URBANIZATION results in an increasing demand for energy, particularly for transportation, heating/cooling and electricity. However, as people in cities do not produce their own energy, but obtain it from energy suppliers, they are often unaware of the effects of their energy consumption.

Over the past 20 years, Europe has tried to formulate a policy for sustainable energy to reverse this development. The main goals of a move towards sustainable energy are to reduce the dependence on fossil fuels, and carbon dioxide (CO2) emission to 20% of the present value. A sustainable situation would require a maximum emission of two tonne CO2 per capita per year. At the moment it stands at 11 tonne CO2 per capita per year in Germany. The emission is somewhat lower in the cities (9.8 tonne CO2 per capita and year), but to this we must add some emission that is generated outside the cities. The emission from private house-holds in Germany is about 2.3 tonne CO2 per capita and year, which is about double the emission in Delhi (1.1 tonne CO2 per capita and year, including emission from industry, trade and mobility).

The energy transition strategy involves three main goals which must meet the requirements of consistency, efficiency and sufficiency as first proposed in the debate on sustainability at the UN conference of Rio de Janeiro in 1992.

The first goal is a shift towards renewable energy. This would result in greater consistency, i.e., curb anthropogenic emissions which disturb the natural cycles, such as the carbon cycle. The second goal is to improve energy efficiency by reducing transmission loss from the production site to the user. The energy may come from sustainable sources, but this is not necessarily the case. The third goal is to conserve energy by changing consumer behaviour, e.g., ensuring that some lights are switched off, thereby reducing room temperature. We would term this as sufficiency.

Moving beyond the goals of sustainable energy, we discuss the methods by which cities in Germany and Europe attempt to implement the energy transition as well as the results obtained – the focus being on private households. Our research indicates that despite various efforts the CO2 emissions have only marginally reduced. Moreover, we argue that a greater thrust towards sustainable energy can give rise to enhanced social friction, a challenge which cannot be resolved by the present green government or green market policies. Finally, we critically review some alternative approaches.

 

Many cities and towns in Germany, and all large cities in Europe, have enunciated energy policies to achieve the three goals mentioned earlier. This move could include the following initiatives, though the list is by no means exhaustive:

1. The application of solar energy (for hot water and electricity) is supported financially or is regulated. Pilot programmes to demonstrate the use of solar energy in public buildings. Stimulate energy awareness through competition, giving awards, advising as well as by specifying constraints for new residential areas.

2. Initiate similar measures for improving energy efficiency – subsidies to insulate houses, replace old electrical equipment, and so on. Enforce strict rules for the construction of new buildings; encourage cities to set ambitious goals for their buildings and the equipment they buy; and monitor energy consumption of all properties.

3. The activities are not only focused on technical aspects, but also include information campaigns, neighbourhood assemblies and distribution of brochures to stimulate the citizen’s consciousness about their own energy consumption. Ensuring involvement of the society and citizens is increasingly part of the activities.

 

How successful are the European cities? A team of scientists evolved the ‘European Green City Index’ (EGCI) to assess the sustainability of about 30 bigger European cities on a scale from 0 to 100. The following indicators of this index are important for mapping the energy transition:

* CO2 emission per capita and year, CO2 emission per GDP, a measure of the ambition of their CO2 reduction strategy.

* Energy consumption per capita and year, energy consumption per GDP, share of renewable energy, the quality of the programmes to stimulate the use of renewable energy and energy efficiency.

* Energy consumption of buildings per m2, the number and extent of regulations, the quality of the support measures.

* Number of ecomobility¹ participants, length of bicycle paths and of the public transport network, measures to stimulate ecomobility, and efficacy of measures to reduce traffic jams.

The authors reached the following conclusion: environmental performance is positively correlated to economic performance. This at least is clear for the 30 European cities. For German cities, however, the picture is somewhat different. Environmental performance essentially remains the same regardless of economic performance. One reason for this is that all German cities already have an extensive environmental policy in place as a result of the environmental awareness of their administrations. The other reason is that the national energy policy in Germany affects all cities equally. This result seems to be in agreement with the theory behind the Environmental Kuznets Curve: initially the environmental problems increase with economic performance, but after attaining a certain level of wealth, they show a declining trend.

