Germany's Road to Natural Gas Has Coal Detour - Pacific Standard

Germany's Road to Natural Gas Has Coal Detour

Germany's energy revolution makes a shift to natural gas likely all over Europe.
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Germany's nuclear phase-out strikes either joy or fear into the hearts of environmentalists — joy over the end of nuclear power in a major industrial nation, or fear over the undeniable prospect of more coal-fired plants in central Europe.

Some estimates claim Germany will add up to 40 million tons of carbon dioxide with (supposedly temporary) new fossil-fuel plants to replace its nuclear power — an increase "equivalent to the annual emissions of Slovakia," as Reuters put it not long ago. But the phase-out comes with a tricky statistic at the heart of the plan, a cap-and-trade rule that could shift power generation in Europe decisively away from coal.

In theory it works like this: Emissions in the EU are capped, so if Germany starts to hog emissions permits on Europe's carbon market by burning more coal, the price of permits will rise — but emissions won't. And the rising cost of emissions will convince Germany's neighbors to quit burning so much coal.

So while Germany attempts a massive and uncertain experiment in migrating from nuclear to renewable energies, it will belch more coal smoke (and carbon dioxide) into the air but pressure the rest of Europe to belch something else. Daniel Jefferson, an analyst at a company called Point Carbon, told The Guardian that he expected to see a move to natural gas "in those countries where there is scope for a fuel switch from coal to gas."

The Point Carbon study, released in June, said countries like the United Kingdom, Spain and Italy — faced with a €5-per-ton rise in emissions permit prices — would switch from coal to gas. Russian gas would be the big winner, but the switch might also benefit Germany, since the European Union's new gas link to Russia lands on the German coast.

EUROPEAN DISPATCHMichael Scott Moore complements his standing feature in Miller-McCune magazine with frequent posts on the policy challenges and solutions popping up on the other side of the pond.

EUROPEAN DISPATCH
Michael Scott Moore complements his standing feature in Miller-McCune magazine with frequent posts on the policy challenges and solutions popping up on the other side of the pond.

So the European cap-and-trade system will help Germany navigate its energy revolution. All of Europe will pitch in, and the overall trend — in theory — should be positive.

The reason I call it a "tricky statistic" is that emissions limits can be cheated. The recent recession has also left emissions permits undersold, meaning there's room, under the EU limit, to burn more coal or gas overall. And a limit can also be raised, if leaders in Brussels find the will.

These emissions-trading technicalities were no doubt part of Angela Merkel's calculus when she declared an end to the German nuclear industry this year. She also knew money from emissions permits would flow into Germany's so-called "climate fund," which helps finance green-energy projects around the world. If permit prices rise — say, because of German coal — so does the pot of money.

There's only one problem: The German government now wants to use a fraction of the fund (about €160 million per year in 2013 and 2014) to subsidize coal. [http://www.thelocal.de/national/20110713-36277.html]

Environmentalists and Green politicians are naturally in an uproar. But the government argues that since coal belongs to the larger vision of an energy revolution, it's justified to support a handful of new plants out of the fund.

Merkel's government has to be careful. Her turnaround this year was unprecedented in German politics because her party, the Christian Democrats, were such a traditional voice for the nuclear-power lobby. But if they don't manage the energy revolution with finesse, they might simply become a voice for gas and coal. "After the nuclear folly, now we have the coal folly," a Green Party lawmaker, Oliver Krischer, has said, and it would be nice for the next 10 years to prove him wrong.

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