FT.com / World - Interview transcript: Angela Merkel

FT.com / World - Interview transcript: Angela Merkel


Interview transcript: Angela Merkel
Published: March 6 2007 22:04 Last updated: March 6 2007 22:04

Angela Merkel talked to the Financial Times at her office in Berlin on Monday 5 March. Here are excerpts from the interview on key themes.

On climate change:
Our pledge is to reduce carbon emissions by 20 per cent unilaterally until a global, post-2012 agreement is concluded. Our negotiating position for the post-Kyoto talks is a reduction objective of 30 per cent, which would be binding when it becomes part of an international agreement. Our biofuel target is a binding commitment we are making within the EU.

There is also a general agreement that we should aim for 20 per cent renewable energy [as a proportion of all energy produced]. If we call the biofuels target binding, it would seem reasonable, without prejudging the outcome of the summit, if the renewables target were binding too.

This is the first step in our climate strategy. Of course, there will be further negotiations about national burden-sharing commitments. Kyoto was no different. We first agreed on an 8 per cent reduction target for the EU, and we then decided which member states would have to contribute what shares of the whole. The issue of burden-sharing will be mentioned in the summit’s conclusions.

When can these burden-sharing agreements be reached?

We will do this in steps. First, we will ensure that the post-Kyoto talks get under way this autumn. This will require clear political signals from the leaders of the key countries. We want to use our G8 presidency in particular; our outreach programme with China, India, Mexico, Brazil and South-Africa can help us to sound out the general readiness to act.

We are getting encouraging signals from the US and China. This will lay the groundwork for the environment ministers when they meet this autumn in Bali at the end of the year. Of course, a post-Kyoto agreement will not come this year. Early negotiations are helpful but we will need one or two years at least.

In qualitative terms, [the EU’s] commitment on greenhouse gas reduction will put Europe at the forefront internationally. It is a strong signal that the member states have agreed to make these pledges.

We will try to feed these commitments into the work and the conclusions of the G8 summit in Heiligendamm... There are three issues we need to discuss in Heiligendamm. First, we must reach a common understanding of the risks associated with climate change. We in the EU think we should do all we can to prevent a rise in average temperatures beyond two degrees. We will see where other G8 members stand on this.

Then we must talk about what mechanisms can be used to put a price on carbon emissions, such as certificates as we have them in Europe and in some American states, and we must talk about a process whereby such a system could be made to work at an international level. Personally, I think tradable emission certificates are the most sensible instrument to reduce CO2 emissions, and a very market-friendly one.

The third issue is that of innovation and technology, because we will not achieve our targets with today’s technologies.

It won’t be easy, but that’s why the EU should make commitments now and take this pioneering position.

Can you get the big developing states on board?

We see a developing consciousness, in China for instance. The key now will be to decouple this growth from energy consumption, which is something Europe has already achieved.

Do you foresee one world-wide price for carbon?

The first step is to set up regional systems [for carbon-trading]. These would put different prices on carbon emissions. Long term, experts suggest we should have a worldwide certificates market, which would imply one price.

Today, Europe generates 15 per cent of total CO2 emissions. The considerable investments we want to make in developing cleaner technologies are justified if these technologies are going to be implemented elsewhere, especially countries that cannot afford to develop high-tech solutions of their own.

We feel a responsibility to act as pioneers, but it only makes sense if we bring others on board. We cannot address such a global challenge on our own.

Why has climate change gained such urgency?

For a while, the issue receded into the background because we had the Kyoto protocol, many governments were still missing conclusive scientific evidence, and because the market for resources was not as tight as it is today. Now we have alarming reports from the scientific community on global warming and energy policy has climbed up the political agenda, given the price of oil and gas and what it actually means for large industrial nations to be dependent on imported energy.

The necessity to combat climate change and to reduce our energy dependency, coupled with the fact that Kyoto is now running out, have concentrated minds. Energy has become a strategic issue. It is interesting that 50 years after the signing of the Rome Treaty this question of energy should come to the fore again. We are again beginning to think about energy policy as a European issue.

This is a new step. It means Europe is discussing what used to be an exclusively national policy area. We are convinced the innovation push must come from Europe. Otherwise the 20 per cent [target for CO2 reduction] won’t save the world. These goals, this big effort we are undertaking, only make sense if they give us an economic and technological advantage that will also benefit the rest of the world.

