Germany aims to combat climate change, phase out nuclear power, and switch to a reliable, affordable, clean energy supply. Climate targets and emissions trading contribute to some, but not all of these goals, which is why the German government is pursuing a comprehensive, long-term climate and energy strategy with policies addressing different sectors and technologies.
Emissions trading is an important tool, but it will not lead to the goal that Germans want. For instance, cost is the main mechanism in emissions trading, so actions are prioritized according to their cost benefits, with the intended result being that the project that costs the least is the one done next. The unintended outcome is that nothing worth doing gets done unless some investor considers it to be the cheapest option. In the case of renewables, onshore wind power practically always beats out all other competitors, making emissions trading a particularly bad way of ramping up all types of renewables.
For Germany, the goal is to reduce energy consumption to a level that can be provided by renewables even as we ensure ever higher material standards of living. While questions like “When is solar going to be competitive with coal or nuclear?” are popular, solar or wind or any other single source of renewable energy cannot replace conventional power on its own – only a mix of renewables can. And since emissions trading promotes only the cheapest option, it cannot produce that mix, so it is not sufficient for the German goals. Policy-makers in the country are convinced that they need policies that gradually increase efficiency with today’s technologies (which emissions trading does) as well as policies that drive innovation for technologies that are initially more expensive, but become competitive in time (which feed-in tariffs do).