Between dogma and expertise: how to deal collectively with today's major issues?

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The Russian-Ukrainian issue, the fiasco of German energy policy that it reveals and the "gas diplomacy" that has been linked to it raise very difficult questions that the automotive world cannot escape. These questions relate to the energy policies of the various European states. Although highly technical in appearance, these questions are also eminently political and it would be illusory to think that they can be solved by an increase in expertise: on the contrary, it is by providing the means to have a real public debate on these matters that solutions can be found.

For the automotive industry, beyond the immediate problems faced by manufacturers, in Russia itself or because of dependence on Ukrainian suppliers, the current crisis is above all a very strong incentive (or even an obligation) to integrate the energy issue into their agenda better than they have done up to now.

The prevalence of local pollutant and greenhouse gas (GHG) emissions as well as congestion issues have already led the industry's players and observers to become much more attuned than they used to be to transport economy issues, which for a long time had remained a kind of monopoly of administrations, elected officials and their public transport partners. Today, terms such as 'modal share', 'land use' or 'car ownership' are commonly used in automotive circles and refer to a heavy intellectual investment in this field of expertise.

It was felt that, with the electric vehicle and its recharging, with the question of green hydrogen and its availability for transport or with that of biofuels, a similar movement would be necessary to understand how to integrate automotive issues into the changes taking place in this field. 

Initially, the automotive world thought that, like schools faced with the problems of delinquency, obesity, etc., it could not solve all the problems of the societies in which it was evolving on its own and at the same time.  The most insistent political and societal demand was for decarbonisation and drastic limitation of local pollutants and, in particular, of NOx and fine particles: this would be met by the electric vehicle and it would be left to the States to settle the question of energy mixes and their ability to offer solutions that are both decarbonised and economically and politically sustainable.

The fact that producing batteries or recharging electric vehicles (BEVs) was not the same in Poland, Germany or France was a problem that had to be dealt with "elsewhere".

Our German neighbours were more along these lines and seemed to think that with the efforts they had made on renewables, they could, even if they got coal and nuclear out of their power system, argue that the VW Group was right and that the electric vehicle (BEV) combined with the policy of energy transformation (Energiewende) pursued throughout the Merkel era constituted a defensible decarbonisation package in Germany as elsewhere.

Just over six months ago, as Eric Leser points out, the European Commission took up the idea in its Green New Deal: the idea is "that the substitution of carbon energies will happen 'naturally' in a few years through subsidies, taxation and fiscal incentive policies". It is enough for the Brussels technocrats," writes E. Leser, "All the Brussels technocrats have to do is impose behavioural changes on companies and the public, for the former in their investments and strategic choices and for the latter in terms of transport, food and housing...". We know that, a few days before the war in Ukraine broke out, the German government was still sufficiently convinced that renewable energies would do the job that its representatives became angry when some people mentioned the idea that nuclear power could be included in the list of decarbonised sources...

However, at that time, the "gas shock" and its consequences on the price of electricity were already there: the fact that Germany had been largely mistaken and had wanted either to go it alone or to drag the other Europeans into the impasse was obvious.
The public was discovering what many reports had already pointed out: while renewable energies (RE) are very attractive and deserve to be supported and subsidised, all of them, except hydro, have the great disadvantage of being 'intermittent' (REi). As a result, an electricity production system that makes a major contribution to REI, such as the one that Germany has acquired at great expense, must be supplemented - in Germany and/or its neighbours - by the existence of "controllable" capacity, i.e. capacity that can be triggered when consumption peaks and REI are too short.

Since Germany wished to progressively close down all its nuclear and coal-fired power plants, it had to (like other countries such as Belgium and the UK) build new gas-fired power plants and ensure their supply and that of the entire residential sector, for which gas-fired systems were also favoured over electric ones (in order to show a more flattering carbon balance). This is obviously where Germany's "gas diplomacy" comes in and it is thus clear to everyone, including Germans, that the unsustainability of German choices was threefold. It was energetic, political and geopolitical, and European, since their choices had consequences far beyond Germany alone.

The automobile is technically concerned because it emits greenhouse gases and is therefore at the heart of decarbonisation policies. It should be less directly affected if electrification increases, but it will be indirectly affected when it comes to producing (and recycling) vehicles and, in particular, batteries, and when it comes to recharging them.

More politically, the fact that, in the context mentioned, reversals are taking place (on nuclear power in particular) in France, Germany or elsewhere risks breaking the very fragile consensus that was taking shape: the fact that the superb Brussels-Germany assurance is being seriously undermined will inevitably give wings to those who considered themselves scorned or wronged in their defence of paths other than that of the electric vehicle (BEV).

This reopening of the debate in Europe will undoubtedly be necessary because our energy systems are interdependent via the interconnection of the networks that provide a major part of the solutions to the problems of intermittency of electrical production associated with renewables. This implies, among other things, the existence of a European electricity market.

Furthermore, the emissions of one country in particulate matter, for example, are found in the others, we have or are supposed to have a common diplomacy and we conceive common recovery plans and/or transition management methods. All this has so far remained largely theoretical and the recurrent calls for harmonisation over the past 10 years have hardly been heard. A France Stratégie note of January 2021 on this subject noted:  
"A fragmented political steering between the different Member States concerning an electricity system connected at the scale of the European Union is therefore a factor of fragility for the future. It may make it hypothetical to achieve climate ambitions under satisfactory economic conditions.
To illustrate, in 2014 the BMWi welcomed the introduction of a capacity market in France. It saw this as a way of promoting the emergence of additional capacity in our country that would contribute to Germany's security of supply: 'The capacity of nuclear power plants in Germany can decrease by the same amount as the German electricity market has the capacity of French power plants at its disposal thanks to the cross-border interconnectors in place."

Already presented in this way, the energy policy issues raised appear eminently political, as the modalities of decarbonisation and the distribution of the related burden between European countries are very clearly posed. In addition, there are two crucial economic questions that Eric Leser formulates quite well. 
i) Producing decarbonised energy is more expensive and prices will structurally increase even once the "shocks" we are experiencing today have been absorbed. Therefore, as we can see when we talk about "fuel poverty" or "mobility poverty", these "forced" expenses weigh proportionally much more heavily on the budgets of modest families than on others and, as we have seen from the reactions of States to the "shocks", households will have to be helped to cope with these increases. 
ii) Moreover, the investments to be made are very heavy while the returns are low and therefore the ROI is distant. Private companies are therefore not very quick to assume - on their own in any case - these capital expenditures. So the public has to pay for it through taxes and/or borrowing. This is what happens. 

These economic questions are distributional questions which are, in turn, eminently political and very similar to those posed by the electrification of household car fleets and/or the provision of charging stations. E. Leser is right to point out that the question is relatively simple and is "how to substitute decarbonised energy for fossil fuels without endangering our economies and societies". He is wrong, however, when he claims that it should be "approached as an engineering and economic problem, not as a moral, ideological or solely political issue": no, energy issues are not questions that McKinsey can solve, even if expert reports can help to better frame or document them; they are eminently political questions in the strongest sense that are the subject of public debate.

 

The weekly column by Bernard Jullien is also on www.autoactu.com.

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