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November 17, 2017

Germany's climate change hypocrisy

One of the things that became absolutely apparent during the German coalition talks is that the CDU, CSU and FDP are pursing a climate change policy very similar to that of Donald Trump. The policy is one of blatant disregard for the emerging global consensus on limiting greenhouse gas emissions. The only real difference with Trump is that the latter was more honest about it, by pulling out of the Paris Accord altogether. 

Germany is currently on course of missing all its climate targets, both in the near term (for 2020) and in the longer term (for 2030). And Merkel suffered a huge diplomatic setback yesterday at the global climate summit in Bonn, where the German government was confronted by an initiative of 20 other countries including the UK, France, Italy, and Canada, to commit to an exit from coal-fuelled power stations. Canada gets most of its energy from wind power. The UK is committed to an exit by 2025, but coal currently only constitutes 15% of its total energy supply. The UK will expand its gas-power and nuclear sectors.

Germany's dilemma is, of course, the result of Merkel's decision to phase out nuclear energy by 2022 before phasing out coal, as well as the large share of the manufacturing industry in its total economic output. At the moment 40% of German energy supply is coal-based. The climate targets require either massive de-industrialisation, or a shift in attitudes towards nuclear energy.

FAZ notes in an article that Merkel avoided any statements during her speech on how Germany intends to meet its greenhouse emission targets by 2020. The coalition of countries that will commit to a binding target for an exit from coal-powered energy will increase to about 50 members by the next environmental summit, to be held in Poland next year. 

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November 17, 2017

Canada minus the plus

We noted recently that the EU would not offer the UK a Canada-plus style trade agreement, that is a normal trade deal plus privileged access to the single market, beyond perhaps a few sectors that fall under the regime of regulatory equivalence. Politico has a story that Michel Barnier regards a Canada-style deal as the only option. The paper has obtained an EU document saying that the UK's demand for regulatory autonomy and separation from the ECJ would extricate the country from the EU framework. The paper said it was thus not possible to negotiate single-market arrangements in specific areas, as a result of which the only option is a standard FTA.

We see it exactly the same way. There is a high degree of delusion in the UK about the possibility of combining single-market access and restrictions on free movement. According to a BBC/Comres poll, 52% of respondents expect this to happen, while 18% say that they expect the outcome to be membership of the single market plus free movement (i.e. EEA), while 26% said they expected no single market access, plus restriction on free movement (FTA).

This level of delusion is extremely dangerous because it will come as a shock to many in the UK when the EU does not offer a deal on finance, in particular. David Davis' idea of a special immigration regime for bankers only is totally unacceptable to the EU, as it discriminates among EU citizens as well as EU countries. And the trick of using empty-shell branches in the eurozone to conduct business is going to be challenged, not least by the ECB.

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