Climate Paths 2.0 – Departure to the Climate-Future

With the study ”Climate Paths 2.0 – A Program for Climate and Germany's Future Development” the BDI presents a detailed study on how the ambitious climate protection targets for 2030 and 2045 can be achieved with swift action and without misinvestment on a national level. More than 150 experts from BCG, the BDI and around 80 companies and associations were involved. The result is a detailed economic analysis with precise investment proposals. The study shows: The transformation to a climate-neutral industrialised country is possible. But of course, climate protection requires investments, and it must pay off – for the companies and for the citizens.

The Key take-aways from “Climate Paths 2.0”

• Germany must undertake the greatest transformation in its post-war history. Legally mandated GHG neutrality by 2045 requires a fundamental restructuring of our energy system, international energy supply, building and vehicle stock, infrastructure, and large parts of industry.

• The immediate changes required in this decade are drastic. To achieve the legally set climate target for 2030, Germany needs to largely eliminate investment in fossil technologies within the next nine years – and in some sectors right away. In addition, coal-fired power generation must fall much faster than previously planned.

• Implementing climate protection measures requires additional investments of about 860 billion Euro by 2030, or about 100 billion Euro a year – almost 2.5 percent of Germany’s gross domestic product (GDP).

• Achieving the 2030 target requires almost cutting emissions in half compared with 2019, a goal current climate policy will not achieve in any sector. Without a change in direction, Germany will reduce annual emissions only by about 184 Mt CO₂e – half as much as necessary. Critical decisions and changes in direction are required, beginning in the legislative period starting in the fall of 2021. If these decisions and changes are delayed, either Germany will no longer be able to achieve the climate targets or doing so will require significantly higher investments.

• Implementation of the required climate-protection measures is complex from both a political and a regulatory perspective; simple answers fall short. Germany needs a broad mix of instruments that includes both overarching and sector-specific measures. These enforce rapid infrastructure development, make the use of fossil fuels more expensive, and help lower the cost of renewable technologies. To set the course for GHG neutrality in 2045, the regulatory framework will also need to build support for the substantial investments required among citizens and businesses.

• Climate Paths 2.0 proposes a Program for Climate and Germany’s Future Development involving about 20 instruments that can drive forward the development of sustainable infrastructure, significantly accelerate the conversion of energy, transport, and heat to renewable sources, and initiate the transformation of Germany’s industrial base toward GHG neutrality.

• The rising costs of CO2, energy, and materials will add financial burdens of about 15 to 23 billion Euro for companies in 2030. Maintaining industrial competitiveness requires reliable compensation instruments for the most affected sectors.

• Implementing the climate protection measures will add an additional financial burden of 20 to 30 billion Euro in 2030 for private households that do not (or cannot) switch to low-emission technologies. To ensure that the burden is shared fairly, social compensatory measures are necessary.

• Government support for the transformation and balancing the shared burden for private households and companies will require additional annual public spending of 47 to 50 billionEuro in 2030 and a total of 230 to 280 billion Euro between 2021 and 2030. Spending will have to be financed through cuts to the federal budget, levies, taxes, or new debt.

• Germany’s national endeavour can only have a major impact on global climate change if it brings international followers and partners on board. This is even more reason for Germany to strongly endorse a European and internationally coordinated climate policy. In addition, Germany should work toward a significantly more open setup of EU state aid law, thus enabling government support for climate transformation.

• The next federal government must set the course on climate quickly. Germany needs both more effective and better coordinated political governance at the federal and state level and a substantial acceleration of planning and approval procedures.

• Achieving Germany’s legal climate target is a massive undertaking for society at large, which requires an immediate course correction already in the first months of the new legislative period. At the same time, successful implementation of the comprehensive modernization program described here offers a historic opportunity for Germany to transform into a climate-neutral industrial country and to make an ambitious contribution toward limiting the effects of climate change, thereby securing the prosperity of this and future generations.