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Georg Zachmann

Georg Zachmann

Georg Zachmann joined Bruegel in 2009 and is a member of the German Advisory Group in Ukraine and the German Economic Team in Belarus and Moldova.

Articles by Georg Zachmann

‘Fit-for-55’ package: Squaring the circle

July 15, 2021

The European Union finds itself at the centre of a three-dimensional puzzle. Burdens need to be shared between 450 million citizens, 25 million businesses and EU countries in a way that is acceptable to enough of them.

Read the piece published by Euractiv.

Republishing and referencing
Bruegel considers itself a public good and takes no institutional standpoint.
Due to copyright agreements we ask that you kindly email request to republish opinions that have appeared in print to [email protected].

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How to extend carbon pricing beyond the comfort zone

April 1, 2021

Rapid emission cuts need a carbon price for the whole economy. This must be introduced in careful stages. 

The European Union has set itself an enormous task: reducing greenhouse emissions by about 40% compared to current levels in only nine years and essentially stopping those emissions by 2050. These targets go beyond the comfort zone of gradual replacement by cleaner alternatives of power plants, cars, planes, factories and heating systems that reach the end of their lifetimes. Furthermore, the EU’s current climate policies are insufficient to ensure that companies and consumers move quickly to reduce oil, coal and gas consumption, and invest in zero-emission alternatives. 
Simply forbidding polluting activities, such as driving combustion-engine cars or heating with oil and coal, will

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Redefining European Union green bonds: from greening projects to greening policies

September 21, 2020

European Union green bonds, as promised by European Commission president Ursula von der Leyen, might be better linked to the bloc’s achievement of its climate goals, rather than project-by-project green criteria.
In her first State of the Union speech (16 September), European Commission President Ursula von der Leyen set a target of raising through green bonds 30% of the up to €750 billion that will be borrowed under the Next Generation EU recovery fund. Such large-scale EU green bonds issuance could reduce interest rates and contribute to kick-starting a global green bond market based on European rules.
The challenge, however, is to ensure that EU green bonds really are green. The standard approach is that green bonds should be earmarked for green projects that can conform to pre-defined

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The European Union-Russia-China energy triangle

December 9, 2019

Concern is growing in the European Union that a rapprochement between Russia and China could have negative implications for the EU.This Policy Contribution is a version of a paper prepared for the seminar ‘Trade relations between the EU, China and Russia’, co-organised by the Delegation of the European Union to Russia and Bruegel with the support of the EU Russia Expert Network on Foreign Policy (EUREN). The seminar was funded by the European Union. The content of this paper is the sole responsibility of the author and does not represent the official position of the European Union. Research assistance by Francesco Castorina is gratefully acknowledged.We argue that energy relations between the EU and Russia and between China and Russia influence each other. We analyse their interactions in

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Schaut in die Region!

October 29, 2019

Die deutsche Industriepolitik folgt bisher keiner klaren Strategie, sondern ist von Unternehmensinteressen getrieben. Das ist der falsche Weg.Bundeswirtschaftsminister Peter Altmaiers Idee, die Industriepolitik strategischer auszurichten, ist begrüßenswert. Denn vom Staat gesetzte Rahmenbedingungen bestimmen bereits heute die Richtung der Industrieentwicklung in Deutschland. Beispielsweise bevorzugt der Energiemarkt große energieintensive Unternehmen, während kleinere Unternehmen wie zum Beispiel Datenzentren benachteiligt werden. Bisher folgt die deutsche Industriepolitik keiner klaren zukunftsgerichteten Strategie, sondern ist von den Interessen der hergebrachten Firmen getrieben. Die von Altmaier angestoßene Diskussion um eine explizite Industriestrategie kann also sehr nützlich sein,

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Getting better all the time: The benefits of learning for decarbonisation

April 16, 2019

The technological development will dramatically impact decarbonisation cost. In this blog post, the author suggests that national decarbonisation strategies should put a special emphasis on the benefits of learning.

This blog post is based on the publication put together in the framework of the COP21 RIPPLES project.This project has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement No 730427.

Technological improvements are seen as a physical law that will substantially contribute to reducing the cost of global decarbonisation efforts. Hence, the expected learning rates built into models that assess the cost of decarbonisation are substantial. The climate strategy proposed by the European Commission assumes, for example,

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LNG and Nord Stream 2 in the context of uncertain gas import demand from the EU

September 27, 2018

Georg Zachmann sees the development of import demand for natural gas in the EU as uncertain. In case of strongly increasing import demand, both Nord Stream 2 and liquified natural gas imports could contribute to ensure European supply.

