A contribution to the debate on CO2 pricing – by Stefan Gsänger
Currently, with the very important # FridaysforFuture movement the debate over the introduction of a tax or levy on CO2 as an important tool for climate change mitigation is currently booming in Europe and beyond. Of course, at first, it seems reasonable and appropriate that socially harmful behaviour such as the emission of CO2 and other greenhouse gases are given a higher price and, as it were, penalized. According to the assumptions underlying this logic, the undesirable behaviour, i.e. the emission of CO2, decreases with it and the climate is saved. However, there are some valid important objections to such an approach:
What contribution can CO2 pricing make to 100% renewable energies?
In the meantime, there is broad consensus among experts that the necessary, emission-free energy supply can only be achieved with 100% renewable energies, together with other important emission-reducing measures, for example in agriculture and industrial processes. Various scientific studies, most recently by the Energy Watch Group, have shown that such a scenario is possible and even economically advantageous in the overall balance. In addition, given the global advance of renewable energy, leadership in the sector brings a significant advantage in global competition. But how can this goal of 100% renewable energies be achieved as quickly as possible? The key question is hence: Can a price on CO2 make a notable contribution?
Steering effect through higher prices?
Higher prices, as we know from behavioural psychology and from real life, do not automatically lead to behavioural changes. Rather, habituation effects often occur at a higher price level. Smoking is a good example: With every increase in tobacco tax over the past few decades, tobacco consumption has temporarily declined but recovered after a short time. Only the introduction of a ban on smoking in public spaces led to a noticeable decline in smoking.
The same was and is to be observed with regard to mineral oil consumption and fuel prices with already large tax surcharges. Despite allegedly large efficiency gains in the consumption of fossil automobiles, the fleet consumption of all vehicles has not fallen either nationally or globally but has risen steadily. Obviously the price also only marginally influences the behaviour here.
Even in the building sector, it is not clear that the substantial fluctuations in the prices of oil or natural gas would have a significant impact on consumer behaviour. On the other hand, clear regulatory efficiency requirements or standards clearly have an effect.
Are costs the decisive obstacle to renewable energies?
It is often argued that renewable energy would become more competitive through a levy on fossil competitors. However, renewable energies today have no cost disadvantage globally, in most cases, they represent the most economical energy variant, and that worldwide. Rather, the barriers for renewable energy sources lie in the regulatory area: prohibitive rules such as flat-rate distance rules for wind farms represent insurmountable obstacles to the further expansion of wind energy, which by a CO2 tax in no way become smaller. In many countries, regulatory issues such as grid access or other technical and administrative barriers to the energy market continue to be a major obstacle.
Low-emission or emission-free technologies?
A fundamental problem of CO2 pricing is that it does have a diffuse effect, because it explicitly does not support emission-free technologies, but instead puts a penalty on emitting technologies. It is therefore close and the previous experience proves that initially so-called low-emission technologies instead of emission-free technologies benefit from such pricing, so-called bridge technologies such as natural gas, and thus not just renewable energies. Natural gas has a structural advantage in the still fossil-dominated energy market, as it already has market access and a strong, well-established market position. However, the fastest possible switch to renewable energy would be delayed and, ultimately, the goal of zero emissions.
Atomic renaissance through climate protection?
Although many countries have decided to phase out or not to start using nuclear power, in many countries there are currently strong efforts to consider nuclear energy as a climate solution, and that despite questionable climate neutrality, excessive costs, the unresolved question of disposal, dangers of nuclear proliferation and catastrophic consequences of the nuclear accidents in Chernobyl and Fukushima. Atomic energy in particular shows that there are often other reasons than economic arguments that are important when it comes to choosing energy sources.
In particular, older and therefore more dangerous nuclear power plants e.g. in the European electricity market could benefit enormously from a “privilege” through exemption from the CO2 levy, which in turn would delay the rapid switch to renewable energies, possibly by decades.
Steering effect in the transport sector?
Beyond the electricity sector, the question arises as to what impact a CO2 tax would have. As far as the transport sector is concerned, the taxes on gasoline and diesel are already highly taxed in most countries, so that the suggested surcharges in the prices for end consumers would hardly be noticeable. Here, a ban on internal combustion engines as already adopted in some countries would be an effective way.
In the shipping sector, innovative companies are already working on not only developing but also applying appropriate alternatives. The basis for this is the IMO’s decision to reduce shipping’s greenhouse gas emissions by 50% by 2050, which is basically a clear prohibition strategy. The crucial question here will be the binding nature of the IMO decision.
In order to re-direct traffic, it would be sensible – in the absence of currently existing renewable alternatives in the field of flight – to introduce a kerosene tax on flights whose revenue is then to be fully invested in the development of regenerative propulsion systems for aircraft in order to bring about the needed change as quickly as possible.
Prohibition as an elementary basic principle of political order
In principle, it can be stated that usually a behaviour recognized as harmful is usually simply prohibited by regulatory or even criminal law. This applies to offences such as theft, assault, murder, rape – all of which, of course, happen in reality and are then sanctioned. No one would seriously think of reducing such crimes by introducing a tax rather than the threat of imprisonment. Why is not there a serious discussion about banning the emission of fossil CO2, the effect of which threatens our very existence?
