There are so many claims that Germany’s Energiewende is a true failure. For example, Larry Hamlin wrote that “EU climate alarmist champion Germany has its Energiewende program exposed as a catastrophic failure with enormous costs“. Or, a post on notes that ” Germany is expected to fall short on pretty much all its national and EU emission reduction and clean energy targets for 2020. ” These opinions are strangely all over the internet. I just want them to get the facts straight. And what is better than letting the data talk.

In Figure 1 we see Germany’s renewable energy share in gross final energy consumption and gross electricity consumption from the year 2000 to 2018. The dotted lines show the national targets. As one can see, Germany is in line for achieving both 2020 targets. In fact, the 2020 target for its renewable energy share in gross electricity consumption is already overshot and Germany is well in line to achieve its 2025 target during 2019 or 2020 already.

Figure 1

While it is true that there are costs associated with the Energiewende, it is clearly wrong to speak of Germany falling short of its energy targets. I think that is a point well worth emphasizing and it does show that, whatever Germany is doing, works.

Figure 2

However, as is nearly always true, there is a catch. Renewables in energy consumption is only one of the vital targets helping our planet to become more sustainable. It is not only important that we rely on renewable inputs to meet our consumption needs, but that also our production does not produce unwanted outputs.

The major additional output is, of course, the production of greenhouse gases. As Figure 2 shows, it is true that Germany will fall short of its 2020 targets by maybe 50-70 million tons if current trends continue. Most of this is due to the energy industry, then industry in general and then transport. Under Merkel’s rule the dirty part of the energy industry, especially the coal industry, as well as the dirty part of the transport industry, has seen substantial support. This is the reason for the shortfall in emission reductions. It has nothing to do with the Energiewende per se. It is simply the result of protective policies, based on an old legacy. There is a term for this in academic, it is history dependence.

Let’s see whether the new leaders in Germany will follow Merkel’s path of protecting the coal industry and the old school car industry, or whether there will be a further shift away from dirty energy inputs and from transport relying on combustion. As long as one is not tight to a specific history, then one is also more likely to change the path one treads on.

Germany is without doubt one of the green role models that the world is looking at, especially with respect to its energiewende. But how green is Germany really?

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Krughütte, PV park

I just came across a recent report on the state of photovoltaics in Germany, written by Harry Wirth from Fraunhofer ISE. What are the main takeaway points? The points in italics are my own.

By the way: There is this Stanford University report proposing that the world can go 100% renewable by 2050. This stands in contrast to the results in this Fraunhofer ISE report, suggesting that 100% renewables in Germany by 2050 is simply too expensive. The reason for this discrepancy has been taken up by the energiewende blog. Basically, the Stanford Report suggests that the 100% renewable scenario is achievable and requires 1080 GW of installed PV capacity. We will see below whether this is realistic or not.

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  • Will you be part of the new VISIONS 2100 project?
  • Clean Energy Wire is, together with, a great source for news about Germany’s Energiewende. HERE you can read about the components that make up the electricity price in Germany. Taxes make up 3/4 of this price, and the renewable energy surcharge 1/3 of the taxes. Despite this – or maybe because of this (?) – exports roar, Germany grows. Why? Energy makes up only 2.5% of Germany’s GDP, similar to most countries in the world.
  • HERE you can read why all this bogus talk about renewable energy production being too expensive is, simply, bogus. In words:

    Today, even Citibank estimates that transitioning to clean energy will globally save an estimated $1.8 trillion in comparison to a business-as-usual scenario by 2040

  • The effect of Germany’s eco-tax is slowly diminishing. So Mr Klusmann suggests to index eco-taxes. The reason:

    the whole idea of environmental taxes is not to increase the level of taxation, but to focus the existing level on discouraging environmentally damaging consumption.

  • And all this energy transition in Germany is starting to pay off:

    The Fraunhofer Institute has found that Germany made about €1.7 billion, or $1.93 billion, in 2014 by selling surplus electricity. In 2015, that amount could reach €2 billion or $2.2 billion.


  • Responsibility to Act – Sustainable Development Goals 2015, in Rotondes, Luxembourg, from 7th-9th December 2015. For more information go here:
  • Climate Ethics and Climate Economics: Discounting the Future, in Oxford University’s Martin School, Oxford, UK, from 13-14 January 2016. Keynotes by Simon Caney and Partha Dasgupta. More information here:
  • ISDRS 2016 – Rethinking Sustainability Models and Practices: Challenges for the New and Old World Contexts, to be held 13-15 July 2016 in Lisbon, Portugal. For more information follow this LINK.

As always, you can find all the information on conferences, workshops and seminars in my environmental economics calender on the right.

So what are the recent news?

  • Countries are currently putting in pledges for the negociations at COP21 in Paris. At the moment, these INCDs (intended nationally determined contributions) from 150 countries would possibly (given the uncertainty) lead the world onto a 3°C warming path. In general, many scientistics suggest that the objective should be to reach at maximum a 2°C warming, simply because we have very little information as to what is going to happen if the world warms by more than 2°C. So if those INCDs are the maximum that all countries are willing to pledge, then what else should be done at COP21? Jeremy Woods suggests the following:

    Firstly, there needs to be consensus among the world’s largest emitters, both industrial and developing countries, that they can deliver the lifestyles their populations will demand and cut emissions drastically. That pathway will require that global rules around competition are reset and that common ground-rules for competition and innovation are established across the board. Secondly, the INDCs are a very small step along this road and the trajectory from 2030 to 2050 must be clearly signposted in order to allow the necessary private sector investment to be made now and over the coming decades to deliver the innovations needed. Public sector financing alone is totally inadequate for the job ahead.

