20.05.22 “The uncertainty is growing” Interview with Dr. Jörg Rothermel • Reading time: 3 min.

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Summary

Dr. Jörg Rothermel is the Managing Director of the German Association of Energy-Intensive Industries (EID) in Berlin. He gives a stark warning about the possible departure of the companies.

Jörg Rothermel, what does “energy-intensive” actually mean?

There are several different definitions. The special compensation regulation of the German Renewable Energy Act states that the industry’s electricity costs must amount to at least 14 percent of the gross value added. But each piece of legislation has its own threshold. Our organization represents the construction materials, chemical, glass, non-ferrous metals, paper, and steel industries. 

Dr. Jörg Rothermel, Managing Director of the German Association of Energy-Intensive Industries (EID)

The capital stock of the energy-intensive industries has been decreasing for decades. Are these sectors not already in decline anyway?

No. Companies are continuing to invest, primarily to improve their efficiency. Between 1990 and 2012, the energy-intensive industries reduced their greenhouse gas emissions by 31 percent and, at the same time, increased their production by 42 percent. From this perspective, they have already made a major contribution to protecting the climate. In addition, it is important to remember that these industries produce a lot of the materials that make the green conversion possible, for example for cars, gas turbines, wind energy and photovoltaic systems, and buildings. 

In some cases, investments have, of course, moved outside Germany over recent years. The chemical and steel industries, for instance, are increasing their capacity in areas where energy is available at competitive prices. 

Economists believe that the cost of electricity in Germany is competitive, if the concessions for the energy-intensive industries are taken into account…

It is a fact that electricity prices in other countries are much lower. German industry has to pay the second highest price for electricity in Europe at an average of ten cents per kilowatt hour. In France, industrial electricity costs only around six cents and energy-intensive industries there pay even less. Outside Europe, energy is even cheaper. In China, for example, the electricity costs are well below the German market price and more than 50 percent is added to the market price in the form of taxes, surcharges, and levies. 

German electricity costs could be competitive when the special rules for energy-intensive industries are taken into consideration. But for this to be true, the businesses would have to actually receive the concessions! That is by no means guaranteed. Among the 1,900 members of the German Chemical Association (VCI), for instance, this is only the case for 100 companies. 

Does climate policy represent a serious threat to the business of the energy-intensive industries?

Not yet, but the uncertainty is growing. The coalition agreement of the German government states that the system of surcharges and levies needs to be revised. The cap on the electricity tax comes to an end this year and the number of businesses that receive compensation in the emission trading scheme is falling with each revision of the system. The government will have to decide soon whether it wants to help the energy-intensive industries with the process of decarbonizing or wipe them out. 

Is decarbonization not being driven automatically by the CO2 emission trading scheme?

No, the scheme is not able to fully control decarbonization. The new technologies that can operate without fossil fuels are simply not competitive enough. An electricity-powered steam cracker for the chemical industry, for example, is so expensive that it is not a viable purchase proposition for a company that wants to remain competitive on the international markets. In addition, the operating costs of the new green technologies are often much higher. For instance, the cost of producing ammonia using green hydrogen is five times higher than the conventional method. The energy-intensive industries need support or a special electricity price, otherwise Germany will not achieve its target of being climate-neutral by 2040. 

Will it be possible to decarbonize all the energy-intensive industries?

The chemical and steel industries have already produced road maps for decarbonization. In the case of glass and paper, the CO2 emissions are determined solely by the energy consumption and can also be avoided. The cement industry will initially have to make use of carbon capture and storage for the CO2 from its production process. 

Would it not make sense to outsource particularly energy-intensive processes abroad?

The German chemicals industry in particular benefits from the fact that everything from the raw materials to the medicines is produced in one place, which makes it highly efficient. If this chain is broken, the entire chemical industry will collapse. The energy-intensive industries employ around 835,000 people and each of these jobs safeguards two additional jobs in other areas of industry and in the service sector. This means that we are talking about roughly 2.5 million jobs in Germany. In addition, outsourcing production abroad would also have negative consequences for climate policy. German industry is among the most carbon-efficient in the world. In China, for example, the CO2 emissions from raw material production are now twice as high as in Germany. 

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