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FDP, Greens deeply divided on coal closures, carbon pricing

Utility lobby chief, green energy expert to help unblock talks

Government advisers recommend carbon tax to achieve climate goals

Preliminary talks to form a coalition government in Germany have made little progress with positions on climate and energy remaining polarized, especially between Chancellor Angela Merkel's proposed junior partners -- the pro-business FDP and the Greens.

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So far, the four parties have only managed to agree to honor the Paris climate deal, with the Greens pushing to accelerate Germany's coal phase-out, while the CDU/CSU and FDP argue against additional coal closures in the near term despite Merkel maintaining that Germany will achieve its self-set 2020 climate targets.

According to media reports, two energy experts and government insiders -- utility lobby chief Stefan Kapferer and state secretary for energy Rainer Baake -- were involved Thursday in an attempt to unblock the talks and find a compromise in the complex areas of Germany's energy transition.

BDEW chief Kapferer is a member of the FDP and before heading Germany's powerful utility lobby was state secretary for energy in Merkel's second coalition with the Liberals, which reversed the first nuclear exit ahead of a sudden u-turn following the Fukushima nuclear crisis in 2011.



Baake, a member of the Green Party, is referred to as the father of the 'Energiewende' due to his involvement in the first red-green coalition (1998-2005) which initiated the nuclear phase-out and renewables expansion. He replaced Kapferer as state secretary for energy in Merkel's third coalition, the current caretaker government.

No details were reported from the meeting with MPs from both FDP and Greens not excluding withdrawing from the talks if no workable compromise can be found.

Six weeks after the election, party leaders plan to present first position papers on 12 policy areas on Monday after two weeks of preliminary talks, with little agreement reported so far and only another two weeks left to finalize preliminary talks before party members are asked whether to enter formal coalition talks.

For the Greens, which may face the biggest hurdle to convince its party base, a special congress has been scheduled for November 25.

In between, Merkel will also address the COP23 climate talks in Bonn, which Germany hosts for Fiji, attempting to focus on global climate issues following the withdrawal by US President Trump from the Paris agreement.


NUCLEAR PHASE-OUT LIMITS OPTIONS FOR NEAR-TERM


Amid options to overcome the stalemate in Berlin, some commentators point towards higher carbon pricing as a way of discouraging coal-burn in Germany without state intervention or closures, which could threaten compensation claims by plant operators similar to the nuclear phase-out.

A group of government advisers this week recommended a national CO2 price to cover all emission sources, technologies and sectors.

Germany is furthest behind its climate targets in the transport sector, where the advisers see the 'greatest need for action', according to a first version of their annual energy transition monitoring report. The full report will be released in December.

Similar to Dutch plans of a carbon floor price, such measures would be in addition to the European emissions trading scheme, with current low EUA carbon allowance prices not enough to drive coal out of the market, it said.

The two areas were progress is well advanced -- the nuclear phase-out and the renewables expansion -- may actually hamper the options for an accelerated coal-phase out as requested by the Greens, the report said.

Germany's nuclear phase-out -- the final six reactors and a combined capacity of over 8 GW are scheduled to come offline by end-2021/2022 -- will further increase regional imbalances and bottlenecks within the power grid.

Germany's former energy minister, Sigmar Gabriel, said it was impossible to phase out nuclear and coal at the same time with plans to expand the power grid delayed by local resistance and high upfront investment costs.

With German power bill payers still committed to pay some Eur400 billion ($464 billion) to operators of renewable power plants, the scope for additional direct government investment is limited, with Merkel's conservatives keen to avoid rising energy costs for industry and households.

--Andreas Franke, andreas.franke@spglobal.com
--Edited by Dan Lalor, daniel.lalor@spglobal.com