“One of the biggest challenges”
A member of the German Council of Economic Experts, Veronika Grimm talks about ways to end dependence on Russian gas and about the energy transition.
Veronika Grimm holds the Chair in Economic Theory at Friedrich-Alexander-Universität Erlangen-Nürnberg (FAU). The energy markets are one focus of her work. She has been a member of the German Council of Economic Experts since April 2020. We asked the economic expert three questions.
Professor Grimm, you have expressed the view that it would be possible to do without Russian gas at short notice. How would that be achieved?
Within the framework of the sanctions imposed in response to the Russian war of aggression against Ukraine, Europe should work towards quickly and comprehensively reducing its payments to Russia for energy imports. Thanks to the latest price rises, Russia receives roughly 20 billion euros per month from the EU. Russia could easily respond to any attempts by the EU to stop these payment flows by halting its deliveries of energy sources. It is therefore important to prepare for this scenario by assessing the economic consequences and analysing ways to deal with the situation. Economists have explored these issues in numerous studies, one of which I was involved in. Our conclusion was that it would be a challenge and would result in a significant economic slump. If a delivery ban could not be avoided for reasons of security policy, however, it would be manageable.
One goal of Germany’s G7 presidency is: “Strong alliances for a sustainable planet”. Will the current developments not lead to new dependencies?
That is indeed something one should try to avoid. The transition to climate neutrality generates potential for diversifying our energy imports: around the world, there are far more countries with excellent conditions for renewable energies than those with available sources of fossil energies. We can obtain hydrogen and synthetic fuels from them. That gives rise to new possibilities. When it comes to resources that will be important in the future, we need to ensure that no dependencies emerge, though we are already somewhat late in doing this in some cases. We also have to look closely at our trade relationships. However, one of the biggest challenges of the coming years will be that fossil fuels will become more expensive if we want to be independent of Russia. This will pose a threat to our competitiveness in some respects.
Will the energy transition now be given a boost?
I hope so. When fossil energy sources are expensive, it is often worth switching more quickly to renewables. In other words, renewables create an opportunity for lowering energy costs. Reliable framework conditions will need to be put in place to trigger the immense private-sector investments necessary for the transition and to rapidly expand the infrastructure required to transport electricity and hydrogen. In this context, accelerating planning, approval and implementation processes will be of vital importance.
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