Germany Threatens UK Car Production In Carbon Emissions Row
Angela Merkel's New Realpolitik: Forget Global Warming
Senior members of the German government have warned EU member states that German car makers could scale back or scrap production plans in their countries unless they support weakened carbon emissions rules, according to diplomatic sources. Germany has stepped up the pressure on them to water down limits on vehicle emissions to protect the country’s mighty car industry, particularly luxury makers such as BMW and Daimler. The sources added that some calls warning EU member states of possible consequences have come from members of Chancellor Angela Merkel’s office. --Paul Milligan, Daily Mail, 19 June 2013
Large German companies such as Siemens and Bosch are abandoning the solar industry. Their strategies resulted in debacles – their investments in solar power companies cost them billions. Compared to what investors have lost as a result of their investments in solar stocks, however, these sums are almost negligible amounts. The former stars at the stock exchange, SolarWorld and Q-Cells, have destroyed tens of billions of capital. --Thiemo Heeg, Frankfurter Allgemeine Zeitung, 18 June 2013
Electricity prices in Britain may be almost double those in Germany within three years due largely to the impact of a new tax aimed at supporting renewable power generation, a report by bank Credit Suisse has claimed. The bank’s analysis showed wholesale prices, which form the backbone of energy bills, would top those in Germany by 85pc in 2016-17 and would be higher in general for the next seven to 10 years. The bank blamed the roughly fivefold rise in the government’s new tax on carbon-dioxide emitting power generation over the next seven years, while also pointing to Britain’s lack of infrastructure to import power from the European mainland. --The Daily Telegraph, 19 June 2013
I do not blame my noble friend the Minister in the slightest for the fact that this is the worst Energy Bill in living memory and, indeed, probably the worst Bill of any kind that the present Government have brought forward. That may to some extent explain why it is so enthusiastically welcomed by the party opposite. It has, as the Minister made clear, one purpose and one purpose only: to reach the very demanding—that is an understatement—and radical decarbonisation targets in the Climate Change Act, which, as she rightly said, is something on which no other country has embarked. She seemed to think that was a good thing. In my opinion, it is just because no other country is so stupid. --Nigel Lawson, House of Lords, 18 June 2013
In the Energy Bill going through Parliament there is allowance for generous subsidy for a huge push towards burning wood to produce electricity. It’s already happening. Drax power station in Yorkshire has converted one of its boilers to burn wood pellets instead of coal; soon three of its six boilers will be doing this and the power station will then be receiving north of half a billion pounds a year in subsidy. By 2020, the Government estimates, up to 11 per cent of our generating capacity will be from burning wood. This is a really bad idea. It will cost a fortune, worsen air pollution, exacerbate dependency on foreign energy and increase greenhouse gas emissions compared with burning gas and maybe even with burning coal. All these are in direct contradiction of the Energy Bill’s ostensible purpose. Yet “biomass” is trumpeted as a key part of the Government’s strategy to keep the lights on and combat climate change. --Matt Ridley, The Times, 20 June 2013
1) Germany Threatens UK Car Production In Carbon Emissions Row - Daily Mail, 19 June 2013
2) The German Solar Disaster: 21 Billion Euros Burned - Frankfurter Allgemeine Zeitung, 18 June 2013
3) New Report Warns: Britain’s Electricity Prices To Go Through The Roof - The Daily Telegraph, 19 June 2013
4) Nigel Lawson: The Worst Energy Bill In Living Memory - House of Lords, 18 June 2013
5) Matt Ridley: It’s A Bio-Mess - The Times, 20 June 2013
1) Germany Threatens UK Car Production In Carbon Emissions Row
Daily Mail, 19 June 2013
Senior members of the German government have warned EU member states that German car makers could scale back or scrap production plans in their countries unless they support weakened carbon emissions rules, according to diplomatic sources.
