The business case for climate action: The economic benefits of German climate policy

The business case for climate action: The economic benefits of German climate policy

A new study by PriceWaterhouseCoopers (PwC) confirms the positive macroeconomic effects and fiscal benefits of the German Energiewende. According to the study, policy measures under the Climate Action Programme 2020 (“Aktionsprogramm Klimaschutz 2020”) will spur economic growth, create jobs, and benefit private households and industry as well as the national budget. The Juncker Commission should read the study carefully as it dispels unfounded fears that the low-carbon transition will be economically harmful. If the EU doesn’t raise its climate ambitions, its member states will miss out on these opportunities.

Energy transition as a green economic stimulus package

According to the study (DE) which was commissioned by the German Federal Ministry for the Environment (BMUB), Germany’s Climate Action Programme 2020 will be a major economic success for the country. The study finds that climate policy measures will create a total of 430,000 new jobs by 2020, mainly in the construction and metal production sectors, and increase GDP by 1 per cent in 2020. Due to increased energy efficiency and an overall decline in energy demand, Germany will also save €3,5 bn in fuel imports. The authors argue that, despite the high initial investments of €125 bn, long-term savings of €274 bn, e.g. through reduced energy consumption, will result in a net economic gain of €149 bn. Private households will save about €25 bn in energy bills. While the energy sector faces a net burden of €10 bn, industry, transport, agriculture, as well as the trade and services sectors can expect a total gain of €84 bn.

Positive news at a time of rising climate change scepticism

The study is published at a critical moment for both the German government and advocates of a low-carbon transition. The German Energiewende represents a key political project of Chancellor Angela Merkel who announced recently that she will run for a fourth term as Chancellor. At the same time, just ten months prior to the general elections in Germany support for the Alternative for Germany (Alternative für Deutschland, AfD) is growing – a right-wing party which denies climate change and the imminent risks linked to it. Populist movements in the UK and many other European countries have voiced similar positions. The rise of populist parties and climate sceptics is closely connected to growing fears that climate policies are too expensive and a waste of tax payers’ money. Yet to the contrary, the report shows that the low-carbon transition represents an enormous opportunity to promote economic growth and create both white- and blue-collar jobs in future-proof industries, all while protecting the environment.

The myth of the costly Energiewende

EU countries in Central and Eastern Europe (CEE) have long criticised and ridiculed the German Energiewende. They depicted a Germany which would face blackouts, rising energy prices and a relocation of industry to third countries. The alleged economic folly of the low-carbon transition has repeatedly been a pretext for CEE countries to delay, water down or stop entirely many ambitious climate policy measures at the EU level. But none of it has come true. German industry has remained in the country, blackouts have not occurred and Germany has already created 370,000 jobs in the renewable energy sector.

The PwC study is an important and timely reminder that the transition to a low-carbon economy will continue to create jobs and benefit industry, private households and taxpayers. It may not be able to dispel the persistent myth that low-carbon development is economically harmful. But alongside other studies that reach similar conclusions, such as last year’s New Climate Economy report, it provides powerful arguments to dismante the economic case against climate action.

One small step for the EU Commission, one giant leap for the EU economy

The EU is in danger of missing a major opportunity to promote low-carbon development. As clean energy investment in the EU keeps falling year after year, China is already overtaking Europe as a clean technology leader. The European Court of Auditors recently found that the EU is not meeting its climate spending target and, to make matters worse, large parts of the EU budget still support high-carbon infrastructure. The EU is currently under-delivering on low-carbon growth.

In order to take full advantage of the economic benefits of the low-carbon transition, the EU needs coherent and ambitious climate and energy policies that create a stable framework for future investments. The Juncker Commission should make use of the full spectrum of instruments at its disposal to send the right signals to markets. The Capital Markets Union, the upcoming post-2020 EU budget, the Energy Union (see E3G’s checklist for evaluating the package here) and especially the European Commission’s “Winter Package”, which is due on 30 November, must set the course for a more ambitious transition of the EU economy as a whole.


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