Less CO2 through power plants EUEmissions trading paying off

Status: 06/17/2021 3:36 p.m.

The European emissions trading system had an impact last year. According to figures from the Federal Environment Agency, CO2 emissions in Germany’s power plants have fallen sharply. It looks different with industry.

From Martin Polansky, ARD capital studio

The German power plants emitted 15 percent less CO2 last year than in 2019. Coal power plants in particular were shut down. The energy sector and industry in this country have reduced their CO2 emissions by 33 percent since 2013. This is shown by current figures presented by the Federal Environment Agency (UBA).

According to the head of the German Emissions Trading Authority at UBA, Jürgen Landgrebe, European emissions trading has proven its worth. “The greenhouse gas emissions of the plants in Germany have fallen significantly.” Since 2018, the EU has decided to significantly strengthen its ambitions in European emissions trading. “And as a result, the markets reacted immediately,” said Landgrebe.

Significant price increases since 2018

Emissions trading is seen as a market-based instrument to reduce CO2 emissions. The system has existed since 2005. It ensures that around 1,800 power plants and industrial companies in Germany require emission certificates in order to be allowed to emit CO2.

The certificates are traded. The number of these decreases annually, which means that their price increases gradually. As a result, CO2 emissions are also becoming more and more expensive. While the certificate price was quite low for a long time, it has increased significantly since 2018 – to more than 50 euros per ton of CO2.

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Gas-fired power plants and renewable energy systems have benefited from this, said the head of the emissions trading office. Last year, more than 45 percent of the gross electricity consumption in Germany was covered by renewable energies. “The aim is for us to price fossil fuels heavily so that renewable energies also become competitive more quickly,” said Landgrebe.

Weak effects in industry

Many market observers assume that emissions trading could lead to the shutdown of coal-fired power plants in this country much earlier than 2038. This end date was agreed a good two years ago in the so-called coal compromise between industry, environmental associations and trade unions. The federal government had largely adopted the compromise in the coal exit law. In industry, however, the effect of emissions trading has so far been less pronounced. Emissions have only fallen by around eight percent since 2013 – also due to the corona pandemic. In many cases there is a lack of marketable alternatives, for example for chemical plants or the steel industry. The latter is to switch from coke to hydrogen in the long term.

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Help for retrofitting

The head of the German Emissions Trading Authority advocated increasing the pressure on industry. Fewer CO2 certificates should soon be issued. In addition, public aid is available for retrofitting. Landgrebe referred to the European innovation fund, which will provide approximately 20 billion euros for corresponding investments.

“The national decarbonisation fund is also providing around two billion euros to strongly promote such technologies and bring them to market readiness,” said Landgrebe.

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Special taxes on industrial imports?

The steel industry and other sectors fear that European companies could suffer competitive disadvantages if the pressure to switch becomes too strong. The argument goes that climate protection does not benefit from steel coming more from India or China in the future.

In the European Union there are therefore considerations to impose special taxes on industrial imports from regions of the world with low climate standards in order to protect domestic industry. The EU Commission wants to present plans in July on how emissions trading can be used even more. On the one hand, consideration is being given to lowering the CO2 cap more quickly in order to meet the more ambitious European climate targets. On the other hand, certificate trading could be expanded to the areas of transport and buildings.

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Surcharge at the gas station

In Germany, there has been a national CO2 pricing for fuel, heating oil and natural gas since the beginning of the year. However, this system is currently not based on a fixed CO2 cap, which is gradually being lowered, but on a price surcharge, for example at the petrol station – in the hope that people will use less fuel.

Similar to the issue of phasing out coal, European emissions trading could in the long run make the special national regulations superfluous in this country – if it proves to be the more efficient and market-compliant system for reducing CO2 emissions