Merkel’s Greens Challenger Seeks CO2 Price Rises to Ditch Coal

Chancellor Angela Merkel must ditch coal in favor of cleaner gas power plants to protect the climate, said the co-leader of Germany’s Greens party, urging a redoubling of efforts to raise carbon prices in the world’s biggest cap-and-trade program.

The Greens will push for more ambitious European Union climate targets for 2020 to help raise CO2 prices, said Juergen Trittin, outlining his party’s strategy for federal elections in little more than four months. A higher price for carbon permits would make burning coal more expensive and so less attractive, which the Greens would complement by setting strict efficiency standards for new fossil plants, he said.

“It’s key that we succeed in getting CO2 certificates back to a decent price,” Trittin said in a phone interview yesterday in Berlin. “German gas plants are under threat of being closed as a result of their low running times because they can’t compete with coal” which he said is “highly subsidized.” Older, written-off coal-fired stations should be “pushed out of the market as they mess up prices and the climate.”

Trittin, one of his party’s two lead candidates for the Sept. 22 elections, is returning to a core Green policy area as he attacks Merkel’s handling of the energy overhaul that is the signature policy of her second term. Polls suggest the Greens’ allied message of tax rises and more euro-area debt sharing may resonate with the public: the party has 14-15 percent support after taking less than 11 percent at the last election in 2009.

U.S. Talks

The Greens’ roots as an anti-atomic movement give them added credence after Merkel’s decision to transform Germany’s power market, Europe’s biggest, by more than tripling the share of renewables in the electricity mix by 2050 while phasing out nuclear generation. Underscoring the party’s clout, Trittin met in Washington last week with U.S. acting Energy Secretary Daniel Poneman for talks on the energy switch and the fracking boom in the U.S.

Germany will this year start up more coal-fired power stations than at any time in the past 20 years, the Muenster-based IWR renewable-energy institute said in February. German CO2 emissions rose 2 percent last year as more coal was burned to generate power, the Environment Ministry said that same month.

“We need a new market structure for a power system dominated largely by renewables,” said Trittin, who replaced Merkel as environment minister in 1998, serving in the same post under Social Democratic Chancellor Gerhard Schroeder until 2005. “The question is how to build up capacity markets, and there is way too little discussion on that in Germany.”

Backloading ‘Compromise’

The fix for the carbon-market glut designed by the European Commission, a measure called backloading, has divided industry, the European Parliament and member states including Germany. The Parliament on April 16 sent it back to the environment committee for further debate, reflecting concerns that higher energy prices would deepen the euro-area recession and that intervention would be against the market nature of the program.

Backloading “is a compromise because one couldn’t agree on a more ambitious target,” said Trittin, the architect of the Schroeder government’s policy to exit nuclear power before Merkel reversed that decision in 2010, then returned to it the following year after the Fukushima disaster.

Trittin said he would give the Environment Ministry more control over power grids, reform the EEG clean-energy law so that energy from biogas plants is stored in the gas grid, and invest in making buildings more energy-efficient.

The German government has been trying to prevent a voter backlash after costs for the clean-energy expansion spiraled and greenhouse gas emissions rose. Merkel has urged reform of the country’s renewable subsidy system and slowing down an expansion of onshore wind and solar generators to keep costs in check.

Consumer prices increased in part because of exemptions for companies and excess supply of coal-fired power, said Trittin.

While putting the brakes on new renewable installations would have only minimal effect on cost, it would “choke off an industry that employs some 400,000 people,” Trittin said. Adding more onshore wind in southern Germany would reduce the need for building lines to ship electricity there, he said.

Before it's here, it's on the Bloomberg Terminal.