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November 23, 2017
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Between 1990 and 2016, Germany reduced its greenhouse gas emissions (GHG emissions) by 27.6%. Excluding the significant downtrend in the first few years after the German reunification, GHG emissions still declined by more than 19% between 1995 and 2016. This is a considerable success, particularly in an international comparison. After all, global energy-related carbon emissions increased by more than 50% during the same period. [more]
PROD0000000000456648 1   |    November 23, 2017Chart in Focus November 23, 2017 Ambitious climate goals are moving out of reach Author www.dbresearch.com Deutsche Bank Research Management Stefan Schneider Eric Heymann +49(69)910-31730 eric.heymann@db.com Between 1990 and 2016, Germany reduced its greenhouse gas emissions (GHG emissions) by 27.6%. Excluding the significant downtrend in the first few years after the German reunification, GHG emissions still declined by more than 19% between 1995 and 2016. This is a considerable success, particularly in an international comparison. After all, global energy-related carbon emissions increased by more than 50% during the same period. Germany has publicly committed itself to reduce its GHG emissions by 40% by 2020 (in comparison to 1990). If this goal is to be reached, emissions will need to decline by c. 17% by 2020. In other words: Germany has only four years – 2016 to 2020 – to reduce its GHG emissions by almost the same percentage as in the 20 preceding years. This goal is surely ambitious – and it seems quite strange that (almost) all political parties simply defend it and do not (or at least not publicly) ask the question whether the grapes might be too high. We are obviously dealing with a significant political taboo here, probably not least because climate change is a very emotional issue for parts of the public. The German climate protection goals also played an important role in the (failed) exploratory talks for a “Jamaica” coalition. In the media, the issue was narrowed down to the question of how many (older) coal power plants should be shut down prematurely in order to make a contribution towards reaching the climate goals. While we do not want to join this discussion, we would like to point out that any emissions from electricity generation are subject to the EU emissions trading scheme (EU ETS). Thus, they have only a theoretical effect on the national German climate protection goal, if any. If Germany shuts down coal power plants (be it by government order or for economic reasons), demand for emission certificates under the EU ETS will decline, which is why the certificate price will decline as well (ceteris paribus). Other power plant operators within the EU can then purchase the newly freed, cheaper certificates. The emissions cap under the EU ETS will not change – at least in the current regime. Back to the German climate protection goals. The long-term GHG emissions reduction targets remain ambitious. Assuming a linear reduction path, emissions would need to decline by 25% in the 2020s and by 33% in each of the two subsequent decades. Then, GHG emissions would be 80% below the level of 1990 by 2050 – or, in other words, in line with the minimum goal. Officially, Germany even aims for a reduction by up to 95%. This means that the percentage declines would need to rise every decade in comparison to all preceding decades. Ambitious climate goals are moving out of reach Sources: Federal Environment Agency, BMWi, Deutsche Bank Research Deutsche Bank Research Ambitious climate goals are moving out of reach 2   |    November 23, 2017Chart in Focus Original in German published on November 20, 2017: ˮ Ehrgeizige Klimaziele geraten außer Sicht ˮ © Copyright 2017. Deutsche Bank AG, Deutsche Bank Research, 60262 Frankfurt am Main, Germany. All rights reserved. When quoting please cite “Deutsche Bank Research”. 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In the United Kingdom this information is approved and/or communicated by Deutsche Bank AG, London Branch, a member of the London Stock Exchange, authorized by UK’s Prudential Regulation Authority (PRA) and subject to limited regulation by the UK’s Financial Conduct Authority (FCA) (under number 150018) and by the PRA. This information is distributed in Hong Kong by Deutsche Bank AG, Hong Kong Branch, in Korea by Deutsche Securities Korea Co. and in Singapore by Deutsche Bank AG, Singapore Branch. In Japan this information is approved and/or distributed by Deutsche Securities Inc. In Australia, retail clients should obtain a copy of a Product Disclosure Statement (PDS) relating to any financial product referred to in this report and consider the PDS before making any decision about whether to acquire the product. Of course, long-term forecasts are subject to particular uncertainties. Nevertheless, assuming that declines become ever more rapid over time runs counter to both intuition and experience from other areas of life. After all, success is usually most easily achieved right at the beginning (excluding revolutionary technology breaks). Obviously, we will need to see significant technological progress in all economic and social areas (and within less than 35 years) if the long-term climate goals are to be reached. If policymakers set themselves such ambitious goals, they should have more than just a vague idea about the technologies and instruments they plan to use in order to realise them. In addition, they should tell corporates and citizens about the (considerable) costs involved and the restrictions which will probably become necessary. A climate policy which is based solely on (exaggerated) idealistic notions inevitably loses credibility.