 

The pattern is quite different when we examine the relationship between the CO2 emission and economic performance. One might expect that the CO2 emission decreases with GDP. Yet, based on the same EGCI data, it appears that the opposite is the case: the CO2 emission increases with GDP! Even though the results are mixed, the tendency is clear. There are, however, a few outliers, such as Oslo or Stockholm. Both cities have in place a diverse and ambitious energy policy. Their low CO2 emission can be explained by other factors. Stockholm has almost no heavy industry and the city was able to expand an existing district heating network which mainly uses biomass. 64% of Oslo’s total energy consumption (heat and electricity) is met by hydropower, which is a very high percentage for European conditions. For all German cities, we find the same relationship between CO2 emission and GDP. Bremen is, however, an exception. This city is relatively small, but 48% of its energy consumption is accounted for by one big steel plant. Excluding the consumption of the steel plant, the relation of CO2 emission to GDP is in line with the general tendency.

When we compare the relationship of environmental performance vs. GDP and CO2 emission vs. GDP, it is possible to conclude that while the environmental performance improves with rising GDP, this does not necessarily result in successfully reducing CO2 emissions. Apparently the relationship between CO2 emission and GDP is more dominant. That is at least the snapshot. In an analysis of the ‘German Green City Index’ (GGCI) this is mentioned indirectly at one point: ‘Environmental regulation contributes decisively to the good results of the German cities.’ Further, it states, ‘German cities show weaknesses with regard to the actual consumption and infrastructure.’²

 

The current situation hence does not bode well for an energy transition, although there is a well developed environmental policy in place. Let us look at the data from Germany to assess whether there has been significant progress during the past years.³ The energy consumption per capita per year in all sectors (i.e., industry, services, transport and private households) has in fact stagnated, while the total CO2 emission per capita and year has declined by 10%. Information with regard to private households shows that the heat consumption per m2 per year has decreased, but not the heat consumption per capita per year. This means that while efficiency has increased, the effect of this on energy consumption has been offset by an increase in the living area per capita. In economic terminology this is called a rebound effect.

The picture for electricity consumption is similar. The electricity consumption has increased slightly, but hot water consumption has declined. The CO2 emission caused by electrical equipment has increased. Although the equipment has become more efficient and a larger fraction of the electricity is generated by renewable energy, the CO2 emission has nevertheless increased due to increased use of the equipment. A slight decrease in CO2 emission per capita per year caused by heat consumption was recorded. In this case, the increase in efficiency due to insulation and new heating equipment is greater than the increase in living area per capita, thus resulting in a 10% reduction in the CO2 emission per capita and year. Since about five times more energy is used for heating than for electrical equipment, the overall effect (heating and electrical equipment) is a slight decrease in CO2 emission per capita and year.

 

In so far as the numbers are concerned, the following interim conclusion can be drawn: although Germany has tried to move towards an energy transition during the past 15 years, it has achieved only limited success. The current reduction of approximately 10% is caused by two purely technical strategies: switching to renewable sources and increased energy efficiency. The strategy to change consumer behaviour has yet to show a positive result.

In my view a clear energy transition will be accompanied by serious social problems since it promotes social inequality, especially income inequality. The present policy, though enjoying majority support, will not or cannot respond to this challenge. This is because a basic mechanism for the regulation of capitalistic societies will no longer be available in the future: availability of cheap energy and cheap resources, which made the unequal distribution in the so-called developed countries in the North bearable, may no longer be possible.

 

The social problems are already visible with a CO2 emission reduction target of 10%. This is demonstrated by the price trend in private households: the price for electricity increased by 50% during the past ten years, and the price of natural gas used for heating increased by about 100% in the same period. For natural gas, this is caused by increased prices in the world market. The tax itself (27%) is not important; the percentage of tax is higher for electricity (47%). The tax consists of sales tax, license tax, and a levy for renewable energy and eco-taxes which were introduced about ten years back. Actually, all these taxes work in the same way as eco-taxes, as they depend on the amount of energy consumed. Politicians are afraid to increase taxes to accelerate an energy transition for fear of widespread protest.

To what degree is the policy to move towards sustainable energy in Germany and Europe associated with social problems? This question will be answered taking into account two separate ideas undergirding the energy transition policy: the green market and the green state. The social consequences of these ideas, especially on income distribution, will be assessed using some examples.