With EU governments and lawmakers aiming to finalise the rules next week, which most of the 27 member states back, Germany has stepped up the pressure on them to water down limits on vehicle emissions to protect the country’s mighty car industry, particularly luxury makers such as BMW and Daimler.
The sources added that some calls warning EU member states of possible consequences have come from members of Chancellor Angela Merkel’s office.
German automakers like BMW (pictured here) could scale back production plans in the UK, France and Italy unless they support weakened carbon emissions rules
One EU diplomat said Berlin had reminded Lisbon of Portugal’s 78 billion euro ($100 billion) euro zone bailout, which was heavily financed by Germany, in its bid to convince the country to drop its opposition to softer limits.
‘They have tried everything at the highest level to pressure member states, in particular countries in the bailout club, to support their proposals,” said the diplomat, who spoke on condition of anonymity.
‘Germany seems hell-bent on pressing its interests. Even countries that are generally pro-German feel that they are going too far.’
A German government source denied that Berlin had put particular pressure on countries that have received EU financial aid, and said its aim was to protect jobs in the EU auto sector.
‘Our strategy is to focus on France, Britain and Italy as the big car producing countries, and on the countries which have important supply industries,’ the source said. They should all be together in this fight. We should not drive jobs out of Europe at a moment of high unemployment.’
2) The German Solar Disaster: 21 Billion Euros Burned
Frankfurter Allgemeine Zeitung, 18 June 2013
Large German companies such as Siemens and Bosch are abandoning the solar industry. Their strategies resulted in debacles – their investments in solar power companies cost them billions.
The author and former television journalist Franz Alt is a militant solar lobbyist. On his website, the 74-year-old, who wrote his doctoral thesis about Konrad Adenauer, gushes: “The sun sends daily 15,000 times more energy than all six billion people consume currently. This offer, we feel, is a godsend. We use the energy from the boss himself very much. It is environmentally friendly, climate-friendly, it’s free and yet sufficient for 4.5 billion years. We assure you that the sun has never sent us a bill.”
Could it be that Alt has solar panels on the roof (and thus has benefited from the lush subsidies for solar power for years), but no solar stocks in the portfolio? If he had, he would see the thing about solar energy being “free” a bit different: because the sun does send an invoice after all. Although not to him; but to the broad band of small shareholders, for example, who believed in the growth of the industry in the good times and eagerly bought shares – or to many large corporations which also invested in solar power and solar heat, and now withdraw disillusioned from their investments.
Green strategy resulted in debacle
Recently, Siemens had to make this expensive experience. On Monday, the group announced that the solar division will shut down. By the spring of next year, the loss-making division is to be completely closed. Thus, a final attempt, lasting seven months, to find a buyer was ultimately unsuccessful. Affected by this decision are 280 employees, most of them in Israel. With the purchase of the Israeli company Solel, CEO Peter Löscher entered the market for solar thermal systems, from which he had expected rapid growth. The strategy resulted in a debacle: All in all, Siemens lost around one billion Euros. The closure alone will cost the company a double-digit million amount.
Losses in the German solar industry
For Bosch too, the eclipse came faster than expected. In March, the automotive supplier announced its withdrawal from the business with solar cells and solar modules. The production will end in early 2014, as will its sales and development. Due to the withdrawal, 3,000 employees at locations in eastern Germany, especially in Thüringen, are facing unemployment. Bosch board chairman Franz Fehrenbach, the main man in charge, had been driving the entry into the solar business since 2008 . When the Frankfurter Allgemeine Sonntagszeitung asked him “Is the industry doomed to die?”, he answered depressingly, “For Germany, it looks like it is, unfortunately.”
The reasons for pulling out of solar are similar to those of the other manufacturers of solar modules and cells, which, one after another, slipped into the red or even had to file for bankruptcy since the end of 2011: Bosch had failed to restore the competitiveness of the division Solar Energy – because of the strong price erosion of up to 40 percent. The investment in the photovoltaic industry has cost the electronics company even more money than Siemens: around 2.4 billion Euros. Additional costs will be incurred by the social plan. The company has fully depreciated a total investment of 1.56 billion Euros by the end of 2012. In addition, there were also operating losses of 750 million Euros.
