It is the main benchmark for everything climate action: Will a particular decision or measure help lower carbon emissions? And can it be proven? Yes, says Germany’s Green Climate Minister Robert Habeck, at least when it comes to the coal phase-out. Because he wants to retire all emission allowances that will be freed up as a result. And with this, counter the criticism that Germany’s emission reductions have no effect on the global climate in the European “waterbed”. But this also means that the German government will forego billions in revenue from these auctions.
This Climate.Table also looks elsewhere at how effective and transparent climate policy is. Obscure seals for “climate neutrality” are heavily criticized and therefore about to be abandoned. A new study examines the net-zero strategies of global companies and uncovers a whole lot of greenwashing. The International Ski Federation (FIS) is criticized by its own athletes for climate ignorance. And the EU Court of Auditors gives Europe’s climate development policy of recent years a devastating verdict.
Therefore, trust is good, but control is even better. That is also our journalistic goal. As every week, we hope to provide you with an engaging read at Climate.Table.
The emission allowances in the EU Emissions Trading System (ETS) that will be freed up by the planned coal phase-out are to be removed entirely from the market, according to the German Federal Ministry for Economic Affairs and Climate Action (BMWK). This is what a ministry spokesperson told Table.Media. Only with this approach would the coal phase-out in Germany contribute to emission reduction.
Even after the latest tightening of the ETS at the EU level, the coal phase-out would still leave “a residual amount” of allowances that would be freed up. “And we want to have this residual amount of allowances deleted,” the spokesperson said.
This is the ministry’s response to fears that the compromise on the coal phase-out by the “German Coal Commission” and the end of coal-fired power generation in the Rhineland region, brought forward to 2030, would not benefit the climate. It was feared that these allowances could be used for emissions elsewhere (the so-called “waterbed effect“). Parts of the climate action movement and the scientific community accused the Coal Commission of this.
Emissions can only be avoided if the necessary allowances are removed from the market. Among other things, the Greenhouse Gas Emissions Trading Act (TEHG) must be amended to this end. The BMWK is currently working on this. Because the old law does not reflect the stricter ETS adopted by the EU, according to the BMWK.
The political and economic conditions concerning such an intervention in emissions trading are difficult to assess:
Most importantly, however, the Ministry of Finance will lose billions in revenue if Germany can no longer auction these allowances as planned. At prices of currently just under 100 euros per tonne of carbon dioxide, the retirement of emission allowances in 2021/22 (agreed in the compromise of the “German Coal Commission”) would already mean a loss of revenue of about one billion euros for the German national budget. According to estimates by Florian Rothenberg of the analysis company ICIS, about ten million tonnes of carbon dioxide would not be emitted in this case, and their allowances could not be auctioned. This would correspond to about ten percent of the allowances auctioned annually in Germany.
This sum would significantly increase if the allowances from the earlier phase-out in the Rhineland were actually removed from the market. According to the BMWK and the state government of North Rhine-Westphalia, the compromise on the phase-out will save a total of 280 million tonnes of emissions by 2030. At current market prices, that would be about 28 billion euros the federal budget would lose in revenue between 2030 and 2038.
Emissions trading has already generated substantial revenue for the national budget. In 2021, 5.3 billion euros flowed into the German government’s coffers from European emissions trading alone. Climate action has so far been financed from this ETS revenue via the “Energy and Climate Fund” (EKF).
The German Federal Ministry of Finance (BMF), which would have to take the possible revenue shortfall into account in its budget planning, did not initially comment on the plan by the Economy Ministry. At present, “legal adjustments regarding future emission allowances” are being made in emissions trading, according to liberal Finance Minister Christian Lindner. “No comment on the content of the interdepartmental consultations” could not be made.
It sounds promising, but the results have apparently been meager: Of 24 corporations that consider themselves global pioneers in the fight against climate change, only five companies have any genuine decarbonization plans to show for it. This is according to the new Corporate Responsibility Monitor, published on Monday by the NewClimate Institute. While companies pledge to strive for net zero emissions, “carbon neutrality” or the like, the plans of 17 companies are of “low integrity” (see our Climate In Numbers section).
Not only the NewClimate Institute report criticizes vague climate neutrality pledges – criticism of climate neutrality seals has recently been coming from all directions. The major drugstore chains Rossmann and DM are therefore now abandoning the seals – although they have been used increasingly in the recent past. Rossmann head Raoul Roßmann recently said in an interview with the German newspaper “Die Zeit” that climate neutrality seals are “basically dead”.
Unlike labels such as “organic” or “Fairtrade”, there are so far no binding rules for climate neutrality regarding what the term actually stands for. How many of these labels are awarded is just as unclear as the question of which standards they meet.
Efforts are still being made to keep the label alive: Various organizations are currently defining climate neutrality standards. The EU is in the process of defining rules for so-called “green claims“, which also include climate neutrality labels. A first draft was released in January.
An international working group is simultaneously working on the ISO standard 14068, which is intended to define carbon neutrality. Among other things, it will define what “unavoidable” emissions are. Larissa Kleiner from the German Federal Environment Agency (UBA) is cautiously optimistic that this will have a positive effect: “Such rules bring more transparency,” she says. But the requirements could remain insufficient.
Criticism of the business with climate neutrality is growing: “There is no such thing as processed, climate-neutral products,” says Agnes Sauter of Environmental Action Germany (DUH). Products bearing the label “climate positive” are particularly absurd, she adds. A study by the Consumer Association of North Rhine-Westphalia also shows that consumers do not understand and are confused by the various sustainability and climate labels. In addition, companies rest on the promises of certification without making the necessary changes, says Carsten Warnecke of the NewClimate Institute, for example.
