Climate-neutral Germany (Executive Summary)

Climate policy is having an impact – emissions in the energy sector have fallen by around 40 percent since 2014. However, the transition in the transport sector, the climate-neutral modernisation of buildings and the necessary changes in the industry sector still pose challenges. To overcome these challenges effectively, reliable climate and economic policy frameworks are crucial.

Three quarters of the investments in energy and transport infrastructure, industrial facilities and buildings required by 2045 are necessary regardless of the transition. Redirecting financial flows towards climate-neutral solutions through price incentives and market regulation is therefore crucial. Additional investments specifically for climate action account for about three percent of GDP, many of which are economically viable – renewables and electricity grids, for example, are 90 percent financed by market revenues and fees.

The scenario includes more targeted support for building retrofits, purchase incentives for electric vehicles that focus on small and used cars and the expansion of public transport infrastructure. These longer-term measures are bolstered by a temporary support mechanism, with ten billion euros per year from carbon pricing revenues allocated for compensation payments.

Relying solely on carbon pricing, market regulation, subsidies or infrastructure expansion has its disadvantages. By contrast, a combined approach allows for cost efficiency, planning certainty and social equity. Regardless of the exact composition of the policy mix, the path to climate neutrality requires a collective societal effort – and paves the way for a future worth living for everyone.