Capital losses of more than 21 billion Euros
Compared to what investors have lost as a result of their investments in solar stocks, however, these sums are almost negligible amounts. The former stars at the stock exchange, SolarWorld and Q-Cells, have destroyed tens of billions of capital. In December 2007, the solar cell and module manufacturer Q-Cells, listed with a market value of more than 11 billion Euros, was one candidate for promotion to the first tier in the stock exchange. As sufficiently known, this did not happen after all.
Instead, the company had to file for bankruptcy in 2012 and was bought by a Korean company; the private investors lost practically everything. SolarWorld AG, whose founder Frank Asbeck was called Sun King in the good times, now depends on new investors.
Translation Philipp Mueller
3) New Report Warns: Britain’s Electricity Prices To Go Through The Roof
The Daily Telegraph, 19 June 2013
Electricity prices in Britain may be almost double those in Germany within three years due largely to the impact of a new tax aimed at supporting renewable power generation, a report by bank Credit Suisse has claimed.
The bank’s analysis showed wholesale prices, which form the backbone of energy bills, would top those in Germany by 85pc in 2016-17 and would be higher in general for the next seven to 10 years.
The bank blamed the roughly fivefold rise in the government’s new tax on carbon-dioxide emitting power generation over the next seven years, while also pointing to Britain’s lack of infrastructure to import power from the European mainland.
Prices in the two countries had tracked one another for years, but they diverged last year as Germany spurred a boom in renewable energy generation by pouring billions into subsidising the green sector.
The Credit-Suisse figures show that in the winter of 2016/17 UK power prices will trade at an 85pc premium to German equivalents, compared with a 25pc divergence currently.
“Our analysis suggests these differentials will continue for the next seven to 10 years,” analysts at the Swiss bank said in a report to clients.
The government introduced the mandatory tax on carbon emissions at £4.94 per tonne of CO2 earlier this year, adding to the carbon charges already in place under the European Union’s Emissions Trading System (EU ETS).
The two costs calculated together will rise to £30 per tonne in 2020, an expense which will significantly increase British power prices, Reuters reported.
4) Nigel Lawson: The Worst Energy Bill In Living Memory
House of Lords, 18 June 2013
My Lords, like other noble Lords who have spoken, I begin by declaring an interest. It is a non-remunerated and non-pecuniary interest, unlike some noble Lords’ interests. It is the chairmanship of the Global Warming Policy Foundation. While I am about interests, perhaps I should declare two past interests, which I think are slightly more relevant to this debate: one which was remunerated, not particularly well, Secretary of State for Energy, and the other, president for a very long time—indeed I am the immediate past president—of the British Institute of Energy Economics. I have been tilling this soil for quite a long time. I am glad to say that next to me here is my successor as president, my noble friend Lord Howell, who was my predecessor as Secretary of State for Energy. Unfortunately, his other commitments prevent him from speaking in this Second Reading debate but I hope he will bring his great wisdom on this issue to bear in further stages of this Bill.
I do not blame my noble friend the Minister in the slightest for the fact that this is the worst Energy Bill in living memory and, indeed, probably the worst Bill of any kind that the present Government have brought forward. That may to some extent explain why it is so enthusiastically welcomed by the party opposite. It has, as the Minister made clear, one purpose and one purpose only: to reach the very demanding—that is an understatement—and radical decarbonisation targets in the Climate Change Act, which, as she rightly said, is something on which no other country has embarked. She seemed to think that was a good thing. In my opinion, it is just because no other country is so stupid.
