G8 Meeting: Climate Change Laid To Rest

GLACIERS ADVANCE, GLACIERS RETREAT

Revealed by UK media shortly before the start of the G8 meeting near Lough Erne in Ulster, David Cameron's adviser for Europe, Ivan Rogers blocked moves from Germany and France to make climate change a major G8 agenda item.

Ritual whines that this meeting is yet another “last hope for an international agreement that could avert catastrophic climate change” have worn thin, very thin. The real world potential for any international climate change pact setting European-style ETS carbon taxes and tradable permits is zero and not worth talking about. Linked whining about “rising concern” that the UK government is watering down its climate change mitigation ambitions, the same way these are on the point of being watered down in Germany, other European countries and the European Commission, are also not worth talking about – because the die is cast and change is coming.

British climate-correct media, like the 'Guardian' and 'Independent' have predictably claimed that UK Chancellor George Osborne's stubborn refusal to set a 2030 date for “complete decarbonisation” of the British electricity system is not only a threat to Britain but also to Europe's ambitions for a squeaky clean and sustainable world. Osborne is said to be pushing for a slower timetable, and lower targets across the EU for 2020, in the same way as a rising number of other European deciders – possibly including Angela Merkel and her CDU, but only after her “triumphal re-election” in September's national elections.

AND WHAT ABOUT THE ECONOMY, AS IF THAT MATTERED?

The Lough Erne meeting had much more serious and real issues on the table. The two-day summit focused the “Three T's” of tax, trade and transparency, ranging from how the US FATCA anti-evasion tax on hedge funds and wealthy individuals who use them to dodge taxes will be mirrored by similar legislation to hit tax evaders in Europe and Japan. The planned EU/US free trade deal and measures to make WTO trade regulations more transparent were also high on the agenda. Hopes for the EU/US trade deal are high, even very high, with the term “an economic Nato” being bandied. Potential net benefits to Europe from the package could possibly exceed $75 billion-a-year.

Conversely the spend-and-spend prayer wheel of the climate correct lobby, estimated at 350 billion euros for Germany alone in 2000-2012, and 600 billion euros for 2000-2020 unless its Energiewende is sharply cut back, makes these new hopes small change. UK spending “to avert climate catastrophe” only on its wildly ambitious and technically flawed offshore wind program for 2012-2020 is costed at about $300 billion (₤200bn, €225 bn), before the fatally-predictable upward revisions.

To be sure the Vatican Radio broadcast Pope Francis' appeal to G8 summiteers, saying that “money, politics and economics must serve, not rule”, in particular to fight poverty, eliminate hunger and ensure food security in low income countries – but energy security through extreme spending was not included. The clean energy goal to protect polar bears while driving large sections of the European public into fuel poverty, and out of a job was also absent from the Papal message.

The Pope added that politicians must serve people and promote an ethic of truth. For the much touted, but empty “new paradigm” of creating a sustainable economy based on fighting “carbon effluent” and enriching traders playing the CO2 permits casino while they lose other peoples' money, the avoidance of truth is endemic. The blowback can only be sharp and angry, and is coming.

THE HOME BASE OF NEW NORMAL IS WEAKENING

While the Parti Socialiste government of Francois Hollande stoutly maintains its Holier Than Thou anti-fracking policy – but French oil major Total SA prepares to import US shale gas as LNG and sell it in France – over the Rhine in Germany the glacier is retreating. In a time-hallowed political process of insistent hints and whispers, theatrical denials and short briefings from “anonymous CDU sources” close to power, Angela Merkel is preparing the way for German lawmakers to give approval to fracking (hydraulic fracturing) to produce gas and oil in the country.

When Germany does it, the French will gambol alongside like the obedient poodles they are!

No date is set for the German volte face except “soon after her triumphal re-election” in September, but this alone will do precious little to plaster over Energiewende-gate, AKA the incredible costs of energy transition. The costs of Germany's energy transformation plan – supposedly critical to “global climate stability” - have become so outrageous that German industry is now alarmed. For at least the past 18 months, the plan has become too expensive for Germany, let alone other Europeans, and has spurred a flight of German industry out of the country. The flight targets the home base of shale energy, the United States, but is especially damaging to CDU ideologists still toeing the climate-energy-correct line because Germany's industrialists are also actively seeking to develop shale oil and gas, stranded gas resources, and plain old conventional oil in Europe's neighbor regions of West Asia, the Middle East, North Africa and the eastern Mediterranean, as well as east Africa and further afield.

Like German households, business users look at the bottom line on their energy bills. They are if anything further enraged or dismayed to hear that windpower and solar power can produce electricity at almost zero cost – but power prices go on rising due to the green energy levy, as well as Federal and Lander taxes and charges – which help the funding of bailouts to stricken industries which can't pay the power bill. In certain cases, including the country's largest utility firm E.On special new charges may be permitted by Federal and Lander agencies to cover the firm's disastrous investment in natural gas-fired power production, where every kilowatthour produced is now at a loss due to extreme high imported gas prices, the collapse in European carbon allowance permit prices, and the ever-declining number of hours-per-year that gas fuelled plants operate.

The crisis faced by E.On also concerns a large number of other European utility companies which heavily invested in cleaner-burning, lower-emission gas-fired plants in the 2005-2010 period, but now have non-performing assets. In a rising number of cases, according to Eurogas chief Jean-Francois Cirelli, this threatens their business survival. The Association of German Chambers of Commerce and Industry puts things starkly: "The U.S. has become much more attractive to companies than Europe".