“There is so much non-regulation in this area, it is unbelievable,” says Warnecke. Companies that award seals set the standards themselves and then also monitor compliance themselves. Larissa Kleiner from UBA also points out that different terms are repeatedly used interchangeably in the debate. For example, the term “climate neutrality” is more akin to “greenhouse neutrality” or “CO2 neutrality”.
Also criticized are:
Carsten Warnecke of the NewClimate Institute says: “The steps that are actually behind certification are of course the right ones”. So far, however, the wrong priorities have been set.
What are these steps? The first is the carbon footprinting of a company. It is often based on the Greenhouse Gas Protocol. It divides emissions into three areas, so-called scopes.
According to the Greenhouse Gas Protocol, only Scope 1 and Scope 2 are necessary to develop emissions inventories. In the interest of the climate, Scope 3 should also be included, as this is often where a large part of the emissions occur.
This should be followed by defining reduction targets and roadmaps. This step is most important for climate action. Only then can the remaining, unavoidable emissions be offset with allowances. Service providers such as ClimatePartner handle these steps for the awarding of climate neutrality labels. “The label alone is only one sign,” says a company spokesperson. “Much more important are the processes that happen in the background.” Most companies that apply for seals do not take this lightly and are diligent in their approach.
Carsten Warnecke observes something different: “Many companies do not set CO2 reduction targets at all,” he says. And if they did, they would be completely incompatible with the Paris Climate Agreement. Instead of reduction targets of up to 50 percent by 2030, companies tend to set them at around 15 percent. This is where he believes companies need to start and invest. They must also make targets and the way to achieve them transparent, he adds.
His criticism is also directed at companies such as ClimatePartner: There is hardly any counseling on reduction, emission reduction targets are seldom obligatory and far too often the purchase of offset allowances is immediately offered. ClimatePartner wants to take corrective measures in this regard. “In the future, emission reduction will be a mandatory element of our certification process,” the company announced.
Whether this is enough to eliminate all doubts surrounding the climate neutrality of products is unclear. Agnes Sauter of DUH believes that politicians should ban such seals altogether. Warnecke says if they are to be used at all, they should only be in a “tight corset” of rules that stipulate high reduction targets.
Europe can become less dependent on China for the production of solar products in the medium term. However, such a turnaround would need a lot of political will, billions of euros in start-up financing and several years, experts and business representatives agree. Chinese plans to restrict exports of solar production equipment in the future could be a warning shot at the right time.
China wants to maintain its dominance in the solar sector. The global market leader plans to restrict the export of production equipment for the solar industry. In doing so, the People’s Republic is hitting the West in a critical weak spot, as Johannes Bernreuter, an expert on solar supply chains, says. Many Western plant manufacturers have dropped out due to cheap Chinese competition and the decline of the domestic solar industry. The Chinese approach is seen as a response to Western and Indian plans to (re)build their own solar industry. Western buyers who want to expand their production and use Chinese equipment would have to go through complicated approval procedures. In the end, the Chinese government will decide whether the technology can be exported.
Whether China’s planned export restrictions will achieve their goal, however, depends on Europe’s political response. “China’s export restrictions on solar production equipment could severely torpedo the expansion of the solar industry in Europe,” Andreas Bett, Director of the Fraunhofer Institute for Solar Energy Systems (Fraunhofer ISE), told Table.Media. The development of industrial production along the entire value chain would be made more difficult.
But rebuilding a European supply chain would be entirely possible. The know-how for the individual steps of the solar supply chain “is basically still available in Europe – also in the area of mechanical engineering“, says Bett. However, the knowledge would have to be reactivated and updated to produce the required quantities of individual solar components and precursors. According to Bett, it could take “a good two to three years for plant manufacturers to be able to provide substantial capacities”. The longer politicians wait to provide support, the more difficult it will be to ramp up European production again, warns the Fraunhofer expert.
Gunter Erfurt, CEO of Meyer Burger, is also convinced that Europe still has the necessary technologies in all parts of the complex supply chain. Rebuilding a European solar industry will be “a major feat,” says the head of the Swiss solar cell and module producer. But with “the right strategic industrial policy, this would be possible despite a Chinese ban on solar manufacturing exports,” Erfurt told Table.Media. This will not be easy, however. Because in certain areas, Germany is the only country apart from China that still has the necessary technologies. Nevertheless, Erfurt remains optimistic. It is certainly possible that “European plant manufacturers could ramp up their capacities quick enough to make the expansion of European solar cell production possible”.
China currently dominates all links along the supply chain. Thanks to substantial government subsidies and copying Western technologies, manufacturers in the People’s Republic have gained market shares of 75 to 97 percent. Erfurt laments that China has also undermined market forces to achieve this. “Chinese solar manufacturers and plant constructors do not make profits,” says Erfurt. This is quasi-state-imposed in order to remain the global market leader. The state also subsidizes production plants. The West’s dependence on solar energy from China is now greater than its dependence on Russian gas and oil before the Ukraine war, says Erfurt.
To overcome its dependence on China, Europe must establish “technological sovereignty in the solar sector,” says Bett. To achieve this, a market share of 30-50 percent should be produced in Europe, according to the head of Fraunhofer ISE. This would correspond to 50 to 60 gigawatts of production capacity. By comparison, Meyer Burger aims to achieve an annual production capacity of 3 gigawatts by 2024.
Erfurt demands that politicians declare the photovoltaic sector “a strategic industrial sector“. The political course must be set in the first half of 2023 to ensure that the development of a European solar industry moves forward, says the CEO of Meyer Burger.
