Germany Plan To Eliminate Nuclear Power Plants May Add 40 Million Tons of CO2

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Nuclear power plant, North Rhine-Westphalia, Germany

Germany’s new plan to shut down all of its nuclear power plants by 2022 has the potential to add up to 40 million tons of carbon dioxide emissions annually as the country replaces nuclear power with fossil fuels, analysts said on Tuesday. The extra CO2 emissions would inevitably increase the demand for carbon permits under the European Union’s trading scheme, thereby adding a little to carbon prices and pollution costs for EU industry.

The phase-out for nuclear power in Germany is seen as more of a political ploy than a technical advancement as German Chancellor Angela Merkel tries to capture the anti-nuclear sentiment in the aftermath of Japan’s Fukushima crisis. Environmentalists of course welcomed the shift away from nuclear, although some are demanding a faster shift, in the hopes that it would focus a shift to renewable energy which they view as less harmful by avoiding radioactive waste and harmful greenhouse gas emissions.

According to Amrita Sen, an analyst at Barclays Capital, “We will see a pick-up in German coal burn. Longer term, they will be using more renewables and gas but this year and next, we should see a lot of support for coal burn.”

Analysts predict that the shift for Germany will also lead to an increase in planet-warming greenhouse gases equivalent to the annual emissions of Slovakia, as Germany uses gas and coal to replace the power lost from it’s nuclear facilities, both of which produce greenhouse gases, including CO2, whereas nuclear power does not for the most part. That calculation implied some skepticism with the coalition’s assertion that it would cut power demand and expand the use of renewables such as wind and solar power.

There are differing opinions on the annual amount of CO2 emissions estimated to be released for the future. Analysts from Deutsche Bank estimated an extra 370 million tones of carbon dioxide (CO2) emissions through 2020, compared with Societe Generale’s extra 406 million tones. Another analyst, Matteo Mazzoni, from Italy’s Nomisma Energia, has given estimates of roughly an extra 20-29 million extra tones of CO2 per year. Mazzoni was quoted as saying “this is not likely to drive prices much higher in the medium term, unless the price of power comes under pressure,” in reference to the price of emissions permits called EU allowances (EUAs).

As for other EUA price forecasts, Socgen analyst Emmanuel Fages increased his third quarter 2011 EUA price forecast by a modest 0.5 cents to 17 euros per tone, and would reassess other prices based on the power plan from Germany. The benchmark EUA contract for December 2011 delivery was trading at 17.24 euros ($24.63) per ton on Tuesday at noon, up 35 cents or 2 percent for the day. Fages told us “Carbon prices should obviously also get an uplift due to the sentiment born from the decision, but it will be limited and temporary. The market remains largely oversupplied (EUAs) for two years to come, capping any significant price increase in the short run.”

The EU trading scheme was designed to limit industrial emissions by allocating a fixed quota of EUAs to some 12,600 factories and power plants but the global recession in 2009 left an oversupply of permits. So based on preliminary data, the Germany Plan To Eliminate Nuclear Power Plants adding up to potentially 40 Million Tons of CO2 annually may not be as good as it seems on paper, at least until all the data is in.

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