 

The method of the green market consists of steering change towards renewable energy technology through the use of positive and negative economic incentives. These methods influence both businesses and consumers alike. A few examples of green market are, first, the ‘EEG’,⁴ the renewable energy law in Germany. It guarantees the operator of a facility which creates electricity from renewable sources, a specific reimbursement from the energy company which operates the network. This reimbursement is set at a level above the market price for producing electricity; in Germany, it is about five euro cents per kwh. However, the difference from the market price is not paid for by the energy producers but by all consumers. The added costs of the energy suppliers are reimbursed through a fund created by setting an additional charge to the end cost, the EEG levy.

A second example is the energy tax. A tax is levied on the consumer for the use of electricity, gas, heating oil and gasoline/diesel, which is about 5-10% of the price. This also applies to companies, who however receive generous subsidies. Approximately 90% of the revenue (about 20 billion Euros per year) goes into the public pension fund. In Germany, employers and employees pay the same amount into the government pension fund. Through this tax, both pay a monthly amount of about 10% into the pension fund. Even those who are unemployed contribute to the public pension fund. Consequently, while part-time workers, students, the unemployed, and those receiving public assistance receive no benefits from this repayment, nevertheless as consumers they are still required to pay this tax.

A third example is the market incentive programme – ‘renewable energy’. Whoever installs a thermal solar system, a heat pump or uses bio-mass for heating, etc., receives a government investment subsidy. Unlike in the first two examples, this subsidy comes from tax revenues. Subsidies are also available for renovating housing space. The owner receives a favourable credit or direct subsidy up to 17.5% of the investment sum relative to the energy efficiency of the renovation. This results in an increase in the rate of modernization of houses and apartments.

Normally the rate of modernization is 1% per year, but the government expects a rate of 2.5% through this programme. This energetic modernization also results in an increase in rents. Calculations have proven this. The landlords have the right to raise the rent up to 11% of their investment costs. But the tenants will only get back a maximum of one half of the rise in rent by decreasing energy costs. This means a big rise in the rent, which causes many problems and much opposition, for example in Berlin. As a result, poorer occupants from older city areas which are to be modernized are forced to move out. In the jargon of city research, this is called ‘gentrification’.

 

The method of the green state consists of laws, rules and regulations for the use of energy. Unlike green marketing, the attitude towards energy savings is not encouraged but demanded. It is regulated and can be scrutinized and enforced. One example is the EnEV⁵ (energy saving ordinance) which specifies maximum limits for the use of primary energy for the heating of dwellings. For the construction of new buildings, there are relatively strict regulations. Depending on the shape of the building, they can use at the most 60-100 kwh per square metre, which is a third of the average energy use of older buildings (about 200 kwh per year). How the building owners arrive at these values is left to them. There are, however, some obligations: 15% of the heating must come from renewable energy sources, such as solar heating, heat pumps, or combined heat and power generation, but it is also possible to meet the target of 15%, for example, through use of better insulation. For older buildings, there are fewer regulations.

 

Another example is the BImSchV⁶ (the governmental emission protection ordinance). This ordinance allows a heating loss of 9-11% from the boiler relative to the size of the building, failing which the boiler has to be replaced. Boilers over 20 years old, which are less efficient, must be replaced. Similarly, the older so-called ‘night storage heaters’ which use a large amount of primary energy, must be replaced, but only when they are 30 years old and only after 2019! Regulations for the renovation of buildings are made in a manner that house owners and tenants alike are not forced to make expensive and uneconomical renovations.

A third example is the ban on light bulbs based on the EU-ecodesign guideline. Bulbs with a higher wattage than 60w are no longer allowed to be sold. A ban on lower wattage is likely to follow. Such direct bans on devices with a high energy usage are, however, not very common.

Both the green market and green state are features of the political strategy of the ‘Green New Deal’, favoured not only by a political party like the Greens, but also UN institutions, NGOs, and a growing number of economists and environmental researchers.⁷ The Green New Deal aspires to respond to the economic and ecological crises in an integrated manner. The main idea consists of a government supported innovation and investment impetus to introduce green technology in the field of green marketing to marry economic growth with ecological advancement, since the expectation is that with newer technology less of the environment will be used or damaged.

