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The Market Mechanism will Shape the Energy Market

 

Kiel Institute for the World Economy (IfW) in cooperation with Leibniz Information Centre for Economics (ZBW)

October 2, 2013

Solutions and limits: at the Global Economic Symposium (GES) in Kiel, the members of the session “Towards a Sustainable Energy Mix” presented a number of possibilities to ensure tomorrow’s energy supply—however, they also reached their limits.

The business representatives largely agreed that the market is the best instrument to shape the future energy supply. The Vattenfall representative Pieter Wasmuth made himself especially clear: “The real problem is that we do not have a uniform energy market. Fossil fuels are being traded on an EU market, whereas the market for renewables is highly regulated.” By creating an open market for all technologies, the current problems, which are mainly symptoms of the regulated situation, could be solved.

Martin Bachmann from Wintershall Holding was equally open to all technologies, including the controversial fracking method and CCS. The most important thing, said Bachmann, is quick progress with the real agenda: lower greenhouse gas emissions. Systematically pursuing this superordinate goal could also solve all the other problems (inefficient use of energy, high costs, lack of or wrong investments). Natural gas reserves in particular should be used.

Yvo de Boer from KPMG advised to exercise caution when choosing transitional technologies, which is due to happen within the next five years.“Transitional technology is particularly relevant, because it will dominate the coming 30 to 40 years. But coal and nuclear energy will also still be with us for the next few decades,” the expert felt certain. De Boer said that exercising control via the costs, whilst taking environmental aspects, health and societal costs into account, would be the way forward. But he also had an eye on climate change and voiced the opinion that CCS would become relevant, as this would be the only way to “couple burning coal with climate change.”

Caio Koch-Weser from Deutsche Bank Group reckoned three key points would be essential for the future of the energy market: transparency, permanence and reliability. According to the financial expert, such a market would also attract the necessary investments. Another important building block of the market would be a carbon price—either via trade or via taxes.

The panelists largely agreed that the solutions for our future energy supply should be sought on a global level. However, they also thought that the role of the UN should not be strained. De Boer was the loudest critical voice and argued in favor of smaller country alliances. Similarly, Koch-Weser advocated the top-down approach from the UN accompanied by a bottom-up approach from country alliances.

Although a number of approaches and solutions have been discussed, the current limits to what can be done also became clear. The members agreed that the demand side needs to change its behavior considerably, too, but the question as to exactly “how” remained unanswered. In addition, a concept for waking the “sleeping giant” and actually using energy efficiently is still lacking.

 

The Global Economic Symposium (GES) 2013 is being organized by the Kiel Institute for the World Economy (IfW) in cooperation with the German National Library of Economics – Leibniz Information Centre for Economics (ZBW).

Further information is available at http://www.global-economic-symposium.org and on the official GES Blog at blog.global-economic-symposium.org.

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