At this point, therefore, particularly interesting to have empirical evidence of the results achieved so far by the two countries that the literature takes examples of the two pure models of capitalism: the UK for liberal market economies and Germany for coordinated market economies.
Tab. 1 “Change in carbon intensity 2015-2016” Source: PwC UK
The graph shows the change in carbon intensity for the year 2015-2016 and it reveals that the UK is outperforming in reducing carbon intensity by 7.7%, compared to Germany that shows a rate of 6.6%1. This is directly related to major investments in low-carbon technologies and the stability of its services sectors. On the success of the UK, Jonathan Grant, Director of Climate Change and LCEI (Low Carbon Economy Index) co-author at PwC, observed: “A number of factors have contributed to the low carbon transition in the UK, including cross-party support for tackling climate change, support for energy efficiency in our homes and renewables projects”. This demonstrates the fact that cooperation can be achieved also in liberal economies and if it follows a comparative advantage in radical innovation, it’s guaranteed to boost ratings.
While, the German transition process remains in great difficulty. In Germany and many other European countries, they finance promising but not yet profitable technologies to which traditional investors are not interested. Yet, the closure of coal-fired power stations is hardly mentioned in the country, also considering the obstacle of trade unions in the sector that, between power plants and the mining sector, take care of thousand workers’ interests.
In fact, the reality is that a multitude of actors in the world economic system, consumers, producers and workers of many industries and above all politicians, have a very strong short-term interest in maintaining the energy status quo. In the case of politics, for example, just thinking about how current energy system guarantees a major amount of taxes for the State, and a constant flow of energy at a relatively low cost to voters.
For this reason, too, changing the system is very difficult: sometimes countries believe it is preferable to extend the life of the old system, than risking a change that will give only medium-long term perceptible benefits.
1 PwC research, September 12, 2017