To accomplish the “major feat” of developing a European solar industry and prevail against subsidized Chinese competition, Fraunhofer chief Bett proposes:
In many areas, Erfurt’s demands match those of Betts. To allow the development of a European solar industry, the CEO of Meyer Burger demands:
The German government and the EU Commission are so far reluctant to make official statements on China’s planned export restrictions. A spokesman for the German Ministry of Economics said that they could not comment on “possible intentions of the Chinese government”. A Commission spokeswoman said that they were aware of the possible export restrictions and were currently analyzing them.
Oil and gas companies are currently focusing more and more on the expansion of fossil reserves and are abandoning their original plans for more climate protection. In view of record profits caused by the international energy crisis in the wake of the Ukraine war, industry and politicians are reconsidering their previous plans to leave oil and gas reserves in the ground for the sake of climate action. This jeopardizes meeting the climate plans set out in the Paris Agreement.
The trend became apparent over the last few weeks with several separate decisions:
According to a report by the International Energy Agency (IEA), expanding gas and oil production jeopardizes global climate targets. To meet them and reach zero emissions in 2050, the OECD agency said in its “Net Zero by 2050” roadmap, “there are no new oil and gas fields approved for development,” and “no new coal mines or mine extensions are required”. This warning was confirmed by a fall 2022 review of all relevant studies on the subject.
The plans of companies look different. According to a late 2022 study by the think tank Carbon Tracker, certain companies have the following plans compared to 2019:
There are no known long-term plans to cut production by state-owned energy companies in Saudi Arabia, China or Russia, for example.
Oil and gas companies made record profits last year as prices soared. Overall, the industry earned about four trillion dollars, the IEA said. The big six private companies doubled their profits year-on-year to 219 billion dollars. They pocketed 110 billion in dividends or buybacks of their own shares. But some firms also wrote off large sums by withdrawing from Russia after the invasion of Ukraine.
The business policy pursued so far by private oil companies in particular, however, is hardly in line with the Paris climate targets anyway. According to Carbon Tracker, Chevron, Eni, Shell and TotalEnergies have collectively approved at least 58 billion dollars for new projects since 2021. If all of these projects were to be implemented, they would result in oil and gas consumption that would drive global temperatures above 2.5 degrees.
The report warns that Eni, ExxonMobil, and TotalEnergies, among others, have another 23 billion dollars worth of investment open for 2023. Their realization would push temperatures even further beyond 2.5 degrees.
One reason for the companies’ fondness for new fossil projects could also be the way they pay their management. For example, another study reveals that all but one (Eni) of the other 34 private energy companies pay their managers to grow the business. These bonuses for growth account for about 41 percent of pay at ExxonMobil, 20 percent at Shell and 10 percent at Chevron. Even among oil companies that officially commit to climate targets, a large portion of total management pay is tied to production growth – about 30 percent at BP, 18 percent at Eni, and 15 percent at TotalEnergies.
There are quite a few self-proclaimed climate protectors in the corporate world. But according to the new Corporate Climate Responsibility Monitor by the New Climate Institute, these companies are failing to live up to their own claims. The 2030 climate targets of the companies examined fall far short of the emission reductions required for 1.5 degrees.
The institute examined a total of 24 companies from eight greenhouse gas-intensive sectors. Three companies were picked from each sector that have pledged to climate action in line with the 1.5-degree limit. The New Climate Institute also sees them as role models for other companies.
The study found that not even the companies’ promises were sufficient to meet their aspirations. Two of the companies, Pepsico and American Airlines, did not present a clear target for 2030. According to the study, the other 22 companies promise on average to cut their emissions along the value chain by 15 to a maximum of 21 percent – but it would be necessary to reduce global greenhouse gas emissions by 43 percent and carbon emissions by 48 percent.
Furthermore, none of the companies achieved a high level of credibility with their climate targets and strategies. Only nine companies were given medium credibility in the study. Only four of them – Apple, the H&M Group, Stellantis and Maersk – also pledged to cut emissions by more than the required level by 2030. ae
The military requires a lot of energy. The German armed forces are no exception: They consume 7.5 terawatt-hours per year, which corresponds to about 15 percent of the public sector’s total energy requirements. Vehicle operation consumes about half of this; the other half goes into heating and operating military properties – i.e., primarily the barracks. Yet the official figures from the Ministry of Defense only reflect what is consumed domestically. Foreign deployments are not included.
But the energy transition is also on the agenda for the German armed forces. The US armed forces lead the way in adapting to the non-fossil age, and NATO pushes. The Bundeswehr has elaborate, sensible concepts. Now it’s a matter of implementing them. And that requires money.
Federal Defense Minister Boris Pistorius has stated that the extra 100 billion euros from the special fund will not be enough. And this does not even include the additional investment required for the energy turnaround. When it comes to allocating scarce funds, the question, therefore, arises: Are energies from renewable sources just a “nice to have” or a gain for security?
One answer can be found by taking a closer look at the conditions of foreign deployments. Consumption at home, under peacetime conditions, would be a misleading measure because the military is there to fight. That’s why deployment in the field is the right yardstick. There, the most important thing is to ensure a stable and reliable supply of energy to the so-called operational bases – in other words, the soldiers’ base of operations.
Until now, electricity production and heating by diesel generators were common. But the diesel is produced far away and has to be transported to the field camp – sometimes by airplane and then over hundreds of kilometers on bad roads. This usually consumes half the energy that the diesel brings to the field camp – the inefficiency is high. In addition, fuel transport is by far the riskiest logistical activity – such transports are a frequent target of attacks. So what could be more obvious than to rely as far as possible on the decentralized use of solar energy and wind power, for example, through photovoltaic systems to generate electricity?