  • Dan Farber has some neat suggestions how managers may more easily take care of the externalities that they create: simply expose themselves to it:

    For instance, we could require managers of nuclear plants, utility officials, and officials of reactor manufacturers to live within a mile of the plant, along with their families.  That would enhance the incentive to think of safety.   Similarly, we might require oil company executives and their families to live within a mile of a refinery, so they would experience the same risks and the same exposure to air pollution as the surrounding community.

  • It is often claimed that there is not enough space for alternative sources of electricity. So what is the situation in Germany? A recent study finds that there is plenty of space.

    Germany could install 125 gigawatts of wind turbines on only 1.7 percent of the country – on land, not including offshore wind farms. Likewise, 143 gigawatts of PV could be installed on 0.9 percent of the country.To put these numbers into perspective, a recent study by Fraunhofer IWES investigating a 100 percent renewable supply of electricity found the need for only 87 gigawatts of onshore wind along with 40 gigawatts offshore. For PV, IWES estimated that 134 gigawatts would be needed, slightly less than what the BBR found to be feasible.

    Is 0.9 percent of the country for PV a lot? One thing is often overlooked: put solar on a rooftop, and you haven’t taken up any additional space at all. The study found that “even if a third of all suitable roofs are not used for solar because the building owners simply don’t want to, the technically suitable roof potential is enough to install 65 GW by 2032… without any need for new ground-mounted arrays at all.” In other words, Germany could get around 10 percent of its electricity from PV using only two thirds of suitable existing rooftops.

  • On Friday I was at the excellent 62nd Economic Policy Panel Meeting in the Central Bank of Luxembourg and was, together with Timo Goeschl, the discussant of a recent article of John Hassler, Per Krussell and Jonas Nycander. This is a policy-relevant article that is going to be published in the journal Economic Policy, and discusses their 2014 Econometrica paper with Mikhail Golosov and Aleh Tsyvinski, Optimal Taxes on Fossil Fuels in General Equilibrium, as well as provides further points on the green paradox, integrated assessment modelling, etc. Though I can’t give you many details yet (you can get the published version in June), what is interesting to see is that there has been a recent trend away from these large black-box integrated assessment models to smaller, more intuitive approaches that are analytically tractable. My main point is the following: In order to make these reduced-form integrated assessment models analytically tractable one has to resort to some stronger assumptions. Weakening those assumptions requires one to additionally address those other factors that make integrated assessment models so complicated, and one is back at the black box approach. Then again, given that we know very little about the damage functions, etc., one can obviously not claim that the reduced-form models are worse or better than the standard integrated assessment models that also rely on particular assumptions on e.g. damage functions.
    Pindyck is much more negative about integrated assessment models in general. Matthew Kahn discusses a bit about Pindyck’s comments. In case you are interested, you can read his full critiques HERE or in his new working paper HERE.
  • The European Society of Ecolocial Economics presents a new Handbook of Ecological Economics.
  • Fake meat solution: Many people changed to a vegetarian diet simply for moral reasons, or because they understood that there are serious health impacts from regular meat consumption. For example, it is now widely-accepted that eating meat every day is roughly as dangerous for you as smoking a pack of cigarettes every day. Thus, if you are a health-conscious person, or if you rank the welfare of animals sufficiently highly, yet at the same time if you enjoy a tasty burger, then fake meat may be just the alternative that you were searching for!
  • Investors fear the upcoming decommissioning of nuclear plants in Germany:  Estimates for decommissioning of German nuclear power plants ranges from 30-70 billion euros. In contrast, the provisions for dismanteling made by Germany’s nuclear utilities are 39 billion euros, certainly at the lower end of the cost spectrum. Given that costs in the nuclear industry tends to be underestimated by a factor of 1.5 to 2, we can imagine that the final costs will be even higher. As a result, investors are selling their shares from German nuclear utilities. I attach below the share prices for E.ON and RWE in Germany. As you can see, their shares prices have significantly dropped during the past two years.
  • World can be 100% renewable energy at no/little extra costs: Zachary Boren has done a good summary of the latest Greenpeace Energy (R)evolution Scenario. The bottom line is that, according to estimates by Greenpeace, the world can completely phase out BOTH non-renewables AND nuclear by 2050 at no extra costs. Has anyone deeply analyzed the assumptions of Greenpeace? It seems a bit optimistic, I mean the zero extra costs result. But hey – in effect – even at some extra cost should this be an interesting option. I mean, from our integrated assessment climate change models, basically bigger economic growth models with a climate change feedback, we economists generally find that it is optimal to continue to rely on fossil fuels for quite some while at to accept some degree of warming. But it is also clear from these models and subsequent sensitivity analyses that the more additional realistic feedbacks and information we add, like uncertainty, like health costs from fossil fuel use, potential for technical change in the renewable sector, etc, the earlier will we want to switch to renewables and phase out non-renewables. I think while we economists focus too much on the optimal policy given our limited models, we may also want to consider that small economic costs of completely phasing out nuclear and non-renewables may be strongly outweighed by a world without human-induced climate change and fewer worries about nuclear accidents.
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