 With falling demand, the EU does not need new import lines. Gas import demand will very much depend on political decisions: many business-as-usual scenarios foresee increasing gas import demand; however, all scenarios that implement the requirements of the Paris Climate Agreement lead to a dramatic drop in the demand for natural gas.
The commissioning of Nord Stream 2 could allow Russia to selectively supply individual member states and potentially empower Gazprom to increase its profits at the expense of ist Eastern European consumers.

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Climate policies risk increasing social inequality

February 8, 2018

The aggressive political interventions needed to effectively counteract climate change will make the rich richer and the poor poorer, if social concerns are not given greater prominence in policy debates.

This opinion piece was also published by El País, Hospodárske noviny and Ta Nea.

Europe has only 30 years to stop fuelling cars with gasoline, producing electricity from coal, and heating homes with oil, or it will fall short of its agreed contribution to the fight against climate change.
Such a profound shift will require massive political interventions: standards will prohibit certain technologies, carbon taxes will make the use of dirty energy expensive, and public programmes will encourage the deployment of cleaner technologies. Compared to existing climate policies, future

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The clock is ticking: Ukraine’s last chance to prevent Nord Stream 2

January 24, 2018

Ukraine is running out of time to provide western gas consumers with the necessary trust to abandon the Nord Stream 2 gas pipeline project

This opinion piece was also published in European Pravda

Nord Stream 2, the gas pipeline to directly connect Russia and Germany, is undoubtedly bad for Ukraine. It will allow Gazprom to largely circumvent the Ukrainian gas transit system when supplying EU consumers. This could result in significantly lower transit revenues for Ukraine: up to USD 2 billion per year, which currently corresponds to about 2-3% of Ukraine´s GDP.
More importantly, it might make gas supplies from the EU to Ukraine more difficult. If Russian gas supplies to Slovakia are delivered through Nord Stream 2, Germany and the Czech Republic, the price of this gas at the

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The impact of Brexit on the Irish energy system – pragmatism vs. principles

November 21, 2017

Brexit promises pain for Ireland that could be cut off from the EU internal market and be left exposed to market instability in the UK. Georg Zachmann assesses the scale of the possible damage for Ireland, and how the UK and EU might use the special energy relations on the Irish island to commit to a pragmatic solution.

Ireland is the EU member state that will be most impacted by Brexit. A particular case in point is the energy sector. Currently the Irish electricity and gas markets’ only physical connections are with the UK. So, after Brexit, these Irish markets would not be connected with the EU anymore. This has material implications.
Adverse effects for Irish gas customers
Currently, Ireland imports about half of its gas consumption through the UK (the rest is produced

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Nord Stream 2 means gains for Germany but pain for Europe

June 23, 2017

The proposed Nord Stream 2 pipeline could destabilise European energy cooperation and offer Gazprom excessive influence in Central and Eastern Europe. These disadvantages do not justify the commercial benefits for German companies.

This opinion piece was also published in German in EnerGate

The construction of a new pipeline under the Baltic Sea between Russia and Germany throws up a series of economic, legal and political questions. German politicians face a particular dilemma. The project seems likely to be profitable for Germany itself, but it would worsen the gas supply for Germany’s eastern neighbours. The strategic opportunities that Nord Stream gives Gazprom are particularly worrying. It would make it possible for Gazprom to improve its market position in north-west

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Nord Stream 2 can wait

June 13, 2017

Gazprom is pushing ahead with plans to build a second gas pipeline under the Baltic sea, straight form Russia to Germany. Supporters claim that Ukraine cannot be relied on as a transit partner, and that Europe will need more gas in the future. Georg Zachmann is unconvinced, and argues that the project should wait.

Gazprom wants to build a second gas pipeline under the Baltic straight from Russia to Germany. Nord Stream 2, as the project is called, has provoked controversy in Europe – but the pipeline is planned to be in use as soon as 2019. Supporters of Nord Stream 2 make two bold claims: Ukraine is apparently an untrustworthy partner for gas transit, and Europe supposedly needs more Russian gas. Both arguments are questionable, and there are good reasons to put the project on

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The carbon buyers’ club: international emissions trading beyond Paris

April 4, 2017

The effort to define rules for international emissions trading faces the strong desire of nation states to develop their own climate policies, which collides with the need for tradable units in one country to be equivalent to tradable units in another country. To overcome this dilemma Georg Zachmann proposes a club of carbon-buying countries that would regulate only imported mitigation outcomes.

