Majority of Germany's large companies look positively at green transformation – report

The majority of Germany’s large companies expect that the transformation to a climate neutral economy will have no negative or even positive effects on their international competitiveness, and believe the country will become more attractive as a business location as a result, a report by state-owned development bank KfW found. Surveying companies with annual revenue of more than €500 million, KfW found that 44 percent of them were positive or very positive about their own international competitiveness with regard to the energy transition. A further 31 percent do not expect any consequences and only 16 percent of the companies expect negative effects. The majority of companies (76%) are positive or very positive about Germany's prospects as a business location, particularly as a result of the green transformation. However, the design of national and EU climate policy will be a decisive factor in how the conversion of the economy affects international competitiveness, the report found. “As long as the level of ambition of important EU trading partners in terms of climate protection is still significantly lower, acceptance of the green transformation in Europe will require effective protection against competitive disadvantages, especially for energy-intensive industries,” it concludes.

While changes in the economic and regulatory environment resulting from the transition are a challenge, especially for companies that are particularly exposed to international competition, the growing global demand for clean technologies and greenhouse gas-neutral products also creates growth opportunities for businesses in the country, the report found. The EU’s recently adopted CO2 border adjustment mechanism (CBAM) and planned  operating grants for climate-friendly production processes point in this direction. The report notes, however, that the current discussion about the U.S.'s Inflation Reduction Act makes it clear that “further strategic answers must be found in the race for market leadership for green technologies – without getting caught up in a costly subsidy competition.” It concludes that “a must for the future competitiveness of Germany and Europe is the accelerated expansion of renewable energy sources and the market ramp-up of green hydrogen.”