German's sacred cow: the (combustion engine) car
German's sacred cow: the (combustion engine) car
#106
Good Morning from Berlin,
Germans very much like (combustion engine) cars.
According to a recent survey, 67 per cent reject phasing out combustion engines.
But that is exactly what is supposed to happen. According to the EU, from 2035, new cars shouldn’t be driven by a combustion engine
But maybe there is a way out: with the help of e-fuels.
The German governing liberal party FDP is trying hard to ensure that combustion engine cars with such fuels are allowed to be sold in Europe after 2035.
E-fuels are manufactured using captured carbon dioxide or carbon monoxide, together with hydrogen obtained from sustainable electricity sources such as wind, solar and nuclear power. Produced that way, they are climate neutral.
In principle, e-fuels are a perfect solution to fight climate change. We could keep a mature propulsion technology and make it climate-friendly by running the engines on CO2-neutral fuels.
This makes sense, doesn't it? In the end, the aim is not to ban a specific technology but to achieve climate neutrality – with the best methods and at the best prices.
There is a “but”, though.
What if the end of the combustion engine does not come in 2035, if combustion cars are sold after 2035 but have to operate with e-fuels, if therefore, drivers will continue to rely on combustion engines, and as a result, production capacities for e-fuels would be far too low with production costs far too high?
How will politics react if the purchase of fossil fuels on the world markets will only be a fraction of the cost of e-fuel production? Will it withstand the pressure and only allow its voters to fill their tanks with expensive e-fuels?
Or will it be similar to the beginning of the 2000s, when negotiations were held about introducing the (nowadays very successful) European Union Emissions Trading System (short: EU ETS), with its "cap and trade" scheme where a limit is placed on the right to emit specified pollutants over an area and companies can trade emission rights within that area.
Back then, two sectors were left out of EU ETS: buildings and road transport. Those are precisely the sectors in which voters would have mostly felt the negative consequences of rising energy prices due to the ongoing reduction of CO2 emission certificates. (more on that in my text from last Friday)
We are now paying the price for pandering to voters and industry back then. It is precisely those two sectors in which Germany is falling short of its climate protection goals, and the German government will probably try to repair the missed target with measures worth billions.
What can we learn from this for today's question of whether the combustion engine should be banned?
A proper framework is necessary to achieve climate protection goals accurately. Such a framework has been missing in the traffic sector so far. However, European politicians have drawn the correct conclusions from the success of the EU ETS and will introduce an EU ETS 2 for road transport and buildings from 2027.
If the EU ETS 2 is implemented correctly, it will no longer be worth filling up cars with fossil fuels. The certificates needed to buy these fuels are becoming scarcer every year. Therefore driving with fossil fuels will simply become too expensive.
So you could say that there is no need for a ban on combustion engines. But the question arises here as well, whether politicians will tolerate skyrocketing fuel prices at gas stations.
From a political point of view, it could make sense to ban combustion engines altogether since it would avoid debates about high fuel prices.
From an economic and environmental point of view, this is probably a mistake since the problem of climate change is not combustion engines but fossil fuels.
By the way: I'm confident that the problem of high e-fuel-prices can be solved with the means of the market economy.
In a functioning market economy, demand drives innovation. Currently, producing one litre of e-fuel costs about €2; plus, the quantities produced are ridiculously small.
But what will the production costs be in two, five, ten years? If politics signals today that climate-friendly e-fuels have a future, corresponding investments will be made tomorrow. And I would be astonished if these investments did not lead to rapidly falling e-fuel prices and rapidly increasing capacities in the years to come. Where a lot of money can be made, a lot of money will be made – for the benefit of consumers, for the benefit of the climate.
Onwards,
The Strolling Economist