In what can be seen and judged as a triumph for the free market and an epic failure for government interference, Der Spiegel reports the following headline:Wind Turbines in Europe Do Nothing for Emissions-Reduction Goals
The story, authored by Anselm Waldermann, explains that the "greening" of German electricity, "Roughly 15 percent of the country's electricity comes from solar, wind or biomass facilities, almost 250,000 jobs have been created and the net worth of the business is €35 billion per year." Ok, not bad, but what's the catch?
It turns out the that carbon credit trading scheme hasn't accounted for any reduction in carbon emissions, and Waldermann places the blame on the EU-wide emissions trading system. As it turns out, the system determines the total amount of carbon output. However, it hasn't reduced that amount as new alternative energy plants are built. In other words, carbon credits are oversupplied. Cheap? No. 100% Free. Trade stocks for free on Zecco.com. The Free Trading Community. www.zecco.com
So, now what, cries German climate-sensitive folks. Well, like most things bureaucrats design, they don't consider human nature. Companies aren't going to run and spend millions of share holders dollars to build windmills when they build a new coal plant cheaper. Mountain House Freeze-Dried Food
This story does have a happy ending! The German Green Party recognized that the best way to make this system work is to spend the money more efficiently. And here is the "A-HA!" moment:
"When reduction of CO2 emissions is more cheaply achieved through insulating a building than using a wind turbine, that is where we should concentrate our support."
And here is the chart that goes with the proverbial light bulb:
The Costs of CO2 Reduction
To reduce CO2 emissions by one ton, it costs (in euros):
Building Renovations (90% of cases) <0>100
Modernizing an old black-coal power plant 20
Reductions in industrial CO2 emissions >20
Replacing black coal with natural gas 28
Brown-coal power plant with carbon capture technology >30
Modernizing a new black-coal power plant 50
Replacing brown coal with natural gas 50
Black-coal power plant with carbon capture technology >50
Biomass >50
Biofuel >50
Wind Energy 50-60
Geothermal Energy >100
Solar Energy (Photovoltaic) 300-500
* A value less than zero indicates that the measure is actually profitable.
Sources: McKinsey, RWE, German Renewable Energy Federation
As one can clearly see, it doesn't make sense to spend tons of money to reduce carbon, rather, making simple changes is considerably more profitable. That is what business is all about. When a company can reduce costs and still deliver a high quality product, they will make a profit and share holders will be happy. In the words of Nelson Muntz, "HA-HA!"
