IS GERMANY RESUMING ECONOMIC GROWTH WHILE MEETING CLIMATE TARGETS?

Indeed, Germany is navigating a promising pathway towards reconciling its economic ambitions with its ambitious climate objectives, demonstrating a commendable resilience and adaptability. The year commenced on a high note, with the German economy and its Energiewende strategy showing robust signs of revitalisation. This positive trajectory comes in the wake of a somewhat tumultuous period, marked by a court ruling that cast doubt on the funding mechanisms for the nation's climate initiatives, thereby tempering investor enthusiasm.

In a significant legislative move, the Bundestag, in early February, endorsed a groundbreaking budget for the year 2024, earmarking €476.8 billion for expenditures. This budget not only respects the fiscal constraints imposed by the debt brake but also, for the first time since the COVID-19 pandemic's inception, accommodates new borrowings to the tune of approximately €39 billion. A historic allocation of €70.5 billion dedicated to infrastructure investments, with a substantial focus on the energy sector, underscores Germany's unwavering commitment to the Energiewende.

March witnessed the launch of a €4.4 billion funding initiative aimed at aiding heavy industries such as steel, cement, and glass in their transition towards green technologies. This initiative is part of a broader €50 billion investment strategy designed to curtail emissions. The funding encompasses the development and deployment of innovative technologies and infrastructures, including hydrogen production facilities and pipelines.

Meeting climate protection targets

The confluence of economic advancement and the successes of the Energiewende is increasingly evident. Recent data reveals that Germany is on course to achieve a 65% reduction in greenhouse gas emissions by 2030, relative to 1990 levels, surpassing previous projections. This achievement underscores the tangible benefits of the German Energiewende.

In 2023, wind power emerged as the predominant source of electricity in Germany, contributing to 31% of the nation's electricity production. This milestone was facilitated by the streamlining of permitting processes, a critical policy measure aimed at expediting project implementations. Renewable energy sources accounted for 56% of total electricity generation, a notable increase from the previous year. Germany's ambitious target of achieving 80% renewable energy by the end of the decade marks a significant pivot towards sustainability.

Germany's strategy extends beyond electricity to embrace molecular forms of renewable energy, given the country's annual consumption of 1,000 terawatt-hours of natural gas. This approach calls for the gradual adoption of green gases, such as green hydrogen, across various sectors, including industrial, heating, and even power generation.

The integration of green gases with natural gas is poised to address persistent emissions challenges in sectors like transport and heating. Upcoming legislative developments concerning the blending of green gases are anticipated to provide clarity and direction in this area.

In the heating sector, the adoption of green gases is expected to facilitate the achievement of climate targets, circumventing the need for the contentious ban on fossil-fuel boilers, which has sparked considerable debate and public opposition in Germany.

The transport sector saw significant legislative progress on 14 March, with the Bundestag's approval of the 37th ordinance to the Federal Immission Control Act (37th BImSchG), aligning with new EU mandates. This ordinance paves the way for the adoption of renewable non-biogenic fuels in transport, backed by a robust verification system.

Furthermore, legislation promoting the use of electricity-based renewable fuels in aviation and maritime transport aims to ensure long-term investment security, highlighting the strategic importance of green hydrogen certificates.

The European Union's Emissions Trading System is set to play a pivotal role in driving climate progress, with plans to extend its coverage to heating and transport fuels by 2027. This expansion will incentivise consumers to transition away from gas boilers and older, more polluting vehicles, further aligning economic activities with climate goals.

A transformative combination

In summary, Germany stands at the forefront of a transformative journey, blending economic stimulation with environmental stewardship.

Through strategic investments, regulatory reforms, and an unwavering commitment to the Energiewende, Germany is not only addressing immediate economic challenges but also paving the way for leadership in sectors critical to the future, such as energy.