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Summary and Policy Recommendations

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Climate Protection as an Economic Modernization Strategy

1. Climate protection requires sustainable development. Sustainable development strives to meet the needs of present generations, without destroying the natural foundations of life for future generations. This is a major challenge which must be met by all nations, whether they are industrialized or developing countries. One element of sustainability is economic modernization, which is based on the improvement of energy and resource productivity and the gradual development of solar energy. Besides the direct positive environmental effects of an energy efficiency and solar strategy, there are strong economic arguments as well.

2. Climate policy can yield considerable cost-savings. A considerable share of potential energy savings can be developed profitably, simply by reducing unsustainable energy consumption. It is estimated that for the EU up to the year 2005, at least 14% of CO2 emissions can be reduced at an actual profit. But in order to realize this potential, it is necessary to stimulate markets for energy saving by creating a suitable enabling economic framework.

3. A progressive energy efficiency and solar strategy can stimulate wide-ranging technological innovation. These innovations can yield considerable benefits. They are easily grasped by the public, especially the young. They offer true problem-solving potential as opposed to the problem-shifting technologies, such as the end-of-pipe technologies available in the past. The innovations can also enhance the long-term competitiveness of countries in the global markets of the future. (The so-called „first mover advantages") And they are particularly suitable for assisting developing countries in pursuing development processes that are less energy intensive.

4. Energy conservation creates jobs. As a rule-of-thumb, it is safe to say that for Germany one petajoule of saved energy creates 100 new jobs a year. Estimates of the job-creating potential of a progressive climate-protection strategy in Germany range, from a very optimistic 1.5 million new jobs (assuming a 25% reduction in CO2 emissions by the year 2005) through 800,000 (assuming a 20% reduction by 2005) to a moderate 60 to 90,000 (by 2020). Since these new jobs will be created in new sectors, the political challenge ahead is to support the eco-efficient industries so that they are able to create new jobs whilst at the same time ensuring that the energy-intensive industries have sufficient time to adapt to new standards.

5. A progressive energy efficiency strategy can yield numerous benefits at the regional level. In macroeconomic terms, energy efficiency measures such as the insulation of houses, the use of energy-efficient technologies and the increased utilization of renewable energy sources will result in the replacement of expensive energy imports with enhanced domestic engineering know-how, industrial output, skilled labor and services. As a result, considerable economic benefits will trickle up into the regional economic cycle.

6. Taking strong action now will help to avoid the future costs of climate change. Substantial costs will result from climate change-induced degradation and losses to biodiversity, agriculture and forestry, not to mention sea level rises, extreme weather events, and increased migration. Current estimates vary considerably, which is not surprising due to the complexity of the climate change phenomenon. The response of the insurance industry is an important indicator of the fact that the future costs of climate change

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might be considerable if inadequate action is taken.

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The Opportunities for International Climate Policy

7. To date, the opportunities for economic modernization have not been seized either in Germany or at the European or global level. Five years after the signing of the Framework Convention on Climate Change at the Earth Summit in Rio de Janeiro in 1992, the trend towards increasing CO2 emissions continues unabated. The situation is similar to the „disarmament poker" of the 1970s and early 1980s. While negotiations are conducted in official fora, behind the scenes, industrialized nations continue to „re-arm" by refusing to take the necessary climate protection measures.

8. The US cannot be counted on to play a leadership role. It continues to adhere to the famous dictum of former President George Bush in the preparations for the Earth Summit in Rio in 1992 that the „American way of life was not up for negotiation". Unfortunately, there are numerous factors which mitigate against Japan assuming the leadership role as the host country of the 3rd Conference of the Parties to the Climate Convention. The European Union’s reduction proposals represent the most progressive demands in comparison to other industrialized countries. But overall, it is still too weak an actor.

9. Comparative research in international relations has clearly demonstrated the importance of lead states for the success of international negotiations. A strong leader is needed to put progressive proposals on the negotiating table and to raise the stakes of the actual negotiations. Neither the US nor Japan can be expected to assume such a leadership role. Therefore, movement in the „climate poker game" will only be possible if the European countries recognize the clear advantages, and indeed, responsibilities of assuming a leadership role in climate policy.

10. A strong leadership role would not only pay off for the lead states in economic and social terms. The „climate dividend" could also take the form of a more just and peaceful world in the 21st Century. Climate policy offers the chance of exerting a positive influence on international peace and social policy. It can act as a of lever to ensure that the world is a safer and fairer place in the next century. For the European Union this global challenge offers the opportunity to present itself as an independent leading power.

