IPCC On the Relation Between Emission Trade System and Feed-In Tariff

An enemy of renewable energy called Joachim Weimann writes about the latest IPCC report in Frankfurter Allgemeine Zeitung. Thanks to Heiko Stubner for the link.

He thinks that feed-in tariffs are useless as long as there is a cap on CO2 under the European Emission Trade System. This is a common fallacy employed by people trying to slow down deployment of renewable energy. I have dealt with it before, for example in this post titled “German Anti-Renewable Losers INSM”.

It is of course true that whatever fossil fuel use is displaced from German electricity generation by new renewable energy sources like wind and solar will just be used somewhere else under a cap and trade system.

But that does not mean that deploying low carbon energy sources does not reduce emissions. Of course it does.

It only means that those reductions won’t actually achieve anything as long as the cap is not reduced as well. And in the long term, reducing those caps obviously requires more low carbon energy sources.

The whole point of having a cap and trade system is to reduce CO2 emissions. Using this system as an argument to keep coal alive longer in Germany is certainly not what it is intended for. This reminds me of lawyers for American airline companies using the Kyoto Protocol of all arguments for their point of view that, yes, airlines should be allowed to dump CO2 into the atmosphere at zero cost.

The article tries to imply that the latest IPCC report endorsed this loser argument. It does not.

What the IPCC report actually says:

Interactions between or among mitigation policies may be synergistic or may have no additive effect on reducing emissions (medium evidence, high agreement). For instance, a carbon tax can have an additive environmental effect to policies such as subsidies for the supply of RE. By contrast, if a cap and trade system has a binding cap (sufficiently stringent to affect emission-related decisions), then other policies such as RE subsidies have no further impact on reducing emissions within the time period that the cap applies (although they may affect costs and possibly the viability of more stringent future targets) (emphasis mine).

That’s exactly right. The cap means that reductions in the electricity sector just shift the emissions to some other place. But Weimann is still wrong assuming that this supports his view. It only does if you overlook the part at the end. Obviously, deploying renewable energy will help when deciding on the cap for the next period. And obviously it helps reducing costs, which works all over the World. Reducing the costs of solar by the German feed-in tariff has brought costs down so far that China is now deploying massive amounts.


Published by kflenz

Professor at Aoyama Gakuin University, Tokyo. Author of Lenz Blog (since 2003, lenzblog.com).

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