The Magazine for Asian Investors
At last year’s climate conference, France and Japan both advocated a rapid phase-out of fossil fuels. Both want to follow the ambitious plans of decarbonization and convert their countries from so-called clean energies. But for the start of 2022, both will have to cut back on their plans for the time being.
France Starts Coal-fired Power Plants
France has been struggling with its aging nuclear power plants since late last year. According to reports from France, 10 power plants have been taken offline for maintenance. The maintenance work is protracted and therefore also a costly factor. In addition, no new investments in new power plants were made for a long time. So it came that France as an interim solution has started again their old coal-fired power plants. The current energy problem in France comes for the government around President Macron at a very inopportune time, since just this year new presidential elections are. Macron will do everything to ensure that the population will not experience drastic increases in energy prices during this time. So it came that he forces the largest energy producer of the country Electricite de France SA (EDF.VI) to sell its electricity below the market price. This visibly hurts the energy giant because it is forced to sell its electricity below market price and later buy it back on the market for the market price.
A funny side factor is that France actually has wind turbines that should provide up to 17 gigawatts of energy. The reality, however, is different as the plants mostly deliver far below the capacities. So it happens that on some days only 2 gigawatts are available which means that this kind of energy production is anything but reliable.
Japan Subsidizes Fossil Fuels
In Japan, the Japanese government has decided to introduce a temporary gasoline price subsidy in response to the rise in gasoline prices. Accordingly, oil traders and importers will receive a subsidy of 3.4 yen, which corresponds to around $0.03 per liter of gasoline. This is intended to relieve the pressure on gas stations, as the price of gasoline has risen by 23% compared with the previous year, reaching a level not seen in 13 years. On average, the price of gasoline is said to have exceeded the ceiling of 170.2 yen ($1.488) per liter, which is why the subsidy is now taking effect. This is to apply until the end of March.
Both examples show that the calmness of the population is an important point that makes governments temporarily turn away from their set goals. Especially when it comes to winning votes and staying in power because that is the sole driving force for politicians.