Citywire, 11/29/2021
Hanjo Allinger, professor of economics at TH Deggendorf and managing director of CAP2, talks about the difficulty of sustainable investments.
After the resolutions of the 2015 UN Climate Change Conference in Paris came into force in January, it is almost impossible to securely offset one’s own emissions through offset projects. Because each country has now made an individual commitment to reduce emissions, there is always a risk that the host countries of climate projects will reduce their own CO₂ reduction efforts as a result of the commitment of climate activists. This means that the savings achieved there can no longer be safely regarded as additional and offset against their own emissions. Unfortunately, even the climate conference in Glasgow could not eliminate this problem. For the most part, it is only getting more complicated.
Investors have long focused on portfolio restructuring for lack of alternatives: Shares in companies with high emissions are exchanged for shares in companies that are more climate-friendly. But not only can performance suffer, the approach is also unsatisfactory in terms of content: after all, no emissions are avoided in this way, they are merely the responsibility of the buyer of the shares and no longer of oneself.
“The crucial thing is that fewer climate-relevant gases are emitted.”
Even politicians seem to get caught up in discussions about which coal-fired power plant should be shut down, when, and for how high compensation payments. Yet this is not the crucial question at all: energy producers in Europe are 100% subject to emissions trading. If a power plant is shut down, the emission allowances released could be used by others. If they are not permanently taken off the market, the total amount of emissions in Europe does not change. This must be prevented. Who emits is irrelevant to the climate; what matters is that fewer climate-relevant gases are emitted.
The key to climate protection therefore lies in reducing the emission rights available in European emissions trading, not only for states, but also for each individual. European emissions trading ensures that emissions are only ever released into the air to the extent of the rights issued. Anyone who can avoid a ton of CO₂ or equivalent emissions for less than €70, which currently has to be paid for a pollution right, avoids. Those with higher avoidance costs must buy emission rights from others.
In Germany, four providers make climate protection possible by setting aside emissions allowances for everyone. For example, ForTomorrow and The Compensators on a non-profit basis, as well as commercial 50zero and CAP2 specifically for capital investors.