The issue
Mitigating greenhouse gas emissions is more difficult in some countries than in others. International emissions trading can help to reduce the overall cost of mitigation and ensure that companies in different countries face the same carbon price. Lower costs and tackling competitiveness concerns can enable higher levels of climate ambition. The Paris Agreement explicitly provides for international emissions trading, but the rules governing trading still need to be determined. In the absence of strict rules, international emissions trading might become a loophole leading to reduced climate ambition. And because of its consensus requirements, the United Nations process is unlikely to lead to comprehensive rules. To fill this gap, the European Union should engage with other nations to determine a set of rules that can serve as a gold standard for emissions trading anywhere in the world.

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Energy policies in Eastern European partners

December 2, 2016

Collaborative economy
Georgios Petropoulos was invited to speak at a workshop on collaborative economy organised by the Internal Market Committee (IMCO) of the European Parliament on November 8.

By: Georgios Petropoulos
Topic: European Parliament, Parliamentary Testimonies
Date: November 18, 2016

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An approach to identify the sources of low-carbon growth for Europe

September 27, 2016

In order to secure growth and jobs, Europe needs a new growth model built on developing emerging sectors with high value added. But in which sectors can Europe grow, and what economic policies would work?

European policymakers are struggling to identify economic policies that can create new jobs and return their economies to a stable growth path. The aim of this report is to examine how Europe can gain a competitive edge in new products and services with higher value added that can form the basis for future growth and jobs. In light of limited fiscal and political capital, the crucial issue is prioritisation in terms of technologies, regions and policies.
Given global decarbonisation concerns, the wide array of low-carbon technologies offers significant growth potential. Some EU countries have already been able to develop a comparative advantage in wind turbines and electric vehicles, though the EU is less effective at exporting solar panels and batteries. Based on patenting activities we, however, see some potential – maybe not for entire countries but for some regions – to further specialise in all of these four low-carbon technologies.

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Nord Stream 2: a bad deal for Germany and Eastern Europe

July 18, 2016

Georg Zachmann argues that the Nord Stream 2 project is a danger to the European consensus on relations with Russia. What is more, it could undermine efforts to diversify Europe’s gas supply and might risk higher prices for Eastern Europe.

This op-ed was originally published in Dienas Bizness, Hospodárske Noviny, Kauppalehti, Público, Rzeczpospolita and Süddeutsche Zeitung.

At the end of last year, Gazprom reached a deal with five Western European companies (BASF, E.ON, ENGIE, OMV and Shell). They agreed to add two additional lines to the Nord Stream gas pipeline across the Baltic Sea, increasing the capacity of the pipeline from 55 billion cubic metres per year to 110 billion from 2019. The project has provoked controversy, as it sharpens divisions among EU members about energy and foreign policy.
In terms of energy policy, the EU has two goals. It is trying to make itself more independent from individual suppliers, and also aims to do without fossil fuels in the medium term. In recent years the market position of the EU has improved markedly. Thanks to low global energy prices and unexpected falls in gas demand – which in 2015 was around 40% lower than expected according to 2005 predictions – European users have been able to push for significantly lower gas import prices. Prices have halved in the past 2 years, to about $170 per thousand mᶟ.

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Keine Energiewende ohne Energieunion

June 13, 2016

Die europäische Perspektive ist für den Erfolg der deutschen Energiewende entscheidend. Doch die europäischen Partner werden nicht einfach die deutschen Ziele und Politikinstrumente übernehmen. Ist eine Energieunion die Lösung?

This op-ed was originally published in Frankfurter Allgemeine Zeitung.

Alle Länder der Europäischen Union (EU) streben nach einer sicheren, umweltfreundlichen und preiswerten Energieversorgung. Zu diesem Zweck wollen die Mitgliedstaaten den Energiebinnenmarkt vollenden und bis 2030 gemeinsam den Anteil der Erneuerbaren und die Energieeffizienz erhöhen sowie den Treibhausgasausstoß senken.
Hiermit enden allerdings bereits die Gemeinsamkeiten. Weder können sich die Mitgliedstaaten einigen, wer wie viel zum Erneuerbaren- und Energieeffizienz-Ziel beitragen soll, noch haben sie eine gemeinsame Vorstellung davon, wie ein Energiebinnenmarkt aussehen könnte. Besonders eindrücklich lässt sich das anhand des Strommarktes illustrieren: Die Endkundentarife werden zwar gern als Marktergebnis dargestellt, sind aber faktisch in den Mitgliedstaaten politisch ausgehandelt. So repräsentiert der Strompreis im europäischen Großhandel nur noch ein Zehntel des deutschen Haushaltskundenpreises – die restlichen 90 Prozent werden von Beamten der deutschen Regulierungsbehörden und Ministerien bestimmt.

