German libertarians go green (again)

At its party conference on May 17, the FDP, Germany's Libertarian party, gave up its opposition to the country's Renewable Energy Act (EEG). A majority of party members voted to discontinue opposition in light of the jobs created by this law. The original version of the law was adopted under a CDU/FDP coalition (Helmut Kohl was chancellor), but when the SPD/Green coalition under Schröder expanded the law in 1999, the FDP decided they no longer liked it. They have since been calling for a quota system, like the one in the UK that has stifled renewables. The German policy is the clear model worldwide.

Little info is available in English about the FDP's new stance, and the FDP itself does not seem eager to publicize its change of heart in German either. But the website of the party member who put the motion to a vote, Horst Meierhofer, proudly proclaims (in German):

Germany's Renewable Energy Act is based on the Feed-in Act, which Hans-Dietrich Genscher [the FDP’s highest ranking member at the time] helped design. Internationally, this system has set the standard.

I have never before read that Mr Genscher was a chief designer of the law, but whatever - we'll let them have their mention if they will finally be proud of it.

Since May 17, there has been no opposition to the EEG in the Bundestag. All other German parties always supported the EEG.

The FDP's about-face comes at an interesting time. Libertarians in Spain and Germany have been publishing some rather poorly researched attempts at proving that these policies do more harm than good. It is interesting to note, therefore, that German Libertarians have now said they disagree -- and admitted that the idea originally came from them.

The policy in question, commonly referred to as "feed-in rates," creates a market for a slew of technologies that need to be ramped up. It does not "pick winners," as the British Economist has complained -- that is what the British quota system (and the RPS in the US) does. Feed-in rates simply say that if a country wants to have renewables, utilities have to actually pay (people like you who invest in them) what they cost.

Germans usually think of the Democratic Party in the US as the American version of the SPD and the Republican Party as the CDU. I always say that the Democratic Party in the US is closest to Germany's FDP, and that the Republican Party in the US is also closest to Germany's FDP. The kind of anti-government rhetoric common in the two major US parties is really only consistently found in the FDP over here. The SPD and CDU both believe that the government has a crucial role to play in designing rules for the market, which they do not believe can be left up to itself. That is exactly what the EEG does: design a market, and leave the technology issues up to the market. It seems that German Libertarians are also closer to the Freiburg School of ordoliberalism than American libertarians are, even though the Cato Institute has a Hayek lecture hall. Wikipedia describes ordoliberalism as:

a school of liberalism that emphasises the need for the state to ensure that the free market produces results close to its theoretical potential.

So the state has to step in. That's German neoliberalism. Not even the most radical libertarian party in Germany will go further than that.