The Future of Germany's Climate Policy

Germany’s election on the 26th of September was finalised with the Green Party’s best result in history at 14.8%, taking 118 of the Bundestag’s 735 seats. After emerging as a “kingmaker” alongside the liberal Free Democrats (FDP), the formation of a coalition alongside the election winner SPD is likely to include ardent discussions of climate policies as Germany begins to lay down its path to the promised goal of 65% reduction in greenhouse gases emissions by 2030.

It is not surprising that the FDP’s Beer said that the two kingmakers “need to talk about the appropriate measures” of tackling their coinciding climate goals. Ottmar Edenhofer, director of Potsdam Institute for Climate Impact Research, correctly points out that the “Greens and liberals have different preferences as to the mix of market-based instruments, subsidies and regulatory law to achieve carbon neutrality over the next few decades.” Indeed, contrasting the FDP’s market-based solutions meant to incentivise coal phase-out by 2038, the Greens promote stronger laws and even bans to force the shift towards renewable energy. Their interventionist approach is likely to yield faster, assured results, but it is important to also consider the possible effects this would have on the country’s principal industries.

Germany’s manufacturing sector has always been a key factor behind its GDP growth and export strength, and the country is operating at a constant current account surplus. Machine building, automobiles, electrical engineering, and other such industries, however, also demand a lot of energy, and the use of fossil fuels can therefore to some extent be classified as a supporter of the country’s performance. At a time when global warming and climate change pose an every-growing threat to future generations, the Green Party’s wish to alter the current law connected to renewable energy in order to increase the use of low-carbon energy would be a monumental step towards improving the sustainability of industry sectors including manufacturing.

This shift is highly desirable and would contribute towards the goal of carbon neutrality by 2045, but it is difficult to predict the short term impact of such an imperative approach on the targeted sectors. If the rapid change is not accompanied by ample financial support, especially aid such as the offer of subsidies, firms may have to cope with an almost instant surge in their production costs by increasing the prices of their goods. This clearly less than ideal outcome of the policies would negatively impact the economy on multiple levels. Not only are we speaking of the inflation experienced by the German population resulting in lower real incomes and hence a decrease in purchasing power expressed through lower household consumption, but also of a possible ensuing decrease in the trade surplus the economy is associated with.

All of the potential effects would spell a feasible slow-down of the economy’s growth for a duration that is hard to determine.

But to be noted is the “if” preceding this imagined course of Germany’s future. According to political scientist Jun, the Greens and liberals could come to an agreement regarding how to finance their joint climate initiative, such as through the creation of an investment fund to “benefit the next generations.” Whilst the stance taken by the Green Party may appear as extreme, especially when compared to the FDP’s alternative suggestions, the absence of concrete details in relation to the desired legislation makes prophesising the German economy’s future futile. Whether the benefits from greener, more sustainable transport and industry sectors will outweigh any negative effects on business costs is something that will be considered during the implementation of any policy, and the coalition of the political parties will in itself definitely assure a more moderate, safe approach to the tackling of climate issues. The forward-thinking nature of the parties has already been displayed through both Greens and liberals having promised to continue increasing overall German research spending by at least 3% each year.

When discussing the election and what future it will create for Germany, the vocally disputed approaches to climate policies may even overshadow other factors that many would have wanted to receive equal or greater spotlight. “Unfortunately, research and education, apart from debates about climate actions, were severely neglected as topics during the electoral campaigns, making it hard to judge what to expect from the different parties,” says Gisela Kopp, a behavioural biologist at the Max Planck Institute of ornithology. Whilst talks of forming a coalition continue, we will certainly be in a much better position to approximate the course of Germany’s policies, including those on climate.


Written by Nicola Craciun

Research compiled by Jonas Theaker


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