Draft version leaked – coal exit before 2050, ecological tax reform and divestment
A first draft of the Climate Action Plan 2050 was leaked in early May 2016. The environment ministry aimed to consolidate a long catalogue of measures suggested by the consultation process (see below). The finished plan is to be decided upon by government after the summer recess 2016.
The leaked draft (seen by the Clean Energy Wire) describes a pathway for Germany to become carbon neutral by 2050. The framework for Germany’s ambition is set by the Paris Climate Agreement and the EU climate targets, which Germany “as an economically strong member state” will attempt to fulfil at the upper margin, the draft reads.
In order to reach the climate target of reducing emissions by 80-95 percent by 2050, emissions from power production and energy-related emissions from the transport, building, industry, trade and services sectors have to be avoided entirely. This will require an electrification strategy and sector coupling. The plan also sets out interim targets and deadlines (for 2030) for CO2 reductions in the different sectors and proposes measures to ensure emissions can be cut in these areas. The proposal includes:
- Ecological tax reform and internalising environmental costs
The environment ministry suggests that the government introduce an “ecological tax reform”, seeing that “environmentally related taxes and levies can cost-efficiently trigger climate-friendly economic behaviour”. The reform should include the implementation of “ecologically fair prices” by internalising the environmental costs of harmful products and services. The government should investigate how “additional levies on fossil fuels and heating fuels” could be used to support environmentally beneficiary technologies, the ministry suggests.
- Climate friendly investment
Reduce bad incentives for investments – the government should alter incentives and re-work its own investment guidelines to ensure that projects that are harmful to climate and/or environment are not supported (divestment), and that no new investments are made in these areas.
- Power sector: Reducing emissions from coal
By 2030, the energy sector is to cut CO2 emissions in half. Coal power in particular has to be reduced “well before” 2050, the plan says. To ensure this is achieved in a socially acceptable way for citizens and regions that are dependent on coal mining and power generation, the ministry suggests a “pluralistic” commission should come up with a coal phase-out plan by mid-2017.
- Building sector: Making both old and new buildings climate neutral
Reduce emissions from 119 million tonnes CO2 in 2014 to 70-80 million tonnes in 2030. Reforms and measures in the building sector will not only involve strict standards for new-builds but also include “step-wise” refurbishment obligations for heating systems in old houses.
- Transport: Digitalisation and electrification
Emissions from the transport sector must be reduced from 160 million tonnes CO2 in 2014 to 90-100 million tonnes in 2030 (minus 40 percent). By 2030, most new cars must be electric. The government should present a “climate protection concept” for the transport sector by summer 2017.
- Industry: Carbon floor price and climate aware investment
Reduce emissions from 181 million tonnes CO2 in 2014 to 120-125 million tonnes in 2030. Modernisation and investment should be geared towards efficiency and emission reductions as early as possible, or the result will be stranded investments and capital depreciation, the draft says. The implementation of a European carbon price floor should be considered to strengthen the European Emissions Trading System (EU ETS).
- Agriculture: Reduce numbers of ruminant animals, eat less meat
A complete decarbonisation is not possible, but by 2030 the agricultural sector may only emit 55-60 million tonnes of greenhouse gas emissions (down from 72 million tonnes in 2014). By 2050 emissions must be reduced to 35 million tonnes of CO2 equivalents. Proposals: Reduce meat consumption by half by 2050; preserve meadows and pastures; incentives for the environmentally friendly farming of 20 percent of all land by 2030 (6 percent in 2014).
- Land use and forestry
Use forests as carbon sinks; re-naturalise moorlands for the same purpose.
- National welfare index
The government should investigate a national welfare index – which rates the condition of a nation by the state of its natural resources and ecosystems and damages from greenhouse gases – to be published annually, alongside gross domestic product.
- Embed climate protection local public services
The government should investigate how to make climate change a higher priority for local and regional level policy.
Why have a Climate Action Plan?
When the Christian Democratic and Social Democratic parties formed the current “grand coalition” government following federal elections in 2013, they agreed to pursue a target of reducing Germany’s greenhouse gas emissions by 80 to 95 percent by the middle of the century, compared to 1990 levels. Measures to achieve this goal were to be rooted in a broad dialogue between stakeholders, and written into a climate action plan.
The environment ministry has said the cabinet will agree on the plan in summer 2016. It will not be a law – and so will not be put to a vote in parliament – but rather become part of the government’s energy transition strategy. The plan is to outline the path Germany must take, by implementing certain policy measures, in order to achieve previously agreed greenhouse gas reduction targets. It remains to be seen whether the plan will include further targets, e.g. specific goals for individual sectors, and how strict a time frame it will set for various changes to Germany’s energy system. The government plans to regularly review and update the plan.
