Deutsche Bank says “A certain degree of eco-dictatorship will be necessary” to achieve climate neutrality

The two dominating slogans of the EU Commission and in particular von der Leyen are NextGenerationEU and climate neutrality by 2050. Lofty. On the latter DB Research has this to say in their paper ‘What we must do to rebuild‘. On page 9 they set the tone on what’s to come on 71:

Climate neutrality: Are we ready for an honest discussion?

The EU’s ambitious Green Deal wants to ensure that “nobody is left behind”. Sounds excellent, but it is not realistic unless we ask some difficult questions. Quite simply, Europe cannot become carbon neutral with existing technologies, and various new technologies are politically unacceptable in the current environment. Unless that changes, the alternative is restrictions, either on consumption or trade.

On page 71 they get more into details.

Inconvenient truths – inconvenient questions

Let’s face an inconvenient truth. Global energy demand is likely to rise further in the coming years, driven mainly by population growth (the world’s population grows by 80m people each year) and the desire for prosperity. Fossil fuels will remain the most important source of energy for now. Even according to the latest Sustainable Development Scenario of the International Energy Agency, which includes considerably more climate protection measures than those foreseen in the Paris Agreement, the share of fossil fuels in primary energy demand will still amount to 56 per cent in 2040. This is already a massive reduction from today’s 80 per cent. The SDS expects renewable energy sources to have a share of 35 per cent in total energy consumption; the biggest increases are expected in wind and solar power. In short, even in this optimistic scenario, renewable energies are far away from being the main pillar of global energy supply.

Being serious about openness to (new) technologies

One important question for the coming years is: Are we serious about being open to different (new) technological solutions? In the first place, we will have to recognise that all sources of energy come with specific risks and specific advantages and disadvantages in terms of economic efficiency, reliability, capability, and climate and environmental sustainability. These are the traditional corners of the energy policy triangle. There is also the question of whether certain technologies are politically acceptable.

Turning to economics, we will need to talk honestly about the costs of specific sources of energy. Fossil fuels are highly reliable and powerful, but their external costs are not adequately internalised yet. Carbon prices will need to be significantly higher than the political consensus currently allows. In the case of wind power and photovoltaics, pure electricity generation costs (which are declining) are only part of the picture. As weather-dependent sources of energy gain importance, investments in networks and power storage capacities will need to be increased. Cost-intensive network interventions will take place more frequently. Moreover, other suppliers (for example gas-fired power plants) will see their capacity utilisation decline if more electricity from wind and solar farms is fed into the grid. These system-wide costs of an increased reliance on renewable energies are often neglected.

Nuclear energy is a good example for difficulties in terms of political acceptance. Countries such as Germany are aiming to exit from nuclear energy, which comes with very low specific carbon emissions, simply because people/ politics do not accept it as a source of power. In contrast, nuclear energy remains an (important) pillar of the electricity sector in France, the US, China or Japan. These countries are also actively researching next-generation nuclear power options. The different stance on nuclear energy in Germany and France is probably one reason why the Green Deal does not mention nuclear energy at all.

Carbon capture storage and usage systems are quite unpopular in the EU, too. According to the IEA, however, we will need them for decarbonisation. The Green Deal also supports investments in this technology, even though CCS, at least, meets with considerable political resistance in countries such as Germany.

I would like to point out that these statements should not be taken as support for or rejection of any of these technologies. If, however, people are actually afraid that large parts of the planet may become uninhabitable due to climate change and if they really want to achieve climate neutrality, they should not reject technologies right away that may help to reach this goal, even if they involve certain risks. An honest debate about climate neutrality will need to include non- ideological risk assessments of different sources of energy and also an analysis of potential measures to adapt to climate change.

A certain degree of eco-dictatorship will be necessary

The impact of the current climate policy on people’s everyday lives is still quite abstract and acceptable for many households. Climate policy comes in the form of higher taxes and fees on energy, which make heating and mobility more expensive. Some countries have set minimum energy efficiency standards for buildings or similar rules in other areas. However, climate policy does not determine our lives. We take key consumption decisions, for example whether we travel at all, how much we travel and which means of transport we use, whether we live in a large house or a small apartment and how we heat our homes, how many electronic devices we have and how intensely we use them or how much meat and exotic fruit we eat. These decisions tend to be made on the basis of our income, not on climate considerations.