11. A progressive climate protection strategy is peace politics in action. The security aspect relates first to the uncontrollable risks and consequences of climate change. It is feared that mass migration and armed conflicts which will result from sea-level rise in critical, overpopulated regions, not to mention the decline in strategically important water reserves, the destruction of fertile soils and the spread of tropical diseases will all place insurmountable demands on the international peace and security machinery.

12. The security aspect relates secondly to excessive dependence on oil and gas imports and the risks that such dependence creates for conflict and war. The main reason for the involvement of the US in the 1991 Gulf War, was of course their dependence on oil reserves in the Middle East. If current consumption trends continue, it is highly likely that fossil fuels reserves will become increasingly scarce at the latest, in the middle of the next century. It is feared therefore, that violent forms of „acquisition" (e.g. wars and terrorism) will be adopted by those developing countries who will be excluded from global markets due to shortage-induced price increases.

13. Global security is indivisible. Reduction of fossil fuel import dependence means a concurrent investment in peace, since future resource conflicts are more likely to be resolved in a non-violent manner. Reduced dependence also increases those forces promoting democratization in many oil states, a process which has hitherto been obstructed internally and externally by well-armed autocratic regimes. A progressive climate policy is thus not only necessary from the point of view of environment

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policy, it is also indispensable in terms of peace and security policy.

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Europe must take the political lead

14. International climate policy could contribute to the transition of Europe from that of object of globalisation to one of major actor in the creation of a just and sustainable world in the 21st century. A progressive climate policy could also stimulate awareness of the „European Project", for which interest has long since been lost, among both citizens and politicians of the EU.

15. The US as the current engine of economic globalisation refuses to take real action against the dangerous health and ecological effects of unlimited traffic and the unregulated exploitation of nature. The concept of restricting activities which degrade the natural resource base is still foreign to the mindset of neo-liberal economic thinkers and politicians. In this regard, Europeans have a clear natural „local advantage" due to the limited space and resources available on the European continent. One critical objective must be to positively influence the American neo-liberal thinking, which is based on unlimited competition, and to promote the concept of an ecological and social market economy.

16. For this reason, a strong European Union is more important than ever today. This is why the European institutions must be able to represent the Union in climate policy, and promote the interests of the EC and of humanity as a whole. This would provide the EU with a moral basis upon which it could challenge the US’s claim to leadership, which is based on economic and military might.

17. Germany and the European Union must therefore exert their influence to press for a strong international climate protocol at the third Conference of the Parties in Kyoto. The results of the Kyoto conference will be of crucial importance for national and European policy. In this light, the following key elements should be included in the actual protocol.

the obligations to reduce as many greenhouse gases as possible must be legally binding and the first target year set for 2005 on the basis of 1990 emission levels;

The protocol must be strong enough to be able to compel governments to work cooperatively to ensure implementation. Therefore, the protocol must contain as few loopholes and exceptions as possible. Any measure which may create undue flexibility, such as the net approach, the borrowing of emissions, emissions trading or joint implementation without an effective regulatory framework must be avoided.

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A New Start in German and European Climate Policy

18. Markets for energy saving and renewable energy sources offer considerable investment opportunities, financial returns and catalysts for technological innovation. Above all, investment capital, e.g. from banks, investment funds and contracting companies, should be directed to these sectors. For this, a clear regulatory framework is necessary to ensure reliability, predictability, and planning and investment security. This, in turn, will help to facilitate the development of market forces to ensure the realization of the technological innovation and employment-generating potential of strong climate protection policy. The principle that „the market is a good servant, but a poor master" should be reflected in the form of a clear climate policy framework, which encourages entrepreneurial initiative and stimulates competition.

19. It is essential to restore the credibility of German climate policy within Germany, and at the European and international levels. This will necessitate fundamental course corrections in current German and European climate policy.

20. The stated intention of the German Government to reduce German CO2 emissions from 1990 levels by 25% by the year 2005 should be anchored in a legally binding federal law. Modelled on a similar Swiss law, the German law could include a subsidiary CO2 tax

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on fossil fuels. The proposed tax would only become effective if other climate-protecting measures failed to reach the stated target. Tax exemption would be possible for those companies which undertake reasonable efforts at reducing their CO2 emissions. One subsidiary effect of the law would be to support voluntary measures to increase energy efficiency and conservation, and the promotion of renewable energy sources. The actual tax would have the character of an „emergency brake", which would not be applied until all the other proposed measures would have been proved inadequate.

21. The Federal Government must be prevented from amending the Power Industry Act. Instead, „ecological crash barriers" in the form of priority regulations for rational energy use, cogeneration, and renewable energy sources must be included in this law. The government’s bill will undermine environment and climate protection policy. It also encourages concentration and jeopardizes municipal energy supply, it is hostile to medium-sized and small businesses and moreover, it will result in unjust and inequitable consequences.