The policy too has a particular characteristic. It has been characterised by our leading energy economist, Professor Dieter Helm of Oxford, as the Gosplan approach—his word, not mine. The noble Baroness, Lady Worthington, had a similar critique of this Bill. It is a curious, arbitrary form of nationalisation with much greater discretion for Ministers and officials than any of the old-fashioned nationalisations. The noble Baroness developed a powerful critique. It was probably the only aspect of her speech with which I agreed, but nevertheless she made a very important point. The other claims for the Bill are, of course, poppycock.
As my noble friend Lord Teverson pointed out, this is not a new Bill. It was first published in draft in 2010, and in gestation, it inevitably goes back beyond that. Since then, absolutely everything of importance in the energy field has changed. Incidentally, we need to distinguish between the climate change issue and the energy issue. For example, Professor Helm, to whom I referred and who I have known for many years, is, on the climate change issue, at the alarmist end of the spectrum, yet he has produced the most devastating critique of the Bill because he is, among other things, unlike some noble Lords who have spoken, a highly competent economist.
Anyhow, since the Bill first came forward, everything of significance on the energy scene has changed. On climate change, too, it is now agreed even by the Met Office that there has been no further recorded global warming for the past 16 years or so. That has led to a great debate among scientists as to whether, as seems likely, they exaggerated in the past what is known in the jargon as the climate sensitivity of carbon. There is an emerging consensus among scientists that the climate sensitivity of carbon is probably less than they thought.
That means, importantly, that any dangers from warming, if they occur, are postponed well into the next century. It means that there is no urgency to go ahead in this way, not only because the uncertainties are in the distant future but because we have no idea what technologies will develop over the next 100 years. All we know is that there will be technological development, because there always has been and always will be.
Again, the Kyoto agreement has collapsed with no successor. The whole of the Bill was predicated on the idea of a global agreement, but we now know that there is no global agreement and that there will not be a global agreement on mandatory carbon emission controls. In the European Union, which is the closest to us in going in this direction—although it has no Climate Change Act as it is not so stupid—the renewables industry is in meltdown. Over the past five years, the share price of the renewables companies has fallen by at least 80%. The countries concerned are busy withdrawing their subsidies and one renewable company after another is going bankrupt.
The final thing, to which allusion has already been made and which is probably the most important, is the shale gas revolution. The development of fracking, as many noble Lords know, means that it is now possible economically to win gas from shale on a massive scale. Indeed, the United States, which was first in the field, is already doing it for oil as well. It is getting oil from shale. That has transformed the picture economically. The price of gas has collapsed in the United States, the price of coal has collapsed in accordance and even the oil price is looking a bit shaky. That also has an important geopolitical consequence as shale is in abundance throughout the world. In this country, we have large deposits in the north-west, in Lancashire—in the Blackpool region—and in other places. That means that we no longer need to have any fear of being beholden either to an unstable Middle East or to an unreliable Mr Putin. There is an abundance of fossil fuels throughout the world. Everything has changed.
We have an abundant supply and a prospect of lower prices. As other speakers have said, on the old forecasts it was thought that prices of fossil fuels were likely to increase. Even the International Energy Agency now thinks—although obviously it is all very uncertain—that they are just as likely to fall as they are to rise in the future. Yet despite these revolutionary changes, the Government’s policy and the Bill itself are completely unchanged from when they first came forward. They are ploughing on as if nothing had happened, despite the fact that the whole energy scene has totally changed.
This is not just a stupid energy policy; it is also an extraordinary foreign policy. I see a distinguished former Permanent Secretary at the Foreign Office in his place, the noble Lord, Lord Kerr. He used to be my Principal Private Secretary, so he is obviously a good man. I remind noble Lords that in the other place the Energy and Climate Change Committee produced a report on low carbon growth links with China. It concluded and I am not making this up:
“China … should be at the heart of HMG’s climate change mitigation strategy”.
There was, of course, a response from the Government as there always is to Select Committee reports. This was jointly from DECC, the Department of Energy and Climate Change, and the Foreign and Commonwealth Office. They said:
“We therefore welcome the Committee’s report, which rightly concludes that the UK has an important role in encouraging the trend to low carbon in China”.