Abolition of slavery by taxes?
Imagine that Abraham Lincoln introduced a tax on every slave to abolish slavery. It is obvious that for ethical reasons this could not be a serious alternative. Lincoln enforced a clear legal, immediate ban on a fundamental issue similar to today’s climate protection and therefore became a figure of historical merit.
Emission ban is an ethical imperative
Of course, no one is calling for the ban on burning coal, oil and gas from now on. However, given the existential threat to humanity posed by the climate crisis, which does not allow any further delay in counteraction, it is ethically imperative to set a clear end date for the use of fossil fuels. After this date, it must simply not be allowed to burn fossil carbons. In any case, this end date must come as soon as climate science considers it necessary, taking into account the amounts that the atmosphere still “tolerates”. Existing emissions trading systems must also be redesigned in such a way that the allowable emissions are steadily reduced and move to zero at a time to be determined.
Of course, a ban must ultimately not only apply to CO2 emissions, but also to other greenhouse gases and, accordingly, to other contaminating technologies such as nuclear energy.
The fairytale of the costs of the energy transition
Proponents of an effective climate protection policy should also consider that a levy on CO2 fits well with the deliberately set in the world, false narrative that the switch to renewable energy represents an economic burden. An impressive example was the alleged trillions of Euros for the German energy transition, claimed by the then Minister of the Environment Altmaier, which was nonsense from an economic point of view, but did not miss its effect and paved the way for drastic measures. In order to strengthen the narrative of the allegedly intolerable avalanche of costs, socially disadvantaged people are brought into the field, for whom such a burden is unbearable. However, the opposite is true. Renewable energies are unrivalled today and will bring tangible benefits to almost all people.
Distraction from what is required
Anyone who follows the public debate and has an eye on the real problems of the energy transition can now almost despair of the extent to which this debate has distanced itself from what is actually hindering the expansion of renewable energies or what effective climate protection is needed. E.g. the expansion of wind power in Germany has completely collapsed, and only a few are talking about how this can be reversed. The dispute over CO2 pricing thus diverts attention from the really important issues, and these are the barriers that stand in the way of the consistent expansion of renewable energies in practice.
General priority for renewable energies
What is urgently needed above all is a general and absolute priority for renewable energies, as envisaged e.g. by the original German feed-in law EEG for the electricity sector. The successes of this regulation are indisputable, as well as the disastrous consequences after the abolition of priority – the collapse first of the German solar industry and currently the wind industry speak a very clear language. The old priority must therefore not only be restored but necessarily expanded, far beyond the regulation of the electricity market. A fundamental political decision is needed for the primacy of renewable energies in all areas where energy is used, either anchored in a Climate Protection Act or even as a sustainability principle in the constitution.
Based on this, a large number of individual measures are required: in the transport sector, apart from the expansion of public passenger and freight transport, electromobility currently has the greatest potential, seen from today. For new registrations of fossil combustion engines, therefore, an end date must be set, in parallel, everything must be done to massively accelerate the expansion of charging infrastructure for electric vehicles. Construction and planning regulations that make the use of renewable energies more difficult must be altered accordingly. In the building sector, existing standards have to be updated and the use of renewable energies is to be defined as part of these standards, as is already the case in some countries today. Construction and planning regulations that make the use of renewable energies more difficult must be changed accordingly. In sectors such as aviation and shipping, where the engines are still fully or predominantly fossil-fueled, market incentive programs are necessary in addition to an equally clear end date in order to finally bring emission-free technologies to the market.
A pioneering role brings economic benefits
One major advantage of having a renewable energy priority combined with an emissions ban is that it can be implemented by one country without fear of disadvantages compared to other countries. Rather, as the experience of the past decades has shown, it can gain a technological lead and strengthen its innovative strength, which, in addition to local and national benefits such as job creation and saving on imported fossil fuels, also creates additional export perspectives.
In this respect, unlike the question of CO2 pricing, it only plays a secondary role in deciding whether such a measure should be adopted at national, e.g. European or global level. Of course, it would be in the sense of effective climate protection, if as many countries as possible joint such decision. If this is not possible, pioneers will act as role models, inspiring other countries to introduce consistent programs as well
CO2 pricing as an accompanying measure
In the context of the proposed renewable energy priority strategy, carbon pricing can, at best, be an accompanying measure to facilitate the abandonment of old habits through steady increases in prices – no more and no less. Alone, however, it will be far from sufficient to bring about the necessary rapid switch to renewable energies – sometimes it may even have counterproductive effects, as described above. Proponents of CO2 pricing therefore also have a duty to prove that such a levy supports the expansion of renewable energies. But the focus should clearly be on regulatory law.
Climate protection and citizens based energy transition hand in hand
If therefore, the priority of renewable energies becomes a general part of our legal system, then there are good prospects of achieving a sustainable economy that does not harm the climate any further. Small and medium-sized as well as large companies, but also the citizens of many countries around the world have already proven in the past three decades that they are able to provide the technical and economic solutions on a broad basis, at a decentralized and local level but also nationally and even globally. So that climate protection and the citizens-based energy transition go hand in hand, towards a more democratic and sustainable society.