GERB in the European realm of climate ambitions

Image Source : Liv Oeian / Shutterstock.com

Deputy Prime Minister Donchev confided the winning party GERB’s willingness to leave the presentation and coordination with the EC of the National Plan, which will form part of the European Plan for Recovery and Resilience, to the next government.

Borisov’s cabinet presented several drafts, none of which revealed consensus-based strategic thinking.  

The Haskovo regional coordinator of GERB and freshly elected MP Delyan Dobrev preached the Green Deal virtues and the inevitable coal power generation’s closure. Simultaneously, his fellow party members in the neighbouring Stara Zagora constituency assured voters that coal mines and thermal power plants would not shut any time soon. The truth is that the populist GERB party has consistently avoided taking a tough line on contentious issues as climate change.

Borissov governments’ inaction and dithering translate into nightmare scenarios when the remaining options are only “blood, sweat and tears”. As the rest of the world does not wholly share them, EU climate policies, including the carbon border adjustments – the euphemism for carbon content tax, threaten to turn Europe into an imploding “Green Dream” island. EU governments push the climate agenda and bet their national stakes on new energy sources, bypassing market mechanisms in favour of legislation and regulations. The travel to the new Dream Land is promoted in Leninesque mode of political emergency and expediency, not accounting for ​​direct and indirect destruction, deindustrialization, loss of competitiveness, jobs, welfare, reflecting a mismatch between objectives, resources, and profit-loss optimums.

Climate policies initially pivoted to identifiable and measurable targets in the process of decarbonization. Each polluting industry traced its chance to meet them and adapt to the new environment, leaving the process predictable and relatively neutral to political and market speculation. Regrettably, soon after pursuits to lower carbon footprint commenced, the proponents of climate emergency switched priorities from acting as Messiahs of the new Faith to pragmatic lobbyists for the new energy sources and associated businesses, enforcing interests via regulations and subsidies.

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The emission allowances market dynamics represent the EKG  graph of the decarbonization process.

Where does Bulgaria stand?

In 2018, the emission allowances’ value as share in the end price of electricity (the household and industrial average) reached 12 per cent. On February 7 and 8, 2021, emission allowances broke the 40 euros/ton bar at the ETS for the first time in the exchange’s history. Forecasts pass 45 euros/ton end of April, further shooting up to 50 by the end of the year. Polluters will be lucky if 45 euros/t remain the year’s average price. Under such a scenario, the share of emission allowances will top 70 per cent of the end price of electricity at the end of 2021, without a proportional power price hike for fear it will trigger social unrest.

With sales revenues collapsing to one-third of 2018 levels, state power generation companies will have no option but to further erode their capital base, depriving themselves of overdue transformation investments, to serve the government’s social policy and EU climate policy extremes. Only in rare instances, balance sheets receive state aid and budget transfers.

Against such backdrop, the drafts and the convincing Brussels labour on the merits of the Energy Reform or Implementation Plan becomes an uphill battle, given the missed deadlines and the implosion in the Bulgarian energy sector following years of benign neglect. Things are bound to get only worse as the EC has embarked on fast-tracking green hydrogen, produced by power generated by wind turbines and solar panels. The ultimate transformation fuel – hydrogen – is expected to substitute other energy sources and raw materials for the industry – the ideal world of climate change politicians and business people.

Green hydrogen, produced through water electrolysis, in order to compete against other energy sources, adding sustainability as a source via battery storage, needs emission permits’ price in the range between 250 and 700 euros/tonne, according to a recent study by Samuel Furfari and Henri Masson. No energy system in Europe could withstand such a shock transition to carbon neutrality by 2050.

Neither the consumers, nor the economy can survive a five to ten times surge in electricity prices unless energy efficiency savings skyrocket or pandemics strike every year. Suppose European politicians and bureaucrats continue to chase climate change, disregarding the gravity of side effects. In that case, with the damage caused and the public scare that agile speculators will turn into political power and personal wealth, the classics will echo: “We have brought hell on earth with the best of intentions.”

As destruction will outpace creation, Europe’s technological, industrial and human capital base will shrink. Finally, Europeans will end up with less in order to protect the planet as economies and livelihoods suffer from persistent shocks, including pandemics and climate policy related black swan events. Only growing economies and prosperous communities can generate the needed resources to deal with climate challenges.

The EU’s global leadership claims are not backed by commensurate investments in renewables and green technology R&D,  comprehensive and competitive value chains.

China invests twice more than the US and the EU in research and development in renewable energy innovations, controlling almost 80 per cent of the rare earth metals market, which form the industrial base for the future RES revolution and trends in decarbonization. Beijing is cashing in on the US and the EU climate ambitions while prioritizing national over global agenda when push comes to shove in shutting down the coal industry.

Back to  the Bulgarian idiosyncracy, the government has been kicking the can down the road, doing nothing to preach a more concerned approach at the EU top-level of hyper climate activism.

The Bulgarian government does little to define and protect ‘national’ interests before EU-level policies are adopted, nor do institutions seek to identify the optimal response, blending the inevitable value destruction with cost-benefit weighted value creation solutions.

The bottom line, if Bulgarians are to suffer in the name of European climate ambitions, the least they should expect is for the EU’s rich and climate-addicted nations to foot the bill.

Ilian Vassilev

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