22. The central element of any instrument mix for designing structural change must be ecological tax reform. The important signal-setting function of ecological tax reform is based less on the effects it will have in terms of energy prices, than on a combination of the following structural factors:

  • the price of energy would be raised slowly, in small steps which are announced in advance, over a period of ten years;
  • in order to avoid competitive disadvantages, a special set of regulations would be introduced for industry;
  • the tax burden would be offset by a reduction in labour taxes. This will result in the strengthening of the investment power and competitiveness of the German economy, not to mention, a new alliance between the environment and labor sectors.

23. A solar initiative should be launched. The central element should be the national application and realization of the „joint implementation" concept. Within the framework of a new solar consortium, energy suppliers, among others, should make a small part of the tax-free accruals and reserves paid by electricity customers, (estimated at DM 50 billion), available in order to finance a 100,000 solar-roof program. Start-up grants and low-interest loans should be provided to support the establishment of new companies in the renewable energy sector. Private business should develop a joint initiative within the framework of the European Union for an export-promotion programme, „Power for the World", which would supply rural areas in developing countries with electricity. These measures will help to ensure the full realization of the voluntary agreement on CO2 reduction, which has been signed by German industry. In particular, banks, insurance companies and the construction sector will be expected to make an active contribution to climate protection on the basis of these voluntary agreements. In return, the CO2 savings that will accrue, should then be credited back to these companies.

24. A solar agency should be established on the basis of the Japanese model. The task of such an agency would be to bring together scientists, plant manufacturers, academia and research institutes, as well as consumers, to determine the need for further research and development on a systematic and realistic basis. At the same time, the solar agency should ensure that research and development efforts concentrate on the removal of structural impediments to solar energy.

25. A public awareness campaign is needed to promote the use of and investment in solar energy. Although everyone favours solar energy (used here as a collective term for all renewable energy sources), most people prefer to invest their capital in more prestigious consumer goods, out of ignorance of the investment potential, and above all because its use is not yet associated with any particular gain in prestige. Personalities from the fields of sport, the arts, media and youth culture should be persuaded to take part in an image campaign to promote solar energy. The solar cell, the solar collector, the

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solarmobile and the solar pocket calculator could in this way become status symbols thereby shedding the „Utopian do-gooder" image.

26. An ecological turnaround to reduce CO2 emissions in the transport sector is required to avoid undermining CO2 reduction successes in other sectors. What is required is a type of „disarmament" in the automobile sector. This would include: a 3-litre car; a balanced ratio between public and public transport; a resurgence of non-motorized transport, (through reduction of motorized vehicles in the public transport space in urban areas); a decrease in the volume of goods transport (by raising the tax rate for diesel to the same level of gasoline, and the European-wide introduction of a heavy-transport tax); and the reduction of air traffic (by the elimination of special tax advantages in the aviation sector and the replacement of short-haul flights with more efficient ground transport link).

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The European Climate Alliance

27. One important objective of German climate policy must be the creation of a European climate alliance. To this end, the EU’s climate protection programmes must be strengthened on a massive scale. It is of particular importance to prevent the development of a counterproductive regulatory framework at the EU level in the energy and transport sectors. Therefore, it is equally important that unsustainable structural and agricultural policy measures be dismantled.

28. European energy policy must be supported by strong climate policy in the form of energy efficiency directives. These would include directives on: binding regulations for electricity obtained from co-generation and renewable energy sources; energy conservation and efficiency; and a uniform European regulatory framework for feed-in payments for electricity from renewable energy sources. The liberalized European energy market is not an end in itself. A strong EU climate protection policy can help mobilize the forces in the larger world market for: the promotion of ecologically sound economic growth; the securing of existing jobs and the creation of new employment for the more than 18 million who are currently unemployed. By supporting the export-promotion program, „Power for the World", which provides electricity for rural areas in developing countries, the European energy sector should help legitimate Europe’s claim to moral leadership in the international climate arena.

29. Liberalization of the European common market, which will be further supported by monetary integration, must no longer be pursued at the expense of climate protection. Therefore the European Union must ensure that clear priority is given to rail transport when developing European transport networks. An ecological turnaround in European transport policy must also include restrictions on: fuel consumption by cars; a heavy-vehicle tax to decrease the volume of goods transport; and the abolition of tax exemption for aircraft fuels.

30. In line with the proposal for a German CO2 reduction law, the EU’s greenhouse gas reduction targets should also be legally binding. This would result in a review of the climate-compatibility of the EU programs in other sectors, which would be imperative to ensure a coherent European climate policy.

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© Friedrich Ebert Stiftung | technical support | net edition fes-library | Februar 2000

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