Climate Change Mitigation Will Cost Germany €2.3 Trillion
A new report entitled Klimapfade für Deutschland, compiled by the Germany’s Prognos Institute and the Boston Consulting Group, estimates that Germany’s transition from fossil fuels and nuclear power will cost the nation more than €2.3 trillion in direct investment over the next three decades.
The study is based on data gathered by some 200 experts from the Federation of German Industries (BDI), and comes from 68 separate associations. Panels of scientists , entrepreneurs, and trade unions met over 40 times to debate and discuss the data. In other words, the study is robust, and includes a multiplicity of viewpoints.
Even so, it is the opinion of Dieter Kempf, President of the BDI, that Germany’s climate change mitigation goals are unrealistic, both in economic and practical terms. He says flatly:
From our point of view, a 95 percent reduction in greenhouse gas emissions, which some climate politicians would most like to include in the coalition agreement, can not realistically be achieved in Germany.
Some environmentalists, however, were encouraged by the study’s findings. They point out that eliminating Germany’s dependence of imported oil, the nation will save some €470 billion by 2050. Likewise, they believe that the investment will benefit Germany’s large wind turbine manufacturers.
Although activists do make a reasonable point regarding oil imports, the suggestion that government investment in wind turbines will drive the economy is ludicrous—it falls squarely under the category of the broken window’s fallacy. That money would be spent elsewhere in the economy, and so the growth would occur in any case.
This point is made by by Kempf, who spoke to the German newspaper Die Welt:
It’s not that easy. From a stable gross domestic product to conclude that the climate protection expenditure would be an economic gain for all citizens, would even be fundamentally wrong. Because in the theory of economics also increases every traffic accident GDP. “What ultimately makes macroeconomic and climate policy sense, must not be commercially viable,” said BDI President Kempf true.
In fact, most of the carbon-saving measures initially produce economic losers. “Four-fifths of the necessary measures to achieve the 80-percent climate target are associated with direct abatement costs,” warns Kempf: “That means: These measures do not pay off in the view of the respective decision maker – whether industrial companies, homeowners or private consumers.”
Somebody has to pay the billions, too. Many homeowners, oil heating owners and motorists are thus inevitably asked to pay for climate protection requirements, without them having an immediate economic advantage.
In order to gain acceptance, incentivize and avoid social imbalances, large sums of money must be used for compensation. The trillion decarbonisation program is also a never before seen fiscal redistribution program.
The argument should be well-taken. Germany’s “investment” in green energy is not but wealth redistribution—the money always comes from somewhere else. Someone’s benefit is another’s detriment.
And perhaps the worst part of Germany’s climate mitigation plan is that it may actually increase global emissions. How? Stricter environmental measures in Germany will lead to the offshoring of German industry to places with lax laws, like China. In the end, pollution from the imported products displaces the gains made in Germany.
This isn’t just idle speculation, it’s a statistical fact: harsh climate laws tend to raise global carbon emissions.
Empirical Evidence Shows that Carbon Taxes (& Other Green Schemes) Increase Global CO2 Emissions
The following section is taken from Spencer P Morrison’s article on carbon taxes and pollution, as the discussion pertains to the question at hand:
To begin with, data from the World Bank reveals that China, and other developing countries, produce far more carbon per dollar of economic output (at purchasing power parity) than do Western nations. For example, China produced 0.6 kilograms of carbon dioxide per dollar of economic output in 2014, whereas America produced 0.3 kg of CO2, and Germany produced just 0.2 kg.
On top of this, China shows no signs of decreasing its emissions any time soon: China’s currently building hundreds of new coal-fired power plants, which will ensure its CO2 emissions continue to rise for decades to come.
Taken together, these facts suggest that every factory pushed out of the West due to carbon taxes actually increases global emissions dramatically, and this will continue to be the case for decades to come.
A number of other studies came to the same conclusion.
One important paper published in Proceedings of the National Academy of Sciences, found that carbon reductions alleged to the Kyoto Protocol were more than offset by increase emissions from imported products. Glen Peters of the Centre for International Climate and Environmental Research said this of the research:
Our study shows for the first time that emissions from increased production of internationally traded products have more than offset the emissions reductions achieved under the Kyoto Protocol … this suggests that the current focus on territorial emissions in a subset of countries may be ineffective at reducing global emissions without some mechanisms to monitor and report emissions from the production of imported goods and services.
Essentially, local carbon taxes are not a useful tool for mitigating a nation’s carbon footprint. If anything they actually raise global emissions. The paper also notes that China accounts for some 75 percent of the developed world’s offshored emissions.
Another study published in The Guardian, found that “50 percent of the rise in Chinese emissions are the result of goods for foreign markets.” This was echoed in a different study from the scientific journal Geophysical Research Letters, which found that cuts in carbon emissions by developed countries have been cancelled out “many times over” by increases in imported goods from developing countries—especially China.
Another study found that all of the trumpeted carbon reductions in places like Germany fall apart under closer scrutiny:
According to standard date, developed countries can claim to have reduced their collective emissions by almost 2% between 1990 and 2008. But once the carbon cost of imports have been added to each country, and exports subtracted – the true change has been an increase of 7%. If Russia and Ukraine – which cut their CO2 emissions rapidly in the 1990s due to economic collapse – are excluded, the rise is 12%.
In the same period, UK emissions fell by 28 million tonnes, but when imports and exports are taken into account, the domestic footprint has risen by more than 100 million tonnes. Europe achieved a 6% cut in CO2 emissions, but when outsourcing is considered that is reduced to 1%.
Together, these studies conclusively show that the offshoring of Western industry to China has actually increased global carbon emissions. It is unreasonable to assume that a carbon tax, which will further increase the incentive for business owners to offshore, will magically reduce global carbon emissions. There is no silver bullet. Carbon taxes are a pipe dream.
The same logic applies to Germany’s climate change mitigation strategy—it’s too much, too fast. If Germany’s serious about reducing emissions, it should instead invest in better housing insulation, and more energy efficient products. Too much pressure will force companies to move abroad, and the problem will only get worse.