If we really want to achieve climate neutrality, we need to change our behaviour in all these areas of life. This is simply because there are no adequate cost-effective technologies yet to allow us to maintain our living standards in a carbon-neutral way. That means that carbon prices will have to rise considerably in order to nudge people to change their behaviour. Another (or perhaps supplementary) option is to tighten regulatory law considerably. I know that “eco- dictatorship” is a nasty word. But we may have to ask ourselves the question whether and to what extent we may be willing to accept some kind of eco-dictatorship (in the form of regulatory law) in order to move towards climate neutrality. Here is an example: What should we do if property owners do not want to turn their houses into zero-emission buildings; if they do not have the financial means to do so; if doing so is not possible for technical reasons or if the related investments do not pay off?

The whole paper is recommended.

The Bundesverfassungsgericht is a mostly toothless body …

Remembering their decision of May 2020 about the unsatisfactory “principle of proportionality” (which created in some quarters an uproar) of the Public Sector Purchase Programme (PSPP) of the European Central Bank (ECB) this paragraph puts it, and the whole body of that institution, into perspective:

The Bundesverfassungsgericht is a mostly toothless body, as its studiously suspended judgments indicate. Best known for meekly overturning Germany’s Basic Law to allow Schröder and Merkel in 2005 to stage an unconstitutional election before polls were due, it takes care to avoid serious offence to the Obrigkeiten of the day. Berlin and Frankfurt are unlikely to have much difficulty sending Karlsruhe back to sleep.

Ever Closer Union? – Perry Anderson

The illustrious persons of the early European Court of Justice and more

Now that Brexit has been completed let’s take a look at what the UK has left. Perry Anderson has an article in the London Review of Books, ‘Ever Closer Union?‘. In it he covers the five principal institutions: the European Commission, the European Court of Justice, the European Parliament, the European Council and the European Central Bank. The most withdrawn of these is the European Court of Justice.

Today the court remains, of all Union institutions, the most withdrawn from the public. Discreetly situated in Luxembourg, not exactly a European crossroads, and composed of judges appointed – one per country – by member states, its proceedings are hidden from public scrutiny; its decisions permit no admission of dissent; its archives grant minimal access to researchers. In modus operandi, the ECJ is the antithesis of the US Supreme Court, whose emoluments it comfortably tops – its president receives a salary worth $400,000, plus many allowances; the chief justice in Washington a measly $277,000.

Its history features some illustrious persons.

Thanks to the pioneering work of a young historian from Luxembourg, Vera Fritz, we now have a detailed scholarly study of the composition of the court in the rst twenty years of its existence. Her findings are illuminating. There were seven founding judges and two advocates-general. Who were they? The Italian president of the court, Massimo Pilotti, had been deputy secretary-general of the League of Nations in the 1930s. There he acted as the long arm of the fascist regime in Rome, advising Mussolini on what counter-measures to take to shield Italy from condemnation by the League for its actions in Ethiopia. On resigning his post in 1937, Pilotti took part in the celebrations in Genoa of the conquest of Ethiopia; and during the Second World War headed the high court of occupied Ljubljana aer Italy’s annexation of Slovenia, where resistance was met with mass deportations, concentration camps, and police and military repression. The German judge on the court, Otto Riese, was so devoted a Nazi that without any duress – he spent the war as an academic in Switzerland – he retained his membership of the NSDAP until 1945. His compatriot Karl Roemer, an advocate-general to the court, spent the war in occupied Paris managing French companies and banks for the Third Reich; aer the war, he married Adenauer’s niece, and acted as defence lawyer for the Waen SS charged with responsibility for the massacre of the occupants of the French village of Oradour. The other advocate-general, Maurice Lagrange, was a senior functionary in the Vichy government, fully committed to the ideology of a ‘National Revolution’ to sweep away the legacy of the Third Republic. Acting as link-man between the judicial apparatus of the Conseil d’État and the political apparatus of the Council of Ministers, Lagrange was in charge of co-ordinating the rst wave of persecution of French Jews. When Laval took over the reins of Vichy in 1942, transferring Lagrange back to the Conseil d’État, Pétain thanked him for his ‘rare perseverance’ in the regime’s legislative and administrative work, to which Lagrange replied that ‘for me it has been a great privilege to be so closely associated with the enterprise of national renovation you have undertaken for the salvation of our country. I am convinced that every Frenchman can and should take part in this work.’ Aer the war he was chosen by the Americans to help democratise the civil service in Germany, and by Monnet to help dra the treaty establishing the Coal and Steel Community.

