likely that it will play at least some part in policies addressing climate change. But there are serious problems linked with its use - it is not the silver bullet.

Sigmar Gabriel (left) and Jean-Louis Borloo point towards more flexibility in achieving CO2 target levels globally.

This week France and Germany suggested that rich nations should collectively guarantee deep cuts in GHG by 2020. That stance is nothing new. But the flexibility suggested on the pathway to such collective cuts certainly is a huge step forward in attitudes regarding climate change negotiations.

The Paris meeting held this past week is one of three gatherings of 17 key nations (among them, China, France, Germany, India, Russia, and the USA) in the climate change debate, just ahead of a pivotal UN climate change summit in Copenhagen this December. These 17 nations, which met in Paris, emit 80 percent of the world GHGs, mainly from burning fossil fuels.

As December approaches, French Environment Minister, Jean-Louis Borloo, recognized on the first day of the conference, “there can be more flexibility among us.” He said that France and Germany see no reason why developing nations can not collectively sign up to cut emissions by 25-40% below 1990 levels by 2020. Borloo went on to say that a collective goal would undercut criticism by newly industrialized countries, like China and India, over inaction by developed nations. German Environment Minister, Sigmar Gabriel, added, “the longer it takes for industrialized nations to have a common position, the longer we will have to wait until China and India move [on climate change].”

In this French-German “suggestion” flexibility became a sort of framework as the Paris conference progressed throughout the week. For example, countries, like the USA, which have said that they cannot reach such steep goals by 2020, could contribute to a collective pact in different ways, such as financing development of green technologies. Borloo praised the pace in reaching agreement over a “green-fund” of approximately 100 Billion USD per year to help developing countries limit pollution and develop adaptation plans for unavoidable climate change.

Even though the spirit remained positive throughout the conference, there was some criticism of how certain countries are dealing with the issue of climate change. Notably, U.N. Secretary-General, Ban Ki-Moon, said that he wanted Washington to do more. The Obama administration has suggested a 14-15 percent reduction in GHG emissions from 2005 levels by 2020. Legislation now facing the U.S. Congress would reduce these emissions by 20 percent by 2020.

A main focus of the Copenhagen Climate Congress this past March was to bring consensus to the concentration levels of CO2 at which the world must stabilize in the coming years. During the Paris Conference, Barolo did not talk much about whether progress had been made on the critical issue of the size of GHG emission cuts that scientists say are vital to reducing climate change impacts. But, the idea that change, no matter the level of political flexibility required, must take place.

“The world’s destiny will probably be at stake in Copenhagen,” Borloo said. “Copenhagen is not a retrograde vision; it’s not the start of negative [economic] growth, but a new start for strong, sustainable, sober carbon development.”

We will see how attitudes progress during the next meeting in June in Mexico.

The transport sector once again takes centre stage, as the European Environment Agency criticizes the green credentials of motor vehicles, freight transport and rail networks. Highlighting the need to shift investments in the current economic climate to more sustainable and energy efficient modes, Professor Jacqueline McGlade, EEA executive director, added that

“…trends in transport are pointing in the wrong direction and will continue to contribute to air pollution, rising emissions of greenhouse gas and many negative environmental impacts.”

Jaguar Land Rover has just received a £330m bailout from the European Investment Bank to safeguard its 15,000 jobs an make investments in low emission technologies. The loan, the repayment of which will be guaranteed by the British government, is for a research and development project on reducing emissions. Jaguar Land Rover has been seeking Government assistance for some time and has recently put its workforce on a four-day week to avoid job losses.

The UK government received renewed pleas for an industry bailout from the motoring industry this week. Lobby groups are hoping April’s budget will include a ‘scrappage scheme’ - where car owners are given a financial incentive of about £2,000 to swap their old vehicle for a new greener model.

Whilst no decision has been announced, it is believed the scheme, which increased sales by 40% in March, attracting half a million buyers when it was introduced in Germany; is being taken seriously by MPs.  Statistics showed yesterday that sales of cars in the UK have dropped almost a third year on year. However, environmental campaigners highlight that the transport sector has been slow to introduce more environmental vehicles, and said that the money could be better used to fund sustainable transport solutions. There was also a fear that funds could be diverted from existing budgets set aside by the government for investment in green technologies, such as the £400m earmarked in the pre-budget report for an “environmental transformation fund”, which supports the development of new low-carbon energy and energy efficiency technologies in the UK.

A new report, The State of Green Investing 2009, by Progressive Investor, a green investment newsletter, has increased confidence in green investments, backed by positive signs from the stock market. The US report adds that the green industry is “at the nexus of stimulus support by governments around the world”.

Sometimes, no news is good news. In a week in which Obama gave US states the ability to enforce tough new standards on car fuel efficiency and emissions, German policymakers managed a last minute turnaround to prevent doing the opposite. The audacity of claiming a shift to environmentally friendly car taxation, while preparing a tax model that would have more than halved taxation for the worst polluting SUVs, was breathtaking. Luckily some in Germany’s governing coalition, namely Sigmar Gabriel, minister for the environment, and Wolfgang Tiefensee, minister for transport, both SPD, must realised the impact this would have with voters, both those interested in climate change and those who questioned why they had to pay the same, while those driving 500hp SUV got a hefty discount. In the end a compromise was found, whose central characteristic is that it will mean every kind of car essentially paying what it is paying now. This was criticised by the LINKE party and environmental NGOs as a ‘wrong signal’ because it did not in fact raise taxation for more polluting vehicles. Yet, one could be forgiven, given recent experience with Germany’s Grand Coalition to give a sign of relief at the fact that things haven’t become even worse.