By the way, the situation is different for vehicles. Of course, there are also motor vehicles used by the military that will be battery-electric like their civilian counterparts. However, the vehicles used for ground, water and air combat are far more important for the military’s energy consumption. They need energy carriers of the highest energy density – and that will continue to be liquid fuels, except that in the future, they will no longer come from fossil sources but be synthesized from renewable energies. Such e-fuels are irreplaceable for powering combat aircraft, which must have their fuel on board.
However, as far as properties on foreign deployment are concerned, the following applies: Here, decentralized supply with renewable energies is not only important for climate action but, above all, a security gain. It reduces the risk of outages due to attacks.
The first steps in the right direction have already been taken. In the MINUSMA mission, the German Armed Forces are operating photovoltaic and wind power plants at the Mali and Niger locations. From these, it generated around 1,400 megawatt hours of electrical energy there in 2020 and 2021, respectively, and saved around 450,000 liters of diesel per year. The share of renewable energies in the supply of the Bundeswehr’s operational facilities there was around ten percent in 2021. It needs to get close to one hundred percent.
The same is true at home. The German armed forces use 1,500 properties, or barracks, with around 33,000 buildings. In terms of energy efficiency, they are no better than other public buildings. But this also means that there is a lot to be gained economically by refurbishing them. It is not for nothing that the International Institute of Applied System Analysis (IIASA) described government buildings as “gold mines” in its Global Energy Assessment (GEA) back in 2012.
Now, not everything can be torn down and rebuilt. Military buildings in Germany will not function completely self-sufficiently. That means they will remain dependent on critical infrastructure. But here, too, an at least partially decentralized energy supply can increase security. Bundeswehr properties are rarely built densely. They offer space for small-scale wind or photovoltaic systems that can cover peak demand in times of crisis.
Renewable energies protect the climate – but because they can be generated by small, modular and decentralized plants, they also bring the military a considerable gain in security. This must play a role in the allocation of scarce investment funds from the defense budget.
Hans-Jochen Luhmann is a member of the Advisory Board of the Federation of German Scientists (VDW) and of the VDW Study Group on Security Policy. He is Emeritus Professor at the Wuppertal Institute for Climate, Environment and Energy, where he worked for 20 years, particularly on environmental tax issues. Previously, he was chief economist of an engineering company for ten years, with assignments in Yemen, Ethiopia and Brazil.
Mia Mottley has big plans and wants to achieve a breakthrough in international climate finance this year. The Prime Minister of Barbados wants to turn the international financial system around with her Bridgetown Initiative. This is a package of measures to make the financial system fit for the climate crisis. Mottley is thinking big: She wants to invest thousands of billions of dollars in expanding renewables, adapting to climate change and repairing losses and damage – without taxpayers in industrialized countries having to transfer ever more money to developing countries.
Mottley already promoted the project at COP27 in Sharm el-Sheikh. Her next important event is the Munich Security Conference, which will take place from Feb. 17 to 19. There, Mottley will promote her plan. Avinash Persaud, Mottley’s special envoy for climate finance, says of the initiative, “The character of the Bridgetown Initiative is that it contains very concrete ideas, all of which are implementable within 18 months. They are individually implementable, but together they would change the system.”
Mottley has proven in Barbados that she can achieve ambitious goals. She was the first leader of the Barbados Labor Party, the first prime minister, and the first to win all seats in the island nation’s 30-member parliament for her party – twice. With her parliamentary majority, she legalized same-sex partnerships, lowered the voting age and abolished the monarchy. With the Bridgetown Initiative, Mottley wants to be similarly successful at the international level.
The next major interim target of her 18-month program is the spring meeting of the World Bank and the International Monetary Fund (IMF) in April. A study by the G20 countries shows that the multilateral development banks could lend significantly more if they made better use of their capital. This would enable them to support countries, particularly in adapting to global warming, for which private financiers are hard to find.
The next interim goal will follow as early as June. Mottley and French President Emmanuel Macron then want to organize a conference to finance a massive expansion of renewables. To that end, the IMF is to create special drawing rights (SDRs) worth 650 billion dollars. SDRs are a type of currency created out of thin air by the IMF, as was last done in 2021 when the IMF distributed 650 billion dollars worth of SDRs to its member countries to fight the Covid pandemic.
However, the climate SDRs would not simply be distributed but would capitalize a fund. This would give the fund the best possible credit rating, a AAA rating from the rating agencies. This would allow the fund to borrow money cheaply and then lend it again cheaply to solar and wind farm developers. Then the fund could put up the promissory bills as collateral and borrow even more money to lend out. In this way, some of the world’s savings would be mobilized to fight the climate crisis.
Mottley and Persaud hope to divert 2.5 dollars to five trillion of the total 463 trillion dollars in global savings into the expansion of renewables like that. Crucially, the fund will provide low-interest loans. In many countries with excellent conditions for solar and wind power, their expansion is not worthwhile because the financing costs are too high.
The third element, financial support for countries in the event of climate-related loss and damage, is finally back on the agenda at the next UN climate conference in December: The Bridgetown Initiative envisages the creation of a fund here into which the polluters of the climate crisis, i.e., the major oil and gas corporations, pay.
This would then finance all three dimensions of the climate crisis: reducing emissions, adapting to warming and, finally, coping with loss and damage. By then, at the latest, Mottley would have proven that even small states can play a crucial role: “Size is not the only factor that matters. In many cases, we have the opportunity to exert a disproportionate influence,” says Mottley. And she herself could then once again become the first woman to hold a top office: Mottley has a good chance of succeeding UN Secretary-General António Guterres in 2027. Christian Mihatsch
It is the main benchmark for everything climate action: Will a particular decision or measure help lower carbon emissions? And can it be proven? Yes, says Germany’s Green Climate Minister Robert Habeck, at least when it comes to the coal phase-out. Because he wants to retire all emission allowances that will be freed up as a result. And with this, counter the criticism that Germany’s emission reductions have no effect on the global climate in the European “waterbed”. But this also means that the German government will forego billions in revenue from these auctions.
