Germany can achieve net zero emissions by 2045 at net zero costs – consultancy

The government target of transforming the German economy to net zero emissions by 2045 is achievable at net zero costs if systematic and concerted measures across all sectors are taken, consultancy McKinsey has found. In its report „Net-Zero Germany,“ McKinsey said that transitioning to cleaner technologies could open up new markets and growth opportunities and secure Germany’s leadership in key industries.

The next ten years would decide whether the 2045 target can be met in an economically viable way, and by 2045 Germany would have to invest one trillion euros in new infrastructure and five trillion euros in the modernisation of existing infrastructure.

“The savings achieved through climate action until 2045 can offset the costs of decarbonisation,” the consultancy said, adding that the speed of implementation would have to increase significantly. McKinsey’s Stefan Helmcke said the country is facing “one of the most important and complex transformations we’ve ever seen” that could only work “if all companies in Germany understand that sustainability must be a core part of their business strategy.”

Germany has decided to become climate neutral by 2045 with the reform of its Climate Action Law. Transforming all economic sectors and parts of society will be a massive undertaking. The next ten years are often seen as essential and Germany's next government after the election on 26 September will shape key years of the transition.

Investments in new infrastructure include new renewable energy installations, vehicles and heating systems, while investments in existing infrastructure would have to be consistently brought in line with climate action requirements. One in five jobs would be directly affected by the transition, while the total number of jobs would likely grow on the way to a net zero economy, the consultancy argued.

McKinsey says activities need to be focussed on five sectors with the highest emissions:

• Energy: Renewable power capacity has to be brought to 650 gigawatts (GW), meaning expansion speed needs to at least triple. The power grid has to be expanded by 25 percent and made more flexible through storage and load management.
• Industry: Basic material industries like steel or chemicals have to be decarbonised, for example by converting to green hydrogen and also employing CO2 capturing and synthetic fuels. Changes here will largely be driven by the demand side, such as carmakers looking for greener input materials, the consultancy says. A more circular economy approach will also be needed for industry to become cleaner in time.
• Transport: Emissions-free mobility has to be achieved soon through electric and hydrogen-powered vehicles. About 2,000 charging points need to be constructed every week until 2030 to set up the required infrastructure for e-cars, and the use of shared and smart mobility concepts has to be increased.
• Buildings: All existing buildings in the country need to be refurbished and insulated. Every building must be fitted with heat pumps or district heating systems, depending on regional conditions.
• Agriculture: Existing technologies already can deliver much of the needed emissions reduction, for example anaerobic biogas plants, but new procedures, for example to tackle methane emissions, are needed too. Moreover, consumers need to be encouraged to adapt diets to more regional and plant-based products and minimise waste.
• Finance: While not responsible for any significant direct emissions, banks and other financial institutions have a key role to play in the transformation by switching to green financial instruments that are based on sustainability criteria (ESG) and makes greater use of carbon market models.