On a related note, this week brought out a few other interesting bits of information. DEKRA, an car testing association published a report showing that 92 percent of drivers are willing to change to an ‘Umweltauto’, even if it means a smaller range, worse driving performance, or shorter service intervals. Unfortunately, they didn’t ask how much more people were willing to pay…

Another report, this time written by Roland Berger, a consultancy, for the government of the state of Saxony, shows the economic potential of environmental technology. This industry grew by 17 percent in 2007, employs 18.000 people in Saxony alone, and already contributes 6 percent to the states GDP. And, encouragingly, even in the current economic climate the outlook of the companies asked remained positive. Adding to the good news, for the economy and the climate, was the association of energy and water utilities BDEW, stating that renewable energy covered more than 15 percent of total German electricity consumption. This means Germany is already fulfilling the EU renewable energy targets, and, given that much of the technology is produced in Germany, highlights the positive economic impacts courageous action on climate change can have.

Sigmar Gabriel, minister for the environment and former prime minister of lower Saxony, welcomed the second ‘Konjunkturpaket’ (stimulus package), as a chance for both job creation and the environment. Public investment would be subject to environmental guidelines, while changing car taxation to a CO² basis and paying car owners to get rid of old cars (or, rather, for buying new ones), would be a big step towards a more environmentally friendly fleet of cars. Two days after saying this (and after the package was passed), his ministry published a report showing that German companies were holding a large sharge of business in fast-growing environmental technology markets, and had already created 1,8 million ‘Umweltjobs’ (green jobs) in Germany.

Yet, while the growth of companies and jobs in green technologies is certainly encouraging, with regards to the stimulus package’s environmental impact, the reactions of commentators and interested parties was telling. The automotive and construction industries were positive to enthusiastic about the car tax holiday and the bonus to buy new cars. Environmenalists were not. A newspaper commentary reminded readers that Angela Merkel, in 1995 still as minister for the environment, had strongly opposed the idea of a bonus to buyers of new cars, and called the measure ‘ready for the scrap heap’. DHU and VCD, a environmental NGO and a left-leaning motring association, pointed out that most emissions are created when a car is manufactured, and that the bonus only creates an incentive when the value of an old car is below 2500€, this mainly being the case for cars which (because they are small) don’t emit most emissions anyway. Worse, they provide a model calculation showing that under the new car tax proposals (even though they will be based on CO² emissions), the most polluting cars will actually pay a lot less than before.

Those arguing that the measures aimed at the car industry are in fact only a small part of the stimulus package are right, but there is scant evidence of environmental measures elsewhere in it. While spending on infrastructure (such as modernising schools) will a positive impact on energy efficiency, this is accidental rather than reflecting conscious design. The same holds true for much of the package. Even if the car stimuli have (which seems doubtful) a positive environmental impact, they are designed to shore up manufacturing jobs. And the draught of measures stimulating those green industries that have already created 1,8 million jobs in Germany is disappointing, but also suggests that in a time of crisis, most German politics are scared to believe their own rhetoric.

It is too early to predict how German politics and the environment will ‘get on’ in 2009. Yet, this year will be an important crossroads in showing whether Germany will remain a leader in dealing with environmental issues, including climate change, or not. With a number of state elections, as well as a national, and a European one, election campaigning will have a defining influence on the politicians and policies governing Germany in the coming years, yet so far the signs are not promising.

For the time being, the defining issue in German politics is the second economic stimulus package, agreed upon in principle, and to be passed by the coalition government soon. CDU and SPD have outlined their plans for what it should look like, and from an environmental point of view, it seems likely to disappoint.

It seems likely the emphasis will be on broad-ranging tax-cuts, while government investment will be focused on infrastructure, yet likely to encompass road construction as well as investment in energy savings. The SPD, specifically, suggests using part of a suggested state fund to invest in energy savings in public buildings, as well as a more efficient and environmentally friendly energy grid. Controversially, they also want to encourage consumers to buy more environmentally friendly cars through paying them a bonus for getting rid of their old car, a measure derided by Greenpeace and others as an expensive and environmentally harmful subsidy in disguise to the automotive industry.

The CDU puts a stronger focus than the SPD broad tax cuts, likely to not have a significant positive influence on the environment. Nevertheless, they propose to bring forward a change in car taxation, to make it dependant on a car’s CO² emissions, a measure with a potentially large positive impact on CO² emissions. Furthermore, they also want to invest in energy savings in buildings, yet have not yet specified how they would accomplish this. It’ll be worth watching the upcoming intra-coalition negotiations on the stimulus package to see what happens to these limited environmental measures.

Overall, in trying to stimulate consumption through broad tax cuts, the coming year might disappoint those who had been hoping for a more focused effort on renewable energy, CO² emissions reductions, and job creation in green industries.