Max Planck Institute Finance Researchers Call Europe’s Climate Policy A Failure

28 June 2010

Max Planck Institute Finance Researchers Call Europe’s Climate Policy A Failure Prof. Kai Konrad and his team of finance researchers at the Max Planck Institute call Europe's climate policy a failure. Hans von Storch’s blog brings our attention to an excellent German report by normally green ZDF public television. The report takes a critical view of Europe’s energy policy and reaches the conclusion that it’s a failure. Here’s what the ZDF report says: After 20 years of conference after conference after conference, a sort of traveling climate circus on a worldwide tour, Copenhagen became the highpoint of absurdity in December of last year – a political and media overkill with the aim of nothing less than to rescue the planet. The conference failed yet again. It all gets down to money. Professor Dr. Kai Konrad is a distinguished finance researcher at the prestigious Max Planck Institute in Munich and a close advisor to the Federal Ministry of Finance. He and a team of researchers drew up an expert assessment of Germany’s climate policy. The assessment was so damning that the Ministry quickly removed it from its website. The assessment took a hard look at the 1st Commandment of climate policy: reduce CO2 emissions, and how a relatively small group of countries decided – unilaterally – to reduce CO2 emissions. The researchers writing the assessment deemed this a grave error. Professor Konrad says: Quote: When a small group of countries sit down and say they want to do something good for the climate, and reduce their emissions, it has practically no effect on the total amount of emissions worldwide. It means the rest of the world picks up the slack and just emits more. In effect it means that the countries who cut emissions incur all the costs but no benefits. And the countries that don’t cut emissions, profit. So it’s highly worth it for these so-called “free-riders” who don’t sign on. What has the Kyoto protocol produced? Quote: Since 1990 worldwide CO2 emissions have increased 36% and the few countries that have reduced their emissions have had immense costs, estimated to be $150 billion. When it comes to CO2 emissions, the European Union is a global power. Especially Germany has been a leader in cutting emissions – already 20% less than 1990. Professor Konrad says: Quote: The fact that Europe is a leader in cutting emissions will only lead to other countries slacking off, and thus the costs are merely shifted from the countries that don’t play along to Europe. So whatever progress Europe makes in cutting emissions just gets lost to countries like USA and China. And so the circus goes on. The other countries are happy about the cuts, and the EU carries all the costs. Europe’s Climate Commissar estimates the costs will be: Quote: €500 billion ($620 billion) in the next 10 years. Germany is the leader in this craziness, and is expected to cut emissions by 40% by 2020. This is to be accomplished by Germany’s EEG Gesetz, or Energy Feed-in Act, which forces power companies to purchase renewable energy at exorbitant prices from anyone who produces them and to deliver them to consumers, who then must pay through the nose. Professor Konrad says (in summary): Quote: From a theoretical point of view, the EEG brings no benefit. It brings nothing because the system of buying CO2 emissions certificates doesn’t work. All the certificates do is ensure that the CO2 gets produced elsewhere. Professor Konrad: The Feed-in Act is to be criticised in my view because it is no longer transparent as to what an enormous redistribution it creates and the huge subsidies that flow out of the pockets of consumers and into the hands of those who profit from it. By the end of the year German consumers will have paid €62 billion ($75 billion) without seeing any CO2 reduction. In Professor Konrad’s and his colleagues’ view: Quote: The policy of avoiding the production of CO2 is a failure, nationally and globally. As a result, Professor Konrad’s recommendation is to use a different strategy (one that even the earliest and most primitive of man used): Quote: A D A P T A T I O N The researchers say this policy would be much more successful, and certainly much cheaper than the current CO2 elimination policy.