They went on, correctly:
“As the UK is responsible for less than 2% of global emissions, we need all other major economies to reduce their emissions as well”.
They then added, and I quote:
“By demonstrating political leadership … the UK can have a powerful influence on the speed of transition to low carbon economic models in other countries”.
What on earth have they been smoking? Their view, it seems, is that the Chinese cannot make up their minds whether they really want to decimate their industry on the altar of higher energy prices and impoverish their still quite poor people even further and that they are only looking for a lead from the Foreign Office in Britain before deciding to do just that. What sort of world do they think we are living in? It is complete lunacy. China and India, despite what noble Lords may have heard earlier in this debate, have not the slightest intention of following us down this crazy path.
We must also look at the oil industry. Your Lordships may not like the major oil companies, but they are not stupid. If they really thought for a moment that we were going to move into a decarbonised word, would they be spending untold billions on exploring for new oil and gas—and even more for developing them? What about the financial markets? What happens when one of the oil companies makes a great discovery? Do the shares go down, because, after all, fossil fuels are completely obsolete and they are pursuing a damaging strategy? No, the shares go up, when they have a great oil or gas find.
This is an Alice in Wonderland world in which the Government live and in which this debate is taking place. Nor is this policy a harmless lunacy. UK energy costs and prices are inevitably bound to rise as a result of this Bill, which will become an Act, I am sure. The purpose of this legislation is to push up energy prices, because that is the only way that renewables, and even nuclear, can be made economic. British electricity prices are already, as a result of government policies in this area, among the highest in the world. According to the energy experts who have studied the Bill they are set to double by 2030. As we move from low-cost carbon to high-cost renewables, we will be damaging the economy and damaging industry and it will be the poorest families that suffer the most. I am astonished that we did not hear a word from the spokesman for the party opposite on the plight on the poor who are suffering from fuel poverty, and who will suffer even more as a result of this legislation.
This is a bad, bad Bill. There is not a single energy expert of repute, whatever his views on climate change, who believes that the policy enshrined in this Bill is sustainable. However, that is no consolation because the damage that will be done before the inevitable U-turn takes place will be incalculable.
House of Lords, 18 June 2013
Matt Ridley: It’s A Bio-Mess
The Times, 20 June 2013
In the Energy Bill going through Parliament there is allowance for generous subsidy for a huge push towards burning wood to produce electricity. It’s already happening. Drax power station in Yorkshire has converted one of its boilers to burn wood pellets instead of coal; soon three of its six boilers will be doing this and the power station will then be receiving north of half a billion pounds a year in subsidy. By 2020, the Government estimates, up to 11 per cent of our generating capacity will be from burning wood.
This is a really bad idea. It will cost a fortune, worsen air pollution, exacerbate dependency on foreign energy and increase greenhouse gas emissions compared with burning gas and maybe even with burning coal. All these are in direct contradiction of the Energy Bill’s ostensible purpose. Yet “biomass” is trumpeted as a key part of the Government’s strategy to keep the lights on and combat climate change.
It is also a retrograde step, taking us back towards the days when we relied on plant growth for most of our energy. According to Tony Wrigley’s recent book, Energy and the Industrial Revolution, firewood provided a third of Britain’s energy under Elizabeth I, more than draught animals, human muscle-power, wind, water or coal. By the time of Queen Victoria, firewood’s contribution had fallen to 0.1 per cent.
This astonishing change was key to the industrial revolution. To sustain an industrial economy requires far more energy than can be obtained from even the fastest-growing trees, crops or from horses. Britain would have stagnated in the early 1800s if it had not tapped almost inexhaustible supplies of coal to replace the need to fell trees and grow oats for horses. By 1850 England was each year burning coal equivalent in energy terms to the maximum output of a forest one and a half times the country’s land area. Thanks to coal, that deforestation could begin to be reversed. By 2000, Britain’s forest cover had trebled since its low point in 1900.
