Is Germany waking up to “virtuous” energy policies?

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Just last week Austrian humanities professor Ralph Schoellhammer blasted German energy research as being tainted by adherence to a green agenda. Schoellhammer said that, as with many other Western nations, the German focus on energy transition had blinded them to the serious risk of a shortage due to deteriorating geopolitical circumstances.

A decade ago the German government announced it would shutter all of its nuclear power plants by 2022. Reinforcing that decision, Robert Habeck, Germany’s minister for the economy, last summer outrageously claimed that nuclear power could not help offset reduced gas supplies.

Habeck then decided, based on claims by contracted think tanks that any disruptions to the agenda would cost the Germany economy a trillion dollars through 2050, to push ever harder for a quick energy transition. Germany had already joined dozens of nations pledging to stop using coal by 2028 in keeping with commitments to strive for Net Zero.

Then Germany joined the other G7 nations in calling for an end to investments even in natural gas. In November, Germany announced it would join several other European nations and withdraw from the 1994 Energy Charter Treaty that was designed to secure energy supplies. The treaty also offers protection to companies investing in the energy industry.

All of this recent posturing was taking place in the wake of the Russian attack on Ukraine that led to stoppages of natural gas deliveries to Germany and other European clients. The panicked Germans, deprived of their nuclear energy by choice, defaulted back to increasing reliance on coal- and oil-fired power stations in order to save scarce, increasingly expensive natural gas for heating homes.

But talk is cheap. And energy is not. Not any more. Worse, Germany, like a few other nations, is quickly learning that the virtuous adoption of anti-energy policies has negative consequences in the real world where citizens live. And inside Germany (and across Europe), there is squirming.

On March 6, McKinsey reported that Germany’s historic stable power supply is facing an electricity gap of up to 30 gigawatts by 2030 – equivalent to 30 large-scale thermal power plants. Even massive expansion of renewables would be insufficient unless Germany builds new gas-fired power plants and continues “temporary” operation of existing coal-fired power plants.

Three days later Habeck announced that Germany will use auctions to ensure construction of new gas power plants “for the times when wind and sun do not provide enough electricity.” Yet Habeck still believes his nation can complete its transition to a “climate-neutral” energy system by 2045. A January report from Germany’s Federal Network Agency had claimed that departing from coal before 2030 would not pose a threat to the nation’s energy security.

On another front, German automakers and auto workers are waking up to the threat posed by the U.S. Inflation Reduction Act, which includes $369 billion in climate and energy subsidies – but only for vehicles manufactured in North America. A recent survey of the German Chamber of Commerce and Industry found that 23 percent of vehicle manufacturers and suppliers were already considering relocating their production facilities to the U.S. or Canada.

Tesla has scaled back its plans to produce batteries in Germany, as building U.S. plants for electric vehicles has become “very attractive,” according to one industry executive. Audi and Volkswagen are also drooling over the $5,700 subsidy for vehicles assembled in North America. Another driver is the high cost of both natural gas and electricity in Germany.

Despite the temptations, European Union officials have for now ruled out spending “more and more money” to combat the “protectionist” Biden plan whose tax credit scheme makes European-made EVs less attractive to U.S. purchasers. German finance minister Christian Lindner argued that Germany cannot afford a competition with the U.S. for higher subsidies and that his country already offers mor public sector investment – 800 million euros ($860 billion) via the Generation EU program – than the U.S. IRA.

Even more surprising, the Bosch works council and IG Metall union, fearing massive job cuts from relocation of production facilities abroad, in February issued a “red alert,” warning that “the future of [European] industrial production is in danger.” Green policies threaten 900,000 German workers “directly and indirectly” involved in the production of internal combustion engines.

Germany reduced subsidies for electric vehicles in January based on the assumption that EVs had become increasingly attractive to buyers even with lower support payments that are only half as much as the pre-2023 subsidies of up to 6,000 euros to buyers and 3,000 euros to auto manufacturers. Last-minute subsidy seekers registered 104,300 vehicles in December but only 18,100 in January, though German transportation officials believe total 2023 EV sales will fall only by 8 percent.

And earlier this month, Lindner and German transport minister Volker Wissing called for exempting internal combustion engine vehicles from the European Union’s planned all-out ban on ICE vehicles as of 2035 – if the ICE vehicles can run on synthetic e-fuels.

Wissing went so far as to threaten to veto the vehicle emission laws unless the EU agrees, and he expects to secure backing for his proposal from Italy, Poland, and eastern European countries that provide supplies to the German auto industry. His position is likely to receive strong support from auto industry workers and their unions, who otherwise face structural unemployment that threatens their families.

The auto industry provides employment to 3.4 million people across EU nations – nearly 12 percent of all manufacturing jobs. Working class people are the hardest hit by rising energy prices, job losses, and other aspects of the “green transition.”

Coupled with the additional threat to the European auto industry from the U.S. IRA, it could be that an actual debate on just how to achieve an energy transition without massive societal disruptions might be beginning. This in a political environment in which dissent is increasingly denounced as unacceptable – that the “experts” must not be challenged.

  • Duggan Flanakin

    Duggan Flanakin is the Director of Policy Research at the Committee For A Constructive Tomorrow. A former Senior Fellow with the Texas Public Policy Foundation, Mr. Flanakin authored definitive works on the creation of the Texas Commission on Environmental Quality and on environmental education in Texas. A brief history of his multifaceted career appears in his book, "Infinite Galaxies: Poems from the Dugout."

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