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06.March 2013 - 22:32

An energy form in breast-feeding

In recent climate discussions, the possibility of the collapse of the entire emissions trading system (ETS) has been flashed. An oversupply of emission allowances has been created in the midst of the economic downturn – this also being the reason for the extremely low price of the allowances. The European Commission has offered ”backloading” as a solution: some of the emission allowances would be withdrawn from the market, which would elevate their price – and the price of electricity alike.

As the ETS rapporteur of my political group, I have taken a critical stance towards the Commission’s intentions. But like all other issues, this one is not easy or self-evident, either. I can understand the voices that are worried about the future of the ETS, and want to save it. The main concern is that the ETS is replaced by increasingly shattered national approaches, such as the taxation of carbon. The reason would be fiscal: governments want additional funds.

In my opinion, however, there is little sense in patching the problem with a new one: backloading would only have a cumulative effect. Intervening with market mechanisms would convey a worrisome signal of political volatility: who would dare to invest in such a Europe? Lifting electricity prices is particularly unwise now that the shale-gas boom has opened up the possibility of reasonably-priced energy in other parts of the world. The exodus of European industries that follow price and energy stability really becomes a concern, if our cure for everything is the lifting of electricity prices.

Most people are still of the opinion that emissions trading requires structural reform. But in this case, it is essential to take an honest look at the factors that disturb the ETS market most.

For the emissions trading system the overlapping policies of Member States, especially the renewable energy subsidies and partly also taxation as well as energy efficiency subsidies and regulations have become detrimental. Overlaps have constantly disturbed the formation of a normalised energy market.

It is not in the benefit of the national economy either that we replace profitable energy forms with unprofitable ones and convince ourselves that this creates growth.

The attitudes towards renewable energy reflect a similar mania as those towards biofuels. Only eight years ago, the rhetoric of the biofuel boom was so passionate that it was sufficient that a product’s starts with the prefix ”bio”; profitability or environmental friendliness was not really thought of. Only later people started to consider the whole life cycle of the product.

Similarly it is thought that renewable energy is so good in itself that it can cost whatever; be however mad – it is renewable after all.

The intent appears to be good, but actually the consequence of feed-in tariffs and other forms of generous subsidies to renewable energy have the opposite effect on the environment. The renewable energy industry remains in its infantry and does not learn to walk on its own feet. In a way, it remains in breast-feeding for an endless period of time, and it does not even attempt to seek genuine profitability from the markets, when this profitability is a given. Excessive subsidisation locks the technology on an immature level. This explains the madness that has been practiced during recent years: in Germany, for example, wind farms have been built in places, where there is no wind in the first place. It does not matter – there is a fixed price on renewable energy.

Now, governments everywhere have started to realise this problem. The UK has noticed that renewable energy targets cannot be reached, as this would be incredibly expensive. The subsidisation of renewables has created a massive debt during Spain’s financial crisis. In Germany, the reverse side of the massive investment to renewable energies is the even more massive investment to fossil fuels.

However good renewable energy may be, we should not support the industry at any price. My own estimation is that sooner or later the EU will have to lower its renewable energy target for this energy form to be able to reach genuine – not artificial – profitability.

In my opinion, we should indeed do precisely this in order for us to get hold of high-quality renewable energy. The decision would also save the emissions trading market – if we desire to do so in the first place.

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