This Climate.Table also looks elsewhere at how effective and transparent climate policy is. Obscure seals for “climate neutrality” are heavily criticized and therefore about to be abandoned. A new study examines the net-zero strategies of global companies and uncovers a whole lot of greenwashing. The International Ski Federation (FIS) is criticized by its own athletes for climate ignorance. And the EU Court of Auditors gives Europe’s climate development policy of recent years a devastating verdict.
Therefore, trust is good, but control is even better. That is also our journalistic goal. As every week, we hope to provide you with an engaging read at Climate.Table.
The emission allowances in the EU Emissions Trading System (ETS) that will be freed up by the planned coal phase-out are to be removed entirely from the market, according to the German Federal Ministry for Economic Affairs and Climate Action (BMWK). This is what a ministry spokesperson told Table.Media. Only with this approach would the coal phase-out in Germany contribute to emission reduction.
Even after the latest tightening of the ETS at the EU level, the coal phase-out would still leave “a residual amount” of allowances that would be freed up. “And we want to have this residual amount of allowances deleted,” the spokesperson said.
This is the ministry’s response to fears that the compromise on the coal phase-out by the “German Coal Commission” and the end of coal-fired power generation in the Rhineland region, brought forward to 2030, would not benefit the climate. It was feared that these allowances could be used for emissions elsewhere (the so-called “waterbed effect“). Parts of the climate action movement and the scientific community accused the Coal Commission of this.
Emissions can only be avoided if the necessary allowances are removed from the market. Among other things, the Greenhouse Gas Emissions Trading Act (TEHG) must be amended to this end. The BMWK is currently working on this. Because the old law does not reflect the stricter ETS adopted by the EU, according to the BMWK.
The political and economic conditions concerning such an intervention in emissions trading are difficult to assess:
Most importantly, however, the Ministry of Finance will lose billions in revenue if Germany can no longer auction these allowances as planned. At prices of currently just under 100 euros per tonne of carbon dioxide, the retirement of emission allowances in 2021/22 (agreed in the compromise of the “German Coal Commission”) would already mean a loss of revenue of about one billion euros for the German national budget. According to estimates by Florian Rothenberg of the analysis company ICIS, about ten million tonnes of carbon dioxide would not be emitted in this case, and their allowances could not be auctioned. This would correspond to about ten percent of the allowances auctioned annually in Germany.
This sum would significantly increase if the allowances from the earlier phase-out in the Rhineland were actually removed from the market. According to the BMWK and the state government of North Rhine-Westphalia, the compromise on the phase-out will save a total of 280 million tonnes of emissions by 2030. At current market prices, that would be about 28 billion euros the federal budget would lose in revenue between 2030 and 2038.
Emissions trading has already generated substantial revenue for the national budget. In 2021, 5.3 billion euros flowed into the German government’s coffers from European emissions trading alone. Climate action has so far been financed from this ETS revenue via the “Energy and Climate Fund” (EKF).
The German Federal Ministry of Finance (BMF), which would have to take the possible revenue shortfall into account in its budget planning, did not initially comment on the plan by the Economy Ministry. At present, “legal adjustments regarding future emission allowances” are being made in emissions trading, according to liberal Finance Minister Christian Lindner. “No comment on the content of the interdepartmental consultations” could not be made.
It sounds promising, but the results have apparently been meager: Of 24 corporations that consider themselves global pioneers in the fight against climate change, only five companies have any genuine decarbonization plans to show for it. This is according to the new Corporate Responsibility Monitor, published on Monday by the NewClimate Institute. While companies pledge to strive for net zero emissions, “carbon neutrality” or the like, the plans of 17 companies are of “low integrity” (see our Climate In Numbers section).
Not only the NewClimate Institute report criticizes vague climate neutrality pledges – criticism of climate neutrality seals has recently been coming from all directions. The major drugstore chains Rossmann and DM are therefore now abandoning the seals – although they have been used increasingly in the recent past. Rossmann head Raoul Roßmann recently said in an interview with the German newspaper “Die Zeit” that climate neutrality seals are “basically dead”.
Unlike labels such as “organic” or “Fairtrade”, there are so far no binding rules for climate neutrality regarding what the term actually stands for. How many of these labels are awarded is just as unclear as the question of which standards they meet.
Efforts are still being made to keep the label alive: Various organizations are currently defining climate neutrality standards. The EU is in the process of defining rules for so-called “green claims“, which also include climate neutrality labels. A first draft was released in January.
An international working group is simultaneously working on the ISO standard 14068, which is intended to define carbon neutrality. Among other things, it will define what “unavoidable” emissions are. Larissa Kleiner from the German Federal Environment Agency (UBA) is cautiously optimistic that this will have a positive effect: “Such rules bring more transparency,” she says. But the requirements could remain insufficient.
Criticism of the business with climate neutrality is growing: “There is no such thing as processed, climate-neutral products,” says Agnes Sauter of Environmental Action Germany (DUH). Products bearing the label “climate positive” are particularly absurd, she adds. A study by the Consumer Association of North Rhine-Westphalia also shows that consumers do not understand and are confused by the various sustainability and climate labels. In addition, companies rest on the promises of certification without making the necessary changes, says Carsten Warnecke of the NewClimate Institute, for example.
