Germany versus the EU: Merkel Caught between Industry and the Climate

By , Christian Schwägerl and Markus Verbeet

Last spring, Chancellor Merkel portrayed herself as the world's foremost fighter against climate change. With the EU set to pass a package of emissions regulations, though, she suddenly finds herself defending German industry. Will the real Merkel please stand up?

They were nice images, and the chancellor will surely remember them fondly. First, there was Angela Merkel as the fearless fighter taking on global warming at the European Union's Brussels summit last March. Then, three months later, there was Merkel at the G-8 summit in Heiligendamm, standing on the red carpet on a beautiful late spring day, shortly before the US president finally came around on the subject of climate change. Finally, there was Merkel wearing a red parka, standing in front of Greenland's melting icebergs in August.

One of Europe's largest coal-fired power plants, located in Gelsenkirchen, Germany. Will the country have to embrace nuclear power to get rid of such polluters?
AP

One of Europe's largest coal-fired power plants, located in Gelsenkirchen, Germany. Will the country have to embrace nuclear power to get rid of such polluters?

But those images, those days of noble statements, now belong to the past. The battle over climate change has long since shifted from red carpets to bland conference rooms, where battalions of bureaucrats in gray suits haggle over complicated legal and technical details. Merkel must now perform a difficult balancing act between environmental and industrial policy. The issues she faces are no less momentous than the transformation of industrial society, billions in investments, jobs and vast amounts of carbon dioxide.

These are the elements of a debate that will decide the future of the "climate chancellor," and everyone involved knows that the real struggle is just beginning. The first showdown of the new year will be on the agenda on Wednesday, when the European Commission announces a package of measures designed to combat climate change, including renewable energy targets for its member states.

Significantly Greater Sacrifices

EU Environment Commissioner Stavros Dimas, from Greece, is the chancellor's adversary in the climate change debate. In December, Dimas let Merkel know that she would have to offer more to gain his support than her plucky efforts to reduce European CO2 emissions. He commented dryly that his gratitude to Merkel for her commitment to the climate was so great that it would even offset much of the criticism he would have for the chancellor in the future.

Were Dimas to get his way, German automakers -- who make most of their profits with the sale of large, heavy sedans -- would have to make significantly greater sacrifices than their French and Italian competitors, who produce smaller cars with lower CO2 emissions. Merkel, for her part, had assumed that EU Commission President José Manuel Barroso would protect Germany's big luxury cars. Merkel, after all, helped him get his current job. But Barroso had no intention of getting in the way of his environment commissioner.

German Economics Minister Michael Glos, a member of the conservative Christian Social Union (CSU), was deeply critical of what he called an EU "campaign of destruction" being waged against the German auto industry, while Environment Minister Sigmar Gabriel, a Social Democrat (SPD), characterized Dimas's comments as part of a "competitive war." According to a close advisor, the chancellor, widely praised by Barroso last spring and summer, has since been "deeply disappointed" by the EU Commission president.

French Support

Berlin now sees itself in a race against time. Slovenia is the current holder of the rotating EU presidency, and the German government is hoping to push through concessions for BMW, Daimler, Audi and Volkswagen before France takes over in mid year. Paris, after all, is uninterested in any change in policy that might harm French automakers Renault and Peugeot, both of which churn out lighter, cleaner cars than the Germans do. Barroso, moreover, is courting French support for a second term.

The relationship between EU Commission President Jose Manuel Barroso and German Chancellor Angela Merkel has become strained.
DPA

The relationship between EU Commission President Jose Manuel Barroso and German Chancellor Angela Merkel has become strained.

But as important as the automobile issue is, the stakes on the table on Wednesday in Brussels will be even bigger. Dimas will announce how the EU Commission plans to distribute the burdens of climate protection among the 27 member states. The package of measures will include limits on greenhouse gas emissions for each member state and national targets for the share of renewable energy in each country's total energy consumption.

Under the new proposal, by 2020 the EU's 455 million citizens will release at least 20 percent less greenhouse gas than at the end of the Cold War. The first drafts of the EU plan triggered indignation in Berlin, where the government sees Germany once again assuming more than its fair share of the burden. In an internal memo titled "Climate Package -- Basic Elements of the German Position," officials from the Chancellery offered praise for the fact that the Commission is developing proposals in the first place -- and then promptly set about picking apart the Dimas plan.

Specialists in the German government see the Dimas document as an assault on the world's most effective law to promote renewable forms of energy. For instance, they argue, Dimas wants to make it possible for the British to use credits to buy cheap German electricity from renewable sources, thus acquiring more of a green image without having to invest in new technologies themselves.