The successful negotiation of a global climate treaty in Paris in December 2015 gave the undertaking an extra boost. “In the light of the outcome in Paris, the federal government will decree a national Climate Action Plan 2050,” the environment ministry says on its website. But the plan also comes at a time when Germany is struggling to meet its climate targets and many are therefore calling for a speedy coal exit.
Although Germany has increased power production from renewables to over 30 percent in 2015, overall CO2 emissions, as well as emissions from the power and transport sector, have slightly increased or stagnated over the past five years. In its 2014 Climate Action Programme and National Action Plan for Energy Efficiency, the government decided on measures (a mix of incentives and changes to existing laws) to reach Germany’s 2020 climate target.
While the environment ministry has repeatedly called for an organised coal exit by 2045 or 2050, other ministries, state premiers in coal mining regions and trade unions have resisted. Because of this, the Climate Action Plan 2050 is also a first attempt to reconcile these opposing positions and find a consensus on the future of coal in Germany.
Environment Minister Barbara Hendricks sees the plan as an opportunity to shape a reliable framework for actors in the energy sector and beyond. “We want to set measurable goals for 2030 and a roadmap for 2050. This means we have to say where the different sectors are headed. And this means we have to exit lignite coal in the next decades, decarbonise the transport sector and have climate neutral buildings by 2050,” Hendricks said at an event in April 2016.
A dialogue process with citizens, communities, states and other stakeholders in 2015/2016 has resulted in a long list of proposed measures, ranging from a CO2 tax, to the replacement of fossil fuel heating systems in buildings, to introducing a speed limit on German motorways. It is now the environment ministry’s job to come up with a consolidated plan, which is due to be published by May 2016. A short public consultation and co-ordination between ministries is to follow, before a cabinet decision gets scheduled some time before the parliamentary summer recess.
First reactions to the concept of a climate action plan and the consultation process have been predominantly positive, with the exception of some industry representatives who have criticised both the dialogue process and the provisional measures proposed so far and environmentalists who are concerned that the measures will not be progressive enough (see below).
The consultation process
The environment ministry decided on a “reversed” consultation process for the Climate Action Plan 2050. Instead of the ministry producing a draft for stakeholders to then suggest changes to, stakeholder and citizen workshops were to suggest climate protection measures that would then be consolidated into the Climate Action Plan by the ministry.
The process began in summer 2015. The ministry had previously commissioned the scientific basis for the need to cut greenhouse gas emissions in Germany.
Stakeholders could suggest climate protection measures to decarbonise Germany’s economy by 2050 in five “action fields”:
- Energy Economy
- Industry, Trade and Services
- Agriculture and Land use
The participating stakeholders were local communities (towns, councils), federal states, associations (industry, civil society) and citizens. Every group assigned a delegate to the delegates committee.
In a first round of the consultation process, stakeholders handed in some 400 suggestions and ideas, which were consolidated by two research institutes (Wuppertal Institute and Ifeu) into a “measures set 1.0”.
After several meetings of the delegates committee and working groups on the separate fields of action, the researchers put together a “measures set 2.0”. The Institute for Applied Ecology provided specialist expertise on these measures and estimates of their quantitative effects where possible.
In November 2015, 472 randomly chosen citizens in five German cities participated in workshops to which saw 19 further proposals added to the measures set and 12 citizens added to the delegates committee.
A further round of consultation gave states, communities and associations, as well as the citizens involved in the November 2015 workshop, the chance to vote on the measures. The result was the “measures set 3.0”, which was reviewed by the delegates committee one last time.
Then the political process began – starting with the actual work on the plan by the environment ministry. The draft plan will be consulted on by the other ministries, which will likely lead to some changes. A final version is to be presented to cabinet for approval in late summer 2016.
