Prof. Reimund Schwarze from Helmholtz Centre for Environmental Research (UFZ) answered EKOIQ’s wide range of questions from the cost of climate change to Turkish-German economic relations and green economy.

Interview: Burcu GENÇ

Prof. Reimund Schwarze

Prof. Schwarze is coordinating socio-economic research on climate change at UFZ ― the largest multi-disciplinary environmental research institute of its kind in Germany. He is one of Germany’s leading experts on international climate agreements and a text-book author on international climate change policy and law. He was involved in the writing of the UBA study ‘The transnational impacts of climate change for Germany’.

The EU set a carbon emissions reduction target as of a 55% reduction in CO₂ levels compared to 1990 levels (until 2030). The European Parliament accepted a reduction of 60% but European Commission offered 55%. Centre-right parties in EP defend 60% as a higher percentage can affect business but climate activists advocate for a 65% reduction of CO₂. In your opinion, how positive is the point that we have reached in these discussions in terms of mitigation of the climate crisis?

It is a good sign that the EU has set a more ambitious goal. It is also a good step that reluctant member states like Poland have agreed to the target (under the premise of substantial additional funds for their energy transition).

However, it is questionable if the EU, as the third biggest emitter of greenhouse gases, will be able to reach the goals of the Paris agreement with an emission reduction target of 55% by 2030. The newly submitted Nationally Determined Contribution (NDC) of the EU is also not predicted to reduce emissions by 55%, but only by 52,8% because of the changes in the land sector. Also, the NDC announcement does not include additional supporting targets or specific sectoral goals.

If the COVID-19 crisis recovery could be used for faster decarbonization of the European economy, more-far reaching targets between 58% and 70% could be achieved.

Recently OXFAM published a report about the developed countries contribution regarding climate funds. Developed countries either give credits instead of funds or give less than they promised. I would like to ask you if this process of lack of credibility in funding/partnership among partners will affect international climate politics/action?

Climate finance is going to be discussed at COP26 in Glasgow this year, as the alliance of small islands states, and least developed countries push for more climate assistance by industrialized nations. Still, it is doubtful if the interests of these negotiation groups and their needs for climate finance will be taken as a priority because the financial interests of the rich countries likely supersede their interests.

Things could change when increasing climate change impacts in the Global South will lead to massive climate migration to industrialized countries, and the latter would feel the need for supporting developing countries to mitigate the tremendous effects of climate change in the Global South.

 As you know, Turkey still hasn’t ratified Paris Agreement and their main argument is that they don’t have enough economic strength to make a commitment so they want a share from the Green Climate Fund (in other words they don’t want to be listed in Annex A). On the other hand, the European Green Deal proposes severe sanctions (i.e. carbon border adjustment mechanism) against the countries that don’t ratify Paris Agreement. As Turkey has a big trade volume with Germany, I wanted to ask how the trade volume will be affected by these sanctions? What will be the effects for both sides; Germany and Turkey?

The planned “Carbon Border Adjustment Mechanism Law”, as part of the EU New Green Deal is still under process and it is not yet clear how the mechanism will look like and what industries and countries will be affected. However, such a tax could have an immense impact on international trade, also between the EU and Turkey.

On the one hand, the mechanism is seen as a possibility to decarbonize the European economy while maintaining Europe’s comparative advantage on the world markets. On the other hand, the idea is criticized for imposing a new form of economic imperialism (especially concerning developing countries) and would violate the WTO’s principle of non-discrimination. The formation of low-carbon and high-carbon trade blocks could be another negative and counterproductive consequence.

While Germany (and other European countries like France) generally support (a WTO-compatible) carbon border adjustment mechanism and do not fear negative consequences themselves, the Turkish Exporter Association sees the mechanism as very critical. A report by the Turkish Industry and Business Association (TUSIAD) states that the “introduction of carbon border adjustment taxes by the EU could bring an additional cost of €1.08 billion to Turkey’s manufacturing sector, including iron and steel. This cost could be as high as €110 million for the Turkish steel sector.”

However, the Association has declared “interest in aligning their policies with the EU standard and asked for a mechanism and funding to facilitate this approach.” Also, the Boston Consulting Group calculated that Turkey’s steel industry would be probably less affected by the tax because their mills are generally smaller and more carbon-efficient than those of other countries.

Germany approved a new renewable energy sources law, but also allows new coal plants. What is your opinion about climate action from the German perspective? Germany should do more to become a climate leader, or is it enough considering the other countries commitments?

