On the way to independence, the EU doesn’t want to make a mess, it wants to make a big splash. She wants to invest 210 billion euros in order to get rid of energy imports from Russia as quickly as possible, from Russian gas, oil and coal. The Europeans should use energy much faster, much more efficiently, and they should build many more wind turbines and solar cells much faster. A good plan so far – but it has a catch: the money.
After all, the European budget does not have much leeway either. There are still some things in the reconstruction pot to tame the consequences of the Corona virus. The structural support that poorer areas get from the pockets of European taxpayers could also be directed towards energy independence. And then the strategists in Brussels came up with a completely new idea: They peddle reserves from European emissions trading. They calculate that 20 billion euros could be raised with this. But they have no idea what the price will be.
Europe is the envy of the world for its emissions trading. Companies that blow carbon dioxide into the atmosphere have to purchase certificates here, one for every ton of CO₂. The amount of these certificates is capped: Europe’s industry gets an upper limit for their certificates, and the emission of climate-damaging greenhouse gases gets a price. Emissions from power plants and factories in the EU have fallen by a whopping 43 percent since the introduction of this trade in 2005. That’s something to be proud of.
What is better forgotten, however, is the tough road to a functioning system. For years, the price languished, because there were simply too many of these certificates. At times, emitting a ton of carbon dioxide was cheaper than a liter of fuel in Europe. That only changed when the Europeans agreed to take surplus allowances off the market. They ended up in the so-called “market stability reserve”. It is that reserve that Brussels now wants to tap into.
Nobody knows how scarce the certificates will be in the future
This is a dam bursting in every respect. In fact, the Europeans use it to pry open their beautiful lids like a screwdriver would a paint can. Without this cap, however, it is unclear how scarce the certificates will be in the future. This can have dramatic repercussions in a market where, like all energy markets, expectations are ultimately traded. If traders no longer assume that their goods will be scarce and in demand in the future, they will sell them – with the result that the price will fall. On Wednesday, after the announcement of the European independence package, it dropped from 91 to under 85 euros.
Conversely, this means that if the EU sets itself the goal of taking in 20 billion euros in this way, the more certificates it has to release from the reserve, the more the price falls. With the result that the certificates are even less scarce, the price falls even further, even more reserves have to be put on the market – a vicious circle that clever speculators could speculate on.
The Commission asserts that it intends to sell the certificates cautiously so as not to disrupt the market. Just assuming this works and the price doesn’t drop, what comes next? For which noble goal would the next emission rights be sold?
It is as if the EU had found a bank in the winding corridors of the Commission building that grants non-repayable loans and prints the necessary money itself. But the Europeans take this credit for the atmosphere, because in fact more emissions are emitted in return than planned. If the certificate prices drop as a result, fossil energies will become more competitive because companies have to pay less for climate sins. This in turn harms the climate-friendly alternatives. It is the opposite of what the Commission is aiming for on the way to independence.
The fact that gas pipelines or terminals for liquefied natural gas can ultimately be financed from the income only seems like a particularly perfidious, even devilish irony. Fossil infrastructure, financed by concessions on climate protection: you have to think about it first.