Merkel unveils climate plan, alarms industry at costs
German Chancellor Angela Merkel unveiled plans to slash greenhouse gas emissions, a step hailed by environmental groups though criticized by industry as meaning higher energy bills.
Merkel, meeting with utilities and power users in Berlin today, outlined steps to reduce emissions by up to 40 percent by 2020. Proposals focus on boosting the productivity of power plants by 3 percent each year and improving energy conservation, measures Merkel has said are vital to achieving goals on tackling climate change. Germany is Europe's biggest emitter of carbon dioxide.
"There is some doubt about whether our goals can be reached,'' Merkel told reporters in Berlin after the government's third energy summit. "I think we are on a reasonable path.''
Merkel's decision to spearhead CO2 reduction in the European Union gives added impetus to the government to fulfill ambitious targets. The proposals under discussion today ranged from light-bulb usage to ``capturing'' CO2 in underground caverns. The future of nuclear power was also on the agenda, though Merkel rebuffed calls to extend the lifespan of German plants.
Nuclear Analysis
The energy summit analyzed a scenario in which nuclear plants were allowed to operate longer than currently permitted. Still, Merkel said the German government doesn't expect to agree on any change to its nuclear energy policy before 2009, when this legislative period ends.
"The complete renewal of Germany's energy park to meet productivity targets just isn't economically feasible,'' Michael Huether, head of the Cologne-based IW economic institute, said in an interview before the summit. "The debate over Germany's nuclear phase-out is about to be re-opened.''
Germany's 17 nuclear power plants, amortized investments that are due to close by 2021 under an agreement made by the last administration and ratified by Merkel's government, generate about 26 percent of the country's electricity and emit smaller amounts of CO2 than gas- or coal-fired plants. Reactor owners E.ON AG, Vattenfall Europe AG, RWE AG and Energie Baden- Wuerttemberg AG each want to run their nuclear plants longer.
In a four-page paid supplement published on July 1 in German newspapers, RWE Chief Executive Harry Roels urged the government to re-examine the nuclear phase-out because ``it was forged when climate protection wasn't as high in the public imagination as it is today.''
'Anti-Energy Policy'
Other industrialists are blunter. "The energy policy of this government is an anti-energy policy,'' said Klaus Rauscher, chief executive officer of Vattenfall's German unit, cited in an interview in Spiegel magazine on July 1.
Nuclear reactors produce more electricity than coal and lignite plants, which supply 21 percent and 24 percent of Germany's power needs respectively, according to the Economy Ministry. Solar and wind power, subsidized by tax, supply another 9 percent and gas some 12 percent of power.
Germany has pledged to cut CO2 output by 21 percent by 2012 compared with 1990 levels, starting next year with a cut of 57 million metric tons, or a tenth less than in 2007.
The aim is to "unleash a revolution in power efficiency,'' Environment Minister Sigmar Gabriel told reporters in Berlin on June 29. Boosting power plants' productivity will save power consumers annual costs of 50 billion euros ($68 billion) by 2020, he said.
"Surely, if you invest in efficiency that leads to savings,'' said the Social Democrat. "I can't understand industry's misgivings.''
Something in Return
"I don't see how you can force utilities to invest in more efficient plants without giving something in return,'' said Alfred Richmann, managing director of the Essen-based VIK group that represents 80 percent of power bought by German industrial companies, including carmaker Volkswagen AG.
"Power customers would pay the productivity charge,'' said Richmann in an interview. "We need to ensure that meeting climate goals doesn't torpedo our competitiveness -- and this does.''
Power prices are rising, putting a question mark over assumptions that productivity gains lead to lower prices. As many as 126 power suppliers increased prices by an average of 7.7 percent on July 1 after state controls on prices expired, the Verivox power-price monitoring service said on its Web site.
Merkel's planned increase in spending on energy conservation may be more to industry's liking. She proposes raising subsidies for programs to lower heat-loss by buildings to 3.5 billion euros from 1.4 billion euros a year.
The government's third energy summit begins at 10 a.m. Merkel, Gabriel and Economy Minister Michael Glos will report on the talks at a press conference at 1:30 p.m.
(Published by Bloomberg, July 3, 2007)