Under the Government’s plan, biomass power stations will soon be burning much more wood than the country can possibly produce. There is a comforting myth out there that biomass imports are mainly waste that would otherwise decompose: peanut husks, olive pips, bark trimmings and the like. Actually, the bulk of the imports are already and will continue to be of wood pellets.
It is instructive to trace these back to their origin. Reporters for The Wall Street Journal recently found that the two pelleting plants established in the southern US specifically to supply Drax are not just taking waste or logs from thinned forest, but also taking logs from cleared forest, including swamp woodlands in North Carolina cleared by “shovel-logging” with giant bulldozers (running on diesel). Local environmentalists are up in arms.
The logs are taken to the pelleting plants where they are dried, chopped and pelleted, in an industrial process that emits lots of carbon dioxide and pollutants. They are then trucked (more diesel) to ports, loaded on ships (diesel again), offloaded at the Humber on to (yet more diesel) trains, 40 of which arrive at Drax each day.
Yet until recently the Government was in denial about all this diesel. “No net emissions during production are assumed,” it said in its 2007 Biomass Strategy. More recently, it has admitted that the energy costs of transporting biomass can be up to “46 per cent of the energy generated by combustion at the power station” if shipped from afar.
Storing the pellets is not easy. If too dry, they spontaneously burst into flames, as happened at Tilbury last year. The Health and Safety Executive warns that stored wood pellets also produce carbon monoxide, which can suffocate in a confined space.
Burn the pellets and you produce smoke. The Committee on the Medical Effects of Air Pollutants says airborne particulates kill more people than road traffic accidents. It is no accident that the Rural Heat Incentive, designed to subsidise us replacing gas boilers with wood burners for central heating, is not available in cities because it could break air-quality limits. To put it more bluntly, your Government has decided that there is not enough pollution in the countryside.
Moreover, soot — or “black carbon” as scientists now call it — has recently been shown to have a much bigger impact on climate than previously thought. “Global atmospheric absorption attributable to black carbon is too low in many models and should be increased by a factor of almost 3,” reads the key paper published this month. Because burning gas does not produce soot, this is another black mark against wood.
As for carbon dioxide, clear-felling a forest is like raiding the carbon bank. Wood is the most carbon-rich fuel of all — more so than coal and much more so than oil or gas. The biomass industry and the Government respond that trees regrow, so reabsorbing from the atmosphere the CO2 emitted when they were burnt. The Government’s 2012 UK Bioenergy Strategy says that wood burning “results in lower total GHG [greenhouse gas] emissions than leaving the wood unharvested”.
But it only achieves this result by measuring the effect over 100 years. That’s how long it takes on average for the forest to regrow. And this assumes that you do not then cut it down again, or you are back to square one.
Over 20 or 40 years, study after study shows that wood burning is far worse than gas, and worse even than coal, in terms of its greenhouse gas emissions. The effect on forest soil, especially if it is peaty, only exacerbates the disparity. The peat dries out and oxidises.
Yet the Government persists in regarding biomass burning as zero-carbon and therefore deserving of subsidy. It does so by the Orwellian feat of defining sustainability as a 60 per cent reduction in emissions from fossil fuels. As Calor Gas puts it: “This is a logical somersault too far, conveniently — for the sake of cherry-picking the technology — equating 40 per cent to 0 per cent.” (Calor Gas supplies rural gas and is understandably miffed at being punitively treated while a higher- carbon rival industry is subsidised.) Moreover, unlike gas or coal, you are pinching nature’s lunch when you cut down trees. Unfelled, the trees would feed beetles, woodpeckers, fungi and all sorts of other wildlife when they died, let alone when they lived. Nothing eats coal.
So, compared with gas, the biomass dash is bad for the climate, bad for energy security and dependence on imports, bad for human health, bad for wildlife and very bad for the economy. Apart from that, what’s not to like?