Both the main strategies of the Green New Deal – green market and green state – however, face a dilemma: If the taxes and cost sharing are too low, they have little effect on ecological management. If they are too high, they are unsocial. The same is true for the regulations: If they are too lax, they have little effect. If they are too high, they force the poorer population to make expensive renovations. The Green New Deal requires massive mandatory investments in energy transition, which must eventually be paid for by a majority of the population. All this is likely to cause social unrest unless these additional costs can be compensated for by new jobs and higher income.

 

There are a few suggestions as to how to moderate an increase in social inequality resulting from rising energy prices. One proposal is to introduce social tariffs. The person whose income is below a certain level receives a basic amount of electricity or heating at no charge. Some energy providers already do this for a limited number of customers who receive public assistance. Similarly, certain cities follow a policy of providing ‘social tickets’ for public transportation which can be purchased at a lower price.

Another idea is to provide energy consultation to lower income households. This is presently being implemented in certain areas. Recipients of public assistance are visited at home by an energy consultant free of charge and informed of energy saving possibilities. This consultation is mainly directed towards inculcating and facilitating a more frugal user attitude. Other strategies, such as investing in renewable energy or the purchase of more efficient appliances are not affordable for the poor. The problem with this is that among poorer levels of society, a certain change in attitude is expected. It is also likely that this might lead to a reduction in allowance for energy costs when calculating public assistance rates. The energy consultation, especially for the poor, also tends to stigmatize those needing assistance.

 

Another idea is the green commons which consists of creating self-determined production attitudes. This can take place in the framework of a cooperative. This could also mean ceding control of energy services to the communities and cities away from the private sector. Such a movement towards a re-communalization is becoming popular in Germany. Hopefully, the participating members will conduct themselves more respectfully towards nature, by carefully generating their energy from locally available renewable sources such as wind, sun, biomass and, eventually, hydropower. Their strategy of energy production will be planned in a participative, democratic process, independent of profit goals. They will therefore, carry out the distribution and sale of energy in a socially just way.

A third solution is the use of a ‘basically progressive’ tariff. A basic amount of energy is provided free for every citizen. Consumption beyond the basic use, ‘luxury consumption’, thus becomes more expensive. The additional revenue generated is then used to finance the basic free amount. The price per energy unit thereby rises, and investment in efficiency and change in behaviour becomes more profitable.

 

The advantage of this model lies in the fact that it connects redistribution and ecological supervision, without discrimination, without a complicated demarcation of entitled persons, and without adding to bureaucracy. Further, the solution does not involve additional governmental regulations for correct consumption. It is left up to every individual how much s/he wants to use – but simultaneously face tougher limits in the form of monetary restrictions.

This model is also described as ‘ecology bonus’ or ‘ecological basic income’ in discussions.⁸ However, both in the domains of politics and science, it is yet to become popular. The principle of per-person payout of eco-taxes is not only suited for regulating energy supply to cities, it could also be used in international climate politics.⁹ Poorer countries in the South would profit financially because of their lower consumption and higher population. The model of the eco-bonus, with its social compensation, could provide a fresh impetus to stalled global climate diplomacy as well as facilitate an energy transition in European cities.

 

Footnotes:

1. Ecomobility is an environmentally friendly and socially inclusive way of transportation, including cycling, wheeling, walking and the use of public transportation.

2. Economist Intelligence Unit 2011: German Green City Index, p. 13.

3. Federal Environmental Authority (ed.), Energy Efficiency in Figures, 2011. (In German: Umweltbundesamt [Hrsg.] 2011: Energieeffizienz in Daten.)

4. The German Renewable Energy Act; in German, Erneuerbare-Energien-Gesetz (EEG).

5. In German: Energieeinsparverordnung (EnEV).

6. In German: Bundesimmissionsschutzver-ordnung (BImSchV).

7. For example, New Economics Foundation, ‘A Green New Deal’, NEF, London, 2008.

8. Peter Barnes introduced this in the form of the idea of a ‘Sky Trust’. Peter Barnes, Capitalism 3.0: A Guide to Reclaiming the Commons. Berrett-Koehler, San Francisco, 2006.

9. This is proposed for example by Felix Ekardt with his conception for social justice in climate policy. Felix Ekardt, Soziale Gerechtigkeit in der Klimapolitik, Düsseldorf 2010.