8th Munich Economic Summit

May 28-29, 2009, Munich

„Climate and Energy: Right Goals, Wrong Approach?“

For their 2009 discussion forum on climate and energy policy, the co-organizers of the 8th Munich Economic Forum - the BMW Stiftung Herbert Quandt and the CESifo Group - chose a somewhat different, namely supply-oriented approach. How can we ensure that all 190 participating countries in the forthcoming World Climate Conference in Copenhagen will be willing to consent to a binding agreement to globally limit the use of carbon-emitting fuels such as oil and coal? - this was the central question. The reasoning behind this approach was that reducing demand through climate targets for individual countries or regions will only lead to an increase in consumption in other world regions, but will not solve the problem of climate change.

Some 160 representatives of business, industry, science, academia, politics, and the media from more than 20 countries participated in the economic conference in Munich, which consisted of a total of three panels on "the blind alleys of climate policy," the "diverging interests of OPEC and Kyoto," and the right "road to Copenhagen." Panelists included both leading representatives of the international energy industry such as Johannes Teyssen, deputy chief executive of EON, and Tuomo Hatakka, Vattenfall's Head of Business Group Central Europe, as well as prominent climate researchers such as Ottmar Edenhofer from the Potsdam Institute for Climate Impact Research. The European Commission was represented by Karl Falkenberg, Director-General for the Environment, the American business community by Karen Harbert, a senior executive at the U.S. Chamber of Commerce, and OPEC by Mohamed Al-Hamli, Abu Dhabi's minister of energy.

In favor of a global emissions trading scheme

There was widespread consensus that the biggest carbon dioxide emitters should be committed to a binding emissions trading system as is already practiced in the EU. However, heated discussions revolved around the questions of how to implement this goal and whether one should transfer technology to emerging countries free of charge or pay environmental bonuses to prevent the deforestation of tropical rain forests.

In favor of an intelligent energy mix

The topic of nuclear energy was also on the agenda. Whereas Lady Judge from the UK Atomic Energy Authority and Martin Wittig of Roland Berger Strategy Consultants saw nuclear energy as a necessary component of a smart energy mix because of its advantages as a "clean" energy supplier and the insufficient availability of renewables, Renate Künast, chair of the Bündnis 90/Grünen parliamentary party in the German Bundestag, said that not enough money was invested in renewable energy research. According to Künast, the goal has to be a "New Green Deal" - analogous to the government program proposed by the Obama administration - which includes massive entry subsidies for sustainable technologies.

The future of coal

Coal should be a part of the energy future because it is globally available and relatively cheap - this position was taken by both Janusz Reiter, the Polish Ambassador-at-Large for Climate Change, and Tuomo Hatakka, the CEO of Vattenfall Europe. Championing the expansion of coal power plants, Hatakka also pointed out the progress in carbon storage technologies. An opposite point of view was held by economists Claudia Kemfert from the German Institute for Economics Research in Berlin and conference host Hans-Werner Sinn from the CESifo Group as well as Tom Burke, climate change advisor to the British government. Noting the high carbon dioxide emissions during the production of energy from coal, they were extremely skeptical about the feasibility of "clean coal" technologies. In this context, Johannes Teyssen, vice-chairman of the board of management of EON, pointed out that it was necessary to create a positive environment for entrepreneurial risk-taking in order to ensure long-term economic profitability and job creation in the climate and energy sector. Previously, conference host Jürgen Chrobog of the BMW Stiftung Herbert Quandt had mentioned increased investments in energy research and environmental technologies as other important requirements for sustainable growth and job creation in the industries of the future.

Common interests of OPEC and Kyoto?

As for the future role of oil, the UAE's energy minister Mohamed Al-Hamli took great pains to downplay a potential conflict of interest between OPEC and Kyoto, where one side is seen as wanting to extract and sell as much oil as possible and the other side as wanting to reduce consumption and keep as much oil as possible underground. Al-Hamli instead called for an increased cooperation with OPEC in the context of the Kyoto Protocol and noted the importance of a stable oil prize (between $60 and $80 per barrel), in order for OPEC to be able to make a contribution to environmentally friendly technologies.

The road to Copenhagen

The final Summit discussion revolved around the political options for a post-Kyoto agreement in Copenhagen. The participants agreed that ambitious climate targets such as the EU's 20-20-20 package (20 percent reduction in both emissions and energy consumption and 20 percent energy from renewables by 2020) will be ineffective without involving other major carbon emitters such as China, India, Russia, and the United States. Consequently, the Italian environmental economist Carlo Carraro and Karen Harbert from the U.S. Chamber of Commerce called for realistic goals that need to be supported by a "big coalition." Angelika Niebler, chairwoman of the energy committee of the European Parliament, said that the timing was propitious for the EU to take a leadership role - together with the United States, newly active in the field of climate policy under President Obama, and with the involvement of the emerging countries. But according to Henning Wüster, advisor to the World Climate Secretariat in Bonn, there is no clear signal yet that the industrial countries will make financial or technological contributions to the necessary restructuring of industry in the emerging countries.

Conclusion

One thing was certain at the end: To effectively combat the climate change and keep the rise in global temperature below the critical two degrees Celsius, a "super-Kyoto system" is needed involving the cooperation of all major carbon-emitting industrial and emerging countries, oil-producing and oil-consuming countries. Given the diverging interests of many participants, it seems doubtful from today's perspective whether such a best-case solution can be achieved in Copenhagen. The Summit made one thing clear: Unless everybody is on board, efforts by individual countries to implement ambitious climate goals or to change the energy mix in favor of renewables will not be sufficient in and of itself.