1/12: Typically insightful thread from @Sustainable2050, and surely right that German Constitutional Court (GCC) ruling will require a (much) tougher 2030 German emissions target. This is yet another bullish undercurrent for EUAs. @CarbonBubble @CarbonPulse @RedshawAdvisors
2/12: At its heart, the Court's ruling is about freedom: specifically, the freedom (@Luisamneubauer, #FridaysForFuture, and others) from disproportionately large – and hence excessively freedom-restricting – emissions reductions after 2030. Per the ruling: bundesverfassungsgericht.de/SharedDocs/Pre…
3/12: "Provisions that allow for CO2 emissions in the present time constitute an irreversible legal threat to future freedom because every amount of CO2 that is allowed today narrows the remaining options for reducing emissions in compliance with Art.20a of the Basic Law."
4/12: It continues: "If much of the CO2 budget were already depleted by 2030, there would be a heightened risk of serious losses of freedom because there would then be a shorter timeframe (...) to make the transition to climate-neutral behaviour in a way that respects freedom."
5/12: And as @Sustainable2050 said, this is the reality of Germany's current 2030 emissions-reduction target (-55% versus 1990) in that it massively back-loads the burden for net zero by 2050 on to the 2031-2050 timeframe.
6/12: Consider the @Umweltrat chart cited by @Sustainable2050. This shows current German emissions target (-55% by 2030, net zero by 2050) v budget consistent with a 67% chance of 1.75°C. (6.7Gt of CO2 from 2020). Current policy would burn through >90% of 1.75°C budget by 2030.
7/12: If that's not bad enough, consider current policy v German carbon budget consistent with a 50% chance of 1.5°C (4.2Gt from 2020, again per @Umweltrat). In this case, current policy would already burn through the 1.5°C budget by 2026.
8/12: Per GCC ruling Govt must now comply by end of 2022 w/ detailed plan for post-2030 emissions cuts. But w/current polls projecting Greens as largest party after September's general election, the policy response will likely be much more radical for the pre-2030 period as well.
9/12: In short, last week's GCC ruling has huge implications for German climate policy. Would now assume the 2038 end-date for German coal will be brought forward (to 2030 at latest). Would also expect significant further ramp-up of support for electrification and green hydrogen.
10/12: The. most efficient way to do this is to tighten emissions targets for German industrial sectors in EU-ETS. These will have to be tightened anyway under the more ambitious 2030 targets for the EU as a whole but the GCC ruling greatly increases the scale of the cuts needed.
11/12: CONCLUSION: Climate policy will only get tighter over time as scale of the challenge becomes clearer and as the burden on future generations and their freedom becomes increasingly unacceptable. The rational response is therefore to significantly tighten 2030 targets ASAP.
12/12: Or in the words of Germany's greatest poet:

"Freiheit ist nichts als die Möglichkeit, unter allen
Bedingungen das Vernünftige zu tun."

"Freedom is nothing but the possibility to do the rational thing in all circumstances."

Johann Wolfgang von Goethe, 1827
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More from @MCL1965

26 Apr
1/11: Yet another new all-time high in EUAs this morning (€47.73/t) so seems like a good moment to offer a reminder on the new pricing paradigm we have entered and how underlying fundamentals justify the market's bullishness (@CarbonBubble, @CarbonPulse, @RedshawAdvisors).
2/11: The EU will very soon have a legally binding target for net zero by 2050, and the EU-ETS is the principal policy tool for delivering this public-policy objective. Meanwhile, the introduction of the MSR in 2019 has made the market much more confident the EU-ETS can deliver.
3/11: The European Commission states that we cannot get to net zero by 2050 without green hydrogen playing a significant role in the final energy mix. I wrote an article for the FT on the implications of this for EUA prices back in October: ft.com/content/ecdeab…
Read 12 tweets
31 Dec 20
1/9 What if some of Shakespeare's most famous works were prescient parables about climate change? A look at 'Hamlet', 'Macbeth", 'A Midsummer Night's Dream', and 'King Henry IV, Part 2' through the lens of anthropogenic global warming. First thread of four, this one on 'Hamlet'.
2/9 Hamlet is the heir to the Danish throne whose father, the King, has been murdered by Hamlet's uncle (the King's brother). Not content with fratricide, the uncle then marries the King's widow (Hamlet's mother) and usurps the throne.
3/9 The dramatic tension in 'Hamlet' stems from the hero's attempt to resolve this horrifying and unnatural situation, and the tragedy stems from Hamlet's fatal character flaw – he is a chronic ditherer, and delays taking action time and again until it is too late.
Read 51 tweets
29 Dec 20
1/10 A quick journey through energy markets in 2020 via my articles for the FT this year. TLDR: 2020 is just the trailer for the full feature film that will play out over the next decade (@BNPPAM_COM, @CarbonBubble, @CarbonPulse).
2/10 First, and key to everything else, is this fundamental insight: renewable energy i(wind and solar) is intrinsically deflationary, while fossil fuels are intrinsically inflationary. I set out the logic of this argument in this FT piece of 16 December: ft.com/content/f2a27d…
3/10 Second, this has huge implications for the distribution of value across the global energy system — it means that as renewables take an ever greater share of global output over time so fossil fuels will also be subject to deflation (otherwise they won't be competitive).
Read 11 tweets
4 Feb 20
Short thread as stranded assets go mainstream in the Lex column today. The key point is that it is not just a question of the volumes that get strandded, but the lower price you get for the residual volumes you are still able to sell under a given carbon budget. 1/n
I first wrote about this in 2014 in a report entitled "Strunded assets, fossilised revenues", estimating that the world's fossil-fuel producers faced a revenue shortfall of $28 trillion over 2015-35 under a 2°C target based on the IEA's then 450-scenario: longfinance.net/media/document…
And if volumes sold are lower then by definition prices are also lower. The IEA price deck under the old 450-S was quite a lot lower than under its base-case. And $19trn of the $28trn in lost revenues was for oil (no surprise, as oil is much more valuable than coal or gas). 3/n
Read 8 tweets

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