Plenty of Room for Disagreement

"The other member states would be using us as a self-service shop, while we would be left with expensive solar electricity," said an energy expert working for Environment Minister Gabriel. Other experts in Berlin agreed and began blasting away at Brussels. Their efforts paid off. By late last week, the Commission had modified its proposal to protect the German model.

But there is still plenty of room for disagreement. The Commission wants to set up a market where European businesses can buy and sell certificates allowing them emit carbon dioxide. Its plans so far include no exceptions for the many energy-intensive businesses that shape Germany's industrial landscape.

Germany is concerned that it's automobile industry is being disadvantaged.
DPA

Germany is concerned that it's automobile industry is being disadvantaged.

The government in Berlin has noted the EU Commission's growing influence on energy issues with some concern, fearing that Brussels could use its carbon dioxide policy to intervene deeply into German affairs and play a decisive role in issues such as the construction of new coal-fired power plants. If the Commission had its way, a senior official at the German Environment Ministry says derisively, it would deprive Germany of jurisdiction over everything but the "less important greenhouse gases like methane and laughing gas."

The most important battles will take place in Brussels in the coming weeks and months, but the chancellor can also expect to face challenges on the home front. When Gabriel and Glos unveiled the national climate protection package in early December, they made it seem as if everyone in Merkel's government -- pairing the conservative Christian Democrats with the center-left Social Democrats -- fully supported the proposed legislation, a package which includes laws mandating the percentage of renewable energies to be used in heating, and measures facilitating the use of biogas in the existing natural gas network. The entire program, the two ministers implied, would literally fly through the German parliament, the Bundestag, without a hitch.

But Berlin coalition members still disagree on many fronts. "Behind closed doors, our (conservative) counterparts clearly support economic interests, not Merkel's climate policy," says Ulrich Kelber, deputy floor leader for the SPD. Come this spring, the players will be "fighting tooth and nail over every ton of carbon dioxide," Kelber adds, but only after the German states have announced their positions on the federal climate package. Kelber predicts that the new compensation rates for electricity from renewable energies will be especially contentious. "Saxony will want to push solar, Bavaria biomass and Schleswig-Holstein wind energy."

Indispensable Role

The CDU/CSU parliamentary group, on the other hand, is gearing up for a completely different fight. The conservatives argue that Germany will only be able to attain its climate protection goals by increasing its reliance on nuclear power -- a dreadful prospect from the SPD's standpoint. "If we manage to increase the share of renewable energies in power production to 30 percent, we will still be relying on fossil fuels for 70 percent of our energy when the last nuclear reactor is shut down in 2020," warns Joachim Pfeiffer, the CDU/CSU parliamentary group's coordinator for energy policy. Nuclear power, says Pfeiffer, though not a panacea, will nonetheless play an indispensable role in climate protection.

There is, however, a catch: Without clarity over the location of permanent nuclear waste storage sites, continued operation of Germany's nuclear power plants will be difficult to justify. Despite all mediation attempts by Merkel's chief of staff, Thomas de Maizière, the coalition remains divided over the question of whether the northern German municipality of Gorleben should serve as a future final storage site for waste from nuclear reactors. The SPD wants to search for alternative final storage sites throughout Germany. "The only reason they're doing this is to send disposal costs through the roof, thereby hastening a withdrawal from nuclear power," Pfeiffer speculates.

Funding for fusion research is another controversial issue. Next to renewable energy sources, nuclear fusion is the only option for producing large amounts of electricity virtually without carbon dioxide emissions and without nuclear waste. But politicians in Berlin are fighting over every cent earmarked for research. The decision not to increase the budget for fusion research, reached under the government of former Chancellor Gerhard Schröder, remains in effect today. Research Minister Annette Schavan (CDU) has encountered tough opposition in her attempt to increase the fusion research budget for 2008. The Social Democrats also oppose Economics Minister Glos's attempt to introduce regular budget increases for fusion research. According to Jörg Tauss, the SPD's spokesman for media and science, while basic research is important, his party wants to prevent the whole thing from turning into a "costly, unending adventure."

Transforming industrial society is an expensive prospect; so expensive, in fact, that it could end up being out of reach financially, especially amid growing and dramatic signs of a worsening global economic outlook. But, says Michael Müller (SPD), an official in the Environment Ministry, tough choices have to be made. "This is a classic situation," says Müller, "in which all environmental policy goals take a distant back seat to short-term economic priorities and we drop the ball on important investment decisions."

Translated from the German by Christopher Sultan

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