“There is so much non-regulation in this area, it is unbelievable,” says Warnecke. Companies that award seals set the standards themselves and then also monitor compliance themselves. Larissa Kleiner from UBA also points out that different terms are repeatedly used interchangeably in the debate. For example, the term “climate neutrality” is more akin to “greenhouse neutrality” or “CO2 neutrality”.
Also criticized are:
Carsten Warnecke of the NewClimate Institute says: “The steps that are actually behind certification are of course the right ones”. So far, however, the wrong priorities have been set.
What are these steps? The first is the carbon footprinting of a company. It is often based on the Greenhouse Gas Protocol. It divides emissions into three areas, so-called scopes.
According to the Greenhouse Gas Protocol, only Scope 1 and Scope 2 are necessary to develop emissions inventories. In the interest of the climate, Scope 3 should also be included, as this is often where a large part of the emissions occur.
This should be followed by defining reduction targets and roadmaps. This step is most important for climate action. Only then can the remaining, unavoidable emissions be offset with allowances. Service providers such as ClimatePartner handle these steps for the awarding of climate neutrality labels. “The label alone is only one sign,” says a company spokesperson. “Much more important are the processes that happen in the background.” Most companies that apply for seals do not take this lightly and are diligent in their approach.
Carsten Warnecke observes something different: “Many companies do not set CO2 reduction targets at all,” he says. And if they did, they would be completely incompatible with the Paris Climate Agreement. Instead of reduction targets of up to 50 percent by 2030, companies tend to set them at around 15 percent. This is where he believes companies need to start and invest. They must also make targets and the way to achieve them transparent, he adds.
His criticism is also directed at companies such as ClimatePartner: There is hardly any counseling on reduction, emission reduction targets are seldom obligatory and far too often the purchase of offset allowances is immediately offered. ClimatePartner wants to take corrective measures in this regard. “In the future, emission reduction will be a mandatory element of our certification process,” the company announced.
Whether this is enough to eliminate all doubts surrounding the climate neutrality of products is unclear. Agnes Sauter of DUH believes that politicians should ban such seals altogether. Warnecke says if they are to be used at all, they should only be in a “tight corset” of rules that stipulate high reduction targets.
Europe can become less dependent on China for the production of solar products in the medium term. However, such a turnaround would need a lot of political will, billions of euros in start-up financing and several years, experts and business representatives agree. Chinese plans to restrict exports of solar production equipment in the future could be a warning shot at the right time.
China wants to maintain its dominance in the solar sector. The global market leader plans to restrict the export of production equipment for the solar industry. In doing so, the People’s Republic is hitting the West in a critical weak spot, as Johannes Bernreuter, an expert on solar supply chains, says. Many Western plant manufacturers have dropped out due to cheap Chinese competition and the decline of the domestic solar industry. The Chinese approach is seen as a response to Western and Indian plans to (re)build their own solar industry. Western buyers who want to expand their production and use Chinese equipment would have to go through complicated approval procedures. In the end, the Chinese government will decide whether the technology can be exported.
Whether China’s planned export restrictions will achieve their goal, however, depends on Europe’s political response. “China’s export restrictions on solar production equipment could severely torpedo the expansion of the solar industry in Europe,” Andreas Bett, Director of the Fraunhofer Institute for Solar Energy Systems (Fraunhofer ISE), told Table.Media. The development of industrial production along the entire value chain would be made more difficult.
But rebuilding a European supply chain would be entirely possible. The know-how for the individual steps of the solar supply chain “is basically still available in Europe – also in the area of mechanical engineering“, says Bett. However, the knowledge would have to be reactivated and updated to produce the required quantities of individual solar components and precursors. According to Bett, it could take “a good two to three years for plant manufacturers to be able to provide substantial capacities”. The longer politicians wait to provide support, the more difficult it will be to ramp up European production again, warns the Fraunhofer expert.
Gunter Erfurt, CEO of Meyer Burger, is also convinced that Europe still has the necessary technologies in all parts of the complex supply chain. Rebuilding a European solar industry will be “a major feat,” says the head of the Swiss solar cell and module producer. But with “the right strategic industrial policy, this would be possible despite a Chinese ban on solar manufacturing exports,” Erfurt told Table.Media. This will not be easy, however. Because in certain areas, Germany is the only country apart from China that still has the necessary technologies. Nevertheless, Erfurt remains optimistic. It is certainly possible that “European plant manufacturers could ramp up their capacities quick enough to make the expansion of European solar cell production possible”.
China currently dominates all links along the supply chain. Thanks to substantial government subsidies and copying Western technologies, manufacturers in the People’s Republic have gained market shares of 75 to 97 percent. Erfurt laments that China has also undermined market forces to achieve this. “Chinese solar manufacturers and plant constructors do not make profits,” says Erfurt. This is quasi-state-imposed in order to remain the global market leader. The state also subsidizes production plants. The West’s dependence on solar energy from China is now greater than its dependence on Russian gas and oil before the Ukraine war, says Erfurt.
To overcome its dependence on China, Europe must establish “technological sovereignty in the solar sector,” says Bett. To achieve this, a market share of 30-50 percent should be produced in Europe, according to the head of Fraunhofer ISE. This would correspond to 50 to 60 gigawatts of production capacity. By comparison, Meyer Burger aims to achieve an annual production capacity of 3 gigawatts by 2024.
Erfurt demands that politicians declare the photovoltaic sector “a strategic industrial sector“. The political course must be set in the first half of 2023 to ensure that the development of a European solar industry moves forward, says the CEO of Meyer Burger.