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The oil-price slump: crisis symptom or fuel for growth?

January 11, 2016

The low oil price will benefit oil importing countries, but is also a symptom of slowing global growth. Georg Zachmann explores the reasons for the oil slump and its effects on the global economy.
The oil price dropped to a new 11 year low at the beginning of the year. Oil price movements are the result of three factors: changes in oil supply; changes in the importance of oil in the economy and changes in the global economic climate.
Oil supply
Oil supply is outstripping expectations, as US shale oil production appears more resilient than previously thought, and countries like Iran are coming back to the market. In addition, OPEC, a cartel of oil exporters, is not managing supply.
As a result, at the end of 2015 oil production had increased by about 3 percent compared to the 2014 average, from 86 to 88.5 million barrels per day. This increasing supply puts downward pressure on oil prices.
Figure 1: Oil production in million barrels per day 2014 vs. Jan-Nov 2015 in million barrels per day.

Source: OPEC

The importance of oil in the economy
The amount of oil necessary to produce one dollar of GDP has decreased globally thanks to renewables and more efficient energy use. In addition, more GDP is now generated in the service sector, which is less energy intensive.
Energy intensity has fallen globally by 1.4% each year on average since 2000.

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When will the EU switch away from coal?

December 21, 2015

In the US, electricity producers are switching from coal to less polluting natural gas thanks to lower gas prices. However in the EU, the carbon price has been too low to make natural gas competitive with coal.
Despite a weak climate policy the US reduced its energy related carbon emissions by the same amount as the EU (9 percent) between 2000 and 2014.
The main reason for this remarkable drop in emissions was that US electricity producers switched from coal to less polluting natural gas in electricity production, after the shale-gas revolution cut gas prices.
The EU carbon price, the cost to companies of producing one tonne of carbon dioxide (€/t), was too low to make natural gas competitive with coal, and as a result EU electricity producers have failed to make the switch.
We present the carbon prices necessary for US and EU power production to switch from coal to gas in the graph below. This is based on the corresponding fuel prices (in the EU, CIF ARA coal and TTF gas; in the US, Appalachian coal and Henry Hub gas).

Eventually, the European emission trading system is likely to achieve such carbon prices, as every year less allowances are allocated.

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COP21: An important turn on a long journey

December 14, 2015

The Paris Agreement has been hailed as a turning point and a huge success in the international fight against climate change. Its big achievement is that it brings tackling climate change back into the sphere of the politically possible. But implementation will be by no means easy. I base my optimism on four observations:
1. From protocol to architecture
The Paris Agreement acknowledges the impossibility of agreeing on a meaningful international protocol for the very complex and costly climate issue. Several important countries (including the US Senate and likely also China and India) would not have signed a treaty that sets out binding emission targets for their economies.
The Paris Agreement instead develops a flexible architecture which strikes a new balance between national sovereignty and international commitments. Its purpose is primarily to build trust between the parties, by turning climate negotiations from a one shot-negotiation into a repeated game. If developed countries see that developing countries are unambitious in keeping emissions low, they might not be willing to make good on their commitments on climate finance. And if developed countries do not come up with sensible mechanisms on ‘loss and damage’ or ‘technology transfer’, some developing countries might not deliver on their national contributions.
2.

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Helping Ukraine to reform Naftogaz’s gas transmission business

November 23, 2015

Reform of Ukraine’s gas sector is under threat. The European Bank for Reconstruction and Development should step in.

This op-ed was originally published in the Kyiv Post. It will also be published in Vox Ukraine.

Naftogaz, the giant publically-owned Ukrainian oil and gas company with 80,000 employees, used to be a synonym for wastage, corruption and opacity. But it looks like it might have turned a corner. Thanks to a new management team, a fourfold increase in gas prices and the beginning of legal reforms, its losses in 2015 will be down to 3.1 percent of Ukraine’s GDP, from 5.5 percent in 2014, according to the International Monetary Fund. The impact on the deficit could fall to 0.2 percent in 2016, and Ukraine’s dependence on Russian gas has been markedly reduced.
But just as skies were clearing, new clouds appear. The reform of Naftogaz is stalling. Though they adopted a gas law in April,Ukraine’s politicians have not been able to agree a model for the unbundling of Naftogaz’s different business lines, or on which should be prepared for privatization. The risk is that if Naftogaz is not quickly and comprehensively reformed, the bad old habits of redistribution and political corruption will resurface. Because of the importance to Ukraine of Naftogaz, this could undermine the country’s association process with the European Union.

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