Measures in the five “action fields”
The following is a (non-exhaustive) list showing a range of measures suggested by the consultation process in the five action fields and included in the latest measures catalogue:
- Development of framework conditions for power-to-X and storage technologies
- Improved role of power storage in the energy transition
- Better framework conditions for investment in the distribution grid
- Federal support programme to strengthen heating grid infrastructure
- More renewables in CHP
- Coal exit (dialogue/exit/allocation of power production capacity/efficiency standards/subsidy cuts/run-time limits)
- More European renewables support
- Strengthened demand for green power in the power market
- Reform of the EU emissions trading system
- Robust framework for the implementation of the 2030 energy and climate targets
- Sustainable use of biomass potential and bio-methane
- Interconnection of campaigns for energy efficiency
- Framework for easier participation of small prosumers in power grids
- Democratisation through decentralising the energy industry
- Cross-state network for renewable energies
- Support of locally available CO2-reduced energy
- Development of new, efficient energy storage and energy supply
- Influence on international energy policy
- Introduction of a CO2 tax
Industry, trade and services
- Subsidies and taxes made dependent on climate protection requirements
- Labelling of products according to their environmental footprint
- Introduction of a climate levy
- Abolish rebates and subsidies for industrial energy users
- Market incentives for energy efficiency
- Standards for new buildings in line with climate protection requirements
- Mandatory use of renewables in heating of existing buildings
- Replacement of fossil-fuelled heating systems
- Property tax to be dependent on efficiency of buildings
- Digitalisation strategy for transport according to greenhouse gas emissions
- Increase cycling and change road traffic regulations accordingly
- Ambitious CO2 limits for personal cars
- Introduction of a speed limit on motorways
- Support for electric mobility
- Introduction of a road toll for private cars depending on their road performance and emissions
Agriculture and land use
- Climate friendly fertiliser strategy
- Reduce food waste by half by 2030
- Reduce methane emissions by changing feeding of livestock
- Reactivate moorlands for CO2 uptake
- Climate protection law
- Efficiency law
- Ecologic fiscal reform
Reception of the process and discussion of measures
The general idea of giving Germany’s energy transition a long-term framework by introducing a climate plan till the middle of the century is welcomed by most actors. One of the few voices to almost completely reject the idea came from the Federation of German Industries (BDI) in autumn 2015, when it advised the government to “ditch” the Climate Action Plan 2050 entirely because it showed “inconsistencies” between targets and instruments, did not give equal weight to growth and climate protection, and would lead to “scattered regionalism” in climate policies that consumed scarce financial resources. The BDI has since changed the wording of its objection, removing the word “ditch” (see page 19 of the document – in German).
Shortly after the last measures catalogue was published by the ministry, industry associations DIHK, BDI and ZDH (which had participated in the consultation process) wrote an open letter to the environment minister, criticising the process as “highly complex, in-transparent and prone to be instrumentalised”. The effects of the measures were insufficiently quantified, the organisations said. They said that the plan was rushed. Carsten Rolle from the BDI said in April that industry feared there would be no time to discuss the finalised plan before the government was to adopt it this summer.
Shortly after the measures set was published in March, German daily Die Welt quoted a representative of the heating industry as saying the Climate Action Plan 2050 was a “poison list of state-dominated measures”. Of particular concern were plans to raise taxes on homeowners and landlords who fail to make their buildings more energy efficient. “Indeed the measure set includes all of the radical means of force, burdens and obligations that have been laboriously averted or attenuated in the parliamentary process in the past years, with their social and economic impacts in mind,” journalist Daniel Wetzel writes.
Meanwhile green politicians and environmentalists hope the plan will outline a coal exit by 2050 at the latest. Some companies would also welcome such a plan as giving planning security. Daniel Benes, chairman of the board at Czech utility CEZ, which was bidding for the lignite assets of Vattenfall in eastern Germany, said in February 2016 it would be helpful for their investment if the government specified a timetable for a coal exit.
A group of over 40 NGOs, including churches and development organisations, has called for a tougher climate protection regime in Germany, including setting an emissions reduction target of 95 percent by 2050 and enacting a coal phase-out by 2035. The organisations tabled their own “Climate Action Plan 2050 of the civil society”. The plan suggests every sector should be given an emissions target. It also calls for specific medium term targets, as well all separate laws for climate protection and efficiency.
While the latest set of measures proposes a range of policies to achieve a coal phase-out (e.g. allocation of power production amounts/efficiency standards/subsidy cuts/run-time limits) it is still unclear if the final document will introduce a timeline and actual measures.
Measures for transport are another major sticking point. Transport is the only sector that has not reduced emissions at all since 1990. Suggested measures include speed limits on motorways – a highly controversial idea – and support for e-cars.
Christian Hochfeld, head of transport think tank Agora Verkehrswende* says these suggestions are like jigsaw pieces and we don’t yet know how they will fit together. He calls for a better overlap of renewables policies and efficiency and transport policies for a coherent strategy for the energy transition and the transport sector. Hochfeld says the Climate Action Plan should include a decarbonisation target for the transport sector by 2050 as well as a strategy for how the cargo transport on roads could be decarbonised.
Felix Christian Matthes, researcher at the Institute for Applied Ecology (Öko-Institut) said there should be a specific emissions reduction target for each sector included in the Climate Action Plan 2050. This approach was still missing in the set of measures. The colourful bunch of instruments currently under consideration would have to be turned into a systematically developed policy mix, without deciding on every last measure up till 2050, he said at an event in April 2016.
Speaking at the same event, Carsten Rolle from industry association BDI said the measures set was a list of very different instruments that were only helpful to a limited degree. He said the plan had to be more concrete for the time up till 2030 and less so for the longer timeframe until 2050. The BDI is opposed to separate targets for each sector because this would reduce the ability to choose the most cost-efficient measures across the board. Rolle nonetheless called for a policy mix to be implemented with the action plan. He warned that the national Climate Action Plan should only address those emissions that are not already covered by the European Emissions Trading System (EU ETS).
*Like the Clean Energy Wire, Agora Verkehrswende is a project funded by Stiftung Mercator and the European Climate Foundation.