To accomplish the “major feat” of developing a European solar industry and prevail against subsidized Chinese competition, Fraunhofer chief Bett proposes:
In many areas, Erfurt’s demands match those of Betts. To allow the development of a European solar industry, the CEO of Meyer Burger demands:
The German government and the EU Commission are so far reluctant to make official statements on China’s planned export restrictions. A spokesman for the German Ministry of Economics said that they could not comment on “possible intentions of the Chinese government”. A Commission spokeswoman said that they were aware of the possible export restrictions and were currently analyzing them.
Oil and gas companies are currently focusing more and more on the expansion of fossil reserves and are abandoning their original plans for more climate protection. In view of record profits caused by the international energy crisis in the wake of the Ukraine war, industry and politicians are reconsidering their previous plans to leave oil and gas reserves in the ground for the sake of climate action. This jeopardizes meeting the climate plans set out in the Paris Agreement.
The trend became apparent over the last few weeks with several separate decisions:
According to a report by the International Energy Agency (IEA), expanding gas and oil production jeopardizes global climate targets. To meet them and reach zero emissions in 2050, the OECD agency said in its “Net Zero by 2050” roadmap, “there are no new oil and gas fields approved for development,” and “no new coal mines or mine extensions are required”. This warning was confirmed by a fall 2022 review of all relevant studies on the subject.
The plans of companies look different. According to a late 2022 study by the think tank Carbon Tracker, certain companies have the following plans compared to 2019:
There are no known long-term plans to cut production by state-owned energy companies in Saudi Arabia, China or Russia, for example.
Oil and gas companies made record profits last year as prices soared. Overall, the industry earned about four trillion dollars, the IEA said. The big six private companies doubled their profits year-on-year to 219 billion dollars. They pocketed 110 billion in dividends or buybacks of their own shares. But some firms also wrote off large sums by withdrawing from Russia after the invasion of Ukraine.
The business policy pursued so far by private oil companies in particular, however, is hardly in line with the Paris climate targets anyway. According to Carbon Tracker, Chevron, Eni, Shell and TotalEnergies have collectively approved at least 58 billion dollars for new projects since 2021. If all of these projects were to be implemented, they would result in oil and gas consumption that would drive global temperatures above 2.5 degrees.
The report warns that Eni, ExxonMobil, and TotalEnergies, among others, have another 23 billion dollars worth of investment open for 2023. Their realization would push temperatures even further beyond 2.5 degrees.
One reason for the companies’ fondness for new fossil projects could also be the way they pay their management. For example, another study reveals that all but one (Eni) of the other 34 private energy companies pay their managers to grow the business. These bonuses for growth account for about 41 percent of pay at ExxonMobil, 20 percent at Shell and 10 percent at Chevron. Even among oil companies that officially commit to climate targets, a large portion of total management pay is tied to production growth – about 30 percent at BP, 18 percent at Eni, and 15 percent at TotalEnergies.
There are quite a few self-proclaimed climate protectors in the corporate world. But according to the new Corporate Climate Responsibility Monitor by the New Climate Institute, these companies are failing to live up to their own claims. The 2030 climate targets of the companies examined fall far short of the emission reductions required for 1.5 degrees.
The institute examined a total of 24 companies from eight greenhouse gas-intensive sectors. Three companies were picked from each sector that have pledged to climate action in line with the 1.5-degree limit. The New Climate Institute also sees them as role models for other companies.
The study found that not even the companies’ promises were sufficient to meet their aspirations. Two of the companies, Pepsico and American Airlines, did not present a clear target for 2030. According to the study, the other 22 companies promise on average to cut their emissions along the value chain by 15 to a maximum of 21 percent – but it would be necessary to reduce global greenhouse gas emissions by 43 percent and carbon emissions by 48 percent.
Furthermore, none of the companies achieved a high level of credibility with their climate targets and strategies. Only nine companies were given medium credibility in the study. Only four of them – Apple, the H&M Group, Stellantis and Maersk – also pledged to cut emissions by more than the required level by 2030. ae
The military requires a lot of energy. The German armed forces are no exception: They consume 7.5 terawatt-hours per year, which corresponds to about 15 percent of the public sector’s total energy requirements. Vehicle operation consumes about half of this; the other half goes into heating and operating military properties – i.e., primarily the barracks. Yet the official figures from the Ministry of Defense only reflect what is consumed domestically. Foreign deployments are not included.
But the energy transition is also on the agenda for the German armed forces. The US armed forces lead the way in adapting to the non-fossil age, and NATO pushes. The Bundeswehr has elaborate, sensible concepts. Now it’s a matter of implementing them. And that requires money.
Federal Defense Minister Boris Pistorius has stated that the extra 100 billion euros from the special fund will not be enough. And this does not even include the additional investment required for the energy turnaround. When it comes to allocating scarce funds, the question, therefore, arises: Are energies from renewable sources just a “nice to have” or a gain for security?
One answer can be found by taking a closer look at the conditions of foreign deployments. Consumption at home, under peacetime conditions, would be a misleading measure because the military is there to fight. That’s why deployment in the field is the right yardstick. There, the most important thing is to ensure a stable and reliable supply of energy to the so-called operational bases – in other words, the soldiers’ base of operations.
Until now, electricity production and heating by diesel generators were common. But the diesel is produced far away and has to be transported to the field camp – sometimes by airplane and then over hundreds of kilometers on bad roads. This usually consumes half the energy that the diesel brings to the field camp – the inefficiency is high. In addition, fuel transport is by far the riskiest logistical activity – such transports are a frequent target of attacks. So what could be more obvious than to rely as far as possible on the decentralized use of solar energy and wind power, for example, through photovoltaic systems to generate electricity?