German climate policy definitely has room for more. Though political decision-makers are generally aware of the threat of climate change and understand the cost which is generated in the long term, many see a trade-off between climate protection and economic growth and as such a threat to established industries like the automotive industry.

The German government passed a law for a coal-phase out until 2038. However, critics say that this comes far too late and that a phase-out ten years earlier would have been necessary to reach the emission contribution to meet the Paris agreement. The recommendations of a multi-stakeholder coal commission have not been adequately taken into account in the final law. Therefore, the installation of the new coal power plant “Datteln 4” is also strongly criticized by civil society actors.

The German Renewable Energy Sources Act (EEG), introduced 20 years ago, was passed to accelerate the energy transition in order to reach the self-set emission reduction goal. In 2020, the law was adjusted for the tighter EU’s emission reduction goals. A key point in the new law is “renewable tenders” where additional capacities will be tendered in order to accelerate the expansion of renewable energy. However, the EEG lacks its expectations of environmental agencies and parties. Firstly, the goal for renewable expansion is criticized as being too low to reach the German NDC goal. Secondly, the quantity-based instrument of the tenders is described as an inferior solution and should at most mark the minimum target.

All in all, compared to other European countries, Germany is in the middle-field in terms of climate protection and could definitely become more ambitious as current efforts are projected to not be sufficient to meet Germany’s carbon emission reduction targets as promised in the Paris agreement.

Lastly, I wanted to ask you about the cost of climate change. There is a report saying that natural disasters caused 210 billion dollars in 2020. I know that this is a general question, but I would like to ask what is the cost of climate change?

When calculating the costs of climate change, for instance through disaster costs, it is difficult to assign the costs to climate change or to non-climate change-related natural events, as these events often go hand in hand.

Another difficulty in estimating climate change costs it the manifold impacts of climate change. Not only the infrastructure loss during extreme events is the result of climate change, but also crop losses due to incremental climate change and desertification, health impacts from heat or habitat and biodiversity loss, to name some examples. These impacts are harder to monetarize, although they are also direct consequences of anthropogenic climate change.

Nevertheless, global climate change costs are already immense and are higher than quantified by any integrated assessment model. These costs will definitely become even higher in the future and surely surpasses the costs of climate mitigation efforts.

Would you like to add anything?

Climate change is a global challenge. Just like the current coronavirus pandemic, the impacts of climate change make themselves felt in every country irrespective of their geophysical and political boundaries. This international dimension of climate change and adaptation action has been given too little consideration to date. So far, the impacts of climate change have mostly only been observed and examined within national borders. Depending on the extent of its global integration and interaction with other vulnerable countries, a country may, however, be indirectly affected to varying degrees by the international impacts of climate change. This applies both to developed and developing countries. These international impacts of global climate change are of particular relevance to countries that are strongly interwoven with the global economy, such as Germany.

On behalf of the German Environment Agency (UBA), a research project with the title “Impact Chain” was commissioned to examine the potential impacts of global climate change on the German economy through foreign trade flows. As part of this research project, scenario analysis for Germany showed that the impacts of climate change beyond Europe’s boundaries will affect Germany’s national economy more strongly through global trade than the impacts of climate change that arise within Europe. This effect can be traced back to the fact that, in comparison with the rest of the world, EU regions are less severely affected by the direct consequences of climate change for the considered impact chains.

The following recommendation for adaptation measures can be derived from the analysis and the incorporation of the Impact CHAIN project into the challenges that climate change presents for Germany.  The transnational impacts of global climate change cannot be absorbed by a general reduction in international trade relations. Such a strategy could also lead to a significant decline in welfare in Germany. It is recommended not simply to reduce the amount of trade but to diversify, in other words to source certain intermediate services from more than just a single country wherever possible, for example, and to be careful at all times to incorporate potential substitutive goods as well. An overall analysis of the financial impacts shows that Europe in general and Germany, in particular, will be less negatively affected in comparison with some non-European regions. Climate change will result in a displacement effect of the trade from non-EU to EU and EU neighbouring countries (EU+) while Germany’s competitiveness may even improve (in terms of trade). It is therefore recommended to strengthen and expand EU+ economic relations, i.e. the trade between EU and EU neighbouring countries, for example through a new customs agreement with Turkey or other comparatively less vulnerable countries in the EU+ region.

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