This in fact means the western older member countries of the EU including Germany – but not the low wage new member countries of east Europe, where monthly salaries for qualified industrial workers can run at 400 euros ($520) or less. German industrialists have seen the writing on the wall which says they are getting sandwiched between eastern Europe with its low labor costs and the USA with its low energy costs – and prices. Germany's rush to green energy has done a lot more than impose “the new paradigm” of low carbon sustainable, at least in politicians' speeches scripted by climate correct ideologues riding the green gravy train. Wholesale electricity prices have been sliding in Germany but this is swamped - as with so much else in Europe – by higher taxes, charges and fees of which many carry the now provocative word “green”. Final utility bills go on rising, by as much as 20% since January 2012 and in 2012 German households paid more than 2.5 times what their American counterparts paid for the same power supply, according to market watcher GlobalData.

INCOHERENT AND DANGEROUS

German industry chiefs are close to saying – in the open – that Energiewende means they have to look outside Germany and will be forced to shed jobs in Germany. Still in private, their domestic strategy features a near-total freeze on investment, and in public includes their strategy of “in-plant energy autonomy”, producing their own energy and cutting away from national supply systems – corporate Energiewende, strictly based on least cost solutions.

This concerns the “domestic agenda”. BMW is readying a second production line at its factory in Moses Lake, Washington, which began operating in 2011. Munich-based major chemical maker Wacker is expanding capacity at its facility in Calvert City, Kentucky and is increasing capacity targets for its new plant being built in Charleston, Tennessee. World-class BASF is expanding its chemicals production facilities in Wyandotte, Michigan and Monaca, Pennsylvania, and may expand its recently opened plant in Freeport, Texas. In every case, cheap shale energy was high up the list of location factors and reasons for the decision to build.



Chancellor Angela Merkel, from 2005 until “the Fukushima moment” in 2011 was a staunch defender of nuclear power but from that moment her CDU's energy agenda went radically green. In May 2011 she announced that Germany was abandoning nuclear power. Eight nuclear plants were shut down immediately, and all nine remaining reactors in service will be shut by 2022. Her governments since 2005, as well as German-national European Energy Commissioner Gunther Oettinger, formerly a leading CDU politician, made no serious attempt to prevent the riotous boom and slump in carbon permit prices, which from its 2005 start traced a perfect boom-bust arc to crash in April 2013 when the European parliament voted against a salvage operation for the permits. These permits are now close to worthless – as hot air should be priced! More than ever, Energiewende financing became a play of hot air soundbytes and empty promises – with slugging real world hikes of electricity and gas prices for most final users, including all private consumers.

Previously another back-story, Germany's frantic push to increase the share of renewables in its energy mix has spiralled in cost to the point at which – inside the CDU but not in public – the new “consensus answer” is to Europeanize energy transformation costs by adding them to sovereign debts. This last-ditch gambit for saving the gravy train ride of the dreamers and takers who concocted “the climate correct new paradigm” and for several years hit the jackpot in Germany, is frankly unworkable, but has yet again unsettled Merkel's industrial and business sector supporters. German industry has taken a look and said “Nein danke”, and German householders say the same.

Federal government publicity sites continue showing Internet visitors LED street lighting which turns itself off when nobody is in the street, but does not show the hundreds of millions of kiloWatthours of surplus and unusable electricity shorted-to-ground when too much windpower and solar power is available, but demand is not there. Nor the ever rising number of coal-fired power plants brought on stream to supply consumers in the opposite case. Coal and natural gas, in 2012, supplied about 62.5% of German total power with coal supply increasing fast, and cleaner-burning natural gas falling away, also fast.

Since 2010-2011 the inevitable has happened. The cost spiral of Germany's climate-energy-correct transformation policy has turned electricity prices, and final user gas prices, into an economic liability and a political problem which will not go away. Industry to date has generally borne less of the burden than private consumers, but even industry is starting to feel the pinch.

Speaking at a recent conference in Berlin, Mrs. Merkel promised that "very clear suggestions for reform” will be forthcoming, but behind the scenes these go a lot further than the window-dressing talk about strengthening and improving the electricity grid – at fantastic cost - to better handle surging volumes of solar and wind production, or “adjustments” of still-high subsidies. The plan has to be cut back and the climate change handle has to radically reworked, even abandoned. Merkel knows this now, and shel aso knows that German prosperity depends on making massive changes to the unworkable, unrealistic and unpopular platitudes cobbled together by the pompous and smug advocates of “the new paradigm”.

By Andrew McKillop

Contact: xtran9@gmail.com

Former chief policy analyst, Division A Policy, DG XVII Energy, European Commission. Andrew McKillop Biographic Highlights

Co-author 'The Doomsday Machine', Palgrave Macmillan USA, 2012

Andrew McKillop has more than 30 years experience in the energy, economic and finance domains. Trained at London UK’s University College, he has had specially long experience of energy policy, project administration and the development and financing of alternate energy. This included his role of in-house Expert on Policy and Programming at the DG XVII-Energy of the European Commission, Director of Information of the OAPEC technology transfer subsidiary, AREC and researcher for UN agencies including the ILO.

© 2013 Copyright Andrew McKillop - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisor.

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