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The German Federal Government has announced an ambitious national contribution to the effort to combat climate change: In conjunction with the European Union's climate targets, it has set the goal of reducing greenhouse gas emissions (GHG) in Germany by 80 to 95 percent by 2050 compared to 1990 levels. Achieving this objective represents a long-term political, economic, and social project of enormous proportions.
Against this backdrop, the study "Climate Paths for Germany" shows economically cost-efficient strategies for successful 80 to 95 percent GHG reduction by 2050. The study was compiled over the course of the year 2017, with close to 70 companies and associations as well as a board of renowned economists involved in more than 40 workshops. Both the degree of validation and the depth of the study, spread over 270 pages of detailed facts, are unmatched in Germany.
The main findings of the study are summarized below.
The ten main results are summarized below and described in detailed in the following chapters.
1. Continuing current efforts in the form of existing measures, the political and regulatory framework conditions already agreed, as well as foreseeable technological developments ("current policies path"), will achieve an approximately 61 percent reduction in greenhouse gas emissions (GHG) compared to 1990 by the year 2050. This leaves a gap of 19 to 34 percentage points to the German climate targets.
2. 80 percent GHG reduction are technically feasible and economically viable in the considered scenarios. However, implementation would require significantly stepping up existing efforts, more decisive political steering and, without a consensus on global climate protection, effective carbon leakage protection.
3. 95 percent GHG reduction would push the boundaries of foreseeable technical feasibility and current social acceptance. Such a reduction (three quarters more than the 80% path) requires practically zero emissions for most sectors of the German economy. In addition to more or less phasing out all fossil fuels, this would for example mean importing renewable fuels (power-to-liquid/gas), the selective use of currently unpopular technologies such as carbon capture and storage (CCS), and even reducing emissions from livestock. Successful implementation seems only imaginable if most other countries pursue similarly high ambitions.
4. Several game changers could still reduce required efforts and costs of achieving the climate goals in the coming decades, including technologies for the "hydrogen economy" and for carbon capture and utilization. These game-changers will not be ready for use in the foreseeable future and have therefore not been considered for this effort. Nevertheless, research and development in these areas should be made a priority.
5. Cost-effective attainment of the climate paths, from today’s perspective and compared against a scenario without additional focus on emission reductions, would require an overall additional investment of €1.5 trillion to 2.3 trillion by 2050, including about €530 billion to continue existing efforts in the current policies path. This corresponds to average additional annual investments of around 1.2 to 1.8 percent of Germany’s gross domestic product (GDP) through 2050. The additional direct costs after deduction of energy savings would amount to around €470 billion to 960 billion by 2050 (roughly €15 billion to 30 billion per year). Thereof, approximately €240 billion would need to be spent on existing efforts.
6. Assuming optimal political implementation, the climate paths’ macroeconomic effects would nonetheless be neutral to slightly positive, for an 80% ambition even without global consensus. However, a unilateral effort would require greater efforts to protect vulnerable industries—in the form of effective carbon leakage protection and long-term, reliable compensation arrangements policies for industries facing international competition.
7. Successful efforts to tackle climate change would trigger extensive modernization activities in all sectors of the German economy and could furthermore open up opportunities to German exporters in growing "clean technology” markets. Studies suggest that the global market volume of key climate technologies will grow to €1 trillion to 2 trillion per year by 2030. German companies can solidify their technological position in this global growth market.
8. At the same time, the imminent transformation process presents Germany with significant implementation challenges. The considered climate paths are economically cost-efficient and are based on the assumption of ideal implementation, meaning optimization across sectors and "right decisions being made at the right time." Mismanaging the implementation (think of excessive feed in-tariffs and delayed grid expansion in case of Germany’s “Energiewende”) could considerably increase costs and risks or even render the goal unattainable.
9. On its own, Germany's share of global GHG emissions (a little more than 2 percent) is too small to significantly impact the climate. Comprehensive climate protection efforts in Germany are therefore only successful if they motivate other countries to follow suit. On the other hand, they could become counterproductive if a strong negative impact on the economy discouraged other states. A similarly ambitious implementation process by at least the largest economies (G20) would significantly reduce these risks and also open up greater export opportunities for German companies.
10. Successfully achieving Germany's climate goals and a positive international multiplier effect therefore requires significant efforts on all fronts—politically, socially, and economically. It needs a long-term, holistic climate, industrial, and social policy that focuses on competition and cost efficiency, distributes the social burden fairly, ensures acceptance of the measures, and prioritizes the preservation and expansion of industrial value creation. The “centenary project” of mitigating Germany’s national contributions to climate change therefore calls for long-term political support.