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Climate neutral 2050: Why German industry needs urgent political action

3 marzo 2021

This is the government support German industry needs to reach climate neutrality by 2050

Germany plans to become climate neutral by 2050. Achieving this represents a huge challenge for its industrial sector. But it is also an opportunity for Germany to become a global leader in a climate-protection market set to reach €5.9 trillion by 2025. To do this, however, the government must urgently create framework the right political.

To reach climate neutrality by 2050, Germany must implement a reconstruction of its industrial infrastructure.

Why things must change

Climate change is now a matter of global political importance. At the 2015 Paris Agreement, governments around the world agreed to develop policies that keep global warming well below 2°C and as close to 1.5°C as possible. Germany is no exception. Its Federal Climate Change Act aims for a 55% reduction in greenhouse gas emissions by 2030 and climate neutrality by 2050.

Achieving this will require industry to modernize or replace much of its infrastructure. This will be a huge challenge, but also a tremendous opportunity for Germany to become a leader in a global climate-protection market that could be worth €5.9 trillion by 2025. To seize it, government policy must enable the rapid development, construction and operation of sustainable industrial technologies and facilities. The current political framework does not facilitate this.

So, what needs to change? After intensive exchanges with experts across German industry, Roland Berger, together with think tank Agora Energiewende and cross-industry initiative Foundation 2°, has outlined the key factors for a successful industrial transformation.

Five industrial pillars for climate neutrality

To reach climate neutrality by 2050, Germany must implement a holistic reconstruction of its industrial infrastructure. This transition is built on five pillars:

  1. Renewable energy: The expansion of renewable energy generation and the electricity grid is one of the most important requisites for reaching climate neutrality.
  2. Electrification and improved efficiency: A fundamental factor for industry as well as mobility and buildings.
  3. Hydrogen: Building the necessary infrastructure for a hydrogen economy requires international cooperation.
  4. CCU/CCS and negative emissions: For some industry processes, climate-neutral technology may not be available in the near future. These will require carbon-removal solutions such as carbon capture utilization (CCU) and carbon capture storage (CCS).
  5. Circular economies: Greater adoption of circular approaches will reduce material usage and carbon emissions.

Faster, better, greener: Goals for new industrial policies

Whether brand new or realigned, Germany’s industrial policies should focus on the following four overarching goals:

Secure competitiveness

Germany and Europe must remain home to productive industrial companies. This creates jobs and prosperity as well as driving change through sustainable materials and technologies.

Create long-term security for planning and investment

By 2030, core elements of carbon-intensive industrial facilities will require renewal. Currently, however, there is no business model for these new technologies. To plan effectively, industry needs greater certainty around infrastructure expansion, legal frameworks and economic conditions.

Enable rapid implementation

Industry can only implement rapid change under the right political and administrative conditions. Consistent EU state aid law is required to secure subsidies as quickly as possible. Standardization and reduction of technical standards (such as DIN and ISO) is crucial, as are the acceleration of approval processes and modernization of administrative bodies.

Drive large-scale development and implementation of key technologies

Numerous important technologies have already been tested and funded in pilot projects. Now, companies must take the next step and push for large-scale adoption. This is a chance for Germany to become an international leader, particularly in industrial plant engineering.

Perfect harmony: A clever blend of instruments

Achieving both climate neutrality and economic success requires a calculated mix of instruments along the entire industrial value chain.

The industrial sector needs secure access to sufficient green energy and low-carbon materials at competitive prices (upstream). This requires measures to speed up the development of renewable energy supplies and the withdrawal from coal-fired power. International cooperation is important for technologies like hydrogen or CCU/CCS as well as a more circular economy.

In production (midstream), a suitable economic framework is needed to ensure existing processes remain competitive and avoid ‘carbon leakage’ (shifting production to countries with less strict environmental policies).

With sustainable products currently suffering from insufficient demand due to high costs, the sales sector (downstream) also requires changes. Each sector needs a tailored set of incentives and guidelines such as sustainable public procurement, tax benefits and guarantees for high recyclability.

On a more macro level, it is vital that measures are introduced to enable small and medium-sized enterprises (SMEs) to remain profitable on the path to climate neutrality.

The time is now: Recommendations for action

Becoming climate neutral will require extensive change across all global economic regions. German industry can play a leading role – if the federal government enables it to. Below are 12 recommendations for federal policy that would help the country to successfully reach domestic climate neutrality and drive international transformation – all while preserving economic success.

  1. Create an adequate, reliable supply of renewable energy
  2. Secure internationally competitive electricity prices for German industry
  3. Create a national and European hydrogen economy
  4. Accelerate development of an international circular economy
  5. Strengthen acceptance of CCS technologies and develop a CO2 infrastructure
  6. Refine CO2 pricing (emissions trading, taxes, duties and levies)
  7. Drive wider use of key technologies via ‘contracts for difference’ (CfDs)
  8. Targeted support for R&D and efficiency technologies
  9. Stimulate demand for climate-neutral products via incentives and regulations
  10. Create a level playing field for SMEs
  11. Seize opportunities by developing export markets
  12. Make climate neutrality a federal focus and modernize political governance

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Climate neutral 2050: Why German industry needs urgent political action

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Germany plans to become climate neutral by 2050. Achieving this represents a challenge for its industrial sector. To do this, the government must create the right framework.

Published March 2021. Available in
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