Reversed roles in the energy transition

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How constitutional judges are speeding up the energy revolution

When looking at how technological innovations make their way into our world, we always wonder which side is actively pulling the lever and which side is the lever being pulled and has to adapt to the changes. Sometimes government intervention propels new developments, but in the recent digital age, it is mostly highly advanced tech companies that make the first move, constantly releasing novel products. They then force society, governments, and legislatures to adapt to the changed circumstances (and also to sometimes pick up the pieces). In the energy industry and especially in times of the energy revolution, technical innovation from high-tech companies also sets the pace, as it’s mostly the technical feasibility and economic incentives that lead to the integration of renewables into our energy system. But now the German Constitutional Court is also taking part, doing away with political resistance and speeding up this process. Based on their findings, they are now forcing the German government to enact a concrete plan to lessen emissions, and as a result to establish these new renewable technologies.

Constitutional findings set the new pace

The German Constitutional Court announced that in their view as the highest national authority, the German Climate Protection Act falls short. The judges obliged the legislature to present a concrete plan to reduce greenhouse gas emissions for the period after 2030 in more detail by the end of 2022. This case made it up to the constitutional court, as several climate activists, some of whom are still very young, saw their liberties violated by the previous regulations. The judges explained that the regulations would “irreversibly postpone high emission reduction burdens to periods after 2030,” adding that if the CO2 budget is already extensively used up by 2030, this exacerbates the risk of “serious loss of freedom” due to a shorter timeframe for necessary developments in technology and in the social sphere. This groundbreaking ruling was also considered to be a resounding slap in the face of the federal government by the environmental activists. Now the ball is back in the court of German legislature to reach a new agreement to adapt to these findings. 

The broad consensus within the established sciences is that if we want to fight climate change, CO2 emissions need to be reduced. But how is this achieved? Most CO2 is emitted by heavy industry and the energy sources to power them. But we can’t just halt the production of goods and we also can’t shut down the carbon-intensive power plants burning fossil fuels like coal overnight. One way to reduce CO2 emissions in an efficient manner is to use a mix of free market principles and some government intervention.

CO2 certificates

A study by FAU Erlangen-Nuremberg, WU Vienna and the University of Applied Sciences Graubünden concludes that current prices for CO2 certificates in Germany are set too low. Increasing the cost of these certificates would be the most efficient way to force a reduction in greenhouse gas emissions in the electricity sector and would be much more effective than subsidizing renewables.

For their analysis, “Effectiveness of Climate Policies: Carbon Pricing vs. Subsidizing Renewables,” they compared the various control instruments for reducing greenhouse gas emissions in electricity production in Germany and the United Kingdom. With only about 10€ per ton of greenhouse gas, Germany was not making optimal use of the carbon pricing regulation tool. By analyzing key indicators like daily emissions, CO2 prices, electricity from renewables, electricity demand and seasonal effects, the study concluded that Germany has been able to reduce its emissions from the power sector only relatively moderately. At the same time with a CO2 price of about 35€ per ton, the UK has caused a 55 percent reduction in emissions since the introduction of the electricity tax in 2013.

Following this logic, the study suggests that if the price of those CO2 certificates is set too low, coal power plants could stay profitable in the market with solar and wind power only displacing the relatively “clean” gas power plants. Taking into account the dynamics of the energy market, a higher tax on CO2 emissions would lead gas power plants to increasingly replace power plants burning coal. As natural gas emits only about half as much CO2 as coal, this would result in a more sustainable electricity production. A moderately high price for CO2 certificates would, as a first step, stop the operation of coal power plants from being economically viable. While the cleaner gas-fired power plants also cause CO2 emissions, they would act as an integrator for renewables until it will be possible to cover the energy demand completely from renewable energy sources.

A sustainable future

With the German Constitutional Court recognizing the right for a sustainable environment and fair starting conditions for future generations, they are setting an example for other industrialized nations that could cause a larger step forwards for politics on climate change. It is still unknown how the legislature will react and if it will be possible to come to a result, which will be in accordance with the insights of the Constitutional Court, but reducing CO2 emissions is already the goal of many countries and companies alike. With the right technology it will be possible to create an energy system that first runs on lower emissions and without emissions in the long run. 

A few decades from now, after the energy revolution, renewable energy sources will be the long-term state-of-the-art. Curious about which technology this future will rely on? To level up the operational reliability of renewable energy systems, we are happy to do our part with our NTUITY software platform. It significantly reduces maintenance and energy costs by offering intuitive, decentralized and predictive energy management.

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