ESSAYS TWO COUNTRIES, ONE PLANET

important in driving up the price of Germany’s energy transition. The Social Democrats were the dominant party in the Red-Green coalition and much as they favoured small-scale renewables, they had no intention of abandoning coal. Billions of euros still flowed in subsidies to hard-coal and lignite mines, and continued even as a surge in oil and gas prices tilted the market in coal’s favour. In addition, the leading utilities received a perverse windfall from the operation of Europe’s emissions trading scheme (ETS). This was designed to make polluters pay, by putting a price on carbon. But for a time, it had the opposite effect. Between 2005 and 2013 the power utilities received free allocations of emissions certificates calculated to match their existing emissions. At the same time, in a free electricity market they were able to pass through to consumers the “cost” of the emissions certificates that they had in fact been gifted, rather than paying for. The result was a windfall running into tens of billions of euros at the expense of Europe’s consumers.

Transition devours its own

With a generation of power stations built in the 1970s having to be replaced around this time, utilities across much of Europe doubled down on polluting coal. In Britain this dash for coal was aborted in 2008-9 by the financial crisis and the Brown government’s turn to a more aggressive climate policy. Germany was not so fortunate. As the International Energy Agency remarked in retrospect, in the early 2000s Germany’s utilities led “one of the biggest investment waves into domestic coal capacities since the post-war reconstruction.” Questions about environmental sustainability were answered by gesturing vaguely towards the alwaysjust-over-the-horizon promise of carbon capture and sequestration. The environmental ministry led by Social Democrat Sigmar Gabriel connived in this green-washing.

The result was schizophrenic. At the same time as Germany’s green pioneers drove a small-scale revolution in renewable energy generation, its utilities positioned themselves as low-cost providers of coalfired electricity for the booming economies of central Europe. As the renewables share grew at home, Germany’s giant utilities became exporters of cheap, dirty power to the rest of Europe.

It was disastrously shortsighted—not only for the planet, but for the utilities involved. As the recession took hold in 2008, the demand for electricity plunged. The surge in renewable power generation robbed conventional generators of the profits to be made during demand spikes. After Fukushima the nuclear assets on corporate balance sheets had to be written off. In 2013, with the auctioning of emissions certificates, the EU finally ended the windfalls from the ETS, and in 2018 subsidies to the burning of hard coal ended with the closure of the last underground mine, leaving dirty lignite as the main power source.

With their share prices plummeting, Germany’s giant generators faced a battle for survival. While powerful incumbents like RWE began to reposition themselves as leaders in big renewable technology overseas, at home they launched an aggressive attack on the “expensive renewables.” In an era of austerity, high fuel prices made fodder for tabloid journalism whether in the Bild Zeitung or the Daily Mail.

And in Merkel’s second coalition with the free-market, pro-business FDP, those grumbling about the cost of transition found a friendly ear. Talk of a carbon price floor that would have penalised coal power ceased. Feed-in tariffs were dialled back and discussions began on how to cap the taxpayer’s exposure. Onshore wind faced a wave of local protests.

With the SPD positioning itself as the defender of the blue-collar voter, the rollback continued after the party re-entered government in the third Merkel coalition of 2013. A new auctioning system was designed to limit renewables expansion. Whereas the feed-in system of the 2000s encouraged a helter-skelter deployment of small-scale capacity, Berlin now invited bids for fixed slices of renewable capacity, limiting the field to investors able to handle the legal complexities of the auction system. This has effectively excluded smaller solar and wind farm cooperatives. Perhaps they also lacked the necessary guile: many of the auctions have been won by the incumbent generators with price offers so low that they clearly have no intention of building the generating capacity.

In the wind sector, whether onshore or offshore, the uncertainty of the funding regime and legal obstacles to planning permission have brought new investment to a virtual halt. In 2018, German investment in renewables was half of its peak in 2010. In 2019 only a few MW of wind energy generating capacity have been built. Wind turbine producer Senvion declared bankruptcy in the summer, and early pioneer Enercon announced large-scale layoffs in November. The crisis is such that in an unprecedented move, German industry federation BDI and other industry associations joined forces with trade unions to protest against new regulations for wind farms that might make wind development impossible.

In Britain, too, since Labour left office in 2010, funding for small-scale renewable energy projects has faced round after round of cuts. Conservatives representing rural constituencies have pandered to local opposition against onshore wind. The demand to get rid of what David Cameron in some moods called “green crap” has echoed through the pages of the Sun and the Mail. And the government makes clear that competitiveness takes priority. Investment in renewables has fluctuated with the ebb and flow of subsidy regimes and contractual arrangements. The UK’s feedin tariffs were scrapped.

And yet the policy debate unleashed by the Brown government in 2008 did help to forge a consensus, embraced by Cameron in his more progressive moods and at times Boris Johnson too. The Cameron coalition’s Energy Act of 2013 worked as a mechanism for

And yet the policy debate unleashed by the Brown government in 2008 did help to forge a consensus, embraced by Cameron in his more progressive moods and at times Boris Johnson too. The Cameron coalition’s Energy Act of 2013 worked as a mechanism for

PROSPECT

7 of the top 10 CO2 emitting coal power stations in the EU are situated in Germany