BERLIN, Jan. 19 (UPI) -- Climate change may devastate our planet and we may not be able to do much to prevent our lives from changing. But is the world able to stop the worst, or have we already crossed the point of no return?
In this second and final installment of a two-part interview about Europe's energy concerns, United Press International's Berlin correspondent Stefan Nicola spoke to Claudia Kemfert, the head of the energy and environment division at the German Institute for Economic Research, a Berlin-based think tank, about big-money takeover bids, competition on Europe's energy market and the greatest problem to emerge from the energy sector -- climate change.
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UPI. The year 2006 has brought a series of large mergers and takeover bids in the energy sector. Do you think that trend will continue in 2007?
Kemfert: I am sure it will. Energy companies define themselves over their size to compete on the market. An energy market that is liberalized but not controlled always results in companies merging. If you don't prevent that, mergers will happen, and you will be stuck with a few national champions. Because of the high oil and gas prices, the companies have a substantial amount of cash flow they want to spend. As they are strategic firms, they will naturally use that cash flow for investments in other companies to better position themselves on the market, rather than in an update of their pipelines. I think there will be many mergers in 2007 as well that we won't expect.
Q. Eon, which has for the past months tried to take over Spanish competitor Endesa, has defended the tendency to merge, arguing large companies, because they are able to talk head-on to huge suppliers such as Gazprom and Statoil, are more likely to negotiate cheap prices. Are mergers good or bad for consumers?
A. Generally, they are bad, because less competition always means higher prices. But of course it is going to be very hard to prevent these mergers, because they are legitimate developments of a liberalized market. But since the consumer is hardly going to benefit from these developments, we support the plan of a European regulation agency that -- if it can't prevent mergers - oversees the pricing of these companies to ensure that it is fair and competitive.
Q. The European Commission is also mad about the companies' pricing policies, and European Union Competition Commissioner Neelie Kroes has announced she wants to "unbundle" national energy champions by taking away their network ownership. What do you think of that plan?
A. I think it's a step in the right direction, but Brussels should have done this 10 years ago, when they started to liberalized the energy market. Today, there are great differences among Europe's markets. Especially in Germany, many opportunities have been missed. England, which has long completely liberalized its market, is complaining that Germany and France have not been penalized, and rightly so. Of course Germany and France will fight any asset stripping tooth and nail, and they could also reverse the argument: That there are other countries where there is even less competition. I hope that the commission formulates clear benchmarks that the countries have to achieve.
Q. The European Commission also mentioned the absolute need to fight climate change. It seems after the Stern report last year, global warming has become a much more important topic in global politics.
A. Yes, finally it has. I have studied climate change for a long time and wished that politics would have taken climate change more seriously because it really has an economic impact. All that has happened now -- there really is a time before and after the Stern report, which has confirmed clearly that climate change has a considerable impact on the global economy, and it has really awakened the world. Before the report, that impact had been greatly underestimated. I am very happy that the Stern report has been broadly recognized and that politicians finally have a legitimacy to act.
Q. Europe has seen some record hot summers and unusually mild winters. Global warming is happening, and some experts even say we have already crossed the point of no return.
A. The Intergovernmental Panel on Climate Change report confirms that a lot of greenhouse gases have already been emitted, that climate change will happen, is happening. We have to adapt to the effects of climate change and also try our best to reduce greenhouse gas emissions. Industrial nations now have the special responsibility to help those countries most affected by climate change, the developing countries. There will be droughts in Africa and floods in Asia. But many of these countries have very limited means, and that's why the international community should create a climate fund from which those nations can be helped. But also Europe will be greatly affected by global warming, extreme weather events such as droughts and storms will increase, Malaria can come back, the list of possible effects is long, and while we start seeing first signs, we haven't yet experienced the terrible reality of what will likely come.
Q. German Chancellor Angela Merkel, who early in her career was Germany's environment minister, wants to put climate change high up on the list of issues at the Group of Eight Summit in Heiligendamm this coming June. Are you happy that Merkel is taking the problem seriously?
A. Yes, I highly welcome that. England in Gleneagles in 2005 already pushed the issue. But Frau Merkel's possibilities are limited. It is important to get the United States more involved in climate protection, and such attempts haven not been very successful in the past. You also have to create alliances with developing countries that are rapidly growing, like India and China, and offer them technological options so that they can implement carbon dioxide-free energy generation so that the West's past mistakes aren't repeated there.
Q. The United States has not ratified the Kyoto Protocol because Washington believes emissions trading is the wrong way to fight climate change. In Europe, America's contribution is seen very critically.
A. Yes, but even in the United States, things are changing. In California, Mr. Schwarzenegger is taking climate change very seriously. He has proposed concrete steps to reduce emissions by 25 percent, and in his state, the implementation of renewable energy sources is strongly advocated. In the mind of the Americans, Kyoto is done, and I don't think it makes sense to push it in the political discussion any longer, but Europe should focus on what could be done in the future. Yes, Washington opposes emissions trading, but it can't stay inactive much longer, especially with a Democratic majority in Congress. Individual states on the East Coast are already taking part in emissions trading, and I am optimistic that in many states in America, more solutions will be proposed, and renewable energy sources will become increasingly important.
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