By the way, the situation is different for vehicles. Of course, there are also motor vehicles used by the military that will be battery-electric like their civilian counterparts. However, the vehicles used for ground, water and air combat are far more important for the military’s energy consumption. They need energy carriers of the highest energy density – and that will continue to be liquid fuels, except that in the future, they will no longer come from fossil sources but be synthesized from renewable energies. Such e-fuels are irreplaceable for powering combat aircraft, which must have their fuel on board.
However, as far as properties on foreign deployment are concerned, the following applies: Here, decentralized supply with renewable energies is not only important for climate action but, above all, a security gain. It reduces the risk of outages due to attacks.
The first steps in the right direction have already been taken. In the MINUSMA mission, the German Armed Forces are operating photovoltaic and wind power plants at the Mali and Niger locations. From these, it generated around 1,400 megawatt hours of electrical energy there in 2020 and 2021, respectively, and saved around 450,000 liters of diesel per year. The share of renewable energies in the supply of the Bundeswehr’s operational facilities there was around ten percent in 2021. It needs to get close to one hundred percent.
The same is true at home. The German armed forces use 1,500 properties, or barracks, with around 33,000 buildings. In terms of energy efficiency, they are no better than other public buildings. But this also means that there is a lot to be gained economically by refurbishing them. It is not for nothing that the International Institute of Applied System Analysis (IIASA) described government buildings as “gold mines” in its Global Energy Assessment (GEA) back in 2012.
Now, not everything can be torn down and rebuilt. Military buildings in Germany will not function completely self-sufficiently. That means they will remain dependent on critical infrastructure. But here, too, an at least partially decentralized energy supply can increase security. Bundeswehr properties are rarely built densely. They offer space for small-scale wind or photovoltaic systems that can cover peak demand in times of crisis.
Renewable energies protect the climate – but because they can be generated by small, modular and decentralized plants, they also bring the military a considerable gain in security. This must play a role in the allocation of scarce investment funds from the defense budget.
Hans-Jochen Luhmann is a member of the Advisory Board of the Federation of German Scientists (VDW) and of the VDW Study Group on Security Policy. He is Emeritus Professor at the Wuppertal Institute for Climate, Environment and Energy, where he worked for 20 years, particularly on environmental tax issues. Previously, he was chief economist of an engineering company for ten years, with assignments in Yemen, Ethiopia and Brazil.
Mia Mottley has big plans and wants to achieve a breakthrough in international climate finance this year. The Prime Minister of Barbados wants to turn the international financial system around with her Bridgetown Initiative. This is a package of measures to make the financial system fit for the climate crisis. Mottley is thinking big: She wants to invest thousands of billions of dollars in expanding renewables, adapting to climate change and repairing losses and damage – without taxpayers in industrialized countries having to transfer ever more money to developing countries.
Mottley already promoted the project at COP27 in Sharm el-Sheikh. Her next important event is the Munich Security Conference, which will take place from Feb. 17 to 19. There, Mottley will promote her plan. Avinash Persaud, Mottley’s special envoy for climate finance, says of the initiative, “The character of the Bridgetown Initiative is that it contains very concrete ideas, all of which are implementable within 18 months. They are individually implementable, but together they would change the system.”
Mottley has proven in Barbados that she can achieve ambitious goals. She was the first leader of the Barbados Labor Party, the first prime minister, and the first to win all seats in the island nation’s 30-member parliament for her party – twice. With her parliamentary majority, she legalized same-sex partnerships, lowered the voting age and abolished the monarchy. With the Bridgetown Initiative, Mottley wants to be similarly successful at the international level.
The next major interim target of her 18-month program is the spring meeting of the World Bank and the International Monetary Fund (IMF) in April. A study by the G20 countries shows that the multilateral development banks could lend significantly more if they made better use of their capital. This would enable them to support countries, particularly in adapting to global warming, for which private financiers are hard to find.
The next interim goal will follow as early as June. Mottley and French President Emmanuel Macron then want to organize a conference to finance a massive expansion of renewables. To that end, the IMF is to create special drawing rights (SDRs) worth 650 billion dollars. SDRs are a type of currency created out of thin air by the IMF, as was last done in 2021 when the IMF distributed 650 billion dollars worth of SDRs to its member countries to fight the Covid pandemic.
However, the climate SDRs would not simply be distributed but would capitalize a fund. This would give the fund the best possible credit rating, a AAA rating from the rating agencies. This would allow the fund to borrow money cheaply and then lend it again cheaply to solar and wind farm developers. Then the fund could put up the promissory bills as collateral and borrow even more money to lend out. In this way, some of the world’s savings would be mobilized to fight the climate crisis.
Mottley and Persaud hope to divert 2.5 dollars to five trillion of the total 463 trillion dollars in global savings into the expansion of renewables like that. Crucially, the fund will provide low-interest loans. In many countries with excellent conditions for solar and wind power, their expansion is not worthwhile because the financing costs are too high.
The third element, financial support for countries in the event of climate-related loss and damage, is finally back on the agenda at the next UN climate conference in December: The Bridgetown Initiative envisages the creation of a fund here into which the polluters of the climate crisis, i.e., the major oil and gas corporations, pay.
This would then finance all three dimensions of the climate crisis: reducing emissions, adapting to warming and, finally, coping with loss and damage. By then, at the latest, Mottley would have proven that even small states can play a crucial role: “Size is not the only factor that matters. In many cases, we have the opportunity to exert a disproportionate influence,” says Mottley. And she herself could then once again become the first woman to hold a top office: Mottley has a good chance of succeeding UN Secretary-General António Guterres in 2027. Christian Mihatsch
