Germany may be forced to trade emissions abroad to meet CO2 target

The German government is facing up to the prospect of not meeting its 2020 carbon emission reduction goal, and is mulling the possibility of investing in carbon reduction abroad, to compensate.

Tom Glover, RWE Supply & Trading’s chief commercial officer, told Bloomberg, the government could pay other countries to cut emissions so it can meet future targets and help prevent new coal-fired power stations being built.
“This is an opportunity to do something sustainable in the world,” he said. “We could be injecting money into these developing countries to reduce their carbon.”

It is an expensive option for the incoming new coalition government, costing about $208m for the country to meet the non-binding goal with UN credits, according to Bloomberg New Energy analysis.

But it is a live option as Germany is likely to miss its 40 percent cut by 2020 from 1990 levels by at least five percentage points, the government said last week.

Ahead of COP23 in Bonn, there is a growing constituency who say buying and selling rights to pollute are the most cost effective ways of tackling global warming as emissions are near a record and 2017 is poised to become the hottest year yet.

“It will provide a monumental signal if Germany comes out and supports international carbon trading,” said Jeff Swartz, director of climate policy at South Pole Group, which sells carbon credits and advises companies on the transition toward renewable energy.

The market route would probably give Germany’s coal-heavy utilities led by RWE AG a stay of execution as it would reduce the need for power stations to close to meet the target.

However, it would go against the government’s own rhetoric on eventual coal phase-out as well as societal and corporate interests pressing for a timeline for coal exit.

Trading is the most effective way to curb emissions across the EU, but other policies, national and international, are also necessary, according to an Environment Ministry spokesman in Berlin. Germany has previously said it wanted to achieve the target through domestic reductions.

The World Bank last year estimated trading can cut the cost of climate protection by 32 percent through 2030.

RWE, Europe’s biggest producer of greenhouse gases, is hoping lawmakers will allow trade because that would protect the climate as well as potentially prevent early closures of some of its fossil-fuel plants as well as those owned by other producers. Germany still relies on burning coal for about two fifths of its electricity.

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