We made a choice: We could have muddled through and looked away because it was not clear what the cost [of climate change] was going to be. Instead, we decided to act under the assumption that, whatever happens, the cost of inaction will be higher. This, as made clear by the Stern report, is the main paradigm change.

On ‘onbundling’ EU energy:

I’m in favour of competition. It is a precondition for an efficient European energy policy. I’m also in favour of creating the infrastructure for this competition to take place, for instance by setting up interconnectors.

But unbundling is a different issue. We have many traditions in Europe. Fourteen member states already have unbundling, others like Germany have a different tradition.

I do not think the issue of competition can be reduced to the unbundling question. Stripping the energy producers of their networks is no guarantee that there will be more competition. What you need is a strong regulatory system to enhance competition and the right incentives to invest. In some countries, the separation of rail services and networks did not exactly improve the network’s quality.

On foreign policy and energy:

We must create the preconditions for energy solidarity, which means for instance having pipelines that do not just go from east to west. But it’s difficult because states do not sign these contracts, companies do. It’s not for us to decide who their customers should be.

[On the Baltic gas pipeline from Russia to Germany] It must be clear to our Russian partner that the EU stands together on this and will not accept individual member states being treated differently [in terms of which EU countries receive Russian gas from the pipeline].

[On the EU constitution] For the first time, the constitutional treaty [if endorsed by member states] will bring elements of energy policy into the remit of the EU. What we are doing now at the summit [starting on Thursday] anticipates this. And this additional competence is very much in everyone’s interest, and especially in the interest of those countries that are dependent on outside energy suppliers. That’s the case for Poland, the Baltic states, Slovakia or Germany.

[On Russian attempts to invest in strategic western industries] EU member states are observing Russia’s policy and its legislation regarding foreign investments in strategic areas. After an extensive round of privatisations, the state is extending its influence again.

It is understandable to a degree. Most resource-rich countries exercise tight state control over their resources. But the relationship between the EU and Russia must be one of transparency and reciprocity. The EU will keep a close eye on whether Russia allows foreign investors to own majority control of strategic industrial assets, and that applies not just to the energy sector. Then the EU should do the same when it comes to Russian investments in what we consider strategic areas.

We watch the lawmakers in the Duma closely. If only 20 per cent of such a [Russian] company can be in foreign hands, then we should consider the same approach. ... What we expect from Russia is reliability. Other than that I have no problem if it wants partnerships in Europe and not just to be a supplier of raw materials.

[On the Berlin Declaration] It will be different from a council conclusion in that it should actually be readable by the wider public, the people. It will be short and it will not seek to solve the question of the constitutional treaty that will be on the table in June. It will be about the challenges we face, not the solutions.

I do not intend to make Berlin the place for these talks, these difficult talks that await us in June. This is not the intention. The intention is to tell the people what we achieved together, what we can be proud of, and what challenges we face.

Will the declaration mention the euro? There are domains of reinforced cooperation, for instance in the eurozone or in the Shengen area, that are very much part of the reality of the EU.

On the European social model:

This is a puzzling discussion to me. In Germany, we have the social market economy. The distinction some people make between the economic and the social dimensions is something that is alien to this concept.

Regardless of how member states put the European model into practice, there is a broad cultural agreement on how democratic societies in Europe treat their citizens. We all have trade unions, we all have some form of codetermination, and we have political parties that put a different emphasis on the economic or the social components. That’s our common bandwidth.

The fact that economic growth is not an end in itself, that all should be able to share in the prosperity, it is all part of this common ground.

On protectionism:

It should be no surprise that [cross-border takeovers] are easier in the engineering or the pharmaceutical industries than they are in the utilities sector. Many EU member states have a long tradition of state involvement in the energy market.

The single market is making headway into what many people would still consider state prerogatives. Whether a certain type of machine is being built in Germany, that’s not a matter for the state. Whether all citizens have access to electricity, to postal services, or can find a petrol station close to home, that requires a degree of oversight or certain guarantees. There is a certain tension, something we must keep talking about.

Copyright The Financial Times Limited 2007