Wednesday, December 10, 2008

Looking for the Greener/Dirtier Compromise

Getting to 20% by 2020 ain't no easy thing. The commitment by the EU to reduce its greenhouse gases by 20% is nearing some negotiation deadline which is this weekend (Dec. 13th). Poland and Germany are looking for solutions to uphold their right to continue on the coal fired power plant route. Their continued heavy reliance on coal and the lack of effective technologies to deal with the gases means they are set to be screwed when it comes to paying for Carbon Permits.

So what are the solutions. Well, they wouldn't mind a free allocation of permits for the coal industry too (along with the ones they've sought for their other industries). Poland is pressing for a money bank, which transfers more money from Rich to East (FT). Well, I think that is what the EU is already doing.

But let's think about this for a second. You have coal reliant countries with heavy industry trying to keep their power prices low to retain industry. Then you have the other countries who are more diversified in their energy mix and industry. But the thought that comes to my mind is many of these 'other' countries shifted their energy sources, not because it was the greener thing to do, but because of either a state strategy or the endowment of other energy sources. So while I do not want to defend the continued use of dirty coal - or more specifically, the ability to externalize, as compared to internalize, the cost of greenhouse gas pollution, there does need to be a clearly defined transition for these states.

The idea here is that these states have known about the schemes that will be implemented to control GHG emissions for many years, but have failed to act effectively -notably Poland.

What needs to be devised is a strict timetable connected to the allocation of 'free' permits, which are reduced over time. I don't know whether it should be fast or slow, but not beyond 5 to 10 years, the amount of time it would take to build new power plants and the ability to store carbon (ok, this is very optomistic on this last point). If you can get the German economic and scientific machine behind this, then the timetable is appropriate.

There is no doubt that this is a very tight timetable, but the idea is that there is a period of transition which gets the countries to agree now and moves their industry and economy towards a sustainable energy system. Punishment or a lack of agreement will only make future progress that much more difficult.