That gures like these were the ornaments of Europe’s rst Court of Justice reected, of course, the closing of political ranks aer the Cold War set in, when what mattered was not the misdeeds of the fascist past but the menace of communist present. It was a time when the last commander of the Charlemagne Division of the SS, ghting to the last bullet to defend Hitler in his bunker, could emerge as best choice for the Robert Schuman Prize for services to European unity.* Why should European justice too not let bygones be bygones? More generally, appointments to the court had little or nothing to do with juridical qualications. Nearly all were political. The Belgian judge was a leading gure in the Catholic Party of his country; one of the Dutch judges was the brother of a prewar foreign minister; the French judge, Jacques Rue, a former deputy governor of the Banque de France, was one of the founders of the Centre National des Indépendants et Paysans; a Catholic trade unionist from the Netherlands and a socialist magistrate from Luxembourg rounded out the set.

He concludes ominosly.

If the Union’s advertisements for itself, on which it spends a fortune in euros every year, meet no more than a listless acquiescence, rather than active endorsement from the populations over which it presides, that is sucient for its purposes. Fear of the unknown is the more important integument.

Read the whole here.

Could Covid-19 vanquish neoliberalism?

Excerpts from Thomas Fazi’s Could Covid-19 vanquish neoliberalism?

Over the course of just a few months, the Covid-19 global pandemic has shattered practically every shibboleth in the neoliberal bible.

The first and most obvious victim is the idea that money is a scarce resource. …

The coronavirus crisis has now revealed the austerity logic to be an utter sham: as advocates of modern monetary theory (MMT) have been saying for years, states that issue their own currency and issue debt in their own currency (i.e. every advanced country in the world with the notable exception of the eurozone) can never ‘run out of money’, nor can they become insolvent because, unlike households or firms, they can literally create money out of thin air. That’s what being a currency issuer means. In recent weeks, governments around the world have announced massive spending plans and double-digit deficits; yet, curiously enough, we haven’t heard any of the usual screams of “How are you going to pay for that?”. …

The second neoliberal shibboleth shattered by the pandemic is the superiority of private and liberal strategies over centralised economic planning and the welfare state, and the obsolescence of nation-states. For years (well, decades), we’ve been told that governments are wasteful and inefficient; that markets are able to operate more efficiently both in the short term and in the long term; and that governments are largely powerless vis-à-vis the forces of the global economy. …

So governments have surrendered many of their national prerogatives to supranational organisations — the most obvious example being the European Union (EU) and monetary union — while state-owned firms and public services, including public hospitals and healthcare facilities, have been progressively underfinanced and privatised (often by appealing to the aforementioned austerity logic). … According to OECD Health Statistics, Italy and Spain have today fewer hospital beds per inhabitant than China; France and Germany fewer than South Korea or Japan. Governments around the world are rushing to boost their hospital capacity but for tens of thousands of people it is too late already. …

This brings us to the third neoliberal shibboleth blown away by the coronavirus: the benefits of belonging to the European Union and eurozone. There’s a reason EU and euro countries — most notably Italy and Spain — have been hit so hard: the EU remains the only economy in the world where neoliberalism has been embedded into its very legal structure and effectively constitutionalised, through strict rules against government support to local industries, the constant encouragement of deregulation, the enshrinement of the ‘four freedoms’, and, above all, by depriving states of the central plank of economic policy, the currency.

The EU’s guiding principle was approvingly espoused by Italy’s former economics minister (2006-2008), the late Tommaso Padoa-Schioppa: to “weaken social protection” in all areas of citizens’ life, “including pensions, health, labour market, education”. It thus shouldn’t come as a surprise to find out that the European Commission made 63 individual demands of member states to cut spending on healthcare provision and/or privatise or outsource healthcare services between 2011 and 2018, in order to meet the arbitrary debt and deficit targets enshrined in the EU’s fiscal rules, as revealed in a recent report by the Emma Clancy, a political advisor in the European Parliament. …

Finally, the current crisis is exposing the madness of today’s hyper-integrated supply chains and the delocalisation of production that has taken place in recent decades, with countries finding out that they lack factories to produce basic medical equipment (such as masks) or much-needed medicines, which have suddenly become scarce with the collapse of global supply chains. Hyper-globalisation, just like the marketisation of public services, has proven to be not only a serious ecological, economic and social problem, but a threat to national security as well.

Full essay here.

The EU must be forged in this crisis or it will die

Excellent article in the FT.

At the moment, the EU is a little more than a geographic expression with a common central bank. A pan-European national sense is so absent that we could not even agree on the heroes to put on our banknotes. In the future, euro bills might have a portrait of Mario Draghi, the former central bank governor. But currently these banknotes feature non-existent buildings: we could not even agree which nations’ landmarks should be represented.

Read in full here.