On January 31st, Germany’s Coal Commission debuted its recommendations to phase out coal-fired power generation by 2038. The plan, derided by some as "dumb" is hardly that. This plan is not perfect, but it confronts two important challenges: healthcare cost containment and greenhouse gas reduction.
Without equivocation, coal is harmful to society. Between coal dust inhaled by miners that causes lung cancer to air pollutants released from coal-burning facilities, the economic calculus is clearly negative. Containing healthcare costs requires a market-based solution and it starts with either capturing the negative consequences of an economic action or prohibitive legislation or both.
For example, Canada has employed a successful revenue-neutral carbon tax since 2008 in British Columbia. The revenue-neutral carbon tax shifted the taxation burden from ‘desirables’ such as taxing income or sales to ‘undesirables’ such as greenhouse gas emissions. Further, the policy was shown to have a negligible effect on economic growth and led to a 15% reduction on provincial emissions. Simply put, if Germany does not move forward with the precedent established by Energiewende (Ammendment to the EEG) and the Erneuerbare-Energien-Gesetz (EEG or German Renewable Energy Act), the society will absorb the cost through increased healthcare taxes or less healthy citizens.
Germany’s plan to address climate change, a critical threat to the environment, starts with the reduction of fossil fuel emissions. It is universally well-known that climate change is linked, inextricably, to fossil fuel consumption. Emissions release greenhouse gases into the atmosphere, increase carbon dioxide levels, trap heat, and raise temperatures.
Further, the failure to shift away from an archaic and inefficient energy source is speculated to lead to dire results. In a U.N. report, higher temperatures are predicted to cause life-threatening heat waves, water shortages, coastal flooding, and mass migration. Germany is well-equipped to rely more in renewable energy resources. In 2018, 40% of Germany’s electricity mix came from renewable sources of energy, such as wind, solar, biomass, and hydropower. Coal-fired plants release more greenhouse gases per unit of energy than any other energy source, according to Green America, an energy advocacy group whose mission is to harness economic power to create a “socially just and environmentally sustainable society”.
Over the next 20 years, members of the Coal Commission, private sector, and other government officials will be able to curtail dependence on coal. Chancellor Merkel would be wise to adopt the commission’s recommendations.
This article was co-written by Matthew Minor and Ryan Harden.